Social Security has become an integral part of the American social contract, providing millions of Americans with benefits essential to their well being. Its future, however, has been imperiled for the sake of political convenience. Restoring Social Security to solvency and putting its future on firmer ground present enormous challenges to this generation and the next Congress. For years, the debate over Social Security's future has been framed by politically charged phrases and false choices, where preserving quality of life is equated with supporting a flawed, endangered system. This Congress's fiscal policies threaten the retirement security of every American citizen, but we can restore sanity and fulfill our responsibilities to our neighbors through sensible reforms that acknowledge political and economic realities. Put simply, to support the status quo is to stand against both our current and our future seniors. We need a new approach.
Any structural reform of Social Security will take time and thought to implement. Though experts have made a number of interesting long-term proposals, there are pressing short-term problems that require immediate legislative action: we must shore up the existing system. There are millions of retirees who paid into the system and are owed their due; to reduce their benefits would violate our contract with them. Therefore, we must restore the solvency of the Old Age and Survivors Insurance (OASI) and Disability Insurance (DI) trust funds, which together comprise Social Security.
Trust Fund Raids by Congress Bankrupting Social Security
The situation is dire. The OASI and DI funds are recipients of FICA contributions from your paycheck and ostensibly hold your payroll tax contributions in trust for you for retirement. Both funds, however, have historically served as convenient sources of funding for government projects. In the past, payroll tax revenue has been higher than the benefits paid, resulting in a "Social Security surplus" that Congress, by its nature, has spent immediately. This is irresponsible enough, but as the Baby Boomers have aged and the ratio of workers to retirees has gone down, the "surplus" has been disappearing for some time. Moreover, thanks to the recession, the end of the "surplus" has arrived several years earlier than expected: in 2010, Social Security will take in less than it pays out. According to this year's non-partisan Social Security Trustees' Report, there is a 95% chance that this will become the case permanently after 2014. By this report's calculations, the DI trust fund will be completely exhausted in 2018; the OASI trust fund will implode in 2040.
Generational Theft: Social Security Fund Now Full of IOU's, Not Money
Over the next 75 years, Social Security will owe $7.9 trillion more in benefits than it will receive in payroll taxes. For reference, the entire United States economy produced about $14 trillion last year. But even relying on what's in the trust funds today is problematic, because they are comprised entirely of special issue bonds from the U.S. Treasury, which are different from ordinary cash. In accounting terms, these serve as "assets", which is what allows fiscally irresponsible politicians to claim financial strength where none exists. The value, of these bonds, though, comes from their redeemability for cash. Because the U.S. Treasury issues the bonds, the Treasury must pay upon their redemption. The Treasury, though, is just another part of the government and government revenues come from taxes. All we're doing is engaging in an expensive, fraudulent transfer: when these bonds are redeemed, to replace what was borrowed we'll have to either raise taxes or cut spending because of our national debt. This is neither sustainable nor legitimate. If elected, I will fight to end this generational theft and work to reduce the size and scope of the federal government, in order to help us keep the promises we've made to our seniors.
Seniors Can't Live on Social Security Alone
Second, relying on Social Security income alone is not sufficient for retirement security. The average American worker will derive less than half of his or her comfort level of income in retirement from Social Security benefits. At the same time, American families aren't saving and investing enough to prepare for a secure retirement. Defined-contribution partnerships with employers (e.g. 401(k) accounts) help in this regard, but American workers should not have to rely on the financial strength of a single entity for their well being. That's where Automatic IRAs come in: they're simple, they have bipartisan support, and they work. An Automatic IRA is a Roth IRA that provides tax-free growth at low costs, but workers are automatically enrolled (as they increasingly are for 401(k)s). The contribution would be completely optional: if he or she so chooses, a worker may opt out at any time. Studies show, though, that very few people do. Once saving for retirement is the default, workers and their families benefit; at the same time, our cherished principles of individual choice and freedom remain intact. If elected, I will work to implement Automatic IRAs, so that American workers can maintain their standard of living in retirement without increasing our national debt or becoming dependent on a single source of income.
Help Keep Americans Employed So They Have Money to Put Away
Finally, the best guarantor of comfort in retirement is job security in the years before it. We need to encourage employment by cutting capital gains and income taxes so that both job creation and work are as fruitful as possible. Only when we allow the miraculous, wealth-creating engine of private enterprise to work at its fullest potential will we be able to fulfill the worthy goals of protecting our senior and disabled citizens.