A debate has been raging over the future of the Social Security system. On one side, you have people recognizing the real crisis facing the country, one that’s powered by a nasty combination of wasteful spending within the Social Security system and a very significant demographic shift that puts the whole system on the brink of insolvency.
On the other hand, you have “reformers” whose ideas simply consist of throwing more money into the system without doing anything to address its structural flaws.
Vermont Sen. Bernie Sanders, for instance, said that his idea for reform involves “scrapping the cap that allows multi-millionaires to pay a much smaller percentage of their income into Social Security than the middle class.” Along with that, he wants to actually expand benefits rather than explore the idea of upping the retirement age or reducing waste.
That proposal isn’t exactly new. Senator Sanders wrote when he first proposed this legislation in 2011 that this “is exactly what Barack Obama proposed to do when he campaigned for President back in 2008.”
The problem with Senator Sanders’ plan is that the U.S. is undergoing a major demographic transition. Our population keeps getting older, and so raising taxes is not a sustainable solution for keeping the system afloat.
Over the next decade, the Congressional Budget Office predicts deficits of up to $2 trillion for Social Security. Eliminating the cap would turn those deficits back into surpluses for about 10 years. But by 2024, the system would be running deficits again, and the deficit would be $3.6 trillion over the next 75 years.
Sanders’ plan means that Americans would be paying more than ever into the system to keep it solvent, only to find it still out of money when they get to retirement age.
What policymakers like Sen. Sanders fail to realize is that Social Security, as a system, is currently structured to cost more than we could ever put into it. Solutions, therefore, are going to have to be more comprehensive than just increasing spending.
For instance, our generation could have the choice to opt into the program rather than being forced to pay with no guarantee that we’ll receive benefits in the future. Or, the system could save money by raising the retirement age, paying out less money to wealthy retirees, and taking steps to curb the billions of dollars in overpayment that occur every year.
The Social Security system was established 80 years ago when life expectancies, demographics, and the economy looked a lot different than they do today. Eighty years ago, you had 41.9 workers per Social Security beneficiary. By 2010, there were only 2.9 workers, and that number is expected to continue to drop for the foreseeable future.
Add all of those figures up and the math is clear: The present approach to Social Security just isn’t working in today’s world and may lead to bankruptcy by the time our generation reaches retirement age.
What the system needs is not to have more money thrown into it without regard for taxpayers. If Social Security is going to remain in existence, it needs a clear vision for keeping it solvent for generations to come. And ultimately, that means it needs a structural reform to make it work not just for seniors today, but also for working Americans today.