Social Security’s $30 Trillion Fiscal Time Bomb

Daniel J. Mitchell

I don’t give the issue much attention on this blog, but I’m very interested in Social Security reform. I wrote my dissertation on Australia’s very successful system of personal retirement accounts, for instance, and I narrated this video below on Social Security reform in the United States.

Daniel J. Mitchell

Daniel J. Mitchell is a top expert on tax reform and supply-side tax policy at the Cato Institute.

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28 Comments So Far

Edd Wrote: Aug 14, 2012 10:07 PM

Privat accounts are a good idea. SS is not a Ponzi scheme. No one is getting rich from SS. SS as originally concieved was just that , SS for seniors who for the most part paid into the system all their working lives. I paid in to support the needs of the previous generation, my kids will support my generation. There is nothing devious or crooked about that.
Remember, there was always a surplus until our corrupt Congress raided the fund to pay for votes by adding support for disabled, SSA, etc. These programs should be covered by the Dept of Health and Human Services, but then Congress would have to raise the debt to pay for the programs, instead of stealing the money from SS, which goes virtually unnoticed.

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Blair31 Wrote: Aug 14, 2012 6:45 PM

Ronald Reagan, George H.W. Bush, Bill Clinton, and George W. Bush, were more free market than
Barack Obama. Social Security is broke. If it was a private system, it would be foisted off onto the PBGC. I'm all for telling Bernie Sanders, Vermont's Socialist Senator, screams "DON'T PRIVATIZE
SOCIAL SECURITY!" Why not? We have a Hobson's Choice coming here. Either we raise taxes and cut benefits, or cut benefits and raise taxes, and that's not good. Private accounts would be a better choice. If they're good enough for Chile and Australia, they should be good enough for us.

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Kenneth414 Wrote: Aug 14, 2012 11:07 AM

Social Security is not the problem. Think about the 5 trillion extra Obama has spent. That is 6% of the problem. Every year we are spending double on health care as every other developed nation and they live as long. By paying for Canada's Heath Care in return for them managing ours we would save over 1 trillion dollars a year or 30% of the problem over 10 years. A teacher is worth about $50,000 a year including benefits. Why do we pay $250,000 per classroom per year. Why do we never pay for a classroom? Thats more trillions over 10 years. If we could expand our economy it would double over ten years and double again over the next 10 years giving us a $60 trillion dollar economy with a $15 trillion in debt.Ken Krieger Cape Coral,Fl

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MoreFreedom Wrote: Aug 14, 2012 12:51 PM

Social Security is a serious problem. Did you not see the 30.5 trilion in current dollars of unfunded liabilities? Where do you think that will come from? That is 6X the size of the waste of Obama.

You advocate us paying for Canada's health care, while they manage ours? Who's going to pay for our health care? A ridiculous proposal. Tell you what, you pay for my living expenses and I'll manage yours for you. Same kind of deal.

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Stuart95 Wrote: Aug 14, 2012 4:38 PM

Kenneth is making the point that if Canada would manage our health services so that if we paid no more per person than does Canada (which evidently is half what we pay now), we could pay for Canada's entire health-care bill just out of our savings. Considering that Canada only has 25m people or so, he's mathematically correct.

And that $250,000 we pay per classroom (25 students x $10,000 each) may or may not include capital costs.

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Stuart95 Wrote: Aug 14, 2012 10:59 AM

The SS and Medicare programs are two good examples of how good intentions, left to politicians, will morph into fiscally unsound, vote-buying behemoths. The best thing to do is admit that SS and Medicare are nothing more than income taxes with special names, and kill them.

Replace SS, Medicare, and the 100-plus other ways that you can get money from the federal government today with a single, new, means-tested program called "Welfare". Determine the minimum income society wishes to guarantee Welfare participants, and give them the cash. They can spend it on rent, medical insurance, heroin, food, or Volts.

Slowly implement Welfare so as not to ruin the lives of people who were promised SS and Medicare as pensions and health care.

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Anonymous6826 Wrote: Aug 14, 2012 12:05 PM

Remember we PAID INTO Social Security for 45 years and as long as medicare has been alive. It was Congress who moved it into the general fund and spent it. I don't look at it as a "benefit". I just want return on my investment.

