Fixing Social Security is Virtually Impossible (Yet it must get done)

Categories : Financial, News
August 30, 2023

Social Security and Medicare are going broke. Our elected officials readily admit the problem. What they won’t do is seriously discuss how to avoid an impending default. Every day, the problem escalates. Instead, when any brave politician mentions the need to repair the wounded system, political competitors point fingers and assure immediate political destruction. In this case, which side of the aisle a politician favors is irrelevant. Worse yet, voters of all ages tend to fear any proposed change.

Framing the problem, no insurance plan can exist forever if premiums (inflows) are constantly less than benefits (outflows). That is precisely where we find Social Security today. The magnitude of the problem is so large, and so pressing, that no simple solution will suffice.

Last time the Social Security System was updated to extend its life was in the Reagan Administration when the Full Retirement Age (FRA) was gradually raised for younger workers. From the original 65, FRA was slowly indexed up to 67, depending on the year of birth. My generation was given ample fair warning.

Today, Social Security is referred to as the “third rail of politics.” This refers to the electrified third rail of a subway train, which cannot be touched without grave danger. So it is in politics. The subject is politically lethal. It is so bad that when Gov. Ron DeSantis announced that he’d like to save the Social Security System, the Donald Trump PAC accused DeSantis in TV commercials of wanting people to pay more and get less. Imagine trying to get two differing political parties together!

Without updating (fixing) the System, monthly benefits for all Americans, including current recipients, will drop by at least 23%, beginning in 2032 or 2033. Since many older Americans are living on Social Security benefits, many would find themselves in financial trouble. And, because Senior Citizens tend to vote in very high percentages, politicians everywhere would be summarily voted out of office. The irony is palpable.

As 2032 looms, the country is faced with a dilemma of its own making. Someone needs to step up, inform the public as to the impending danger, and risk political suicide. Who that someone will be is unclear at this moment.

Social Security is a contract made with Americans decades ago, and it must be kept. Every day that goes by without a fix makes the problem more difficult. Regardless of party affiliation, politicians are afraid to address the issue. Any long-term solution will require political cooperation. When will the public demand action, rather than threatening the careers of their elected representatives? No longer can that be treated as a rhetorical question.

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