In the recent debate over America’s mounting debt, you may have heard some ominous facts about Social Security. In particular, you might have heard that this year, Social Security payments exceeded revenues for the first time—an ominous milestone that was predicted to occur at least half a decade from now (until the recent recession). This development has provoked general anxiety about Social Security, and rightwing pundits have seized this event to renew calls to cut or even privatize Social Security.
Fortunately, there’s not much to worry about. That may be an unusual thesis for a political opinion piece, a genre rife with alarmism, but it’s an important point to make in a political climate plagued by fear of debt.
The reason there’s little to fear is that the Social Security program has faced tough times before. The last time it did so—in the 1980s—it was only months away from genuine insolvency. As a part of the reform package adopted then, the Social Security Trust Fund was developed to begin to save for the eventual retirement of the baby boomer generation. When payroll taxes exceed Social Security payouts, the remainder is invested in nontransferable U.S. government bonds. The Trust Fund currently has a balance of about $2.5 trillion. Even though the 2010 payouts were projected to exceed revenues by about $29 billion dollars, the Trust Fund will grow rather than shrink. The interest it earns is currently greater than the gap between revenues and spending. Of course, that situation will not last indefinitely. As baby boomers continue to retire, payments will grow and receipts will shrink, and soon enough the Trust Fund will begin to shrink with them.
But despite all of the hype, that’s nothing to be afraid of. The baby boom generation is unusually large. In its most productive days, its payroll tax revenues swamped the cost of previous generation’s retirements. When the baby boomers retire, they’ll take in larger pension funds than subsequent generations can pay. That’s the whole purpose of the trust fund: to save money in preparation for this demographic wave. And no wave, demographic or otherwise, can last forever. By 2029 the average person born in the first baby boom year, 1945, will have died. By 2047 the same will be true of those born in the final boom year, 1964. And these deaths, tragic and difficult though they will be for America’s families, will reduce the burden on Social Security. The tremendous retired population of boomers is a temporary demographic change, not a permanent one. The more general long-term shift in ages, as life expectancies rise due to medical improvements, can be dealt with using very gradual adjustments to the retirement age or payroll tax rate.
The strain on the Social Security system is not destined to increase forever. Furthermore, the idea that the Trust Fund shouldn’t be drawn down is a ridiculous one. The Trust Fund, right now, is the boomers’ retirement fund. When you retire, you spend out of your retirement fund. That’s why it exists. The idea that the baby boom generation should make it through retirement without drawing down their Social Security retirement fund is ridiculous. True, it’s possible that, if the economy doesn’t perform well and the boomers are surprisingly long-lived, the Trust Fund could be completely depleted in 25 years. But the economy tends to over-perform the official Social Security predictions, and the program has been saved with only months to spare before. The current projected day of reckoning is a full quarter century in the future.
Despite any alarmism out there, then, Social Security is one of the most stable and secure government programs out there. Proposals to reform the program to deal with the overall debt problem are misguided at best and disingenuous at worst. America has spent the past two and a half decades building up a Social Security surplus to handle the upcoming strain of the boomers, even as the rest of the government has deficit-spent at an unprecedented peacetime rate. If we want to get a handle on America’s growing debt, Social Security cuts should be the last item on our agenda, not the first.
Louis R. Evans ’13, a Crimson editorial writer, is a social studies concentrator in Currier House.