Will Social Security continue to be funded in the future?

Yes

1 of 2

by Gary O'Neill

Write now Print Invite a writer™ Add to Favorites RSS Feed Contact this writer

The Social Security pension and its related program for medical benefits, known as Medicare, were enacted through laws by the Congress of the United States beginning in the 1930s. They have both become an integral part of our society and have generally served their purpose: providing financial means to people after they reach retirement age. The programs will continue to exist as long as Congress maintains the appropriations and laws which support them. Both programs now account for more than $1 Trillion dollars of government funding annually, and they are forecast to grow to much greater levels in the years to come.

The real question is "What Changes will be made to the programs in order to continue them in the future?" For the last ten to fifteen years, a number of experts have tried to explain that the current system will create an enormous financial burden on the government in the near future, and that changes must be made. President Bush made a strong effort to get the country involved in studying the issue and taking action to make the programs sustainable in 2004-5, but he was largely ignored by the members of Congress and the Senate from both parties.

Because we are talking about an enormous program with significant, long term effects to individuals, any changes must be made gradually and carefully in order to prevent catastrophe. Think of how a large ocean liner is brought to a harbor pier: the huge ship is brought in at very slow speed, with small, continuous corrections made at the direction of the captain and harbor pilot, and aided by tugboats. This is a pretty good description of what must be done to either sustain these programs or transition to a different system. Both alternatives deserve careful study, serious debate and then decisions based on what's best for the country. We cannot afford to allow politicians to make outrageous claims about elderly citizens being cast into the street to distract the rest of us from really thinking through this issue.

If we choose to maintain the program as it is, projections of income and payouts over the next twenty to thirty years clearly show that there is not enough money to continue the system without some change. Experts have offered some alternatives, such as delaying the retirement age to 67 or 70 years old, increasing the amount of money deducted from all workers, or 'means testing' the eligibility for receiving retirement funds. Mean testing essentially would deny benefits to those who are considered wealthy enough to support themselves, without compensating them for the funds they contributed over their lifetime. Most of these alternatives have met with resistance from the voters, which is why no action has been taken yet. Clearly, though, we are only delaying an inevitable set of changes to the current program.

Another alternative, the one that has been most successfully enacted in other countries, is to change the program to allow a greater degree of individual control over retirement savings. By increasing the amount of personal savings allowed by individuals in return for a smaller guaranteed amount from the government later, individuals would be free to invest the funds without incurring additional taxes. They could then potentially achieve a greater rate of return on their savings and end up with a larger retirement income. There are a lot of supporters for this concept, but they have been unable to get the leaders in Congress to seriously consider this option. Congressional leaders use the normal fluctations of the market (and abnormal ones, such as we're in today!) to exclaim "See...if people were dependent on the stock market now, they'd be in trouble."

The truth is, if we don't do something to change the current system, the next generation will be in greater trouble.

Learn more about this author, Gary O'Neill.
Click here to send this author comments or questions.