# Continuation of Social Security answer from GQ. **URL:** \ **Category:** Great Debates\ **Created:** [February 5, 2005, 5:14am UTC](https://boards.straightdope.com/t/continuation-of-social-security-answer-from-gq/288491 "2005-02-05T05:14:29Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![David\_Simmons](https://avatars.discourse-cdn.com/v4/letter/d/9de053/32.png) [@David\_Simmons](https://boards.straightdope.com/u/David_Simmons)\ **Post date:** [February 5, 2005, 5:14am UTC](https://boards.straightdope.com/t/continuation-of-social-security-answer-from-gq/288491/1 "2005-02-05T05:14:29Z")
Witness, on an entirely different matter, the government’s action with regard to releasing regular army and reserve/national guard from Iraq when their alloted time is supposedly up. Second. Isn’t The G.W. Bush who’s scaremongering about Social Security insolvency the same G.W. Bush who stated that is was absolutely positive that we were in mortal danger from Saddam’s chemical, biological and nuclear weapons? And isn’t he the same G.W. Bush who worries about future Social Security insolvency but doesn’t seem to worry about the current inability of the government to pay its bills without borrowing $400 billion a year? Why should anyone believe him. And why are you surprised at the reaction of elderly retirees? Isn’t it an article of faith that politicians can’t be trusted? ---
**Author:** ![kniz](https://avatars.discourse-cdn.com/v4/letter/k/c37758/32.png) [@kniz](https://boards.straightdope.com/u/kniz)\ **Post date:** [February 5, 2005, 8:06am UTC](https://boards.straightdope.com/t/continuation-of-social-security-answer-from-gq/288491/2 "2005-02-05T08:06:21Z")
As pointed out in another thread and elsewhere, Clinton and Gore both said the system is in trouble. The Democrats that disagree with Bush do so on the basis that it won’t go bust until 2053 rather that 2042 (that’s what all the moans were about the other night). The big question is how and when to fix it, not that there is a problem. As someone that is on SS, I’m not worried since all those Baby Boomers getting ready to retire aren’t going to stand for anything that will hurt it for those already retired. We actually are sitting in the catbird’s seat. If they can come up with something to fix it now, it’ll be better than waiting until things get really bad, but I doubt if I’ll be around then anyway. 😉 ---
**Author:** ![rjung](https://avatars.discourse-cdn.com/v4/letter/r/45deac/32.png) [@rjung](https://boards.straightdope.com/u/rjung)\ **Post date:** [February 5, 2005, 10:40pm UTC](https://boards.straightdope.com/t/continuation-of-social-security-answer-from-gq/288491/3 "2005-02-05T22:40:16Z")
> [@kniz](#): > > As pointed out in another thread and elsewhere, Clinton and Gore both said the system is in trouble. The Democrats that disagree with Bush do so on the basis that it won’t go bust until 2053 rather that 2042 (that’s what all the moans were about the other night). The big question is how and when to fix it, not that there is a problem. Kinda misrepresenting the issue, methinks. Most of the folks who are opposed to Bush’s Social Security “reform” are doing so because they believe Bush is grossly overinflating the issue. AFAIK, while both Clinton and Gore realized that Social Security needed to be tweaked, they weren’t calling for a full-bore abandonment of the system as George is doing. It’s the difference between a minor course correction and running for the lifeboats, IMO. ---
**Author:** ![Mister\_Rik](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/mister_rik/32/491_2.png) [@Mister\_Rik](https://boards.straightdope.com/u/Mister_Rik)\ **Post date:** [February 5, 2005, 11:48pm UTC](https://boards.straightdope.com/t/continuation-of-social-security-answer-from-gq/288491/4 "2005-02-05T23:48:44Z")
What **kniz** said. I was hearing about the SS problems, and reading articles about how Brazil solved its own, similar problem, long before I ever heard of G. W. Bush. The point of my GQ post was that the things I hear from **current** retirees make them sound like they’re afraid that the gov’t is planning to take away the money they’re already getting. “They mustn’t change Social Security! If they do, I’ll have to give up my Cadillac, or my motorhome, or my second house in Arizona! I might even have to stop eating every meal in restaurants! Oh, the humanity!” ---
