Wednesday, 13 July 2011

Social Security Four Years Later

Four years ago this month I wrote a column concerning Social Security and its essential place in the fabric of US society.

Remember those heady days of July 2007. The Dow had just closed above 14,000, house prices made your head spin, President George Bush was still paying for the Iraq war on the Chinese credit card, and those recently converted deficit hawks, Messrs. Boehner and McConnell, were more interested in slashing their golf handicaps than federal budgets.

Salad days, indeed! And yet this pain-in-the-butt columnist was warning that unless we bump up Social Security benefits “we’ll eventually have an army of senior citizens living on cat food.”

I likened the retiree’s economic security to a four-legged stool made up of family home, pensions, savings and Social Security. Let’s check the wobble factor after the last three years of financial turmoil?

Well, home prices have tanked, many are “underwater,” meaning that more is owed than the property is currently worth.

Pensions? Becoming as obsolete as the typewriter, even the once sacrosanct civil service retirement system is under attack.

Savings? A recent poll suggested that over a third of Americans don’t even have a hundred bucks stashed away for retirement. No wonder Powerball is so popular.

One silver lining: after sinking below 7000 in 2009, the Dow Jones Index is back up in the 12,000’s. Small wonder since profits are at record highs for the 30 big Dow companies, in no small part due to reduced costs from firing employees.

And for those lucky enough to have a 401(k), the average balance at retirement is $98,000 – hardly a king’s ransom if it has to stretch for twenty or more years, especially if it’s dependent on yo-yoing stock prices.

So, where does that leave your regular Joe or Jane contemplating retirement? You guessed it – depending big time on the old SS!

Back when FDR proposed Social Security he was accused by Republicans of ushering in socialism. Call it what you like – you think there’s a reason he’s one of the most revered presidents?

Apart from the monthly stipend paid to qualified participants, Social Security bestows a measure of dignity upon those who have toiled for a lifetime, raised families and have little to show for it. Instead of cutting or curtailing its benefits we need to safeguard and strengthen them.

There is nothing inherently wrong with the fiscal health of Social Security. From 1937 through 2009 it took in $13.8 trillion in payroll taxes and paid out $11.3 trillion in benefits. The balance was “borrowed” to fund other programs. Because of the recent recession the system is now taking in less than it is paying out. Should this situation continue Social Security is likely to go bust sometime around 2037.

In other words we’ve torn up the social contract honored by previous generations. We’ve stopped paying our way and to hell with those coming after.

And yet for mere pennies extra a week we could make Social Security fiscally sound again. Is that so far beyond us?

And for an extra couple of bucks a month we could beef up the system so that seniors might enjoy the more dignified, and less worrisome, lifestyle enjoyed by their peers in other developed nations.

I know! Messrs. Boehner and McConnell say we can’t afford to raise taxes in a time of recession – businesses will be less likely to take on new employees. Tell that to the Fortune 500 – many so awash in cash they’re even buying back their own stock and still not hiring.

Medicare is already being threatened by the Ryan voucher proposal that invites recipients to fend for themselves with private health insurance and medical providers. Moan all you like about big government, try going mano a mano with big business!

There are many reasons for the current deficits – a fee for service medical system that encourages overspending, an ongoing war mentality that leads to bulging defense budgets, and a refusal to pay as we go for the services we demand.

Social Security need not be one of those problems, if we pony up and do the right thing. In fact, for senior citizens it may well be the only solution.

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