Reform Social Security for Those Who Need It Most
The United States is at a crossroads. You may have heard that Social Security is politically impossible to reform. But that belief will be hard to sustain. In a few years, the Social Security Trust Fund will be exhausted. When that happens, Social Security benefits will be cut across the board by 21 percent—that is, unless Congress changes the law. Either way, changes are coming.
The question that remains is which change we will go for. That choice will have long-lasting consequences.
But first, let’s review how we got where we are. Social Security is facing a permanent cash-flow deficit that started in 2010. Every year since, the payroll tax revenue has not been enough to cover all the benefits paid to current retirees. To make up this difference, the program has been relying on trust-fund assets that once accumulated as a surplus.
Between the Social Security reform of the 1980s and 2010, the payroll tax collected more revenue than necessary to pay for benefits. That extra revenue, the surplus mentioned above, was handed out to the Department of Treasury to pay for bridges, wars, and other things in exchange for IOUs, or a legal promise to repay Social Security when payroll tax revenue no longer covers all the program costs.
In 2033, there will be no more trust-fund assets left for the program to use. At that time, Social Security benefits must, by law, revert to being paid only with revenue earmarked for Social Security. That means current payroll taxes and other dedicated revenue sources like the tax on Social Security benefits.
Now that we understand why benefits will get cut, let’s look at the options we have.
Democrats would like to keep all the benefits and raise taxes on higher-income people quite dramatically. This is a ridiculous idea. The damage caused by jacking up the payroll tax to the level required to res
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