For the first time this year, but assuredly not the last, the Social Security Administration will pay out more in benefits than it gains in revenues, a situation long seen as a tipping point on the way toward insolvency. Though long-expected, economists did not quite expect this annus horribilis to arrive quite so soon. However, a combination of individuals seeking benefits earlier than anticipated and lower tax revenues, both corollary of the economic downturn, have moved up the timelines on both the first year of red income statements and the end result of a red balance sheet.
In terms of the continued financial health of America, this is a much bigger story than a short-term economic downturn, bigger than the possible expenses that will be found in a cryptic healthcare bill, bigger than currency rates, interest rates, stock market performance and unemployment numbers combined. Yet it has always been something of an elephant in the room, probably mostly due to political reluctance to go anywhere near the fruits of FDR's labor, but also due to an overall sense of helplessness; that almost nothing can ultimately be done to save the program.
However, it is not too late to reform the program to ensure its survival, at least for a politically necessary time horizon. A combination of a higher retirement ages (an obvious solution when coupled with rising life expectancies), lower, gradually declining benefits, and an eventual return to economic growth should be enough to get the program past current, and currently dismal, projections. More politically important, however, is the fact that such changes should get the program safely to the point where it will be able to continue paying out to those whose current and near-future retirement plans depend on a monthly check from Uncle Sam. This should allow politicians to make tough decisions about the future without too much kickback from retiree-rights organizations (though even this assumption is a bit optimistic). Despite quick fixes and patches, however, the fact of the matter is that Social Security will probably not be around in its current state, with or without reform, when today's 20 and 30 somethings are ready to put the lunch pail in the cupboard for the last time.
Therefore, combined with the quick fixes noted above, some brave politician will have to get some very difficult points across to the public and come up with some creative solutions to the problems we face. The best example of an attempt at this was President Bush's failed proposal for separate investment accounts a few years back. However, despite being on point with his warnings of future insolvency, his administration arguably did a very poor job of explaining the big picture, the problems we face and potential solutions. He also failed to assure today's benefit recipients that they would not be impacted; that his was a solution for the future, not the present. That the President had little to no political capital in the bank at that point certainly didn't help matters.
How about hope and change? Are they enough to conquer the inevitable issues facing Social Security? Just like anything else, the answer is a resounding no to the former and a perhaps for the latter. The current President is, however, also facing a public widely hostile to any suggestion coming from the White House these days and, much like his predecessor, is low on political capital at the moment. Therefore, it is most likely that it will be some time before this issue is properly addressed. It can only be hoped that 'some time' does not bring us right to the edge of a big scary pit called insolvency because by then, the Rubicon will have been long passed and potential fixes will have become the stuff of old D.C. wive's tales.
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