“There is no more important domestic issue on which we have to have a national consensus than social security, because it affects just about all of us either as current beneficiaries or current taxpayers. Continuing the minimum benefit for present beneficiaries reflects a bipartisan consensus, which I strongly support.” ~ Ronald Reagan, December 29, 1981
Subsequent to that time, interfund borrowing ensued as what was supposed to be a temporary solution to fix financing difficulties faced by the Social Security program.
On April 20, 1983, President Reagan signed a $167 billion rescue plan during a ceremony on the White House South Lawn. The bill raised payroll taxes and established a higher retirement age. What to do about Social Security was in the middle of heated discussions then, and it remains a contentious topic of debate now.
Social Security has been used to help balance the nation’s budget in the past despite the fact that it did not cause the nation’s debt crisis and it is a program that is self-funded through dedicated payroll taxes. As noted on the Social Security Administration website:
“Since the assets in the Social Security trust funds consists of Treasury securities, this means that the taxes collected under the Social Security payroll tax are in effect being lent to the federal government to be expended for whatever present purposes the government requires. In this indirect sense, one could say that the Social Security trust funds are being spent for non-Social Security purposes. However, all this really means is that the trust funds hold their assets in the form of Treasury securities.”
The manner in which Social Security is funded places something clearly on display: the system is not insulated from changes in marketplace economics or the nation’s fiscal realities. That’s why it’s important that the current discussions about the system are critical. The President’s proposal to tie benefits to a ‘chained CPI‘ calculation are bringing up points to which both sides need to pay attention about factors that will, in the long-term, affect the solvency of Social Security. These factors include the health and longevity of our citizens who will ultimately collect from the system; what are our national priorities in terms of where resources should be spent; and even whether or not the system equitable in terms of its current retirement age and payments to those who may not need to draw from the system based on financial means.
If both sides of the political aisle want to end the debate about future solvency — other than closing any provision that allows the system to be drawn from in order to close budgetary gaps in other government functions — the simplest way is to raise the cap on contributions to the system. The best way to ensure that all are paying a fair share is to mandate contributions above the 2013 level of $113,700. Why isn’t this a serious consideration on the negotiating table?
The bottom line is that no matter what side of the political aisle we’re on, and no matter what our own personal level of financial security, the Social Security debate is taking place during a crucial time for the nation. Actions taken now will determine how the elderly will be provided for and what the social construct of the nation will look like going forward. The system was designed to ensure that the society in which live upholds a social contract but, as things currently stand ,we are living through the lingering effects of an economic recession caused, in part, by broken social contract promises. We’re moving through a painfully slow economic recovery and witnessing diminishing middle class wealth levels, but now we must decide whether or not we want the future for millions who are teetering on the brink of abject poverty to look as bleak as their present.