Salvaging US social security: cuts loom as funds run low
If Congress and President Reagan needed solid proof that they must significantly change the nation's troubled social security system, it now has come.
In its July 6 annual report, the Social Security Board of Trustees warned that the massive social program touching just about every American is in real danger of going broke. Simply put, more money is being paid out to beneficiaries than is being provided by workers and their employers. There is an "urgent need to strengthen the financing of the social security system," the trustees report. Without this, they warn, the system will "barely get through the early 1980s" -- under even the most optimistic of economic assumptions.
Beyond this short-range danger, projections into the 21st century are even more troubling. After the turn of the century, the baby boom generation will have reached retirement age, the average life span will have lengthened, and lower birthrates will mean fewer young workers to support the system. The number of social security recipients compared with workers could rise by as much as 126 percent.
Just last week, the 36 million Americans receiving social security retirement checks got an 11.2 percent cost-of-living increase. This will cost an additional $15.4 billion over the next 12 months.
The reaction from official Washington to this sobering news is not despair, however, but determination to solve one of the nation's most serious long-range economic problems.
"Social security can regain permanent solvency if it does not become a political grenade, being lobbed back and forth for exploitive purpose," says Sen. William Armstrong (R) of Colorado, chairman of the Senate Social Security Subcommittee. Mr. Armstrong's panel begins three days of hearings today.
Four years ago, Congress enacted an $80 billion social security payroll tax increase that President Jimmy Carter said would "guarantee that from 1980 to 2030, social security funds will be sound." That optimistic assessment has proven far from correct.
Rather than increase the system's source of revenue -- by either raising the payroll tax even more or drawing from general federal revenues -- the inclination here is to trim social security benefits in order to regain fiscal solvency.