Social Security insolvency and the baby boomer retirement crisis

SSI Income Analysis

The Social Security income system, both disability and retirement, has been enjoyed by many retired and disabled persons over the years as a source of income for times of retirement and disability. However, insolvency concerns brought on by the crushing number of baby boomers who will be retiring over a relatively short period of time as compared to the number of people that will be paying into the system over the same time period is going to lead to a very hard decision within the next few decades as the amount of money funding the system and the government in general will likely not be enough to fund the benefits for the people that will be expecting them.

The Problem & Its Causes

Social Security itself has been around for the better part of a century. Brought about during the Great Recession and the FDR administration, it has evolved and changed greatly over the year. Originally intended as a supplement to the lives of disabled and retired persons, the income stream is now the sole (or close to it) means of subsistence for many vulnerable retired and disabled persons around the country. The reasons for this reach very deep into the fabric of society and thus will make any wide-ranging or widely-impacting solutions very hard to implement without a lot of blowback.

Values & Beliefs as a Social Problem

One of the major reasons why changing the Social Security program massively, even with the insolvency issues presenting themselves, is that Social Security and the level of benefits currently enjoyed by current beneficiaries is viewed by many in society as a social contract and a benefit that cannot be taken away or massively reduced. The problem with Social Security is not all that different from similar issues with pensions (mostly public) and Medicare, which are facing much the same funding issues. There is a glaring mismatch between the solvency levels of the programs and their ability to provide guaranteed benefits and the expectation of current or future beneficiaries of full benefits being paid regardless of whether the funding is there or not.

Who Has the Power

The power to change this condition with Social Security ultimately resides in Washington DC. The Supreme Court may or may not have to review any legislation concocted and the President of the United States (currently Barack Obama) has veto power over anything not passed with significant enough a majority. However, the initial and ultimate power to construct and pass any major changes would fall with the United States Congress. The current state of affairs in Congress makes any major changes to Social Security very unlikely due to how the power current falls. The Democrats, along with the Presidency, control the Senate although it is by no means close to a super-majority. The House of Representatives has been controlled by the Republicans since the seismic shift in seats that occurred in 2010 during the midterm elections at the time. President Obama has since secured re-election and the Democrats made gains in both the House and the Senate, although not enough to change the balance of power in either house of Congress.

Muddying the waters further is that Social Security is one of those "third rails" of politics. Meaning, it is an issue and a policy that gets absolutely demagogic and vitriolic responses when it is mention in certain circles or in certain ways. Anyone who mentions that the program's expenditures need to be cut is often accused of trying to "kill" seniors or otherwise leave them in destitution. That may seem alarmist and unrealistic but it does happen.

Social Work Implications

Whether it is through intentional and arbitrary cuts or whether it is from the money simply running out, the implications of this debate to the social work sphere is quite clear. The current social work maelstrom that exists surrounding urban and ghetto areas will mushroom to anyone and everyone who relies on Social Security income heavily because their main source of income will either be eliminated or at least reduced. This would bring a lot of weight upon the social work sphere which is already weighed down with a populace that ballooned during the Great Recession and was already at its limits before 2008 when that came around.

Solutions

It is easy to say that social workers could do more but that is a bit unrealistic given what it is at stake and what could truly happen here. In the end, the problem that Social Security is facing will have to be addressed by a society as a whole because the options that exist within the government and social work sphere will not be enough to address this. A lot more retired Americans will have to live with their children and/or in other more low cost arrangements because if the money is not there, it is not there.

If nothing is done, the benefit levels for Social Security will simply have to drop because the money will not be there. As such, the legislative solutions that could be implemented in the interim are to raises taxes to bridge the shortfall or reduce benefits sooner so that the impact is lessened over time. Raising taxes may seem attractive to some but one cannot get blood from a turnip and raising taxes too much would kill economic activity and growth and would lead to a much bigger problem. Lowering benefits on people that greatly need the money, even if the programs original intent was never to be a main source of income, is also not going to be socially palpable either.

That being said, there are some solutions that can be delivered. First, the current cap on Social Security tax, which is not paid beyond $110,100 for any taxpayers (no matter what the income level) needs to be raised (SSA.gov, 2012). The cap in question was removed from Medicare tax back in the 1990's and the same needs to be done for Social Security (SSA.gov, 2012). Second, the Social Security payout system will probably need to be means-tested. People above a certain income/wealth level will probably need to be excluded from the system as the program will have to be focused more on people who have little to no income or other economic resources. Third, eligibility requirements for Social Security Disability need to be reined in so that people are not actively sponging off the system. People that genuinely need the money should get it but people using it as a way to not return to work when they can and should need to be cut off.

Fourth, Social Security recipients may want to live autonomous lives and not live with someone else, but they need to consider that if they did not otherwise prepare for retirement. There is a fine line between having a social contract fulfilled and relying too much on the government when saving for retirement and other responsible financial measures were not taken as they should have been. Fifth, all of the redundant programs that exist in the federal and state spheres need to be condensed and simplified so that money is not wasted where it should not or cannot be spent. Again, help can and should go to people that genuinely need it but people that are actively taking advantage of the charity of others need to be prodded more into self-sufficiency.

Sixth, nearly one half of taxpayers in this country do not pay a nickel in federal income tax and that needs to change. There is something to be said of the poor not paying federal income but when households making north of $60,000 are paying nothing, there is something wrong with that. Many people point to the rich as needing to pay more but they've been paying progressively more and more for generations and if shared contribution and shared sacrifice is truly the goal, then everyone who has the means to at least pay a little something, should do so. As it currently sits, the top 1% of all taxpayers pay more than a third of all income taxes. The top five percent pays nearly sixty percent of income taxes. The top ten percent pays more than seventy percent of income taxes. The bottom 50%, on the other hand, pays 2.25% of all taxes (NTU, 2012).

While this problem is a massive one, it is not a new one. As mentioned elsewhere in this report, the Medicare tax used to have a cap that was identical to the Social Security rate and it was removed in 1993 (SSA.gov, 2012). That would be a step in the right direction for Social Security but it would absolutely not be a fix-all and not all of the solution can come from just leaning on taxpayers even more than is already done already. Society as a whole needs to change to make this work if it's going to work out the way it can and should.

Conclusion

There is nothing wrong, in total, with the current Social Security system. There can and should be a safety net for senior and disabled persons to rely upon if they cannot take care of themselves, either temporarily or over a long period of time. However, there is also much to be said for preparation and self-sufficiency and the people that can take care of themselves should be urged (if not made) to do so because the people that are truly defenseless and unable to change or make their own fate in the first place should be the first people to get help and if they get short-changed due to people that are taking advantage, then that is truly a moral failing of anyone that would engage in such a behavior and/or anyone that allows it to happen that way.