**Author:** ![kniz](https://avatars.discourse-cdn.com/v4/letter/k/c37758/32.png) [@kniz](https://boards.straightdope.com/u/kniz)\ **Post date:** [February 8, 2005, 7:14pm UTC](https://boards.straightdope.com/t/continuation-of-social-security-answer-from-gq/288491/5 "2005-02-08T19:14:27Z")
> [@rjung](#): > > Kinda misrepresenting the issue, methinks. Most of the folks who are opposed to Bush’s Social Security “reform” are doing so because they believe Bush is grossly overinflating the issue. AFAIK, while both Clinton and Gore realized that Social Security needed to be tweaked, they weren’t calling for a full-bore abandonment of the system as George is doing. > > It’s the difference between a minor course correction and running for the lifeboats, IMO. I’ve just finished reading **Colossus:The Price of America’s Empire** by Naill Ferguspn. In the next to last chapter, entitled The Closing Door a study made by Jagadeesh Gokhale and Kent Smetters is cited. Since citing the whole explaination of this study was out of the question, I googled and was delighted to find the following: [**ToppleBush.Com**](http://www.topplebush.com/article32_recpres.shtml) > [@](#): > > Try $44.2 trillion on for size. > > That’s the total “fiscal imbalance” figure Jagadeesh Gokhale, an economist with the Cleveland Federal Reserve and the American Enterprise Institute (AEI), and Kent Smetters, an economist at the Wharton School of the University of Pennsylvania, calculated in a recent, unpublished study about new methods of federal budget accounting. > > What the number represents is the difference between all the government’s future obligations – mostly Medicare and Social Security payouts, which will explode when Baby Boomers start retiring in large numbers – and its future revenue. > > The implications of the study, which looks beyond the 75-year window the government currently uses for its estimates, could be staggering – meaning that if the federal government wants to meet its Medicare and Social Security obligations in coming years, it would have to raise taxes, slash federal spending, or both. According to Naill Ferguson they offer four alternative answers. [ul][li]The government could starting today (2003) raise income taxes (individual and corporate ) by 69%[/li][li]it could raise payroll taxes by 95%[/li][li]it could cut Social Security and Medicare benefits by 56%[/li][li]it could cut federal discretionary spending altogether.[/ul][/li] > [@](#): > > from Colossus - "There is, however, one serious problem with these figures, not with the calculations that underlie them but with their _acceptance_. To put it bluntly, this news is so bad that scarcely anyone believes it. > [@](#): > > In the presnt American situation, the vital thing must be to bring Medicare spending under control, for it is in fact responsible for the lion’s share… > A second policy option would simply be to privatize Social Security. Watcha think about them apples? :eek: ---
**Author:** ![Czarcasm](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/czarcasm/32/4050_2.png) [@Czarcasm](https://boards.straightdope.com/u/Czarcasm)\ **Post date:** [February 9, 2005, 12:38am UTC](https://boards.straightdope.com/t/continuation-of-social-security-answer-from-gq/288491/6 "2005-02-09T00:38:56Z")
Moving this from IMHO to Great Debates. ---
**Author:** ![Mister\_Rik](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/mister_rik/32/491_2.png) [@Mister\_Rik](https://boards.straightdope.com/u/Mister_Rik)\ **Post date:** [February 9, 2005, 2:29am UTC](https://boards.straightdope.com/t/continuation-of-social-security-answer-from-gq/288491/7 "2005-02-09T02:29:12Z")
> [@kniz](#): > > According to Naill Ferguson they offer four alternative answers. > [ul][li]The government could starting today (2003) raise income taxes (individual and corporate ) by 69%[/li][li]it could raise payroll taxes by 95%[/li][li]it could cut Social Security and Medicare benefits by 56%[/li][li]it could cut federal discretionary spending altogether.[/ul][/li]Watcha think about them apples? :eek: [sarcasm] Boy, those first three sound super! [/sarcasm] I’ll reserve comment on the fourth option until somebody explains to me what “discretionary spending” is. Pork? ---
**Author:** ![pantom](https://avatars.discourse-cdn.com/v4/letter/p/34f0e0/32.png) [@pantom](https://boards.straightdope.com/u/pantom)\ **Post date:** [February 9, 2005, 4:04am UTC](https://boards.straightdope.com/t/continuation-of-social-security-answer-from-gq/288491/8 "2005-02-09T04:04:15Z")
> [@Phase42](#): > > [sarcasm] > Boy, those first three sound super! > [/sarcasm] > > I’ll reserve comment on the fourth option until somebody explains to me what “discretionary spending” is. Pork? Answer: any spending that isn’t an obligation of the Feds - like the debt - or that isn’t an entitlement or covered by a dedicated tax of its own. Thus Social Security, Medicare, highway spending, airports, and a few other things, which are either entitlements or which have dedicated tax streams to fund them, aren’t generally included in “discretionary” spending. In the end, I suppose it boils down to anything funded out of general revenues that isn’t the debt: defense, NASA, welfare, food stamps, agriculture, education, etc., etc., etc. Almost by definition, pork is a subset of discretionary spending of course. How large a subset would depend on whether you’re on the receiving or the giving end, as it were. 😉 ---
