Despite letters that deny or downplay the tenuous future of the Social Security system, the basic facts are quite sobering.
Each year, the Social Security surplus is replaced with Treasury bonds, and the money spent within the general fund. The Social Security surplus is factored into the yearly budget. Yet despite this additional revenue, a spending deficit is generated and projected to continue far into the future.
In 2008, the surplus will peak at $108 billion. The surplus progressively shrinks until it reaches zero in 2018. From 2008-2018, the projected cumulative revenue loss from the shrinking surpluses totals $359 billion. Unless Treasury revenues are augmented or drastic spending cuts ensue, that's an additional $359 billion to the cumulative 10-year deficits. How high can we drive up the national debt (currently $7.7 trillion) before our world bond rating plummets?
All this occurs before additional revenues are required to repay the first $23.4 billion in bonds out of the Social Security Trust Fund in 2018 to pay beneficiaries. Each year thereafter, progressively more Treasury bonds are repaid from the general fund to meet needs until 2042, when the last $1.003 trillion in available bonds are cashed in. "From 2018 through 2041, the trust funds will redeem bonds worth, cumulatively, $11.9 trillion," says Donald Luskin of National Review Online. Keep in mind that aging baby boomers will require Social Security and Medicare.
Any solution must absolutely not cause any economic decline. Tax increases tend to depress the economy. Spending cuts by a Congress intent on maintaining power is wishful thinking. Means testing turns Social Security into welfare. Private accounts may only be a partial solution.
The solution for both Social Security and Medicare crises is marked economic growth coupled with fiscal restraint. The FairTax addresses the former but does nothing for the latter.
Dale Schmacht, Evans