We Must Ensure Social Security Isn’t Forgotten Like “Life of Riley”

“There are risks and costs to action. But they are far less than the long-range risks of comfortable inaction.”
– John F. Kennedy

Those of us with more than a few gray hairs can fondly remember the radio and television program, “The Life of Riley.” Riley enjoyed a great, carefree life because he lived off someone else’s money and sacrifice. In brief, Riley’s Rich Uncle supported him. Instead of having a negative feeling toward Riley for being a gold digger, we cheered his good fortune.

We have had our own Rich Uncle — Uncle Sam.

Americans love Social Security because it has been a reliable retirement safety net since its enactment in the 1930s. In return for mandatory withdrawals from our wages, Social Security has provided monthly payments after workers reach age 66.

But we have learned that this enabler of our good life during our golden years has a downside for our children and grandchildren. Unlike us, they will receive no more than 78 percent of the benefits promised to them. This shortfall occurs because the Social Security Trust Fund will be exhausted before they reach full retirement age.

What went wrong?

According to the 2010 Trustees Report, Social Security will begin to spend more in benefits than it receives in payroll taxes in 2015. Under today’s economic scenario, Social Security will run a permanent cash deficit until its funds are completely depleted, possibly by 2029.

Social Security owes $7.9 trillion more in benefits than it will receive in taxes. Annual deficits will reach $267.5 billion in 2030 and $317.3 billion in 2035.

The government must cut back markedly on other programs or require major tax increases in order to fund these stupendous outlays.

The culprit is our aging population. The prospective payout to a larger number of recipients over a longer time period has undermined Social Security’s solvency. Since 1935, life expectancy has increased by 18 years, from 61 to 79, according to data provided by the Library of Congress, so we will not have enough workers to support our aging population. By 2050, only 2.6 American workers will be supporting each recipient, compared with 16 in 1935.

What can be done?

What are the options for making Social Security solvent?

Increase the retirement age at which one may collect full Social Security Benefits.

Reduce benefits — especially for higher income groups.

Raise the payroll tax rate.

Raise the cap on wages subject to payroll taxes above the current $106,000

The government would benefit in two ways from postponing the official retirement age.

First, the government would receive more taxes from people who extend their working careers. Second, the government pays out benefits for a shorter time.

The debate is not whether the system is expected to go broke and not even when. The debate is what to do about it.

We must take action as soon as possible, because the payment of full benefits to current retirees would shortchange future generations. The government is essentially running a Ponzi scheme.

Maybe it is for the best that “Life of Riley” is off the air. We do not need any more Hollywood fairy tales that let us fantasize that nothing threatens our retirement lifestyle. The truth belies our optimistic assumptions.

Our Rich Uncle, Social Security, is trillions of dollars underfunded. The government deserves censure for not taking policy steps to counter the financial burden that results from increases in our life expectancy. While reforming Social Security is painful, we can take remedial action to cure its shortfalls.

Let us remember JFK’s warning that the negative consequences of inaction outweigh the pitfalls of new policy initiatives.