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What Social Security crisis?
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April 5, 2000 | WASHINGTON -- The trustees of the nation's publicly funded retirement program reported last week that the booming economy has pushed back the system's date with insolvency by three more years, this time to 2037. And the Medicare program will remain solvent for an additional eight years, until 2025, the healthiest projection for the senior health care program since it began operating in the mid-1960s. It was the third straight year of increasingly bullish projections, and you'd think the legacy-hungry Clinton administration would spin the optimistic report as the latest evidence of the wisdom of its economic stewardship. Hardly. One by one, the Clinton-appointed trustees stepped up to the podium of the steamy Treasury Department conference room Thursday to warn that when it comes to "saving Social Security," this is no time for complacency
Enter politics. Too much good Social Security news is useless to congressional Democrats and their presumptive presidential nominee, Vice President Al Gore. Without a crisis, what scare tactics do the Democrats have to convince senior citizens that if they vote for George W. Bush this November, their monthly checks will disappear? And it goes without saying that a more solvent Social Security system isn't favored by Bush, who would love nothing better than a little chaos in the New Deal-era program that each month sends a cash reminder to 44 million Americans that Big Government is capable of getting some things right. It was easy to imagine leading Bush economic advisor and Harvard professor Martin Feldstein gnashing his teeth over the report. Feldstein has devoted no small portion of his intellectual life to the increasingly dubious proposition that the system is going broke and its only salvation lies in privatization. Social Security has long been America's most popular social program. It's universal, and it's progressive: Low-income workers get a larger percentage of their final, pre-retirement income than do high-wage workers. But high-wage workers still draw a decent enough benefit from the system. The program has transformed the country's seniors, once the most impoverished group in society, into its most prosperous. It provides special benefits for the disabled and for widows -- those gray-haired grannies who probably spent many years outside the workforce raising children or as homemakers and would, therefore, qualify for much lower benefits if they had to depend on their own contributions. It's no wonder, then, that threats to Social Security, both imagined and real, stir up a tempest of emotions. In recent years, there has been no shortage of demagogues eager to conjure up images that the system is on its last legs. As recently as two years ago, the professional prophets of doom were predicting Social Security would go broke the minute the oversize baby-boom generation entered its golden years. The White House even took its Social Security doomsday show on the road with town-hall-style meetings across the country to discuss the "crisis." Investment banker turned gray-wave expert Peter Peterson secured a regular gig on the talk-show circuit with his book "Will America Grow Up Before It Grows Old?" which issued a less-than-stirring call for boomers to stay in the workforce as long as possible and accept cuts in retirement benefits in order to save the supposedly beleaguered institution. With so much gloom in the air, it wasn't surprising that polls of Gen X-ers showed the majority of that undersize cohort believes it will never see a dime from the system. The hype drowned out how minor the problems of the Social Security system really are. Even under the previous conservative estimates of the trustees -- who as actuaries are compelled to make conservative assumptions -- it would take only a 1 percent payroll tax hike (which would be matched by employers) to fully cover every current worker and future worker now alive, with no reduction in benefits, for the next 75 years. And according to the latest report, it would take a hike of only nine-tenths of 1 percent to sufficiently bolster Social Security. Militant defenders of the current system -- notably Dean Baker and Mark Weisbrot, authors of "Social Security: The Phony Crisis" -- argue that increasing the payroll tax is a sensible idea. The real income of the average worker will rise at least 20 percent over the next 75 years. And workers' incomes will rise even more if, as many analysts believe, the economy has entered a new era of high productivity growth fostered by the Internet. Moreover, people will be living substantially longer in the 21st century. The average life expectancy will increase to 81 years for men and 85 for women by 2075, compared with 73.7 and 79.5 now. While that's indeed good news, it stands to reason that if people are going to have higher incomes and live longer, they probably ought to set aside a larger share of their future earnings for retirement, both in the public system and in their individual savings. But a willingness to enact a small tax increase doesn't mean one will be necessary, according to Baker and Weisbrot. Solvency of the Social Security system will depend on how well the economy performs over the coming decades, and the most conservative Social Security trustees say the prognosis for an extended boom is not all that good.
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