WILLisms.com: Social Security Reform Thursday: Week Sixty-Seven -- Two Percent Is Bigger Than It Sounds.

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Social Security Reform Thursday: Week Sixty-Seven -- Two Percent Is Bigger Than It Sounds.

Thursdays are good days for reform, because they fall between Wednesdays and Fridays.

That's why WILLisms.com offers a chart or graph, every Thursday or so, pertinent to Social Security reform.

This week's topic:

A Refresher On Key Dates.

Incoming Senate Finance Chairman Max Baucus, that pillar of Montana moderation, that red state Democrat, was recently asked about when Social Security Reform would be on the agenda.

His reply:

"Oh, I don't know. The trust fund doesn't reach zero until 2042."

Ugh.

Max Baucus, like so many self-proclaimed moderates in politics today, is a coward. He was once considered a potential target for defection from the steadfast Democrat strategy of "just say no to Bush on Social Security Reform" in 2005. Now, he just wants to defer finding a solution until he's not around anymore. Moreover, he doesn't even have his numbers right.

From the Social Security Trustees:

The annual cost of Social Security benefits represents 4.2 percent of gross domestic product (GDP) in 2005 and is projected to rise to 6.2 percent of GDP in 2030, and then slightly to 6.3 percent of GDP in 2080. The projected 75-year actuarial deficit in the combined Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) Trust Funds is 2.02 percent of taxable payroll, up from 1.92 percent in last year's report. This increase is due primarily to advancing the projection period, the availability of recent data that led to revisions in key assumptions, and to changes in methods. Although the program passes our short-range test of financial adequacy, it continues to fail our long-range test of close actuarial balance by a wide margin. Projected OASDI tax income will begin to fall short of outlays in 2017, and will be sufficient to finance only 74 percent of scheduled annual benefits in 2040, when the combined OASDI trust fund is projected to be exhausted.
Social Security could be brought into actuarial balance over the next 75 years in various ways, including an immediate increase of 16 percent in payroll tax revenues or an immediate reduction in benefits of 13 percent (or some combination of the two). To the extent that changes are delayed or phased in gradually, greater adjustments in scheduled benefits and revenues would be required. Ensuring that the system is solvent on a sustainable basis over the next 75 years and beyond would also require larger changes.

2042, in other words, should have been 2040. Sure, that's quibbling, but the guy in charge of fashioning Social Security policy changes ought to at least have his dates correct.

Why not use 2017, when Social Security outlays begin to outpace Social Security tax revenues. Or why not use the date that outlays begin closing the gap on tax revenues (later this decade).

Even more, why ignore the fact that Social Security now consumes 4.2% of the national economy, and in just six presidential elections, that number will be 6.2%:

In other words, Social Security will eat away 2% more of America's GDP than it does today. That's not two percent of the Federal Budget, but America's entire GDP. 6.2% of 13 trillion (roughly the current size of the American economy) is $806 billion. That's serious money. That's the entire budget of several large governmental agencies, combined.

That's a serious problem.

We can seriously do better.

It's been time for reform. The American people demand it.

The clock is still ticking:

Tune into WILLisms.com each Thursday for more important graphical data supporting Social Security reform.

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Previous Reform Thursday graphics can be seen here:

