As an old saying goes, the best time to plant a tree was 20 years ago. The second best time is now.
But when it comes to Social Security reform, the time is quickly coming when “now” won’t even be the second best time to plant a solution.
And while The Wall Street Journal struck a hopeful note last weekend with a report headlined “Congress is finally talking about saving Social Security,” it’s worth noting that we’re in the middle of a heated midterm election season and the public isn’t exactly clamoring to fix the floundering retirement supplement.
Politicians are keen to react to issues that occupy voters’ minds. It is somewhat comforting, then, to know at least some of them understand that if a crisis is looming, it’s best not to ignore it.
The Journal made it clear that, “Lawmakers on both sides grasp Social Security’s real challenges.” That realization would stand as a heavy indictment if bipartisan solutions aren’t found before trouble erupts.
The shortfall
The problem can be summed up easily. Social Security relies on today’s workers to fund benefits for today’s retirees. In 1945, there were 41.9 workers for every retiree. Today, there are about 2.8. That ratio is expected to continue falling as more baby boomers retire and the population stagnates.
In June, the Social Security board of trustees said its old-age and survivors insurance and disability insurance trust funds are projected to last until 2034. After that, there will be enough money to pay only 83% of the promised benefits.
No one in Congress can feign surprise at this news. Social Security’s predicted decline, now more than 40 years in the making, predates many of the issues currently occupying political campaigns.
Possible solutions
So, what solutions are members of Congress discussing? As I’ve written before, several ideas are floating around. Chief among these is to remove the wage limit on Social Security taxes. Currently, any income above $184,500 per year is exempt from the 12.4% tax, half of which is paid by a person’s employer. Congress could either set a higher limit or remove the cap entirely.
The Journal said Republican Sen. Bernie Moreno of Ohio and Democratic Sen. Elizabeth Warren of Massachusetts are proposing to eliminate the cap.
But they haven’t said anything about whether investment income should be taxed, and few Republicans are interested in joining their effort, in any case.
Other ideas include raising the retirement age, eliminating spousal benefits, allowing workers the option of investing their share of Social Security taxes in private equities, raising the Social Security tax or doing a combination of these.
Ideas are plentiful. Last year, Social Security’s chief actuary wrote a letter detailing the impacts of 17 of them. But none is devoid of opposition and struggle. Politicians will need to work hard. Right now, those who are talking about this problem are mostly posturing.
Some draw the line on any reduction in benefits. Others draw the line on any increase in the retirement age, even if it would apply only to today’s youngest workers.
Some in Congress want to form a bipartisan commission, even though time is short. They note, correctly, that anything short of a bipartisan solution would be doomed, especially since both parties have been so adamant about not touching Social Security.
Utah’s political leaders have weighed in through the years. Sen. John Curtis suggested forming a model that could be used to test solutions and their impacts.
Sen. Mike Lee has talked about indexing retirement to life expectancy and allowing people to invest Social Security contributions in private accounts.
Caution: Compromises ahead
To reach any final solution, politicians will need to tread a minefield of tough compromises and agonizing choices. The temptation will be strong to accuse the other side of either being heartless or fiscally irresponsible. And the possible election of some Democrats with socialist leaning would only complicate matters more.
But first, Social Security will need to become a priority, whether voters are calling for it or not.
“We are making some headway and alerting everybody: OK, here’s the deadline, there are people talking about it now,” the Journal quoted Virginia Democratic Sen. Tim Kaine saying.
Good for him. After more than 40 years, people are finally starting to get it.
It’s just that, if solutions to this problem were a tree, it would have been so easy to plant back then, but now it’s becoming much harder to get into the rocky ground with each passing day.