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Social Security: Fix it now

By Jennie L. Phipps · Bankrate.com
Monday, December 3, 2012
Posted: 5 pm ET

Treasury Secretary Timothy Geithner told "ABC News" on Sunday that the White House doesn't want to mix fixing Social Security with other budget changes to avoid going off the "fiscal cliff."

"We're prepared to, in a separate process, look at how to strengthen Social Security," Geithner said on ABC's "This Week." "But not as part of a process to reduce the other deficits the country faces."

Can we really separate Social Security from other debts that cost more than we can afford to pay? How will doing that affect our retirement planning and the financial security of our personal retirement long term? Nothing good, I fear.

The nonpartisan Congressional Budget Office estimates that in 2012, spending for Social Security totaled $773 billion, about 5 percent of gross domestic product, or GDP, and 20 percent of total federal spending. Over the next decade, the CBO predicts the cost of Social Security will exceed what we pay by about 10 percent a year. By 2030, it calculates that the amount Social Security is committed to paying out each year will exceed what is paid in by 20 percent.

That's a lot of money. Like it or not, Social Security is really too big a piece of the pie to separate from the rest of the fiscal cliff issues.

The easiest way to solve a big chunk of the total problem is to raise the Social Security full retirement age from 67 to 70. That delay would trim the amount Social Security pays out by 13 percent a year, the CBO says.

This isn't the only way to fix Social Security. There are others. Two ideas suggested most frequently include raising the cap on contributions, which will be $113,700 in 2013, and changing the way cost of living adjustments are calculated, lowering the COLA to better reflect how people cope with rising prices.

None of these ideas or even a combination of them is painless, but neither is the prospect of running deficits that rival those of Greece where those who faced serious cutbacks recently were rioting in the streets.

Timidity over dealing with this issue -- whether it is by Congress or the White House -- isn't doing us any real favors. Let's do what has to be done and move forward.

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2 Comments
Joe The Economist
December 04, 2012 at 5:33 pm

"Two ideas suggested most frequently include raising the cap on contributions, which will be $113,700 in 2013."

It is frequently suggested because it mostly affects other people. There are two facts that most proponents fail to disclose.

1) This does not fix Social Security. It doesn't even make it solvent. AP reported that completely eliminating the cap does away with only 72% of the solvency problem.

2) This is a tax on which there is no return. We could have raised every penny for controlling the deficit. This idea is simply shifting tax resources away from the debt - which is a major problem - to Social Security.

artist
December 04, 2012 at 9:59 am

Senators Reid and Durbin said there is nothing wrong with SS. They said it has not added a dime to the deficit.

IOW, it's not broken so they won't address it.

What?

Yes, of course they're lying. And some wonder why America is speeding towards insolvency.

There is so much pain in the pipeline. Much of it well deserved.