The 1950’s TV detective series “Dragnet” made the phrase, “Just the facts, ma’am,” a national catchword for cutting through the clutter of argumentative debate. As Congress reconvenes, here’s a “just the facts” examination of Social Security.
Its format is that of a lottery, one for which every worker has to buy a ticket whether he wants to or not. It was known when it was created that half of its participants would lose, getting none of their money back, because they would die before turning 65.
The amount of money going to the winners would depend on each individual’s longevity. Average life expectancy for those over 65 in the 1940s was seven more years, but those who died at 66 got only a pittance while those who lived for decades did very well. Social Security’s first recipient, Ida Mae Fuller, paid in $44 just before turning 65 and then lived long enough to take out $20,993.
The large number of people in the pool smoothed out the fiscal impact of these differences. As long as 100 percent of the workers were paying in for as much as 45 years while only 50 percent of them were taking out for an average of seven years, everything balanced and the lottery worked. Indeed, during the peak Baby Boomer years, when there were many workers and relatively few retirees, it worked so well that more money came in than went out, creating a growing surplus in the Old Age Survivors and Disability Insurance (OASDI) trust fund.
No more. Today, the percentage of workers who live long enough to draw Social Security is 85 percent, not 50 percent. The average number of years in which they do so is closer to 13 than seven. Payments have been greater than revenues for several years. Even with a higher ticket price — the current payroll tax — the lottery no longer works.
In 2005, George W. Bush tried to change it. At the time, OASDI trustees said the surplus in the trust fund would cover the shortfall until 2041, so Bush’s opponents said, “It will be 36 years before we need to worry.” However, in 2011, the trustees shortened that projection, reporting that “trust fund assets will ... become exhausted in 2036.” Then, just last month, the Congressional Budget Office (CBO) shortened it again, to 2033. We don’t have 36 years; we’re at 19 and counting down.
The CBO revision of the the deadline for the depletion of the trust fund is a wake up call. Once the trust fund is empty, OAsDI trustees cannot pay out more money than they receive. That means that, in 2033 (or earlier) payments to retirees will drop to an estimated 77 percent of current levels. This drastic cut that will be evenly distributed to all recipients, rich and poor alike. The longer we wait, the harder and more expensive the fix will be.35 comments on this story
None of this is a surprise; the demographic trends were clear when I ran for the Senate in 1992. I discussed them in my campaign but few were interested. In 2005, as Chairman of the Joint Economic Committee, I tried again, conducting extensive hearings on the subject and then introducing a bill which OASDI trustees said was a 100 percent solution of the problem. I couldn’t get a single co-sponsor. Many senators said they agreed with me but none wanted to touch the issue because they considered it political poison.
Those are the facts, ma’am. Feel free to share them with your congressional representatives. They will not deal with this issue until they hear a demand for action from you.
Robert Bennett, former U.S. senator from Utah, is a part-time teacher, researcher and lecturer at the University of Utah's Hinckley Institute of Politics.