You may have heard that our Social Security system is headed for trouble when the generation known as the baby boom begins to retire. You heard wrong.
In fact, the first baby boomers will begin to draw Social Security benefits just four years from now. Maybe then this ridiculous urban legend will finally be put to rest.
You don’t have to take my word for it. Anyone with a computer and a modem can go to www.ssa.gov and read the Social Security Trustees’ report. It shows that the program can pay all promised benefits through 2042, without any changes at all. That’s nearly four decades. Most of the baby boomers will be dead by then.
If you’re the type who likes to worry about unlikely events that may occur in the far-off, science-fiction future, you’re still going to have to find something else to worry about. The Social Security Trustees plan for 75 years, and even for this immensely long period of time, the much-hyped gap in financing is quite small relative to our economy. In fact it is less than three-quarters of one percent of our income.
To put this in perspective, consider that the average wage will be about 45 percent higher – after adjusting for inflation – in 2042 than it is today. Will we be willing to pay a little more for our most popular federal program, in order to finance the retirement of people who are living longer? I would guess yes, because our population has been aging for decades and Americans have always been willing to come up with the money. The additional funding would be less than our payroll tax increases in the 1950s, 1960s, 1970s, or 1980s.
But in any case this will be decided by future generations. In the mean time there’s no cause for concern. The Social Security Trustees are not trying to paint an overly-optimistic scenario. The numbers above are assuming less than 2 percent annual economic growth, the slowest in our history.
And four of the six trustees that signed off on these projections were appointed by President George W. Bush. The Bush administration has tried to paint as dismal a picture as possible of Social Security, in an effort to partially privatize the program.
A number of verbal and accounting tricks have been used to convince millions of Americans that Social Security needs “reform.” One is to lump the program together with Medicare, which has costs that are projected to rise explosively. But Social Security is a separate program from Medicare, financed by different taxes.
And even Medicare’s problems are not due to the government program itself. Nor are they primarily a result of demographic changes, such as the baby boomers’ retirement. Medicare’s cost increases are driven by the cost of health care in the private sector, which is rising once again at an unsustainable rate.
In fact, the United States now spends 15 percent of its income on health care – almost twice as much as the average for other high-income countries. This is a serious problem that will have to be fixed in the not-to-distant future. But it has little to do with demographics, and nothing to do with Social Security.
There are other disturbing economic trends: besides rising health care costs and an increasing share of the burden being shifted to employees, most Americans are facing increasing job and retirement insecurity. Over the last 30 years we have also suffered the most massive re-distribution of income in American history, in which most of the labor force barely shared at all in the gains from economic growth.
There are plenty of economic problems to worry about, but Social Security is not one of them.
Mark Weisbrot is co-director of the Center for Economic and Policy Research (www.cepr.net), in Washington, D.C. Reprinted from Knight-Ridder/Tribune newspapers with the permission of author.
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