Unfortunately, that construction was a demographic time bomb, as eventually the payouts exceeded the payroll tax revenues, necessitating repeated increases in payroll tax rates to keep up.
Yea. It’s nobody’s fault, as even in the 60’s, there was no reason to think that reproduction would crash the way it did. You didn’t know you were in a Baby Boom until the Boom ended. :-)
And so here we are; now what do we do? No matter what we do, some group is going to suffer. Every solution will impose some penalty on some group. I suggest we adopt this one criterion: that we impose the smallest penalty possible on the group who can most easily bear it.
My preference is the smallest penalty on the broadest base, but that’s a quibble.
The default solution is to do nothing, keep payroll tax rates and benefit rates at what they currently are, and draw needed shortfall money from general revenues.
Well, you’d have to pass a law to do that. And it would be a big deal, focusing attention on the problem.
This is not a solution; it is kicking the can down the road, to blow up later and even bigger.
There is no money in the social security lockbox, only government IOUs. When payouts exceed revenue, money from general revenue will be used, just as it would be if Reagan’s fraud had never happened.
Well, they borrow it. But that’s another quibble.
The fairest solution is to freeze taxes and means test benefits. Payroll taxes have to be frozen as they are in order to not over-burden young workers. Benefits would be means tested to keep outlays in balance with revenues.
Agreed. Why does Buffet get health care insurance for $185 a month, when a subsidized family of four on the ACA is paying twice that? Ken Langone and Carl Ichan have been on CNBC air several times talking about this, how utterly stupid it is for the government to send them SS checks and subsidize their health care when their IN RETIREMENT AGIs are in the millions.
There is a calculation, either on retirement AGI or Net Worth or both, where you start to phase out these benefits, and then use the benefits to buttress the existing system.
There is one glaring huge benefit to the means testing solution I have described: At one stroke, the unfunded liability of the social security system evaporates. Since benefit payouts will not be allowed to exceed payroll tax revenues, there are no future deficits to deal with. The system is self-funding, as was intended from the start. This plan restores the system to insurance against being too old to work yet too poor to live with dignity.
Medicare is harder to fix, though. :-)