Actually there is no Social Security crisis. To arrive at the notion that some forty years from now Social Security will run out of money, projections by the Social Security Trustees assume U.S. productivity growth of 1.6% a year for the foreseeable future. This estimate falls below the average 1.8% productivity between 1960 and 2000; significantly below the 2% average productivity between 1993 and 2003; and is way off some of the yearly growth rates of the last decade that have run as high as 3.8% Even if one assumes a much more modest increase in the future, say of 2.5% or even merely 2% a year, the Social Security “crisis” vanishes, and the program remains in clover for generations to come.
Similarly, the Trustees’ current projections significantly downplay the role of immigration in keeping Social Security solvent. Immigrants, who are mainly young, raise the ratio of young taxpayers to retirees. Although the dominant forecast calls for 0.22-0.25% immigration rates, this prediction is also unduly conservative. Recent immigration rates have been about 0.38% since 1970.
I do not deny that to get a democratic community to face tough decisions, it is often necessary to generate a sense of crisis; otherwise such communities find it difficult to get people to agree to policies that impose costs and changes in long established lifestyles. However, crying wolf where there is none has the opposite effect—it distracts attention from the true crises.
In the case at hand, one need not look far for a true crisis: Medicare must be salvaged. The Social Security Board of Trustees estimates that Medicare’s long-term costs will be double those of Social Security. They estimate that by 2012, Medicare will begin experiencing shortfalls, and by 2020 its trust fund will be entirely depleted.
A truth-in-crisis-mongering policy would lead us to focus on the realistic ones, and not squander political capital and public good will on fixing public systems that are not broken. Once we successfully apply this approach at home, maybe we can next introduce it to our foreign policy—going after nations that have weapons of mass destruction and threaten us, our allies, and the world peace.
SeniorARK adds this Reality Check:
FY 2008 Budget "Borrows" $674 Billion from Social Security
This practice of borrowing from a retirement fund is very familiar to many workers who have borrowed from their 401(k). The difference is that (hopefully) the worker has a plan to pay back the loan, and continue to fund the retirement account.
The government, on the other hand, has no plan to pay back the loan from Social Security. Instead, its plan for at least the next five years is to continue to borrow from this retirement fund. In fact, by using Social Security payroll taxes, the government can even "balance" the budget by 2012.
The other difference, of course, is that the worker the government is borrowing from...is you.