COLUMN: Social Security is in better shape than you may think

Thursday, July 29, 2010 | 12:01 a.m. CDT; updated 12:38 p.m. CDT, Thursday, July 29, 2010

Editor's note: George Kennedy will be taking the next few weeks off. Look for his column to return at the end of August.

My fellow liberals are beginning to worry about Social Security. Now it’s true that liberals are worriers by nature. That’s one reason we favor things like health insurance for everyone and guaranteed pensions. Sometimes we see trouble that’s really a mirage. This time, though, I’m worried that the worriers actually have something to worry about.

(Disclosure: A critic might say I’m even more biased than usual on this because I’m a recipient. My snout is in the trough. On the other hand, nobody’s even suggesting taking anything away from us current oldsters. After all, we vote. They’re really talking about hurting the next generations.)

Here, for just one example of worry, is William Greider, a smart guy and a certified lefty, writing in The Nation:

“In setting up his National Commission on Fiscal Responsibility and Reform, Barack Obama is again playing coy in public, but his intentions are widely understood among Washington insiders. The president intends to offer Social Security as a sacrificial lamb to entice conservative deficit hawks into a grand bipartisan compromise in which Democrats agree to cut Social Security benefits for future retirees while Republicans accede to significant tax increases to reduce government red ink.”

He points out that the co-chairs of that commission are Republican former senator Alan Simpson and Democrat Erskine Bowles, who as an aide to Bill Clinton negotiated with Newt Gingrich to partially privatize Social Security. That deal fell apart. Maybe the current worries will blow away, too; but it’s probably significant that the No.2 Democrat in the House of Representatives, Steny Hoyer, has talked about raising the retirement age.

The apparent rationale is that Social Security is a drag on the federal deficit and is headed for bankruptcy. Both those beliefs, it turns out, are wrong.

I went to the journalist’s favorite research tool, Google, in search of actual, credible information. On the Social Security Network website, sponsored by the nonpartisan Century Foundation, I found some.

In fact, Social Security has a current budget surplus of $2.5 trillion. The best current projection is that the surplus will continue to grow for another 15 years or so, and  pay full benefits until at least 2037. After that, barring changes, it will still be able to pay 75 percent of promised benefits forever, or at least for the 75 years the Social Security Administration is required to project.

One change that could happen, of course, is that the economy could start growing again. That would push those dates farther into the future. But let’s keep worrying.

Another fact is that the current average benefit is just $13,860 a year, which is not far above the official poverty level and places the United States 25th among the 30 richest nations. A poll taken last year showed that nearly half of recipients rely on Social Security for most or all of their income.

When Rep. Hoyer and others point out that we’re living longer — and thus drawing Social Security longer — another fact becomes relevant. That is that while the life expectancy of a white female born today is 80.6 years, the life expectancy of a black male born today is 69.7 years. Wealthy Americans on average live 8 years longer than the poor.

So it seems clear to me that we and the National Commission should be focused on ways to strengthen Social Security, not cut it. That, Century Foundation experts say, wouldn’t be so hard. One way, for instance, would be to lift the cap that now limits the payroll tax to the first $106,000 of income. Another would be to raise that tax by just 1 percent. Another would be to dedicate the estate tax to Social Security.

I have a feeling – call it a worry – that it’s not too early to tell our rulers to keep their hands off our children’s Social Security.

George Kennedy is a former managing editor at the Missourian and professor emeritus at the Missouri School of Journalism.

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John Schultz July 29, 2010 | 2:00 a.m.

Social Security taxes mean people are able to save less for their retirement privately and able to pass less money to their heirs for education, a home, or other worthy endeavors. Take the following example and let me know if you would rather save for your own retirement and control the money, or hope the average yearly benefit you cite of $13,860 pays for the good cat food.

The median income in the US is $25,149 according to the Census Bureau. 6.2% (Social Security tax from your paycheck, and just the employee's half!) of that figure annually would be $1,559. Putting that amount into a Roth IRA from age 21 until age 65 with an 8% return gives you a tax-free nest egg of $601K, or about 43 years of the average cited Social Security benefit. A 5% rate of return nets you almost a quarter-million. What's in your wallet?

(Report Comment)
Ellis Smith July 29, 2010 | 5:06 a.m.

The underlying premise for Social Security seems to be that the vast majority of American citizens are too stupid and/or too profligate to save for their respective retirements; therefore, the nanny state forces individuals and their employers to contribute to what is in fact a legalized Ponzi scheme.

Those folks who mistakenly thought their contributions would, alone, support them in their "declining years" tend in their retirement to be "hurtin' for certain." I would dislike having to exist only on monthly Social Security payments.

Poor old Ponzi! Google him. He was simply ahead of his time.

(Report Comment)
John Schultz July 29, 2010 | 9:45 a.m.

Another thing I forgot to mention is that in my most recent statement of project benefits from the SSA the language they used to describe the future of the program was much less glowing than the words in this column. Unfortunately, that paper's long been shredded but perhaps someone has theirs around still?

(Report Comment)
John M. Nowell, III July 29, 2010 | 12:05 p.m.

I appreciate your frankness, and your sense of humor, however your information is incorrect.

"In fact, Social Security has a current budget surplus of $2.5 trillion. " Goerge, there hasn't been a surplus or "lock box" since LBJ raided the SS trust fund to fund the Vietnam war and replaced the money with worthless government I.O.U.s, backed by the tax payers ability to send more money to Washington than it paid out in benifits. The money withheld from paychecks goes directly into general revunue, and both parties have become used to spending every nickle of it each budget year, and adding more I.O.U.s to the SS balance sheet.

2010 will be the first year that the feds. pay out more in benifits than it takes in, partly due to the recession.
I find it interesting that many federal, state unions have exempted themselves from participating in SS. They have a better system, investing in the stock market and bond funds. Every time reform is mentioned, the A.A.R.P. lobbists go into action and and it's swept under the rug.

I favor the idea of allowing the younger workers to opt out of SS and a cetain age and below, and honoring commitments to those older until SS is no longer needed. But until politicians stop running for reelection and start doing what is best for their constituants and the nation, it will never happen.

The feds have over 67 Trillion dollars in future obligations for federal workers pention and benifits that there isn't any money set aside for. George, we're printing money that we cann't back up. We're broke!

(Report Comment)
Tim Dance July 30, 2010 | 1:17 a.m.

Folks, don't listen to these people. These are the same people that will tell you the SS sky is falling and that the stock market is the way to go for retirement. However, let me remind you that during the Bush administration, unscrupulous fund mangers and brokers that were knowingly selling "sh**y" deals (as McCaskell was fond of saying during a senate hearing) in reference to mortgage securities.

Don't let these wingnuts force you to gamble all your retirement.

(Report Comment)
John Schultz July 30, 2010 | 1:32 a.m.

Very classy Tim, as I've come to expect from you. Do you have a snide and derisive term similar to wingnuts that I can use for progressives who ignore the realities of compound interest, dollar cost averaging, and other basic economic facts? Is it wrong for people to provide for their own retirement and the financial legacy of their descendants without being forced into a federal program with an abysmal rate of return, a program that the courts have ruled you have no ownership stake in? I would much rather invest my own money, using instruments I'm familiar with after talking to my financial advisor.

(Report Comment)

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