From The Philadelphia Inquirer: http://www.philly.com/philly/opinion/inquirer/20120729_Social_Security_is_not_headed_for_disaster.html
Barbara R. Bergmann
Sun, Jul. 29, 2012
Sun, Jul. 29, 2012
The gloomy annual report of the trustees of Social Security has provoked the usual ominous predictions of big trouble ahead. Media accounts spoke of significant deterioration in the financial outlook of the system, and declared it unsustainable unless structural changes were made. The scare words might seem to justify the often-heard prediction that Social Security may last long enough to sustain our current oldsters, but that it is headed for bankruptcy and "won't be there" for our younger citizens.
Nothing could be further from the truth.
Into the future, Social Security can and will provide wage replacement at about the same level it does now. It does not depend for its resources on an entity that might run out of money, that has no way to raise more, and could go into bankruptcy. The U.S. government has the ability to raise enough revenue to pay out whatever level of Social Security benefits the public wants. In that, Social Security resembles all the other things the government pays for, including the national parks, the Food and Drug Administration, and the Department of Defense.
At what level does the public want retirees supported?
All indications are that the public is satisfied with benefits that replace wages at about the present level. Can the richest country in the world afford to continue to do that? Of course. Our taxes are very low compared with those of most other developed countries. Our ability to spend more than we now do on government is very high. If necessary, the public would support higher taxes to maintain Social Security benefits.
The doom and gloom about Social Security, and the claims that it needs radical restructuring, derive from the way Franklin D. Roosevelt's administration explained the system to the public. To avoid accusations of "socialism," citizens were made to understand that the pensions they would get would consist of their own money that they had put into a trust fund.
The trust-fund story made it politically easier to start the system and maintain support for it. But that story has made it vulnerable to the prediction that it is going bankrupt and will have to be radically changed. After all, if the pensions come out of the trust fund, and the fund will shrink to zero in about 2033, as predicted, then isn't the system unsustainable?