**Author:** ![David\_Simmons](https://avatars.discourse-cdn.com/v4/letter/d/9de053/32.png) [@David\_Simmons](https://boards.straightdope.com/u/David_Simmons)\ **Post date:** [February 9, 2005, 4:25am UTC](https://boards.straightdope.com/t/continuation-of-social-security-answer-from-gq/288491/9 "2005-02-09T04:25:27Z")
> [@kniz](#): > > I’ve just finished reading **Colossus:The Price of America’s Empire** by Naill Ferguspn. In the next to last chapter, entitled The Closing Door a study made by Jagadeesh Gokhale and Kent Smetters is cited. Since citing the whole explaination of this study was out of the question, I googled and was delighted to find the following: > [**ToppleBush.Com**](http://www.topplebush.com/article32_recpres.shtml) > > > [@](#): > > > > Try $44.2 trillion on for size. > > > > That’s the total “fiscal imbalance” figure Jagadeesh Gokhale, an economist with the Cleveland Federal Reserve and the American Enterprise Institute (AEI), and Kent Smetters, an economist at the Wharton School of the University of Pennsylvania, calculated in a recent, unpublished study about new methods of federal budget accounting. > > > > What the number represents is the difference between all the government’s future obligations – mostly Medicare and Social Security payouts, which will explode when Baby Boomers start retiring in large numbers – and its future revenue. > > > > The implications of the study, **which looks beyond the 75-year window the government currently uses for its estimates,** [bold added] could be staggering – meaning that if the federal government wants to meet its Medicare and Social Security obligations in coming years, it would have to raise taxes, slash federal spending, or both. > > [/ > According to Naill Ferguson they offer four alternative answers. > [ul][li]The government could starting today (2003) raise income taxes (individual and corporate ) by 69%[/li][li]it could raise payroll taxes by 95%[/li][li]it could cut Social Security and Medicare benefits by 56%[/li][li]it could cut federal discretionary spending altogether.[/ul][/li]Watcha think about them apples? :eek: Oh fiddlesticks! Nobody can forecast conditions 75 or more years into the future with any degree of accuracty. Just suppose someone had tried to forecast in 1866 whether or not the US would be able to finance the cost of WWII, or the Cold War. In 75 years there is a pretty good chance you will be dead and those living will survive these doomsday predictions just like people today are managing to get along in spite of long ago calculations that we should have run out of oil by now. ---
**Author:** ![Duckster](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/duckster/32/1244_2.png) [@Duckster](https://boards.straightdope.com/u/Duckster)\ **Post date:** [February 9, 2005, 5:36am UTC](https://boards.straightdope.com/t/continuation-of-social-security-answer-from-gq/288491/10 "2005-02-09T05:36:41Z")
Let not forget that the Bush Administration thinks sound economic policy is to cut taxes and increase spending at the same time. Hey, the debt is someone else’s problem. Also, propose a FY2006 federal budget and make no mention of a social security plan nor any plan to fund the continuing war in Iraq. Both are different issues and off-budget items. Yet, both are debt problems that must be resolved through the normal budget process. So let’s call social security in crisis, propose cutting the social security revenue stream and provide no method to fund current oblications, nor have a bridging program to get the country over the hump between the current system and Bush’s proposed system. Call it a debt crisis when expenses rise above revenue income (as it’s designed to do) in about 13 years, then call it bankrupt in another 20-30 years down the road, _even though the program will continue to function but at a reduced benefit level_ if tweaks are not made. Haven’t we see this before? Ah, yes! Voodoo economics! ---
