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Social Security: Worry About Bomb Size Not Fuse Length

The Social Security Trustees recommend that lawmakers address the projected trust fund shortfalls in a timely way in order to phase in necessary changes gradually.

By Brenton Smith

Last month the Social Security Trustees released their annual report on the finances of Social Security with little fanfare. As usual, the people responsible for the stability of this valued program urged Congress to deal with how the program will pay its bills over the long-term.

The wording of their recommendation hasn’t changed in five years. “The Trustees recommend that lawmakers address the projected trust fund shortfalls in a timely way in order to phase in necessary changes gradually and give workers and beneficiaries time to adjust to them.” Over that period of time, Congress has consistently ignored the advice.

The “shortfall” measures the size of the problem emerging in Social Security. It represents the sum of money invested today that, along with interest, would fill in the gaps between the revenue and expense of Social Security over the next 75 years. That figure grew by nearly 10 percent over the course of the past year.

That growth should be breathtaking. Social Security created more in unfunded liabilities over 2016 than it collected in combined revenue. Instead of acknowledging these frightening dynamics, the coverage generally focuses on when the consequences should arrive. In other words, we are more worried about the length of the fuse rather than the size of the bomb.

That is a fairly hazardous strategy given the rate at which the bomb is growing. In the latest report, the trustees projected that the system should pay scheduled benefits until 2034 at which point the system would subject payment checks to a reduction of 23 percent.

Where is Washington?

Even this snippet of news should push two concerns through the partisan bickering. First, 17 years is not sufficient time with which to address these issues ‘gradually.’ For example, if lawmakers increase the retirement age gradually, the normal retirement age will not reach 68 until nearly 2050. Second, we expect about half of the retirees turning 69 today to be alive when benefits are reduced.

These dynamics expose a national conundrum. How is it possible that the most valued program in the government’s array of functions heads to certain crisis, without any leadership from Washington emerging on the issue?

More Solutions, Less Consensus

Typically we blame seniors and their right to vote, comparing the issue of Social Security to an electrified third rail — touch it and you die in a political sense. It sounds reasonable, until you consider that vast majority of voting aged Americans expect to be alive in 2034, including millions who have already retired. These voters are not choosing stalemate.

The answer is probably more simplistic. Congress is supposed to build consensus, distilling many ideas into a single concept that appeases the majority of Americans. Compromise is hard work, and it is not getting done.

Part of the stagnation stems from the volume of policy options. Today, the Congressional Budget Office tracks at least 36 different policy options, which serve as building blocks for an infinite number of solutions. Each of these policy options competes for the affections of voters at the expense of its rivals.

On top of actual policy options, Congressmen face voters who are armed an array of “fake news” policies. Millions believe that the money was stolen. Other sets of millions believe that we just need to tax someone more. Others believe that Social Security is simply the victim of demographics that will recycle over time.

These voting blocks are sufficient to bring the consensus building process to a standstill. It is virtually impossible to get the voters who subscribe to the theft meme to consider increasing taxes because they fully believe that any additional revenue will be stolen as well. Those who believe that more tax revenue will solve the problem are unlikely to consider benefit cuts.

In response to this alt-fact atmosphere, politicians In D.C. are mainly interested in avoiding the subject entirely; maybe in hopes that some of the weaker ideas fall out. There is however no boundary of fact for the discussion to rein the debate to a finished product. No one has stolen your money. Simply throwing more tax dollars does not fix the program. It does not even officially kick the can anymore. The passing of the Boomers will not fix the program.

The Cost of Doing Nothing

Social Security exemplifies Queuille’s axiom: Politics is the art of postponing decisions until they are no longer relevant. In the case of Social Security that means that we will do nothing until the crisis defines the solution. That possibility should worry anyone who is concerned about retirement savings or Social Security’s long-term prospects.

Brenton Smith writes on all aspects of Social Security reform, translating the numbers and jargon of the issue into terms that everyone can understand. His work has appeared in Forbes, MarketWatch, Fox Business, The Hill, and a number of regional newspapers. To read more of his reports — Click Here Now.

This piece originally ran on Orlando Sentinel

 

 

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