6/21/2012 4:02 PM ET|
The great Social Security lie
If you think the retirement of baby boomers is the problem, perhaps you should know about the real root of the problem -- and how it needs to be addressed.
The headline machine was in overdrive earlier this year with the arrival of the latest Trustees' Report on SocialSecurity and Medicare. And while much of the media continues to herald the coming bankruptcy of Social Security, they do so at the risk of ignoring the real story -- a story that is neither difficult to explain nor hard to understand.
Technically speaking, an entity is deemed bankrupt when its obligations exceed its revenues. Therefore, if the projections are accurate, Social Security will, indeed, be deemed bankrupt in 25 years -- absent modifications to resolve the funding problems.
However, that does not mean that the money will be all gone come 2035. Nor do the headlines explain why we have the projected shortfall.
Subsequent to the projected expiration of the period where the trust can pay out 100% of the promised benefits, the fund will then be in a position to pay out 75% of promised benefits for the foreseeable future -- and that is not OK. Clearly, there need to be some changes made to Social Security so as to make up the 25% annual shortfall in benefits we anticipate will begin a quarter of a century from now.
The cause of the shortfall
But if we are to hope to make these adjustments in a sensible and realistic way, it might not be a terrible idea for the American public to actually understand the real causes of the shortfall in anticipated trust revenues.
We are consistently led to believe that it is the "aging workforce" that rests at the heart of Social Security' funding problems. Tune in to any of the media reports covering the numbers just out and this is what you are going to see and hear.
The claim, while legitimately representing a small piece of the problem, fails to explain the lion's share of the crisis we will experience in the Social Security Trust --and by lion's share, I mean a full 60% of the entitlement's funding shortages.
The "aging workforce" narrative serves to encourage and support the critics who claim that our problem is too many retirees lining up to collect their entitlements only to find that the government has failed to properly manage the Social Security Trust -- leaving the next generation of beneficiaries to be shortchanged 25 years down the line. As a result, the privatization pushers argue that Americans would be far better off looking out for their own retirement accounts so that government mismanagement will not come between hard-working citizens and their retirement money.
This is the Great American Social Security Lie.
It is a lie concocted by those seeking to fulfill Wall Street's eternal quest to get its sweaty palms on trillions of dollars of our retirement cash, allowing them to expand their casino operations beyond their wildest imaginations -- and Wall Street has a very healthy imagination.
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