**Author:** ![kniz](https://avatars.discourse-cdn.com/v4/letter/k/c37758/32.png) [@kniz](https://boards.straightdope.com/u/kniz)\ **Post date:** [February 9, 2005, 5:56am UTC](https://boards.straightdope.com/t/continuation-of-social-security-answer-from-gq/288491/11 "2005-02-09T05:56:03Z")
> [@David Simmons](#): > > Oh fiddlesticks! I haven’t heard that one in a long time. > [@](#): > > Nobody can forecast conditions 75 or more years into the future with any degree of accuracty. Just suppose someone had tried to forecast in 1866 whether or not the US would be able to finance the cost of WWII, or the Cold War. > > In 75 years there is a pretty good chance you will be dead and those living will survive these doomsday predictions just like people today are managing to get along in spite of long ago calculations that we should have run out of oil by now. So, we can just say to hell with it cause we’ll be pushing up daisies when everything heads south. Good plan. Sorry I bothered you. :rolleyes: ---
**Author:** ![kniz](https://avatars.discourse-cdn.com/v4/letter/k/c37758/32.png) [@kniz](https://boards.straightdope.com/u/kniz)\ **Post date:** [February 9, 2005, 5:57am UTC](https://boards.straightdope.com/t/continuation-of-social-security-answer-from-gq/288491/12 "2005-02-09T05:57:57Z")
Oh, could you please go and straighten out those people at **[ToppleBush.Com](http://ToppleBush.Com)**? ---
**Author:** ![Duckster](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/duckster/32/1244_2.png) [@Duckster](https://boards.straightdope.com/u/Duckster)\ **Post date:** [February 9, 2005, 5:58am UTC](https://boards.straightdope.com/t/continuation-of-social-security-answer-from-gq/288491/13 "2005-02-09T05:58:57Z")
> [@kniz](#): > > So, we can just say to hell with it cause we’ll be pushing up daisies when everything heads south. Good plan. Sorry I bothered you. :rolleyes: But isn’t that the neocon plan all along? 😃 ---
**Author:** ![David\_Simmons](https://avatars.discourse-cdn.com/v4/letter/d/9de053/32.png) [@David\_Simmons](https://boards.straightdope.com/u/David_Simmons)\ **Post date:** [February 9, 2005, 7:37am UTC](https://boards.straightdope.com/t/continuation-of-social-security-answer-from-gq/288491/14 "2005-02-09T07:37:15Z")
> [@kniz](#): > > I haven’t heard that one in a long time. > > So, we can just say to hell with it cause we’ll be pushing up daisies when everything heads south. Good plan. Sorry I bothered you. :rolleyes: This is typical black-white thinking. If I don’t agree that there is an immediate crisis and if I think worrying about a forecast of conditions 75 years into the future is ridiculous it means I think nothing should be done seems to be your only point. Well, I don’t think there is an immediate crisis. And I don’t believe G.W. Bush, based on his history. In my opinion, again based on his history, he is an unprincipled scoundrel whose unltimate goal is to turn the Social Security system over to investment bankers and stock brokers. I don’t know what the exact condition of financing for Social Security will be 15 years from now and I guess you don’t either since your post cited a study for 75 years hence with no solution for you own for 5 years from now. Not knowing the exact financing status years from now means I really don’t know exactly what should be done. I think it is possible that a wait of 4 years wouldn’t be fatal and then maybe there will be someone in office whose business record isn’t one of one failure after another and whose record for story telling doesn’t include exaggeration of conditions in order to sell a questionable position. In that case perhaps a sensible solution can be worked out that will keep the financing in reasonable shape which is all that can be expected. And, if you want to talk about financial crises, why isn’t anyone worrying about the $420 billion deficit which doesn’t include the costs of Iraq operations or the fabulous Medicare drug program? One possible prediction for a lot shorter term than 75 years from now, based on continued deficits of that nature, is that the whole federal government will be insolvent long before Social Security is in serious financial trouble. ---
**Author:** ![kniz](https://avatars.discourse-cdn.com/v4/letter/k/c37758/32.png) [@kniz](https://boards.straightdope.com/u/kniz)\ **Post date:** [February 10, 2005, 6:59am UTC](https://boards.straightdope.com/t/continuation-of-social-security-answer-from-gq/288491/15 "2005-02-10T06:59:59Z")
> [@David Simmons](#): > > And, if you want to talk about financial crises, why isn’t anyone worrying about the $420 billion deficit which doesn’t include the costs of Iraq operations or the fabulous Medicare drug program? I believe you were the one that started this thread with the subject being Social Security. Are you now hijacking your own thread? 😕 ---
