Will Baby Boomers Bankrupt Social Security?
The full retirement age now depends on when you were born. If you were born between 1943 and 1954, you receive full benefits if you retire at age 66. If you were born in 1960 or later, your full retirement age is 67. Some observers suggest the retirement age may need to be raised to age 70 if the system is to remain solvent.
- In the 1990s, Congress raised taxes on benefits to the current 12.4 percent.
In his February 2005 State of the Union Address, President George W. Bush named strengthening Social Security as one of the priorities for his second term in office. He also called for a transition to a combination of a government-funded program and personal accounts ("individual accounts" or "private accounts") through partial privatization of the system.
This proved controversial and further Social Security reform has been blocked by the dispute over privatization. The recent turmoil in the financial markets exposed some of the problems that approach would pose, and privatization no longer appears to be on the table.
Solutions Elusive But Not Impossible
Mounting Debt, Debating Benefit Cuts
Last month (January 2010), a joint report from the National Research Council and the National Academy of Public Administration studied the growth in three major entitlement programs— Medicare, Medicaid, and Social Security. The report, "Choosing the Nation's Fiscal Future," was done by a committee that included three former heads of the Congressional Budget Office.
The report concluded that spending was outpacing tax revenue so much that "any efforts to rein in future deficits must entail either large increases in taxes to support these programs or major restraints on their growth – or some combination of the two."
"The debt level of the United States is unsustainable, something has to give," said Rudolph Penner, head of the CBO from 1983 to 1987 and co-chairman of the report.
“Given that no one in power is serious about restraining the deficit, we are rapidly heading toward a crisis,” Penner said. “If we should ever become rational, I think that the only solution involves a combination of tax increases and spending restraint.”
The U.S. Senate last month voted down a proposal to create a bipartisan commission that would have made recommendations by December on how to deal with rising deficits and the fiscal instability of Social Security, Medicare and Medicaid. Like the Greenspan Commission 27 years earlier, this one would have presented legislation to Congress in a yes-or-no vote, with no opportunity for amendment.
Many Republicans refused to back any move that could force them to vote on tax increases and many Democrats objected to the prospect of deep spending cuts. The bipartisan proposal was co-sponsored by Sen. Kent Conrad, (D) North Dakota, the chairman of the Budget Committee, and Sen. Judd Gregg of New Hampshire, the committee’s senior Republican.
Sen. Max Baucus, (D) Montana, the chairman of the Senate Finance Committee, said, “Their commission is a Social Security-cutting machine.”
This sort of proposal needed 60 votes for passage, and Conrad claimed to be “delighted” to have gotten 53 votes.
“I think that provides a significant boost to the momentum that is under way to begin to address the very deep challenge of a burgeoning debt,” he said, adding that the outcome was “yet another indication that Congress is more concerned with the next election than the next generation.”
In his State of the Union speech, President Obama said he would form such a panel by executive order. But his alternative panel could not force Congress to vote on its recommendations.
“Before too long we need to put political posturing aside and sit down at the table, as we did in 1983, to be bipartisan,” said Astrue, the Social Security commissioner appointed by George W. Bush in 2007 to a six-year term.
“My sense is that very few members of Congress have faced up to it in a hard way,” he added. “But I’m not writing off Congress. I try to be optimistic about these things. I continue to believe we’re going to have some very honorable people taking risks for the good of the country.”
Watch "Tom Brokaw Reports: Boomer$!", Thursday, March 4 at 9pm ET on CNBC. The program will also air Saturday, March 6 at 7pm ET; Sunday, March 7th at 9pm ET; and Monday, March 8th at 8pm ET.