And yet, the amount that will be paid in by people in their 20s and 30s will be much less than the benefits they receive. The older you are, the more you get out of the system. People at or near retirement age look at what they paid in and legitimately say its not fair that they should get their benefits cut since they are simply getting out what they paid in. That is understandable but ignores the point that there is no good outcome here where everyone gets their "investment" back. If today's retirees or those close to retirement get benefits at current levels, the younger generation will be completely screwed.
So the issue is how to we make the system sustainable and share the sacrifice that will be necessary? The money that was paid in is gone. There is no vault with cash in it that can be opened to pay benefits whether its a share of a Treasury bond or some other promise to pay. The cash will come from taxes. So the question still is, is it fair to ask young people to pay for the current level of benefits for old people or should the pain be spread around? My answer is that the burden should fall more heavily on older people because young people did not create this mess.
Yes the situation is getting worse. But, it can't get much worse -- we passed the point of no return a while ago.
People at or near retirement age look at what they paid in and legitimately say its not fair that they should get their benefits cut since they are simply getting out what they paid in.
To be clear, I'm not suggesting that. Someone up-thread suggested it, and I responded that would be even more expensive than just paying the benefits as currently legislated.
If today's retirees or those close to retirement get benefits at current levels, the younger generation will be completely screwed.
Actually, it's more than just the "younger generation". Everyone gets screwed.
So the issue is how to we make the system sustainable and share the sacrifice that will be necessary?
The only way that we can make Social Security sustainable is to either reduce benefits or raise taxes so that the income covers expenses. There is no middle ground.
Raising taxes would be economic suicide. And, it was tried 30 years ago and it only postponed the inevitable.
he money that was paid in is gone. There is no vault with cash in it that can be opened to pay benefits whether its a share of a Treasury bond or some other promise to pay. The cash will come from taxes.
So is every other dollar in government bonds. And I ask again: why should Social Security contributors be the ones to forgive their share of government debt? What about the civil service pensioners, or investors holding bonds?
So the question still is, is it fair to ask young people to pay for the current level of benefits for old people or should the pain be spread around? My answer is that the burden should fall more heavily on older people because young people did not create this mess.
No, they didn't create this mess. But, neither did I. I wasn't even voting age the last time Social Security was "rescued", and I've been paying for it ever since. The only viable solution is to reduce benefits to a sustainable amount.... gradually, while we still have those Social Security bonds to fund it. We have to get benefits down to a point that can be funded by payroll taxes on a year-to-year basis, and adjust benefits to handle income. In other words, run it like a real pension plan.
Current forecast is that the "trust fund" will be exhausted in 2040. After that, taxes can only fund about 75% of legislated benefits. So, that gives us 30 years to reduce it by 25%. The date would slide out to a bit later as benefits are reduced. Less than 1% per year could be met by simply subtracting that amount off the COLA.
Frankly, I'd like to see Social Security completely replaced with a private system. But, I don't think it is politically possible.
However, the kind of reductions I've suggested above would require a hard look at beneficiaries, and how benefits are calculated. Making disability a separately-funded program would be a good start, as would reducing benefits when survivorship is included.
[An aside: this is how traditional defined benefit plans work. When you retire, you can opt for a monthly benefit of $X, or a monthly benefit of $X-Y if you wish survivor benefits for a spouse. The calculation takes the age of retiree and spouse into account. A single recipient gets a larger benefit. A married two-income couple might choose two single benefits, etc.]
These adjustments would put the system back on an actuarially sound basis. It wouldn't be "dead", but at least it wouldn't be a giant sucking wound anymore.