Issue Position: Social Security - Alternatives to the Stock Market "Solution"

Issue Position

You might say, if the stock market is not an adequate solution to long term funding problems, the Social Security actuaries' assumptions still forecast problems. If the actuaries' projections become reality, there are many steps Congress can take. First, Congress can back Social Security with a guarantee that any shortfall will be made up through general revenue. Claims of impending insolvency are indeed concerning, but underneath the rhetoric is really a mundane, non-emergency fact - that the income from the payroll tax is projected to no longer meet expected benefit costs. That does not mean that the costs are too great in any absolute sense, just that more money is needed than the dedicated tax is projected to raise. Compare that to the thousands of other government projects that are funded out of general revenue, rather than a dedicated payroll tax. The same claim of "crisis" cannot be made because Congress meets the cost every year automatically by law. That point is worth remembering, because it reveals that the mere form of funding, not the absolute ability to find funding, is the real source of the problem. In Congress, finding more money is a normal operation of Congress. If Social Security were supplemented by general revenues, as most government programs are, it would be more difficult for privatizers to argue that bankruptcy is the inevitable result of forces beyond congressional control. Can you imagine anyone arguing that the Pentagon is going bankrupt? Of course not. The Pentagon will go bankrupt only if Congress wants it to. The same is true of Social Security. Social Security will become insolvent only if Congress says it should. Second, Congress can correct a persistent problem --Congress has been shortchanging the interest rate on the Social Security trust fund. The interest rate was arbitrarily set to the intermediate term bond rate. But that is a lot less than the average interest rate of US Treasury-backed securities. If Congress changed the law to credit the Social Security trust fund with the average interest rate of all Treasury-backed securities, we can reduce any long term financing problems by about 30 percent. Third, Raising the average wage in America will make the most important contribution to Social Security's long-term projected financial balance, since Social Security derives almost all of its revenue from a wage-based tax. Congress should work to ensure that Americans receive a real raise of $7,000 above any increase in the cost of living over the next 10 years, raising the average real wage to $36,000 from about $29,000 today. If Congress only does this, maintaining such an average increase over the long term (a real wage growth rate of 2 percent), Social Security's projections will remain in balance through 2049. A number of steps can be taken to set the economy in that direction, including reducing the legal barriers to unionization through instituting the "card-check" requirement for unionization; raising the minimum wage to $7.50, restoring purchasing levels of 1970, and maintaining a low unemployment rate and low real interest rates on borrowing.

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