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TROUBLE

A Simple Program, A Complex Problem

By David Brody
Congressional Correspondent

CBN.com – WASHINGTON - It was back in the 1930's when the Social Security Act was born. It offered financial hope for the future, as Americans struggled through the Great Depression. The concept was pretty simple: workers would pay a Social Security tax, and when they retired they would get monthly checks to support them in their old age.

Fast forward 70 years. Today, many economic experts say Social Security will be in trouble in the years ahead and those promised benefits may need to be cut back, or even eliminated in the future, if changes are not made to the system. So what is the problem? Well, here is how it works.

The tax used for Social Security goes into a general fund, and that money is used to pay out benefits to today's retirees. The money that is left over goes into the treasury. Then the government takes out IOU's from it that are used to finance the federal budget.

The problem is, some projections show that starting in about 10 years, there will be no more cash for the government to use. And so, since the government still has to pay back those IOU's, that means Congress may have to raise taxes, increase the debt or cut spending to keep paying benefits.

David John from the Heritage Foundation said, "The simple fact is, that if we don't do something and do something quickly, then our kids are going to end up paying the bill for something they had absolutely nothing to do with starting."

The problem lies in that there are fewer workers today, because the Baby Boomers are just not having as many children. And people are living longer, so they are collecting benefits longer, and some experts worry that could mean serious difficulties in the years ahead. Many believe Social Security will go bankrupt in the next 30 to 40 years if something is not done.

But Dean Baker with the Center for Economic and Policy Research does not believe the dire predictions.

Baker said, "It's sort of silly for us to be running around like chickens with our heads cut off, because somewhere in the very distant future we might have a shortfall in the program. We can deal with that in fairly short order. We don't have to be making plans for 40 or 50 years down the road right now."

Nevertheless, there is a push underway on Capitol Hill to try and fix the system. The buzz words here are 'private savings accounts' in which workers invest a portion of their Social Security taxes into stocks and bonds that typically yield higher returns than the current government-managed system.

John adds, "This isn't going to be your brother-in-law's hot stock tip, although mine has done pretty well recently, and it is not putting your money in Joe's Bar and Pension Plan. This is a case where it would go into a very carefully selected, regulated investment series."

Backers of these accounts say the result will be an increase in revenue that will keep Social Security going and, in the process, give workers more retirement money when their working days are over.

Critics say setting up these accounts will be too costly. But John says it has to be done. He explains, "The simple fact of the matter is that these things are going to be expensive, but they are going to be so much less expensive than doing nothing."

The debate over what to do about Social Security will no doubt linger for years, and as it does, the clock keeps ticking.

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