Social Security Reform Needed; Demographic Tidal Wave Poised to Swamp the System

September 30, 1999

by Mark Neumann

Former Rep. Mark Neumann is currently serving as the National Social Security Chairman for the Council for Government Reform.

Today, it seems like summer and the living is easy. The Congressional Budget Office (CBO) just found another trillion dollars under the national couch cushions, and we can finally stop thinking about tomorrow. But is that really the case?

There is one very important reason that we cannot afford to rush out and spend this "surplus" that has suddenly buried Washington in money. And that reason is the demographic tidal wave that will swamp the current Social Security system.

The people, known collectively as the baby boom generation, are steamrolling toward retirement. When they reach retirement age, the ratio of workers to retirees will hit record low levels. Can a pay-as-you-go retirement income security system survive when there are only two workers supporting each and every retiree?

Barring a tragic and widespread die-off of boomers or a massive infusion of high-wage immigrants, boomers face Social Security benefits that will be only 75 percent of those promised even if the government were to repay everything they have stolen from the Social Security Trust Fund. Right now, we have a small window for action. The massive boomer generation is reaching its peak earning years. The retiring generation, the World War II generation, is somewhat smaller than normal. This gives us a chance to break the chains of the failing pay-as-you-go Social Security system and establish a fully funded retirement income security system that will protect us in our retirement while not bleeding our younger workers dry. During my years in Congress, I fought to make government come clean with its accounting of the Social Security Trust Fund. This raid on the Trust Fund is one of the worst examples of government excess I have ever encountered.

Thanks mostly to a healthy economy and a big payroll tax hike in 1982-1983, the Social Security Trust Fund, which had operated mostly at break even for its first 50 years, has started to accumulate a hefty surplus. That is, more tax revenue was streaming into the fund than was being paid out in benefits. This surplus was "invested" in special non-negotiable government bonds. These bonds cannot be sold on the open market and should not be construed as representing anything other than an IOU from one portion of the government to the other. The bonds represent the future income taxes of our children and grandchildren, not real assets with which we can pay benefits. The surplus in the trust fund will continue only until the mid 2010s and then the fund will start draining the general treasury (taxpayers) to pay promised benefits.

By sometime in the 2030s, those "notes" will be gone and current workers will face a doubling or tripling of the payroll tax or retirees will face draconian benefit cuts. This fiscal crash on the horizon is the single biggest reason I have chosen to stay active on this issue. I cannot sit back and allow the short-term vision of some incumbent politicians to sell my children and grandchildren down the river. That's why I've joined with the Council for Government Reform, a 500,000-supporter group that is striving to enact sensible changes in the nation's Social Security system.

These are changes that will protect the benefits earned by current retirees as well as ensure a system that will not forsake future retirees or bankrupt our children and grandchildren. It is my view that it is entirely possible to accomplish this goal. There is no need, other than for crass political gain, to pit the retirement security of our nation's seniors against the economic well-being of America's working class. This is a false choice generated by the very structure of the current, failing system. We need to acknowledge that even in this time of surplus, we will face hard times again.

The Council is working to stop the raid on the Social Security Trust Fund and give seniors the peace of mind that their earned benefits will be paid while allowing current workers the opportunity to more directly save for their retirement.

I am looking forward to engaging the American people in this great debate about Social Security. I sincerely believe that no one wants to continue down a road that will lead to lowered standards of living for our retirees and our children. Not when solutions are at hand. I look forward to hearing your thoughts and encourage you to visit the Council for Government Reform's web site (www.govreform.org ) to learn more about our project. This article originally appeared in The Washington Times on September 27, 1999.

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