**Author:** ![David\_Simmons](https://avatars.discourse-cdn.com/v4/letter/d/9de053/32.png) [@David\_Simmons](https://boards.straightdope.com/u/David_Simmons)\ **Post date:** [February 10, 2005, 1:56pm UTC](https://boards.straightdope.com/t/continuation-of-social-security-answer-from-gq/288491/16 "2005-02-10T13:56:36Z")
> [@kniz](#): > > I believe you were the one that started this thread with the subject being Social Security. Are you now hijacking your own thread? 😕 You’re right. That comment was probably a mistake. Is that your only response or are you still sticking with the idea that I should get all upset over predictions of disaster 75 years into the future? ---
**Author:** ![justwannano](https://avatars.discourse-cdn.com/v4/letter/j/7ab992/32.png) [@justwannano](https://boards.straightdope.com/u/justwannano)\ **Post date:** [February 10, 2005, 10:14pm UTC](https://boards.straightdope.com/t/continuation-of-social-security-answer-from-gq/288491/17 "2005-02-10T22:14:33Z")
Letsee I’m 58 now. In 2052 I’ll be 106. I’ll surely be around but you other guys better start taking care of yourselves. ---
**Author:** ![kniz](https://avatars.discourse-cdn.com/v4/letter/k/c37758/32.png) [@kniz](https://boards.straightdope.com/u/kniz)\ **Post date:** [February 13, 2005, 5:23am UTC](https://boards.straightdope.com/t/continuation-of-social-security-answer-from-gq/288491/18 "2005-02-13T05:23:14Z")
> [@David Simmons](#): > > Is that your only response or are you still sticking with the idea that I should get all upset over predictions of disaster 75 years into the future? There is a reason for the 75 year period, but I agree that is a long way off. You and I have heard predictions of what was going to happen in the future and none of it has happened, so I have no problem with your argument. As confirmation of that fact, I will mention the “paperless office”. In this particular case the prediction did mention that the longer we wait the worse it will get. Since that $45 trillion will build up over 75 years, lets just surmise that only 10% will accumulate over the next 20 years. That’s $4.5 Trillion and that would amount to doubling our present national debt, which is dangerously high. What do you think? Can we double our national debt by 2025 and still be on good standing with Social Security? At that time we will be paying interest on $9 trillion dollars out of taxes and having to pay back money that has been spent out of the Social Security account at the same time. Everyone admits that and it will be one hell of a burden to bear. Privatizing some part of the accounts will make it possible to pay some of the retirement of future generations with money that doesn’t come directly out of the pockets of tax payers. I’m not completely sold on that idea, but it shouldn’t be dismissed the way the Democrats are doing. At least give it a look see. That’s my feeling on the matter. ---
**Author:** ![David\_Simmons](https://avatars.discourse-cdn.com/v4/letter/d/9de053/32.png) [@David\_Simmons](https://boards.straightdope.com/u/David_Simmons)\ **Post date:** [February 13, 2005, 6:43am UTC](https://boards.straightdope.com/t/continuation-of-social-security-answer-from-gq/288491/19 "2005-02-13T06:43:01Z")
> [@kniz](#): > > There is a reason for the 75 year period, but I agree that is a long way off. You and I have heard predictions of what was going to happen in the future and none of it has happened, so I have no problem with your argument. As confirmation of that fact, I will mention the “paperless office”. > In this particular case the prediction did mention that the longer we wait the worse it will get. Since that $45 trillion will build up over 75 years, lets just surmise that only 10% will accumulate over the next 20 years. That’s $4.5 Trillion and that would amount to doubling our present national debt, which is dangerously high. What do you think? Can we double our national debt by 2025 and still be on good standing with Social Security? At that time we will be paying interest on $9 trillion dollars out of taxes and having to pay back money that has been spent out of the Social Security account at the same time. Everyone admits that and it will be one hell of a burden to bear. Privatizing some part of the accounts will make it possible to pay some of the retirement of future generations with money that doesn’t come directly out of the pockets of tax payers. I’m not completely sold on that idea, but it shouldn’t be dismissed the way the Democrats are doing. At least give it a look see. That’s my feeling on the matter. My question originally was why should we trust any