The closer I get to retirement, the more concerned I am about the financial health of our Social Security system. I've made payments to this fund throughout my working career, with the expectation that in return it will help me meet expenses once I'm retired. Others apparently have the same concern-especially in an election year.
The reason I'm so concerned is that the federal government has not been taking good care of my money. In fact, it's been using it to pay for other things, giving Social Security an IOU.
Those of us in trucking are more familiar with this situation than other people because of our experience with the Highway Trust Fund. Through federal fees and taxes, our businesses regularly put money into that fund to pay for things like maintaining highways and building new ones. As it turns out, however, the government often uses these monies for other purposes — and gives the fund an IOU.
Isn't it comforting to know that the Social Security fund gets an IOU from the government, with total power to decide how to fund that IOU payment? Social security payouts are a matter of law, so sooner or later someone's going to have to come up with the money. Ultimately, that someone will be the taxpayers — both individuals and businesses.
One scenario goes like this. As the economy grows, not only does the pool of taxpayers increase, but higher earnings mean payments-per-capita also increase. In other words, we can “grow” our way out of the funding problem, eventually putting enough back into the system to meet future obligations.
But there's always a “but.” As life expectancies increase, the number of people contributing to the fund will be far fewer than the number who are supposed to receive the benefits. At least we haven't compounded the problem by reducing the length of the work year or workweek. The consequences of such a move are all too obvious in France and Germany, which are now trying to cope with the enormous drain on their fiscal resources caused by lack of attention to the growing imbalance between receipts and payments.
The contributor/recipient imbalance here is also out of whack because our lawmakers keep adding categories of people to the Social Security eligibility lists. As a society, it's important to have these social programs, but they should be funded directly, with specific guidelines for cost controls and assurance of benefit coverage. We're taking the easy way out by dipping into Social Security funds for worthwhile activities that should be able to stand on their own to get the necessary funding.
While it is true that economic growth will help to provide increased tax receipts for funding Social Security, there is apparently no lack of alternatives ways to spend these increased receipts. Congress has lost control of its fiscal responsibility — and that's not likely to change any time soon. As a result, it is unlikely that the expected economic gains will suffice.
The solution requires some rather stiff backs to meet the challenge. Who in Congress is prepared to propose that we scale back payments? Increase the retirement eligibility age? Increase payroll taxes? Remove the Social Security funds from the general pool of funds available to the government? Increase incentives for citizens to use alternative funding programs? Require civil and criminal penalties for fraud and abuse? Allow for more earned income to offset the inadequacy of the current payments? Not this year, for sure.
Take this scenario and apply it to private pensions, too. How soon will major industries have one worker funding the pension of four or five retirees?