IF IT LOOKS LIKE A CRISIS AND IT QUACKS LIKE A CRISIS
February 2, 2005
Crisis deniers have made much of the Social Security trust fund recently, suggesting that it guarantees Social Security's solvency until 2042, or even 2052, according to some projections. However, it was President Clinton -- not President Bush -- who pointed out that: "These trust fund balances are available to finance future benefit payments -- but only in a bookkeeping sense."
Clinton's fiscal year 2000 budget explained that trust fund assets are not "real economic assets that can be drawn down in the future to fund benefits." Rather, these funds are "claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures."
According to Michael Tanner, director of health and welfare studies at the Cato Institute:
- In less than 15 years, the federal government will have to begin finding billions of dollars to continue paying benefits -- by cutting benefits, raising taxes or borrowing even more money.
- Overall, Social Security's unfunded liabilities total nearly $12 trillion, and the longer we wait, the worse it gets.
- Estimates suggest that each year that we wait to reform Social Security costs between $150 billion and $600 billion more.
That sure looks like a crisis, says Tanner.
But the larger crisis is not about the system's finances, he says. It is about workers forced to pay 12.4 percent of their wages into a system that cannot pay them the promised level of benefits. It is about a system where workers have no real ownership of their benefits, and where low- and middle-income workers cannot accumulate wealth that they can use in retirement and pass along to their heirs.
Source: Michael Tanner, "Signs of crisis are clear: Unfair system is going to go broke. The time to fix it is now." USA Today, February 2, 2005.
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