issue guide: Social Security

The Skinny

see also background & facts, pro & con, links

What's Up

Social Security, the once untouchable “third rail” of American politics, got a full bear hug from the Bush administration in 2005. The massive security plan for retired and disabled workers hasn’t been looking so secure lately, with projections that we may no longer be able to meet our promised payments to retirees in 40 years time. To respond to this future “crisis,” Bush made Social Security reform a top priority in his second term. But reform didn't happen in 2005 in the face of opposition from Democrats and uneasiness from Republicans - and may not return for years to come. At the core of the debate is how to fix the funding shortfall - by raising funds or cutting benefits - and whether private accounts should be part of the plan.

What the Debate's About

With only a loosely outlined plan from Bush and no drafted bill from Congress, the debate on Social Security reform was more about broad concepts than details. Nonetheless, the pro and con teams are focused on a few core disagreements: how much of a “crisis” we’re really in; the economics of private accounts; how to fill the hole in Social Security funding; and how much more secure - or insecure - private accounts will make our future retirees.

The basic blueprint. There were three key elements in Bush's plan: giving current workers the option to put part of their Social Security payroll taxes into private retirement accounts, keeping payments to the already-retired and soon-to-be-retired at current levels, and fixing the shortfall in Social Security by cutting back on future benefits and not raising taxes. One way Bush proposed trimming benefits was to peg future payments for wealthier earners to rise with prices rather than wages (since prices rise slower than wages, that means smaller benefits for future retirees).

Crisis or hype? Funding for Social Security is set to become a problem somewhere around 2042-2052, when money coming from workers will no longer cover promised payments to retirees and the Social Security trust fund will have dried up. Without drastic changes today, the administration argues, future generations will be short-changed out of their promised pensions. Opponents of reform don’t deny a future shortfall will come, but they say the crisis is overstated and can be handled with relatively minor changes, such as notching up the retirement age or increasing payroll taxes.

Competing economics. Bush’s plan sees private accounts as key to a solution; private accounts have the double benefit of giving workers better future security and giving the economy a boost in savings and investment. Assuming the market treats the investments right, a worker will have more when he retires. Skeptics, however, think the numbers won’t add up. They worry that the short term pressure on the national debt (as much as $4.5 trillion would have to be borrowed to make ends meet during the transition) could hurt our growth and erase any gains from the private accounts’ added investment. They also doubt that private accounts will boost the economy and think the government will end up picking up more of the tab
than they think(meaning greater taxes for future generations).

Filling the hole. Without reform, Social Security won’t be able to meet its promises to retirees somewhere between 2042 and 2052. Bush proposed recalculating those promises by pegging wealthier folks' benefits to rise alongside price increases instead of wage increases, as they do now. Since wages rise faster than prices, that spells smaller Social Security checks for future generations (but, in the Bush plan, the lowest earners would see no change and middle income earners would receive a smaller blow than high earners). Opponents say that future benefits don’t need to be cut; the hole in Social Security can be filled by other fixes, such as raising the ceiling on payroll taxes or raising the retirement age as Americans grow older.

Different visions of security.
While advocates for private accounts like the security and responsibility that comes with workers having their own nest eggs, opponents say private accounts defeat the original purpose of Social Security which is to insure our retirees won’t end up in poverty. Private accounts can leave a lot of insecurity – if the market takes a beating or if retirees handle their windfall poorly. Many of these
questions could be accounted for when a detailed plan emerges, but solutions, such as a safety net for accounts that take a fall in the market, could complicate funding for Social Security and get us back to a shortfall square one. Details aside, these competing visions of security may be the heart of the debate, and notions of who looks after our retirement security – the government or us – may be the deciding factor in the fight for public opinion.

Questions and quibbles. That, of course, does not complete the list of disagreements brewing over Social Security. Some are concerned Bush’s reforms don’t go far enough or that the administration will, in fact, raise the Social Security payroll tax and put a larger burden on the rich (under the current system and Bush's proposals the rich get proportionately less out of Social Security than what they put in). On the other extreme, some worry that when the numbers don’t add up in the future, the poor will end up getting their benefits cut. When a congressional bill is unveiled, these concerns may be partially answered – but others are certain to pop up.

Where Things Stand Now

After months of letting Bush taking
the lead on selling Social Security reform, the Senate and House looked ready to take on Social Security reform in fall 2005 - but then Katrina arrived. With the dems taking over Congress in 2007, Social Security reform seems doubtful for the next couple of years.

Updated November 11, 2006

Did we miss something, let some slant slip in, lose a link - or do you just have something to say?
Drop a line below! In the spirit of open dialogue, cJ asks you keep it civil, keep it real and keep it focused on the message, not the messenger. See our policy page for more on what that all means.


I would like to see the gov't to pay back the money then have taken out first.

and maybe then a small increase it pay roll tax would fix everything.

accountability for dipping in the till is the bases of replenishing the fund.


thank gene

a random Joe (not verified) | December 24, 2008 - 11:50am

I want social security

I want social security because that's just the kind of person that i am

a random Joe (not verified) | November 30, 2007 - 2:56pm