Minutiae
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Sunday, March 21, 2004
This is a superb commentary on Social Security. This is the testimony given to congress by one of the authors.
"The current fiscal imbalance is so large that it needs to be put into context. As an example, Table 1 shows that the government could, in theory, put the country on a sustainable course by raising the payroll tax on all uncapped earnings by 16.3 percentage points starting in 2004 and lasting forever. That would forever more than double the amount of taxes that are already being paid by employees to the Social Security and Medicare systems and the dollar-for-dollar matching paid by their employers. But even this calculation is conservative in that it assumes that taxes are raised on uncapped earnings, which is a larger tax base than used by Social Security. If capped earnings were taxed, an even larger tax rate would be needed.

Waiting just four years (until 2008) to implement this type of tax hike would require a permanent tax increase of 17.4 percentage points to close an even larger imbalance of $51.5 trillion. The fiscal imbalance grows by about $1.5 trillion each year between 2004 and 2008 (Table 1). That number is about ten times the deficit that the government officially projects for 2004. As with government debt, the fiscal imbalance grows with interest if no reforms are taken.

Such tax increases, of course, would probably put our economy into a tailspin. And so the above example is not intended as policy advice. But these calculations show the magnitude of the current fiscal imbalance and emphasize the need for real reform today. The longer the delay in reforming the nation's fiscal policies, the more drastic are the changes required.

Let me describe the current $43.5 trillion shortfall another way. Instead of raising payroll taxes, suppose we eliminate half of the rest of the federal government in 2004 except for Social Security and Medicare. In particular, we eliminate half of the federal government's spending on the military, homeland security, roads, education, veteran's affairs, agriculture, labor affairs, NASA, commerce, law enforcement, Medicaid, etc. everything expect for Social Security and Medicare. And we do this not just in 2004 but forever. Also suppose that we don't change federal taxes so that people continue to pay taxes as projected. Now, for example, the $150 billion deficit projected for 2004 would turn to a $600 billion surplus! That sounds like a lot of money. But we would still accumulate surpluses too slowly over time. In particular, we would still be left with a fiscal imbalance of about $3.2 trillion. In other words, shutting down half of the rest of government forever is not enough to put the U.S. fiscal policy on a sustainable course.

We need to do more than just balance the budget today. We need to make large changes that place Social Security and Medicare, in particular, on a sustainable course in order to avoid placing huge burdens on future generations in the form of higher taxes or reduced benefits."
Doesn't this just piss you off? My generation is forced to pay into this ponzi scheme, yet it's absolutely certain that there will be no money left for us when we need it. Or we'll be saddled with huge tax increases during our own prime earning years, while we try to plan for our own retirements without social security. This is not fair. This is not right. The window on least-painful solutions is rapidly closing. Whoever sits in office during the next few years will have to make these decisions. Fortunately there are some fairly easy adjustments that would make a huge difference. However they would be a reduction in benefits. Someone just needs to ask the boomers in plain english if they'd rather deal with 10% less now or leave their kids to pay 20% more forever. Insisting on the same benefits is actively fucking your children. The money just isn't there. Or we could all just learn to live with 50% less government. (Guess what my ideal solution is?) It's time for the rest of us to insist that Social Security no longer be the third rail of politics. It'll just hurt worse the longer we put it off. Even then it seems likely that several politicians would have to sacrifice their political careers to achieve a change.

posted by Rachel 3/21/2004
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