In the last few columns, I have tried to put together the puzzle pieces of Social Security in an attempt to lay down some framework for possible solutions to what may be the biggest bailout of them all. After all, it would not be easy to tell millions of American workers whose payroll taxes are being used for current recipients that when their turn comes, sorry, no money. The tax was not optional, so that implies that the benefits are not optional either.
But let's face it, things do not look so good under the current tax or benefit ratios, so what is going to happen? Let's look at things logically, even though this is an emotionally charged subject. Just what can be done to save Social Security for the next generation of retirees?
I remember several years ago when Alan Greenspan spoke and everybody still listened. He was on CNBC one morning (a staple for me, gotta have CNBC) and he declared that on that very day taxes would need to be raised 7 percent and benefits cut by 7 percent just to break even that day. The next day, the problems would worsen, so he was basically saying that this was only a bandage, not a solution.
In 2004, Peter Ortzag, director of the White House Office of Management and Budget, co-authored a book called "Saving Social Security, A Balanced Approach." Similar to Greenspan, he advocated substantial tax increases and some benefit reductions to preserve the program but he felt health care reform needed to come first.
Seeing how things are going on the health care debate, I can only imagine the game playing and finger pointing that will envelope the debate on Social Security. So, are there any new or different ideas floating around other than raise taxes and reduce benefits? Let's explore a few.
One old standby is to raise the covered wage limit, changing the benefit formulas so that wealthier folks get less bang for their buck.
There also is either slowing or eliminating cost-of-living increases, or COLAs, so your benefit check would be the same every year until you die.
One big suggestion is to raise the age limit. Let's face it, when the program was set up in 1935, 65 was really old. Now the average lifespan is 78 for a man and 80 for a woman in the U.S. That is a lot more years of retirement benefits than Social Security actuarially planned for, and for many currently collecting benefits, more than they contributed in taxes.
Many of you may not know that there is a law requiring 75 years of solvency. The actuaries working for the Social Security Administration are pretty good, but how can anybody predict something 75 years out without doing some creative accounting? Even one faulty or inaccurate projection on benefit-to-worker ratios or inflationary cycles can fatally flaw projections. I am not willing to risk my benefits that these guys got it right 75 years out. I saw what happened with creative formulas last year in the real estate and debt markets, so my confidence is a bit shaken when it comes to quantitative analysis, and that is putting it mildly.
Last, but not least, the suggestion that the treasury should start redeeming bonds instead of using treasury IOUs over time, would create actual cash that could be invested in something other than treasuries. This was suggest by George Bush when he attempted to overhaul Social Security and was crushed by all those who scared older folks into believing that changing anything with Social Security would endanger their current benefits. There was fear that people could take their money out of Social Security and start speculating on the markets. But using high-grade bonds instead of treasuries could have made sense in lieu of cash deficits. Lots of sense.
Then, we have the current idea of levying higher taxes on the rich. But that $250,000-suggested income level would trap far too many middle income, two-wage families or small business owners like me.
Last but not least, again, means tax benefits. That would mean that people earning more than a certain level just would not get any benefits at all, but how is that fare if those people paid taxes. That would take Social Security from an earned benefit (through taxes) to welfare.
Besides, Social Security is already being taxed in a way. Just ask anyone who has more than $23,000 per year of non-Social Security retirement income. You pay federal income tax on 85 percent of your Social Security benefit.
Just like health care, Social Security is going to need some changes if it is going to survive and provide benefits for future generations. I know it, you know it. But we must use real numbers, valid accounting and pass a bill that does not leave much up to conjecture. And to make me feel good about it, all of Congress needs to go on the same plan that they are asking their constituents to accept.
I would like to hear if you have any suggestions on how to reform Social Security.
• Carol Perry has been a Northern Nevada resident since 1983. You can reach her at email@example.com or 267-5358.