Of course that's not realistic. But yet everyone who writes or says Social Security will be broke in 2033 is repeating the same sort of unrealistic prediction. Every one of you who advocates removing the cap, expanding FICA to Capital Gains Taxes, raising the retirement age, or whatever.... to fix Social Security is buying into the same thing. Take the jump, here is where I back up that claim:
Each year the Social Security Trustees issue a report on the financial condition of Social Security. Within that report are 4 different projections: low cost, intermediate cost, high cost and a stochastic model. 2033 is only from one of those projections.
As the recovery from the 2000 recession got under way the SS Trustees reported in 2001 that under the intermediate scenario, SS was good thru 2038, from 2037 in 2000. As the economy recovered that date was pushed back to 2042 in the Trustees 2004 report. GDP growth in those years was 2001=1.09%, 2002=1.83%, 2003=2.55%, 2004=3.48%. Not stunning growth, but yet enough to add 5 years to the intermediate assumption.
It is very important to note that the Social Security Trustees have a responsibility to produce a conservative projection. Sort of like a car mechanic who writes an estimate for a car repair.
Your transmission is blown and its going to cost $1,200.
Then you go to pay the bill and it says $1,167.
Well if the bill was $1,500 you might be pissed.
So if the Trustees tell you SS will go broke in 2050, and come 2051 its still fully funded, thats fine. But if they told you SS was broke in 2050 and it went broke in 2047, well you might be pissed. SO I want you to look at the 3 basic scenarios, low cost, intermediate cost and high cost, ok? Heres the link. Notice the part where the Trustees write:
The Trustees estimate that the trust fund will not be exhausted within the projection period.That projection period ends in 2090.
I'm not going to bore you with all the factors that go into making 2090 possible, but I will list the large order factors:
1) Job creation.
2) Wage growth.
Thats it. Sure its not that simple, workforce growth plays into the calculations, as well as how long people live and other factors, but if we don't create jobs and raise the minimum wage, then the small order factors wont matter. There are by most accounts 22 to 27 million under/unemployed people in the US. Stimulus spending of 1 trillion dollars would put most of them to work, about 20 to 25 million. That's a lot more FICA. And raising the minimum wage, well that's more FICA. GDP growth of at least 2.8% over 20 years can get the trust fund thru 2062, when the Boomers will be dead, then assets grow. Most estimates tells us that the days of 4-5-6-7-8% GDP growth are gone, but that as much as 3.5% is realistic. We just need to see GDP growth average 2.9% and we have a much improved chance of seeing the Social Security Trust Fund able to pay out 100% of benefits thru the magic date of 2062.
The Easiest Way to Improve Social Security
There is only one change to Social Security that I advocate. After the 1983 deal the income cap was set at 90%. Today its @ 84%.
90 percentile today is about $186,000.
84 percentile today is set at $110,100.
Setting the income cap back to 90% would mean, in rough numbers, $2,000 more per year for the average senior, and the senior getting the top benefit of nearly 31k would see about a 4k increase. And SS would see a small net increase in revenues. Who is better than me? I'm improving revenue and giving a nice COLA to seniors and those who are Veterans.
Now in light of the picture I have painted of Social Security how does that Chained CPI thingy look like now? Like the POS idea it is? Good, I'm glad you think so.
The fact of the matter is there is nothing wrong with Social Security that a good economy wont fix. And I would prefer it, if for now, no one touched my Social Security. Ya'll got my back?
To paraphrase Charlton Heston..
Colonel George Taylor: Take your stinking paws off my Social Security, you damned dirty Republican.
9:44 AM PT: When I say SS might go broke on a certain date, I mean not being able to pay 100% of benefits. Sorry for the confusion.
9:55 AM PT: More accurately:
In the current Trustees report under the intermediate assumptions, they state the Trust Fund will be depleted in 2033. In my laymans terms I call that broke. When actually FICA revenues will be enough for something on the order of 75% of benefits to be paid. But to believe that assumption you have to believe we will have 20 more years of recession. A Mad Max type of scenario.