financial analysis or prediction put forward by this administration? Those who run the administration have shown themselves willing to make exaggerated statements in order to sell a proposition that was determined on what look more like ideological grounds than on the national welfare. I cited the exaggerations leading up to our invasion of Iraq. On the financial end, the Iraq adventure was going to be self-sustaining through Iraq’s oil. And then there is the drug program under medicare. It was sold on the basis of a $400 billion cost through 2013. The current estimate is $720 billion through 2015. The present budget shows a $420 billion budget deficit but doesn’t include expenses on Iraq. And a recent story in the _Los Angeles Times_ stated that about 30000 of the current authorized strength of the Army and 3000 of the current authorized strength of the Marines are being paid for “off budget” by being included in the emergency suplemental appropriations for Iraq. The administration’s plan calls for several hundred billion tax-supported appropriations in the beginning in order to make up for the Social Security shortfall resulting from people putting up to 30% of their contributions into private accounts and the loss of employer matching of that 30%. Supposedly in the long run the loss of income to Social Security will be offset because the fund will not pay out so much to those with private accounts. However, those borrowed hundreds of billions will still be drawing interest which has to be paid out general revenue and which constitutes a charge that should count agains any “savings to the taxpayer” claimed by GW _et al_. And, while we are talking about reality, the record seems to show that those hundreds of billions probably won’t be paid off but will go on drawing interest as long as there is a United States. And finally, as someone pointed out in another thread, how does a plan which seems to consist only of people being able to partially withdraw from Social Security constitute a plane to save the system? ---
**Author:** ![Kimstu](https://avatars.discourse-cdn.com/v4/letter/k/ecd19e/32.png) [@Kimstu](https://boards.straightdope.com/u/Kimstu)\ **Post date:** [February 13, 2005, 7:54pm UTC](https://boards.straightdope.com/t/continuation-of-social-security-answer-from-gq/288491/20 "2005-02-13T19:54:43Z")
**DS:** _And finally, as someone pointed out in another thread, how does a plan which seems to consist only of people being able to partially withdraw from Social Security constitute a [plan] to save the system?_ It doesn’t. The “partial privatization” that the Bush Administration is advocating for Social Security is actually supposed to be **revenue-neutral** in the long run; that is, it won’t make any difference to SS finances one way or the other. (In the near- and medium-term, though, as you noted, it will cost buckets o’ money in transition costs.) The part of the Bush plan that will actually “save the system”, i.e., balance Social Security’s budget, is just good old-fashioned benefit cuts. The plan is to change the way benefits are calculated, indexing their gradual increase to prices rather than wages, so later generations of retirees will get less money than they would under the current system. (Even the current system **if allowed to go bankrupt** would still end up paying more benefits than the Bush plan is scheduled to pay.) If you’ll pardon my plagiarizing myself from a concurrent thread, I’ll just repost my [Fourteen-Point Explanation of Social Security Issues and the Administration’s Proposal](http://boards.straightdope.com/sdmb/showthread.php?t=301489) here instead of rewriting it: > [@](#): > > **1)** Social Security payroll taxes are collected from current workers to pay benefits for current retirees (the “pay-as-you-go” system). > > **2)** At present, SS takes in from taxes more than it pays out in benefits; this has been going on for a while now and will go on for a while longer, so the surplus contributions are stored in the designated Social Security trust fund. > > **3)** That trust fund, though sizeable, is small compared to the total federal debt, so there’s some question about whether the money in it is “really there”. Other such assets, like US government bonds owned by foreign governments, are considered to be “really there”—i.e., we consider them valid IOU’s from the USA and are committed to paying them—so it seems reasonable to conclude that the SS trust fund is valid too. However, the IOU’s in the SS trust fund do have to be paid back from other government revenues eventually. > > **4)** “Eventually” begins when SS starts having to pay out in benefits