The Manufactured Social Security Crisis

Amidst all the forecasts of doom regarding the budget deficit, I keep hearing about how politicians have screwed up social security so badly that it's out of money and we have to make huge changes to fix it.  We got some of this from Simpson-Bowles of course, and I keep hearing it from my conservative correspondents too.  Social Security is paying out more than it's taking in!  The Trust Fund is a fiction!

But think about it this way: Social Security is just a Math problem, and a really simple one at that.  We pay a certain rate to Seniors.  Workers pay a certain percentage of their salaries to fund benefits.  A percentage of people get on Social Security Disability at a younger age.  All of these formulas can change.  So the ways to fix Social Security are:

1. Increase the tax rate for FICA for everyone (we just lowered the rate in 2011 from 6.2% to 4.2% as part of the lame duck tax deal)
2. Increase that tax rate for high income people only (currently we only tax the first $106,800 of income- we could increase that)
3. Decrease the benefit level slightly
4. Increase retirement age
5. Means-test benefits, so rich people don't get paid out
6. Toughen up requirements for disability

And of course we could go with some combination of more than one of the above solutions.  These are tough choices of course, and my preference is to go with #2, but reasonable people could disagree.  I am strongly opposed to #5, which would lead to erosion of support for Social Security over time as it would come to be seen like welfare, in which poor people are seen by the Right as sponging off the hard-working. The reason SS has been so successful for so long is that we're all in it together.

So there's really no "crisis" in Social Security.  There's a demographic change because baby boomers are retiring and the population is going to get much older, so there are fewer workers to pay benefits.  That's not because we've become a lazy country or there's some moral failing- just blame those WW II GI's making all those babies at the same time when they got home.

So yes, Social Security needs to be fixed, and can't be left as is.  But there are lots of ways to do it, all of which will definitely work.  It's just a question of enough people in Congress and the President agreeing about our priorities.  All big problems should be so easy and un-complex.