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Stuart95 Wrote: Aug 14, 2012 12:24 PM

To the day he died, my grandfather believed that their was a bank account in DC, with his name on it, that contained his decades of SS contributions. And he never believed that he took out much more than he put in.

The federal government has misled taxpayers about the operation of SS; it's just another tax. Why just another tax? Because there is no relationship between what you pay in, and what you get out. You can pay a lot and receive nothing, or pay nothing and receive a lot, and everything in-between. That makes SS simply a taxpayer-funded entitlement.

You may or may not receive a return on your "investment". If you're hit by a bus today, you and your heirs receive nothing. If you live to be 100, you've gotten a great return.

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lastman Wrote: Aug 14, 2012 5:41 PM

You are correct Stuart95. And the Constitution doesn't authorize any such program.

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big jack II Wrote: Aug 14, 2012 10:57 AM

It's a time bomb because of past and present greedy, incompetent, power driven and flat out crooked politicians who have robbed the fund. They should be in jail but no , if you collect rain on your own property you go to jail, no when it gets this ridiculous America is lost and we are only playing at fixing it.

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Paulus Textor Wrote: Aug 14, 2012 10:06 AM

Watching Social Security hobble towards inevitable bankruptcy is like watching a slow, 100 year train wreck.

All the problems associated with this gigantic Ponzi Scheme have been known and talked about for decades. But the insane program remains popular and politically untouchable.

One of the weirdest aspects of Social Security is that a majority of people like it, yet that same majority, if given a choice NOT to participate, would pull out of the system.

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amonk7 Wrote: Aug 14, 2012 9:41 AM

This is such a non-problem. We just make social security a flat tax on all income, and the "problem" is solved forever. I thought we wanted flat taxes.

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restoreliberty Wrote: Aug 14, 2012 10:45 AM

Let's roll.....let's start with taking the burden off your employer and you can send a check of 15% of your income straight to government today and tomorrow when the tax is raised another 10% you can plan on sending 25% of your next weeks' paycheck......put your money where your mouth is today, why wait??

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Words Wrote: Aug 14, 2012 9:40 AM

You know things are bad when the former U.S. Comptroller General (head accountant) and head of the GAO (Government Accountability Office), David Walker, says we are going to fall like Rome. You have the top number cruncher in the country saying that we are about to fall off the fiscal cliff.

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kenneth416 Wrote: Aug 14, 2012 9:27 AM

I have a simple solution--just eliminate the COLA's. Then, by the time the SS Fund, which is held in the proverbial "lock box," has been exhausted, it would take only a modest injection of money from Dr. Bernanke's Fed to stay current. Of course, by then, a loaf of bread will cost $10, a thin spread of mayo $3, and a slice of ham $20, so a sandwich will cost $33. Oh, I forgot--you will have to walk to the deli, because you can not afford to put the gasoline/ethanol mix into your tiny car, because a gallon will cost $25. Saving grace is that you will be able to get 54.5 mpg, downhill, with a tail-wind.

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Joe 145 Wrote: Aug 14, 2012 8:10 AM

This is where 'We need to pass this bill so that you can find out what is in it' will come back.

The past two attempts to modernize Social Security failed because the people did not want it. The first attempt at national Health Care ran into the same problem. The dictatorial way Democrats got it passed is about the only way that I can see of accomplishing repeal or modernization. Payback can be a real B!. But what is more important is that this is a direct threat to the republic.

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silentCalfan Wrote: Aug 14, 2012 4:37 AM

We are probably stuck with Social Security for the foreseeable future, so the current problem to be solved is the imbalance between taxes paid in and benefits paid out. I suggest that balance can be achieved by increasing the revenues and decreasing the payout.
First, benefits are income and should be taxed the same as other income. Until 1993 only 50% of benefits were taxable. Clinton and the Democrats made 85% of the benefits taxable. I suggest that should be changed to 100%, thus increasing revenues.
Benefits should be reduced for affluent seniors; i.e., means testing. Social Security was intended to stave off destitution. It makes no sense to tax struggling young workers and give that money to seniors who don't need it.

