In all of the furor surrounding Obamacare, the glitches in its roll-out and the president’s lie (1), what has been largely missed is the looming crisis over the solvency of the Social Security System (SSS). What follows is a statement about how we got to a point where something must now be done to put the System on a sustainable path; if not permanently, then at least for the next several decades.

When the SSS became law in 1937, it was greeted with cries of “socialism…a Ponzi scheme” by conservatives. They did not like it then and nothing, over the passage of time right up to the present, has softened their view. Though not saying it out loud for public consumption, they see it as symptomatic of a welfare state, and would celebrate an end to what has become one of the most popular federal programs in history.

The solvency of the SSS depends on the presence of more workers contributing a payroll tax than retirees drawing money out of the System. Over the last 20 years, that ratio of contributing workers-to-retirees has shrunk. In the last five years, it has dropped to a dangerously low, three-to-one. That change is a function of two simultaneous events; i.e. a drop in the number of contributing workers because they lost their jobs during the recession, and an expanding number of people who are retiring and thus ready to draw money out of the System. In the simplest of terms, we have less money coming into the System and more money going out. As a consequence, we are approaching that tipping point when the money going out will either equal or exceed the money coming in. We cannot allow the System to reach that critical juncture and so, it falls on Congress to find the best way forward.

It is not as though this problem, in a less extreme form, hadn’t arisen in the past. It surfaced in 1986-87. Then-President Reagan assembled a bipartisan group of members of Congress and enjoined them to come up with a solution. The result, passed by the Congress and signed into law by Reagan involved, at its core, two changes:  (1) active workers would contribute a slightly higher percentage of their salaries to the payroll tax; and (2) the existing limit on the amount of actual dollars you paid into the System in any given year would be raised; i.e. to $106,800.

Unfortunately, the collegial, bipartisanship that marked the 1987 committee work no longer exists. Tea Party members of Congress, eager to reduce the size of the federal government, will see this as an opportunity to cut away at the System, either surgically or with the proverbial meat cleaver. Republicans more generally, will vigorously object to instituting the sorts of changes employed in 1987 (see 1-2 above). It will not matter to them that conservative hero Reagan bypassed the chance to weaken the System in favor of saving it by means of a payroll tax increase. So, it will be left up to President Obama and the Democrats in Congress to find a way to put the System back on a more sustainable path. All this will surface during coming budget negotiations and in the run-up to the 2014 election.

There are three three key blocks of voters who need to pay close attention to these goings on:  Young adults, people nearing retirement age, and those who are already drawing on he System. Potentially, these are the groups most likely to be adversely affected by any downsizing of the System; e.g. cuts in benefits currently being paid and/or future benefits to be paid, and/or an end to the System altogether.

Make no mistake; this is a consequential matter and worthy of all voters laser focus. This isn’t just about the money that’s involved. The outcome will make a major statement about what kind of country we are.

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1. The president’s lie applies only to the 5-6% of people who are under-insured, holding policies that do not meet minimum Obamacare requirements. It is estimated that about 10-12 million individuals are involved out of the total corpus of 220,000,000 folks with some form of healthcare coverage. That does not change the fact that Obama lied. But, it does put his lie in the proper perspective.

 

 

 

 

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