Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, June 5, 1995 TAG: 9506060030
SECTION: EDITORIALS PAGE: A-7 EDITION: METRO
SOURCE: ROBERT L. BIXBY
DATELINE: LENGTH: Long
But can Social Security remain untouched in the balanced-budget fight? The answer depends upon your goal. If you simply want to balance the budget by some near-term year, say 2002, then you can do so without touching Social Security. But if your goal is to achieve a sustainable balance of federal revenues and expenditures, then Social Security cannot be ignored.
For one thing, it's too big to ignore for too long. Social Security is the largest single program in the federal budget, consuming 22 percent of all expenditures. Moreover, its projected liabilities will quickly decimate any balanced budget plan that does not take them into account.
Unfortunately, the real problems don't show up in Washington's traditional five-year budget window. Within this timeframe, payroll taxes will continue to bring in more than enough revenues to cover the benefits owed to current retirees. As is frequently noted, Social Security has been running a surplus for the past several years which, in effect, has reduced the size of the overall budget deficit.
But this comforting scenario will reverse course shortly after the Baby Boomers begin retiring in 2008. Once that inevitable demographic event occurs, outlays for Social Security will vastly outpace income, putting an enormous strain on the remaining budget.
It is difficult to exaggerate the explosion of benefits that will occur when the Baby Boomers reach retirement age. This year, outlays for Social Security will be approximately $340 billion. That number will grow to $580 billion by 2005, and to more than $1 trillion by 2015. In 2020, when today's newborn is entering the work force, outlays for Social Security will have topped $1.6 trillion. For purposes of comparison, that is approximately the same size as the total 1996 budget.
It is further apparent that today's surpluses cannot be counted on to finance these benefits. According to 1995 projections by Social Security's Board of Trustees, the program's two insurance funds - Old Age Survivors and Disability - will begin running a combined annual cash-flow deficit in 2013. By 2020, the combined deficit will be $232 billion; by 2025, it will reach a whopping $482 billion.
And, while it is true that the current surpluses are being invested - with interest - in U.S. government bonds, we have been unable to ``save'' this money because of the need to finance our existing budget deficits. Thus, despite the fact that the Social Security trust funds are accumulating huge paper assets, additional revenues will be needed to convert these assets into benefit checks once the annual payroll-tax income turns negative in 2013.
What this means in practice is that if we don't change course the huge Social Security deficits foreseen by the trustees will have to be financed by some combination of general revenues, higher payroll taxes, reduced benefits, or more debt. None of these options will be any more popular in 2013 than they are now. But they will be more urgently needed, and thus more severe.
So even if we manage to balance the budget by 2002 without ``touching'' Social Security, a feat that will require significant adjustments to other popular programs such as Medicare, we will immediately face a whole new deficit crisis caused by the need to cash-out the trust funds.
Those who argue that Social Security reform should be put off are forgetting that the nation may not be prepared for a new round of benefit reductions and payroll tax hikes after experiencing a seven-year push to balance the budget by 2002.
It is also worth asking why the burden of reform should be pushed off onto future workers and retirees who are already paying much higher payroll taxes than did the current generation of beneficiaries. Phasing in reforms now, as advocated by Sens. Bob Kerrey, D-Neb., and Alan Simpson, R-Wyo., would ensure a more even distribution.
To be clear, the problem is not ``greedy geezers.'' It is a simple matter of demographics. Within the next 35 years the number of Americans over age 70 will double. By 2025, 20 percent of the U.S. population will be over age 65, up from 13 percent today. Life expectancy, which was 61 when Social Security was established, is now 76 and going up.
Meanwhile, as the population ages and the baby boomers retire, there will be approximately two workers to support each beneficiary by 2030. This ratio was five to one as recently as 1960.
There is no getting around the fact that the present course is unsustainable. We can put off the consequences for a few years, but we should be clear about the choice we are making. The longer Social Security is deemed ``untouchable,'' the more draconian will be the solutions visited upon future workers and retirees.
If reforms are to be undertaken sooner rather than later, someone is going to have to deactivate the third rail. That someone is us.
Robert L. Bixby is state director of the Concord Coalition's Virginia chapter.
by CNB