more than it takes in from payroll taxes, which will be sometime within the next couple decades. (This is due to the fact that the big generation of baby boomers will stop being workers and start being retirees; the baby-boom generation is moving through the American demographic “like a pig through a python”, in one economist’s words. As more workers become retirees, the ratio of tax revenues to benefit payments decreases.) > > **5)** Even if the SS trust fund IOU’s are paid back in full from other government revenues, that won’t get us all the way over the baby-boom hump. At some point—currently predicted to occur somewhere in the 2040’s—the trust fund will be exhausted and SS will still be paying out in benefits more than it takes in from payroll taxes. > > **6)** Therefore, to make ends meet for the Social Security system, something will have to give. Either: > > **a)** SS benefits will have to be cut to match the available income from payroll taxes; > **b)** SS payroll taxes will have to be raised to match the required outlays on benefits; > **c)** other government revenues will have to be used to make up the shortfall; or > **d)** some combination of the above. (“Cutting benefits” includes targeted measures like means-testing benefits, while “raising payroll taxes” includes targeted measures like lifting the payroll tax cap. There’s a whole menu of possible options.) > > **7)** The proposed Bush plan advocates making ends meet **solely** by means of option (6a): cutting benefits. This would be achieved by changing the economic formula by which the benefits are calculated: in econo-speak, switching from “wage-indexing” benefits to “price-indexing” them. In other words, the amount of benefits would rise along with inflation rather than with wages, which would mean much slower increase in benefits. > > **8)** The Bush plan would actually result in cutting benefits much **more** than is required to make ends meet for SS. Over subsequent decades, the amount of benefits would get smaller and smaller compared to what they would be under the current system. > > **9)** The Bush plan also proposes allowing workers to divert some payroll tax into “private accounts” or “personal accounts”—sort of like multiple, individual Social Security trust funds. This would make the SS system no longer completely “pay-as-you-go”; instead, it would be part “pay-as-you-go” and part “save-for-yourself”. > > **10)** These individual accounts in the Bush plan are actually designed to be **revenue-neutral** for SS in the long run. That is, they will not save any money or reduce any expenses for SS. It’s the benefit-cutting that accomplishes that. > > **11)** Under the Bush plan, the idea is that the personal accounts would help retirees offset the effect of the benefit cuts by generating returns greater than 3%. Anything you put into your personal account, plus 3% interest, goes to the government when you retire, in the form of additional cuts in your benefits. (That’s how they keep the plan revenue-neutral. No matter how much interest you actually **got** on your personal account investment—even if you ended up **losing** part of your investment—the government still has to cut your benefits by the same amount of total-contribution-plus-3%, in order to keep Social Security from losing money.) > > **12)** Anything left over in your personal account, if there **is** anything left over, you would get to keep. Most people would probably have something left over, although as […] noted above, it’s unlikely that these leftovers would make up for the original reduction in benefits from the switch to price-indexing. > > **13)** Although the private accounts are supposed to be revenue-neutral in the long run, they would cost a fair bit of money (“transition costs”) in the near term. That’s because if you’re letting today’s workers divert some of their payroll taxes into save-for-yourself accounts, you have to find some other money to meet the current pay-as-you-go obligations to today’s retirees. The Bush plan would simply borrow that amount—i.e., add it to the national debt. The transition costs are estimated to be anywhere from about $600 billion to $2 trillion over the next ten years alone, and more after that. > > **14)** Finally, under the proposed Bush plan, none of these proposed changes would affect anybody born before 1950. Everybody scheduled to retire in 2017 or before would get the currently-scheduled SS benefits: no “price-indexed” benefit cuts, no personal accounts, no change whatsoever. [Next page](https://boards.straightdope.com/t/continuation-of-social-security-answer-from-gq/288491.md?page=2)