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MatthewlovesAyn Wrote: Aug 14, 2012 7:52 AM

Now let's see, they taxed you for 16 percent of your income from the first paycheck you ever received, and now when they grudgingly return it (and make you feel like your stealing from the next generation), you want them to tax it again. What color is the sky in your world? Why not lower the payment and NOT tax it?

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Pat1392 Wrote: Aug 14, 2012 11:01 AM

Yeah--then they make us feel like welfare recipients when we collect it.

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Chris from Kalifornia Wrote: Aug 14, 2012 7:59 AM

That money we paid in came out of our taxed income. We already paid the taxes on what we paid in. They need to quit giving it to anyone who didn't pay in.

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binc Wrote: Aug 14, 2012 8:04 AM

I would dearly love to ask, say, a teacher this question. Dear teacher, you have contributed to your pension for decades right? The powers that be, seem to have mismanaged your funds for said decades and now your pension fund is close to broke. You have never fully lived up to your means in anticipation for some enjoyment during your golden years and so have saved a considerable nest egg for yourself. You do know teachers that have spent every dime they made because they are fully counting on their pension funds for retirement. You are told that because you have the money you set aside for decades, you will now be means tested and so will receive less pension because of it-all in the name of fairness of course- because those that

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binc Wrote: Aug 14, 2012 8:06 AM

didn't save like you did will be in dire straits because we sorta, kinda lost a lot of your money Your reaction would be......?.

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Pat1392 Wrote: Aug 14, 2012 11:20 AM

1.5 % of the average of your last 3 years salary times your years of service divided by 12

.015 x 70,000 = 1050 x 25 years =26,250 26,250/12=2187.5 = $2187.50 per month.

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binc Wrote: Aug 14, 2012 9:11 AM

Sounds a lot like redistribution to me.

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PresidentDon Wrote: Aug 15, 2012 1:05 AM

Thats like saying, if you withdraw money from your savings account, you should pay taxes on it. We have already paid taxes on this money as we invested in SS. IF we could deduct every penny we've put in first, and only pay taxes on returns that exceed our investment. With the 60% of the population that does not live to 62, where is the investment for them? When the average citizen was paying 10% income taxes, and with employer contribution "15%" that is the scam. But our government has been bankrupt since 1920. The Federal Reserve was the cover for this fraud. INCOME TAXES are not legal. the 16th amendment was never passed, the Supreme Court said in 1920 the 16th did not give Congress ANY NEW taxation rights. Filing a 1040 is Voluntary!

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PresidentDon Wrote: Aug 15, 2012 1:07 AM

Thats like saying, if you withdraw money from your savings account, you should pay taxes on it. We have already paid taxes on this money as we invested in SS. IF we could deduct every penny we've put in first, and only pay taxes on returns that exceed our investment. With the 60% of the population that does not live to 62, where is the investment for them? When the average citizen was paying 10% income taxes, and with employer contribution "15%" that is the SS scam. But our government has been bankrupt since 1920. The Federal Reserve was the cover for this fraud. INCOME TAXES are not legal. the 16th amendment was never passed, the Supreme Court said in 1920 the 16th did not give Congress ANY NEW taxation rights. Filing a 1040 is Voluntary!

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txfighter Wrote: Aug 14, 2012 4:17 AM

No one mentions the "tax cut" that decreased the amount of money withheld from paychecks for Social Security. WHY? Less money going into the Social Security fund when the big cry is "no money in the Social Security account". This was NOT a tax cut! This was to lower the amount of Social Security that people would get when they retired.

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LA-Steve Wrote: Aug 14, 2012 1:53 AM

Privatizing social security would create a tremendous boost to the economy--probably as well as the Reagan tax cuts. While it would never boost the economy enough to cover current obligations, it would offer tremendous benefits to future retirees. I think Walter Williams said that anyone younger than 47 would be better off. We need to hope that congress doesn't screw it up by making people invest in American companies.

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Social Security’s $30 Trillion Fiscal Time Bomb

Daniel J. Mitchell

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