Despite being one of the most well-liked government programs in the United States, Social Security does not come without problems. Although the program as it currently exists has a very clear expiration date and lawmakers from both parties appear willing to fight for it, there hasn’t been agreement on how to address the program’s flaws in order to prolong its lifespan, despite the fact that it has been helping seniors stay afloat for years.
Legislators and experts agree that a change is necessary to make the program sustainable over the long term. The challenge is figuring out what changes will satisfy the needs of present retirees without putting future recipients at a disadvantage.
Romina Boccia of the Cato Institute has prepared a damning analysis outlining all the ways the program is not just failing but is really a Ponzi scheme that relies on present employees to pay for former employees who are now receiving benefits. Promissory notes or IOUs that represent claims on future tax income make up the majority of the trust fund.
Prior to 2010, however, Americans contributed more in Social Security taxes than the program distributed in benefits. The problem arose when this surplus was given to the other branches of the federal government to spend in exchange for IOUs, rather than being saved in the Social Security Trust. Since then, the demographics of the nation have undergone significant change, and the disparity between income and expenses has been closed.
The Treasury Department will have to borrow an estimated $4.1 trillion plus interest to pay the program between now and 2033, when the Trust funds formally expire, in order to cash in those IOUs. According to Boccia, it’s similar to taking out a loan to settle credit card debt.
The Old-Age and Survivors Insurance (OASI) Trust Fund will be able to pay 100% of all planned benefits until 2033, according to the Social Security trustees’ most recent annual report. This is consistent with the report from the previous year. By that point, the fund’s reserves will be exhausted, and ongoing program revenue will cover 79% of scheduled benefits.
Social Security Reform
Numerous recommendations have been made to try to prevent the program from failing, such as reducing benefits, raising taxes or the retirement age, or changing it back to a means-tested welfare program. However, none of these ideas have even been given any thought before being abandoned.
Additionally, Pew Research revealed that a sizable majority of Trump supporters (77%) and Harris backers (83%) opposed any cuts to the Social Security program, demonstrating the bipartisan nature of the problem. Sixty-six percent of Americans agreed that Social Security needed to be reformed, according to the Aredfield & Wilton Strategies survey. However, 69 percent of respondents of all ages opposed reducing Social Security benefits, 52 percent opposed raising the retirement age, and 44 percent opposed raising worker income taxes.
There is no denying the program’s popularity, and because everyone pays taxes, Americans have a vested interest in its continuation that many other programs are unable to match.
According to Boccia, policymakers should concentrate on lowering the rising cost of payments in order to free up funds for benefit improvements that fulfill Social Security’s original goal of keeping seniors out of poverty if they have any chance of bringing the program back to long-term solvency. Reducing Social Security benefits and the burden they place on employees should be the top priority of reforms.
This means that, even if some Americans may already be doing so, they should concentrate on getting ready to pay for their retirement on their own. Gallup reports that 61% of non-retirees between the ages of 30 and 49 do not expect they will receive Social Security benefits, while 37% do.
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