- The Washington Times - Tuesday, April 19, 2005

In 1935, this nation embarked on a noble effort to assure most elderly workers could retire without fear they or their families would end up destitute. Over the next 70 years, Social Security met that goal.

We who are near retirement age can be confident Social Security will be there for us. Unfortunately, for our children and grandchildren the wolf is at the door. Unless the system is modernized, when our children reach 67 (the current retirement age for their generation), they may face substantial benefit cuts and their working children dramatically higher taxes or massive borrowing just to keep Social Security afloat. This is not a legacy we want to leave to our progeny.

Today, more money is paid into Social Security than is paid out. This will continue until about 2018, when benefits paid out will exceed Social Security (FICA) taxes collected.

In 2027, when our youngest grandchild graduates from college, taxpayers will have to come up an additional $200 billion to make Social Security whole. In 2033, when our grandchildren will start their careers, the annual shortfall will be more than $300 billion. In 2042, when one might hope they will have children of their own, the system will clearly be dysfunctional.

How can this be? Don’t we all pay into a Social Security trust fund during our working lives, which is then paid back to us when we retire? Allow us to state this simply and categorically: there is no trust fund.

When working people pay FICA taxes, the money goes right out the door to pay current beneficiaries and to help pay the costs of the federal government.

When retirees receive Social Security checks, the money doesn’t come from a trust fund account they’ve built up over the years; it comes from the largess of current workers.

Members of each generation typically draw down several times what they’ve paid in. This is possible because more people pay into Social Security than are receiving benefits, and people typically pay in (that is, work) longer than they receive benefits. But when the ratio of people paying in versus those receiving benefits falls, and when those receiving benefits live progressively longer — well, you get the idea.

Historically, Social Security could be likened to a pyramid, with a large base of young people supporting a smaller group of older people higher up. But that pyramid is fast turning into a column with parallel sides.

When it reaches that point, each worker will support one elder as well as herself.

While Social Security still retains something of a pyramid shape, we have an opportunity to convert the system to one that will make it possible for younger generations to provide for themselves through accounts they own and can pass on to their children and grandchildren, while assuring those receiving Social Security benefits and those nearing retirement age not face a reduction in their anticipated standard of living.

But the opportunity to accomplish that is fast evaporating. That’s why some elected officials, including President Bush, have had the courage to say, “stop, the system is in crisis, we must fix it now.” What is truly extraordinary about their willingness to take on this issue is that the price of no action will be paid after this administration is over and after many of those in Congress are retired. They are standing up for our children and our grandchildren. For that we say, “God bless.”

Demaris Miller is a psychologist and a former candidate for the U.S. House of Representatives from Virginia. James Miller is a former Reagan budget director and is chairman of The CapAnalysis Group, LLC.

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