Keeping Social Security's promises to today's workers will be a lot easier if the government stops using the system's trust funds to cover deficits in other federal programs, three Brookings Institution economists say.
Using the trust funds as a form of enforced national savings would spur economic growth and ease the burden of providing pensions in the 21st century for the Baby Boom generation, the economists said in a book released Monday.The economists gave a qualified "yes" to the question they posed in the title of their book, "Can America Afford to Grow Old? Paying for Social Security."
But their assessment is contingent upon early, painful action to wipe out the big deficit in the government's other accounts. One author, Barry P. Bosworth, said there is no way to do that without raising taxes.
"If you do this, you kind of destroy the argument that you can solve the deficit on the expenditures side," Bosworth said at a news conference.
Bosworth and colleagues Henry J. Aaron and Gary Burtless also suggested that even if Social Security's trust funds are used as a form of national savings, the payroll tax may still have to be raised by 6.9 percentage points over the next 75 years to keep Social Security and Medicare from running deficits.
The total payroll tax is now 15.02 percent, divided equally between employee and employer. It is scheduled to peak in 1990 at 15.3 percent, or 7.65 percent for each.
Social Security is currently rolling up $40 billion annual surpluses that soon will become $100 billion-a-year surpluses.
"The growing surpluses in the Social Security system camouflage a major deterioration in the budget balance for (non-Social Security and Medicare) operations," said the Brookings experts.
"The payroll tax, ostensibly earmarked for retirement, survivors, disability and hospital insurance, is being used increasingly to pay for other government expenditures, such as defense and interest on the public debt," they said.