WE HAVE TO DO SOMETHING TO SAVE SOCIAL SECURITY
February 1, 2010
For the next few years, Social Security is fine, however, the system is already setting off alarm signals. The disability program is already in a negative cash flow position and the retirement and survivor's income program is expected to have a negative cash flow in 2010-2011. If we keep on doing nothing until the trust funds that finance the program run dry in 2037, monthly benefits will have to be cut by about 24 percent across the board and the cuts will get deeper than that, says David Walker, who served as the seventh comptroller general of the United States and was the CEO of the U.S. Government Accountability Office.
In his new book, "Comeback America," Walker has several suggestions on how to save Social Security.
- Focus on people who are most in need; provide a new higher-level floor benefit for Americans who have worked at least 30 years to insure they will not live in poverty.
- Do not eliminate Social Security benefits for higher-income individuals but reduce the relative benefit for middle- and upper-income persons through progressive wage indexing or otherwise.
- Raise the normal and the early retirement eligibility ages on a gradual basis, and require that they keep pace with increases in life expectancy; a relatively modest increase phased in over a 20-year period would have a significant impact.
- Allow all individuals to defer their Social Security benefits to any age they choose and increase their monthly benefits based on life-expectancy tables; this would encourage people to work longer.
- Increase tax revenue; keep the payroll tax rate at the current level of 6.2 percent but raise the cap on taxable wages from the 2009 level of $106,800 per person to around $150,000.
- This would be less than the historical dollar level at which 90 percent of total wage income would be subject to the Social Security payroll tax ($171,900 in 2009).
- Require supplemental savings accounts; an additional 2 or 3 percent payroll deduction would go into an individual account for each worker.
- Individuals would have several professionally managed investment options to choose from along the lines of the Federal Thrift Savings Plan, which is now used for federal elected officials and employees.
Source: David M. Walker, "Comeback America: Turning the County Around and Restoring Fiscal Responsibility," Random House, January 12, 2010.
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