Social Security ..... Again

I am glad I got my wish from several months ago. I believed it was time for America to have a debate about social security. Unfortunately, the only debate we have is partisan bomb throwing. Frankly, commentators are simply lying.

To set the record straight, the Social Security system currently receives approximately $200 billion per year more than it sends out. This "surplus" is spent by Congress on various programs and bonds are issued to pay this money back, plus interest, years from now. However, the money is still being spent. Between now and 2017 (when more money will begin coming out of the SS system than what goes in), the annual surplus will shrink.

So unless Congress is planning on spending $200 billion (and greater each successive year)less, there are only three other ways to "fix" social security. One way is to print dollar bills. This will greatly reduce the purchasing power of ordinary Americans, not just abroad, but at home as well. The second way is to raise taxes to close this gap. You can parse this many ways, but at the end of the day, taxes must go up. Or, you can reduce benefits to social security beneficiaries. This is obviously not popular. Nobody wants to to be guaranteed to receive a pay cut.

These are the only answers. Private accounts are benefit cuts. It is less money that the government is responsible for (it is also a cut in government spending as Congress will not have this extra money to spend). Raising the retirement age is a benefit cut. Increasing the maximum social security income level is a tax increase.

The scary thing is that Social Security is not even the most pressing looming unfunded liability; Medicare is. And unfortunately, the situation just got much worse with the prescription drug benefit.

Start saving now folks!