Small Changes to Social Security Could Vastly Improve Its Fiscal Health

(MacMillin Slobodien is the Executive Director of Our Generation, a grouop dedicated to research, educate and promote long-term, free market solutions to today’s public policy concerns.) Today, a growing number of Americans rely on the Social Security program as an income source when they reach an age where they can no longer work. Two thirds of seniors depend on Social Security for a majority of their retirement income, and one third of seniors rely on it for at least 90 percent of their income.   Payroll taxes are supposed to finance Social Security programs.  These taxes are imposed on employers and employees and are collected and paid to the taxing jurisdiction by the employers. These taxes are deposited into a trust fund the Department of Treasury manages.  The way the Department of Treasury manages the trust fund suggests that there is no real money in the trust fund.  Instead, it appears to consist of IOUs that are not worth anything unless people continue to buy United States’ national debt.

Most Americans believe there is an actual trust fund with money in it.  Instead there are IOUs to be paid with debt or current taxes.  For the last 30 years, Congress has raided the Social Security Trust Fund.  More than over $2.6 trillion has been taken from the trust fund to feather the nests of politicians. In addition, the total unfunded liabilities of the United States government exceeds any reasonable ability to pay.  Beneficiaries need financial security and transparency for Social Security.

Social Security is on a collision course to insolvency.  Trustees Report on Social Security released a couple of weeks ago stated that Social Security’s retirement trust fund is on track for insolvency in 2034 while the disability trust fund could run out by the end of 2016. Politicians and the Obama administration should be aware that small changes to the program can make the program solvent for years to come and pave the way for more structural changes in the future. Social Security beneficiaries need Social Security reform proposals that will not increase the retirement age, decrease benefits or increase taxes.

The reforms outlined below if enacted could pave the way to more reforms in the future by making the program more solvent and transparent, two criticisms the current program faces.

• Locking the trust fund and using payroll taxes only to fund Social Security;
• Replacing IOUs with cash, giving beneficiaries more security and transparency;
• Adding Trust Fund IOUs to the National Debt, which would increase transparency;
• Reforming Social Security Disability Insurance by tightening eligibility requirements to focus resources on the most disabled individuals, coupled with incentives to employers to keep disabled individuals working.

Social Security is a program worth saving. It is a program that retired Americans and seniors have come to rely on, and one they paid into over a long working history. Politicians would be wise to reform the Social Security program in meaningful ways.