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Social Security: What’s the Plan and Why it Matters
By
Stephen Ohlemacher
Associated Press
The issue:
Unless Congress acts, the trust funds that support Social Security will run out
of money in 2033, according to the trustees who oversee the retirement and disability
program. At that point, Social Security would collect only enough tax revenue
each year to pay about 75 percent of benefits. That benefit cut wouldn't sit
well with the millions of older Americans who rely on Social Security for most
of their income.
Where they stand:
President Barack Obama hasn't laid out a detailed plan for addressing Social
Security. He's called for bipartisan talks on strengthening the program but he
didn't embrace the plan produced by a bipartisan deficit reduction panel he created
in 2010.
Republican challenger Mitt Romney proposes a gradual increase in the retirement
age to account for growing life expectancy. For future generations, Romney would
slow the growth of benefits "for those with higher incomes.”
Why it matters:
For millions of retired and disabled workers, Social Security is pretty much
all they have to live on, even though monthly benefits are barely enough to keep
them out of poverty. Monthly payments average $1,237 for retired workers and
$1,111 for disabled workers. Most older Americans rely on Social Security for
a majority of their income; many rely on it for 90 percent or more, according
to the Social Security Administration.
Social Security is already the largest federal program and it's getting bigger
as millions of baby boomers reach retirement. More than 56 million retirees,
disabled workers, spouses and children get Social Security benefits. That number
that will grow to 91 million by 2035, according to congressional estimates.
Social Security could handle the growing number of beneficiaries if there were
more workers paying payroll taxes. But most baby boomers didn't have as many
children as their parents did, leaving relatively fewer workers to pay into the
system.
In 1960, there were 4.9 workers for each person getting benefits. Today, there
are about 2.8 workers for each beneficiary, and that ratio will drop to 1.9 workers
by 2035.
Nevertheless, Social Security is ripe for congressional action in the next year
or two, if lawmakers get serious about addressing the nation's long-term financial
problems. Why? Because Social Security is fixable.
Despite the program's long-term problems, Social Security could be preserved
for generations to come with modest but politically difficult changes to benefits
or taxes, or a combination of both.
Some options could affect people quickly, such as increasing payroll taxes or
reducing annual cost-of-living adjustments for those who already get benefits.
Others options, such as gradually raising the retirement age, wouldn't be felt
for years but would affect millions of younger workers.
Fixing Social Security won't be easy. All the options carry political risks because
they have the potential to affect nearly every U.S. family while angering powerful
interest groups. Liberal advocates and some Democrats oppose all benefit cuts;
conservative activists and some Republicans say tax increases are out of the
question.
But Social Security is easier to fix than Medicare or Medicaid, the other two
big government benefit programs. Unlike Medicare and Medicaid, policymakers don't
have to figure out how to tame the rising costs of health care to fix Social
Security.
Social Security's problems seem far off. After all, the program has enough money
to pay full benefits for 20 more years. But the program's financial problems
get harder to fix with each passing year. The sooner Congress acts, the more
subtle the changes can be because they can be phased in slowly.
This page and its contents ©2012
Metropolitan News Company, Inc.
