Monday, March 07, 2005

Social Security Reform

The president's plan to privatize part of Social Security (SS) has been visciously attacked by the Left. Their attack is three-pronged: First, deny that a problem exists; second, instill fear in those retired or soon to retire; and third, frame the debate over privatization as simply a way for the Bush administration to reward the brokerage industry. All of these positions are false, and makes one wonder what the real motivation behind the Left's position on SS reform.

As described on American Thinker, SS was originally intended to be supplemental retirement benefit, accompanying employees regular pension. However, once the Congress realized that SS was taking in far more revenue than it paid out, they realized that the surplus could be used to finance other programs. Ever since, the federal government has been raiding the SS trust fund's surplus and spending it, replacing the spend funds with Treasury bonds, essentially IOU's. It became an income tax on top of the regular income tax.

The idea that part of the revenue stream from SS might go into the hands of individuals and out of reach of the government spenders is the real source of opposition to reform. The picture becomes clearer when you consider that beginning in 2018, the SS trust fund will stop producing a surplus and will need to begin cashing in those IOU's. By 2042 those IOU's will be exhausted as well, and benefits will only be paid at 73¢ on the dollar.

Already our federal budget is severely bloated, and runs huge deficits. Imagine those days beginning in 2018 when we begin to reduce spending in other areas of the budget to replay the IOU's to the SS trust fund? If you think the Democrats are screaming now, just wait until then!

The claims by the Left that there is no crisis is patently false. According to the Social Security and Medicare Board of Trustees annual report for 2004:

"It then begins to increase rapidly and first exceeds the income rate in 2018, producing cash-flow deficits thereafter. Despite these cash-flow deficits, beginning in 2018, redemption of trust fund assets will allow continuation of full benefit payments on a timely basis until 2042, when the trust funds will become exhausted. This redemption process will require a flow of cash from the General Fund of the Treasury. Pressures on the Federal Budget will thus emerge well before 2042. Even if a trust fund's assets are exhausted, however, tax income will continue to flow into the fund. Present tax rates would be sufficient to pay 73 percent of scheduled benefits after trust fund exhaustion in 2042 and 68 percent of scheduled benefits in 2078."

The need to reform SS is real and immediate.

This post can also be found at Blogger News Network.

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