-Week One (Costs Exceed Revenues).
-Week Two (Social Security Can't Pay Promised Benefits).
-Week Three (Americans Getting Older).
-Week Three, bonus (The Templeton Curve).
-Week Four (Fewer Workers, More Retirees).
-Week Five (History of Payroll Tax Base Increases).
-Week Six (Seniors Living Longer).
-Week Six, bonus (Less Workers, More Beneficiaries).
-Week Seven (History of Payroll Tax Increases).
-Week Seven, bonus (Personal Accounts Do Achieve Solvency).
-Week Eight (Forty Year Trend Of Increasing Mandatory Spending).
-Week Nine (Diminishing Benefits Sans Reform).
-Week Ten (Elderly Dependence On Social Security).
-Week Eleven (Entitlement Spending Eating The Budget).
-Week Twelve (Benefit Comparison, Bush's Plan versus No Plan).
-Week Thirteen (Younger Americans and Lifecycle Funds).
-Week Fourteen (The Thrift Savings Plan).
-Week Fifteen (Understanding Progressive Indexing).
-Week Sixteen (The Graying of America).
-Week Seventeen (Debunking Myths).
-Week Eighteen (Debunking Myths).
-Week Nineteen (Reform Needed Sooner Rather Than Later).
-Week Twenty (Global Success With Personal Accounts).
-Week Twenty-One (GROW Accounts: Stopping The Raid).
-Week Twenty-Two (Millions of Lockboxes).
-Week Twenty-Three (Support for Ryan-DeMint).
-Week Twenty-Four (KidSave Accounts).
-Week Twenty-Five (Latinos and Social Security).
-Week Twenty-Six (AmeriSave).
-Week Twenty-Seven (Cost Of Doing Nothing).
-Week Twenty-Eight (Chile).
-Week Twenty-Nine (Entitlement Spending Out Of Control).
-Week Thirty (Reform Better Deal Than Status Quo).
-Week Thirty-One (Social Security As A Labor Cost).
-Week Thirty-Two (Social Security And Dependence On Government).
-Week Thirty-Three (Social Security, Currently A Bad Deal For African-Americans).
-Week Thirty-Four (Longer Life Expectancies Straining Social Security).
-Week Thirty-Five (Howard Dean & Salami).
-Week Thirty-Six (Growing Numbers of Beneficiaries Draining Social Security).
-Week Thirty-Seven (The Crisis Is Now).
-Week Thirty-Eight (Disability Benefits).
-Week Thirty-Nine (Broken Benefit Calculation Formula).
-Week Forty (German Social Security Disaster).
-Week Forty-One (Crumbling Pyramid Scheme).
-Week Forty-Two (Overpromising, Globally).
-Week Forty-Three (Demographic Wave).
-Week Forty-Four (The Jerk Store).
-Week Forty-Five (Defined Benefit Plans).
-Week Forty-Six (Even The Empty Promises Are A Bad Deal).
-Week Forty-Seven (Our Aging Population).
-Week Forty-Eight (The Tax Increases Required To Cover Social Security's Costs).
-Week Forty-Nine (Much Longer To Get Your Money Back From Social Security).
-Week Fifty (A Vote, At Last).
-Week Fifty-One (We Can Do Better).
-Week Fifty-Two (Socialist Security).
-Week Fifty-Three (China Has The Same Problem, Only Worse).
-Week Fifty-Four (Potential Crisis Size).
-Week Fifty-Five (The Crisis Moves Closer).
-Week Fifty-Six (Big Brother Social Security).
-Week Fifty-Seven (Personal Accounts Are Awesome).
-Week Fifty-Eight (Private Accounts and Presidential Proposals).
-Week Fifty-Nine (The False Promises Of Social Security = Unwise Investing/Saving).
-Week Sixty (Declining Rate Of Return).
-Week Sixty-One (Entitlement Spending Threatens America's Defense Capabilities).
-Week Sixty-Two (Dismal Rates Of Return Only Getting Worse).
-Week Sixty-Three (Lost Time, Growing Shortfall).
-Week Sixty-Four (Solutions & Consequences).
-Week Sixty-Five (Totalization Agreements).
-Week Sixty-Six (The 7.65% Solution).

Posted by Will Franklin · 11 January 2007 05:42 PM

Comments

I am afraid that the problem is that the American people DON'T demand it.

Posted by: LAXPAT at January 12, 2007 09:03 AM

LAXPAT... I think you are right to a degree. What's really bad is that our government has the authority and power to take out funds from hard working tax paying citizens that could be investing those same funds in their own retirement plans. AND they could actually be making a very cushy nest egg. Instead SS is designed to hold us all hostage in our golden years. People can't pay for their needs because they have been forced to pay into a government retirement plan that gives absolutely NO Security. Social Insecurity is what it should be called. AND our elected officials could care less!

Posted by: zsa zsa at January 12, 2007 10:28 AM

Basically, Once big government has it's hands on something it is very hard to undo...

Posted by: zsa zsa at January 12, 2007 10:31 AM