As baby boomers age and life expectancies rise, the strain on the current Social Security program continues to mount. Arguably the nation’s most crucial safety net, Social Security will run out by the year 2029. In 2012, Social Security payments will begin exceeding receipts, leaving millions of Americans short of retirement checks. Yet President Clinton evaded this issue during his first term in the Oval Office. At that time, tackling Social Security spelled political suicide. But a strong economy and an $8 billion budget surplus this year prompted legislators to examine the ill-fated system. Last month in Kansas City, Mo., Clinton and Congress members officially kicked off the national debate on Social Security. The public forums proposed by Clinton will last for a year and a White House conference in December is also tentatively planned. Now is the best time for Clinton and legislators to generate practical remedies for a very complex problem.
Since its establishment in 1935, Social Security has served as an antipoverty measure. The main beneficiaries include low-income earners, surviving family members and retired workers. However, the current system also has its weak points. The Social Security trust fund merely consists of treasury bonds — a form of IOUs that can only be redeemed if the government raises taxes, cuts benefits or borrows trillions of dollars. In this system, workers are charged payroll taxes to support Social Security beneficiaries. But the proportion of workers to retirees has fallen from five-to-one in 1960 to three-to-one today. By 2030, there will be less than two workers for every recipient. The increasing life expectancy further adds to the depletion of the program.
Fortunately, legislators indicate that something might actually be done about the ailing Social Security system. Last month, Sen. Daniel Patrick Moynihan, D-N.Y. introduced legislation that could partially privatize the system. Under his bill, payroll taxes would be slashed, the retirement age would increase to 68 by 2023, and optional personal retirement accounts would be established. The retirement accounts would allow individuals to earn interest from their wages. Others such as Rep. Nick Smith, R-Mich., advocate a completely privatized system. Privatization would allow Americans to invest all of their payroll taxes into stock markets and personal accounts. Many other proposals, which range from raising the payroll tax to reducing Social Security payments to the upper class, are being discussed in Congress. So far, the proposal to partially privatize Social Security is the best solution because it complements the system rather than replaces it. But partial privatization would be a drastic change, so planners must consider all the side effects.
With the national dialogue on Social Security underway, politicians can resolve a divisive and complicated problem before it reaches a point of crisis. Critics have dismissed the discussions as a mere talkathon that could amount to no legislative action. However, House Speaker Newt Gingrich said changes to Social Security will most likely occur as early as next year. Clinton will also present his own bill in early 1999. But before any modifications are made to the system, conscious and lengthy deliberations must first develop.