Washington Post political blogger Jennifer Rubin weighs in on the confrontation over Social Security reform in the other night’s GOP presidential debate. In it, Santorum criticized Gingrich’s “big account” reform plan for Social Security – which would allow individuals to divert roughly half their payroll taxes to personal accounts – as a budget buster, given that Social Security is no longer running surpluses and the rest of the budget is in deficit.
Rubin notes:
“Gingrich had two responses, neither of which was credible. First, he promised to “take 185 different federal bureaucracies that deal with low-income Americans. Think about this, there are 185 separate bureaucracies with separate regulations, all dealing with low-income Americans. We can consolidate them into a single block grant.” That’s gong to pay for a huge outflow from Social Security? It’s preposterous. Next, he claimed that in the long run, “if you have a personal savings account model, you increase the size of the economy by $7 to $8 trillion over a generation because of the massive reinvestment.” Perhaps that is true, but we have a huge, nagging debt right now and he’s going to make it worse with his plan. And while Santorum was certainly right on substance, Gingrich’s glibness may have successfully concealed how really silly is his policy proposal.”
I agree, and this highlights one of the interesting differences between Gingrich and Gov. Mitt Romney.
Gingrich is heavy on vision, on historical sweep and on fundamental change. GOP voters like that, and I think that in many ways public policy needs that. Gov. Romney, by contrast, sometimes comes across as something of a bean-counter.
On the other hand, though, when you pick through some of Gingrich’s proposals – in particular his Social Security plan – it seems to me that the beans haven’t been counted. This is where I think Romney would have an advantage in office, of getting his ducks in a row and making sure that the numbers actually, you know, add up.
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Anyone who thinks Social Security OASI is a great program has his head in the sand or is totally ignorant of its history. Since 1958 the US Congress and president have run continual deficits in the General Budget. In 1983 the Big Fix For Social Security projected it would exhaust the SS-OASI trust fund in 2064. The National debt is closing in on $16 Trillion. Social Security has present value unfunded liabilities of over $23 Trillion. Social Security has been running negative cash flows for two years now.
Let us face the facts, if we cannot get a handle on the General Budget, how on earth will Social Security be reformed? If we look at reform and split it into three groups; beneficiaries, Boomers and those under 46 we get many different views of it. Those who are beneficiaries support paying those currently on it 80% to 20%; Boomers seem to support Social Security Reform if it does not affect them 70% to 30% and if we ask those under 46 we find they just want out. More than half the potential voters in this country do not support keeping social security.
So now you have to ask the question; Do I feel lucky? What happens if the country finally wakes up and realizes Social Security is bad for the economy; the payroll tax holiday sure has reinvigorated lowering the payroll tax and congress says raising it will hurt the economy?
The only reform I support is repealing the Social Security Act. Sometimes an amputation is the only way to save the body. We as a country are bleeding economically to death. When did it start?
A. J. Altmeyer, Chairman
Social Security Board Before the House Ways and Means Committee November 27, 1944
“There is no question that the benefits promised under the present Federal old-age and survivors insurance system will cost far more than the 2 percent of payrolls now being collected. As I pointed out in my testimony of last year, none of the actuarial estimates which have been made on the basis of present economic conditions and other factors now clearly discernible result in a level annual cost of this insurance system of less than 4 percent of payroll.”
“Indeed, under certain assumptions the level annual cost has been estimated to be as much as 7 percent of payrolls. On the basis of a 4-percent-level annual cost it may be said that the reserve fund of this system already has a deficit of $6,600 million. On the basis of 7-percent-level annual cost it may be said that the reserve fund already has a deficit of about $16,500 million.”
http://www.ssa.gov/history/aja1144a.html
Guess what, we reached that point for those born and are single in 1938 and for those who are married with non working spouses around 1946.
Robert Ball
Commissioner of Social Security
1962 and 1973,Wrote June 2005
“When Social Security began, benefits for those nearing retirement age were much higher than could have been paid for by the contributions of those workers and their employers. This was done so that the program could begin paying meaningful benefits even though workers nearing retirement would have only a short time to contribute.”
“Instead, the impression is left that the program was sound only when 16 paid in for every one taking out. Thus, of course, when the ratio changed to 3.3 to 1, the program became “unsustainable.”
“They ignore the fact that in 1950 only about 15 percent of the elderly were eligible for benefits and that it was expected by all who were acquainted with the program that the ratio would, of course, change dramatically as a greater proportion of the elderly became beneficiaries.”
“What in fact happened is that when just about all the elderly first became eligible for Social Security benefits, about 1975, the ratio was 3.3 contributors to each beneficiary and the ratio has stayed that way for the past 30 years. As the baby boom reaches retirement age, as the administration says, the ratio is expected to drop for the long run to 2.0 or 1.9 workers to each retiree.
http://www.tcf.org/Publications/RetirementSecurity/ballplan.pdf
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