The Problem with Social Security
David John, a Senior research Fellow at the Heritage Foundation, explains his position on Social Security as it relates to taxes and health care. He suggests it would be a good solution for the government to raise the age of retirement.
David John: The problem is that while I agree that these are “full faith and credits” securities and we haven’t defaulted since sometime in the 1770s or so and we have no plans to do so now, what is actually there is paper and it is a first call on tax revenues. Now, those are tax revenues that are going to come in from income taxes and various other things and, yes, it will all go to the Social Security system.
But at the same time, we still have a problem with healthcare and healthcare is running massive deficits as Mike mentioned, and we have problems with the economic measures we’ve taken in the last six months or so that deal with the economy and unfortunately, we have a lot more demand coming for that tax money than we’re going to have tax money coming in.
Ray Suarez: So when you say “first call on tax money,” after those two trends pass each other and we’re paying out more than we’re taking in.
David John: Right. Right.
Ray Suarez: The Social Security recipients in the 2020s of which I hope to be one, I think.
David John: Me, too.
Ray Suarez: As I hope to be… I mean, in that number, too.
David John: Right.
Ray Suarez: We will also be taking money, not only from people paying Social Security tax or working, but from the general tax revenues of the United States.
David John: Absolutely. And the fact is that we keep taxes to the same level historically, about 18 percent of the economy, the three programs that Mike mentioned, Medicare, Medicaid, and Social Security, are going to suck up every single dollar of that tax revenue starting around 2050 or so and unfortunately, if we could put healthcare issues off to the side and say, “We’ll deal with you later,” Social Security probably would be fairly a simple problem to fix, but we can’t. It’s all coming in together.
Ray Suarez: Well, the same people who are going to want that Social Security check are also going to want the healthcare.
David John: Exactly.
Ray Suarez: Again, all of us getting old and sitting around this table this morning.
David John: Right.
Ray Suarez: So what’s the solution in simple terms? I mean, obviously, you either got to increase the money you collect or say to the people who are hoping to get Social Security checks, “You’re going to get less.”
David John: That’s it.
Ray Suarez: Those are you choices, right?
David John: That’s the bottom line with it when it comes down to it. You can try to make your money work harder by increasing private savings and things like that and the Obama administration is working on that in increasing opportunities for retirement savings and that’s a very crucial element of this whole thing.
We really can’t look at Social Security separately from overall retirement income. But as far as Social Security goes, either we raise taxes and there are costs to that because it makes hiring somebody more expensive and that’s especially true with younger people and lower-skilled workers, or we’re going to have to go through, which is what I think is going to happen is to change benefits. We’re probably going to have raise the retirement age, probably up to 68, 69, something like that, and we’re going to have to focus the money that we got coming in to Social Security even more than we do now on those who need it most.
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