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EDITORIALUnhappy birthdaySocial Security is aged and ailing, but prospects for fix seem dimABOUT OUR EDITORIALS
Dispatch editorials express the view of the Dispatch editorial board, which is made up of the publisher, the president of The Dispatch, the editor and the editorial-writing staff. As is the traditional newspaper practice, the editorials are unsigned and intended to be seen as the voice of the newspaper. Comments and questions should be directed to theeditorial page editor.
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Friday August 14, 2015 6:50 AM
Social Security turned 80 today — an age few people reached in 1935, the year the program was created. That hints at the central problem of this most broadly popular of American entitlements: As currently configured, it’s not sustainable.
It relies on current workers to pay for the benefits of retirees, and there simply isn’t enough money coming in to fund the extended retirement years of the baby boom generation and beyond.
In 1940, the ratio of covered workers paying taxes to support those drawing Social Security benefits was about 160 to 1. By 2014, fewer than two workers supported each beneficiary.
It has been three decades since substantive changes were made to Social Security. With the youngest baby boomers now in their 50s, it’s time to tweak the program again to ensure that it’s still available to younger workers who already have been paying 6.2 percent of every paycheck in Social Security taxes.
According to official projections, the Social Security retirement trust fund currently has enough money to pay full benefits under the program’s current parameters for the next 20 years. The trust fund that pays for disability benefits for workers of all ages and their dependents — a benefit that was added in 1960 — is on track to run out of reserves in late 2016. And it could be even worse than this: Recent analyses by Harvard University and Dartmouth College both found that Social Security’s own financial projections have been overly optimistic since 2000.
This adds urgency to Social Security reform in a very partisan atmosphere in Washington and in an election year. To risk understatement, that will be a challenge.
There are several solutions that are simple on paper, at least, that would close much of the funding gap. They include applying the payroll tax to all wages; currently, the tax is applied only to the first $118,500 of a worker’s wages, a figure that increases with inflation each year. If all wages were taxed, this would take care of an estimated 66 percent of Social Security’s official shortfall. Increasing the payroll tax by a tenth of a percent a year for 20 years, until it reaches 14.4 percent, is a fix that would eliminate nearly 50 percent of the gap.
Both of these approaches involve tax increases, something that is off the table for many Republicans. Other options, including gradually increasing the retirement age and revising the way inflation is calculated in giving cost-of-living increases, have been resisted by Democrats as a cut in benefits. President Barack Obama earlier indicated an openness to adopting the so-called Chained CPI (Consumer Price Index) as a method of calculating inflation, but then backed off.
Meanwhile, some Democratic senators, including Sen. Sherrod Brown of Ohio, have actually proposed to double down and increase Social Security benefits by raising the payroll tax. While that may be music to the ears of some of their constituents, it is irresponsible policy given the financial and actuarial realities of the program, not to mention the fact that the nation is $18 trillion in debt and counting. Proposing to expand an entitlement in addition to raising the tax also could drive a stake through the heart of any hope for reform in the Republican-controlled Congress.
One thing’s for certain: This problem isn’t going away. It’s time to return to the days of Presidents Ronald Reagan and Bill Clinton, when bipartisan entitlement reform still was possible.
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