Treading the Social Security minefield

Treading the Social Security minefield

September 13th, 2011 in Opinion Free Press

Trays of printed Social Security checks wait to be mailed from the U.S. Treasury's Financial Management services facility in Philadelphia. (AP File Photo/Bradley C Bower, File)

Few issues are as sensitive to so many Americans as Social Security.

That's because today about 155 million Americans are paying Social Security taxes -- and about 54 million are getting monthly Social Security benefits.

But Social Security replaces only about 40 percent of the average worker's income after retirement, and the Social Security Administration warns it "was never meant to be the only source of income for people when they retire. ... [M]ost financial advisors say retirees will need 70 percent or more of pre-retirement earnings to live comfortably."

OK, so we know Social Security alone isn't enough to support most retirees comfortably. But will even the limited benefits that it is supposed to provide be there for future retirees?

An AP-GfK poll shows that 70 percent of Americans consider Social Security very important to their financial well-being when they retire. But there is enormous doubt about whether the benefits will be waiting for them. Only 35 percent of the people polled believe Social Security benefits are extremely or very likely to last throughout their retirement. Thirty percent believe it is somewhat likely to be there, and 35 percent believe it is not too or not at all likely to provide expected payments.

The leading Republican presidential candidate, Gov. Rick Perry of Texas, warns -- as economists and others warn -- that Social Security is unsustainable under current conditions. In fact, the Social Security trustees reported that in 2010, the program spent nearly $50 billion more on benefits than it took in from payroll taxes. As The New York Times reported, analysts see that as a "tipping point -- the first step of a long, slow march to insolvency ... ." By some estimates, Social Security will be unable to meet its obligations by 2036 -- and Medicare much sooner than that.

So Perry noted in a recent GOP debate, "It is a Ponzi scheme to tell our kids that are 25 or 30 years old today, you're paying into a program that's going to be there."

What is a Ponzi scheme? The expression relates to Charles Ponzi, who in the 1920s had a bogus investment operation that paid investors not with returns from legitimate investments but with money from people who came into the scheme later. The later you get in on such a scam, the more likely you are to lose your "investment."

Well, with current workers investing in Social Security without any certainty that the program will last through their retirement, is it so controversial that Perry called it a Ponzi scheme? Or that he said, "Anybody that's for the status quo with Social Security today is involved with a monstrous lie to our kids, and it's not right"?

Everybody wants Social Security benefits to be there for them, but few Americans -- and fewer still in Washington -- want to talk about how to sustain those benefits.

We don't know whether Perry has the answers, but he is right to raise the question.