Monday, May 18, 2009

Is there a social security crisis?

One of the loudest conservative memes that I've heard is that social security is in a "crisis" -- and that we should consider privatization as part of a road to resolving that crisis. Yet I've never seen any convincing numbers to prove this. If anything, the previous reforms we had to the system -- like raising the tax cap, for example -- seem like they could solve the "problem" quite well. Robert Reich, former Clinton Labor Secretary and UC Berkeley economics professor, explains:

Yes, I know, the post-war Baby Boom is moving through the population like a pig through a python. The number of retirees eligible for benefits will almost double to 79.5 million in 2045 from 40.5 million this year. But we knew that the Boomers were coming then, too. What we didn't know then was the surge in immigration. Yet immigrants are mostly young. Rather than being a drain on Social Security when the Boomers need it, most immigrants will be contributing to the system during these years, which should take more of the pressure off.

Even if you assume Social Security is a problem, it's not a big problem. Raise the ceiling slightly on yearly wages subject to Social Security payroll taxes (now a bit over $100,000), and the problem vanishes under harsher assumptions than I'd use about the future. President Obama suggested this in the campaign and stirred up a hornet's nest because this solution apparently dips too deeply into the middle class, which made him backtrack and begin talking about raising additional Social Security payroll taxes on people earning over $250,000. Social Security would also be in safe shape if it were slightly more means tested, or if the retirement age were raised just a bit. The main point is that Social Security is a tiny problem, as these things go.

Honestly, it doesn't seem like that big of a deal. Raising the payroll taxes for SS takes care of the shortfall, much as has happened in the past, as you can see from this table of social security tax rates.

Does anybody see anything I'm missing here or is the social security "crisis" just another meme cooked up to try to gain support for privatization and other radical right wing policies?