5/26/18: NOTE: This post was written in 2011, and I didn’t mean to post it today. Thanks for your understanding.
Today in 2011, today when the United States is so deeply in debt, today as our national representatives seem unable to make the hard decisions, what am I willing to sacrifice for the Greater Good of my country? By Greater Good, I mean that the individual sacrifices something in order to benefit everyone. I know this is a negative comment to make – but – how can we convince our fellow citizens that the building is on fire when we can’t even convince them that it is a good idea to defund NPR?
In general terms, we know it is a good thing to limit our spending to the money we earn. Our government has been spending far beyond the limits of income for some time now, and this is exacerbated because income is decreased during a period of recession, and the spending is increased at the same time, greatly increasing our annual budget deficits.
President Obama’s proposed budget for fiscal year 2011 is 3.83 trillion dollars, and proposed income is 2.57 trillion dollars, leaving a deficit of 1.27 trillion dollars. This will be added to our national debt.
For other information about budgets, debt and deficits: http://www.washingtonpost.com/wp-srv/special/politics/budget-2010/.
Then there is this problem: the current interest rate on our national debt averages 3.2%, which is very low. “Interest payments on the debt are poised to skyrocket over the next decade,” the nonpartisan Congressional Budget Office wrote in its most recent budget outlook report.
The CBO — and everyone else for that matter — assumes that interest rates will rise. Just how quickly is the question. The CBO assumes a gradual rise, and projects that the 10-year Treasury rate won’t hit 5% before 2015. But if interest rates end up being 1 percentage point higher than the CBO assumes over each of the next 10 years, interest costs could go up by another $1.3 trillion, putting total costs at $6.8 trillion.
Of the 3.83 trillion dollars in the 2011 fiscal year budget, more than 2 trillion dollars is mandatory spending, which includes 730 billion for Social Security, 491 billion for Medicare, and 297 billion for Medicaid.
Defense is considered discretionary spending, and the amount in the 2011 proposed budget for Defense is 895 billion dollars. Other discretionary spending is $520 billion dollars. You can see that spending for Social Security/Medicare/Medicaid is, by far, the largest portion of our budget.
If we are going to decrease our deficits and debt, reform of these three programs is essential. Let’s look at Social Security.
American Thinker has a wonderful article by Christopher Chantrill about why Social Security should be easy to ‘fix’ (Hat Tip to Sharon!). http://www.americanthinker.com/2011/03/social_security_isnt_broken.html
Unfunded liability for Social Security alone is about 110 trillion dollars right now. Our Social Security payments go into the Social Security trust fund, and should NOT be counted as general revenue. The trust fund is supposed to be used to pay future benefits. But……..
As of August 2010, there is less being paid into the Social Security Trust Fund than is being paid out to beneficiaries. Social Security is now using its “surplus.” Government agencies that borrowed from the trust fund now have to pay the money back. But they’ve spent it. Where will they get it? More bailouts (taxes) coming. And here is a “must read” about the problem. Your payroll taxes are going into a bottomless hole!
You do not have your own SS fund, but there really IS a Social Security trust fund that collects our payroll taxes and “invests” the “surplus” (whenever receipts exceed expenses, NOT a surplus of what is needed to pay all anticipated claims). It’s called the Old-Age and Survivors Insurance and Disability Insurance Trust Funds. The “invests the surplus” is one of the big problems.
When there IS a “surplus,” it is loaned to the federal government to pay for other programs. In return for this loan, the trust fund gets IOUs in the form of special-issue, interest-paying Treasury bonds. The interest isn’t paid in cash, however; the Treasury issues the fund additional bonds for the interest amount. In 2006, the fund was credited with more than $102 billion in interest; the total value of the securities is about $2 trillion. That’s it. Just Treasury bonds. No cash. Here’s some gov info about this: http://www.ssa.gov/OACT/ProgData/investheld.html. Here’s the latest statement from SS: https://www.socialsecurity.gov/pressoffice/pr/trustee10-pr-alt.pdf
The present situation wouldn’t be such a disaster if Social Security hadn’t expanded far beyond its original mandate of providing retirement benefits for workers. In 2007, about 30% of Social Security’s total benefits were paid to retirees’ dependents and survivors, and to disabled workers.
Here’s a summary of the add-ons over the years:
In 1939, Congress added payments for the families of workers who died, and for retirees’ dependents (such as stay-at-home spouses).
In 1956, Congress added disability benefits for workers.
In 1965, Congress established Medicare to pay health-care costs for seniors.
In 1974, Supplemental Security Income or SSI was established as a welfare program for low-income seniors and people with disabilities.
Of these add-ons, however, only disability benefits and payments to dependents, widows, and orphans — actually affect Social Security’s bottom line. Medicare has its own fund, and SSI comes from the general fund.
If the disabled, the dependents and the survivors were booted out of the system, Social Security could almost pay for itself. The system would be more than adequately funded if only retirees were receiving benefits, as was intended. Trying to turn back the clock on these benefits, however, is unlikely. Regardless of how you feel about the added benefits, kicking out all the widows, orphans, disabled and stay-at-home spouses is politically untenable.
So we’re back to choosing from the same controversial list of options: cutting benefits, raising taxes, and/or privatizing some or all of the system.
One of the easiest ways to “fix” social security is to extend the retirement age. Instead of retiring at 66, I would retire at, say, 67 or 68. I think I could live with that decision, as long as I was healthy enough to work.
Another way is to increase payments to Social Security by raising or eliminating altogether the contribution ceiling, which is now set at $106,800 gross income per year. Raising or eliminating the ceiling would be no sacrifice for me at all, unfortunately! This is not fair to those earning above this amount, and it is definitely not fair to employers, who would have to match contributions. Alternatively, or additionally, the percentage paid could be raised for all employees. This is a tax increase for every employed American citizen AND every American employer! I could live with a small increase in my taxes for Social Security, but is it a good idea?
Privatizing some of Social Security seems fair to the people who have been contributing all of their working lives. Is it fair to a person who worked for forty years, paying into Social Security, who dies at sixty, and never collects a dime? If he had life insurance, he doesn’t even get a death benefit! Assuming our hypothetical taxpayer lives, shouldn’t he have some say over how his contributions are invested?
I confess that I do not know what is best, or what alternatives our political representatives will choose, if any. I fear that any radical change will meet such opposition that they will not be able to pass the legislation, but radical change is required.
None of us can avoid having our ox gored. It will happen whether or not our representatives decide to take effective action on the budget.