No Free Lunch Ignoring Social Security’s Timely Cheap Fix Costs You

Dale Coberly Talks Social Security . . .

For over ten years I have been telling anyone who would listen . . . about ten people . . . that the great “Looming Unfunded Twenty-Two Trillion Dollar Deficit! . . . stealing our children’s future,” reported in all the high-end news sources by all the high-end reporters, columnists, nonpartisan experts, serious people, and other liars turns out to be really, really small when you actually “do the numbers.”

At that time the honest numbers showed that raising the payroll tax one tenth of one percent per year (about one dollar per week) for a few years (while real wages were projected to rise about one full percent per year about ten dollars per week per year) would close the Social Security deficit entirely for as far as the eye can see . . . without being a “crushing burden on the young,” without raising the retirement age without cutting benefits, and without “taxing the rich” which Roosevelt warned us would let the rich destroy Social Security.

But, to work this tax increase would need to start whenever the Trustees Report projected that the Trust Fund would fall below the level required for a “prudent reserve” within ten years.

Well, we passed that date four years ago. No one listened.

But there is still time for a still painless and almost a cheap fix.

The long-range Social Security deficit can still be closed entirely as far as the eye can see by raising the payroll tax one tenth of one percent per year for a number of years. Only now the ultimate tax rate would need to be about four tenths of a percent higher than it would have been, had we begun raising it four years ago. And “per year” now means each year until 2045. Previously “per year” meant “no more than once a year, with no raise required on average every other year. And starting four years late would leave Social Security short of a “prudent reserve” for about ten years. This would not be a real problem, as the tax could always be increased a tenth of a percent or so in the event of a near term shortfall. But it would allow the non partisan expert liars an excuse to scream “Social Security is broke—flat bust” every year.for the next forty years.


A better fix would be to raise the tax two tenths of a percent per year until 2033 starting in 2024. This would close the “short range financial inadequacy” as well as the long-range deficit entirely and forever. That’s about two dollars per week each year for ten years. The ultimate tax increase would be 4%.

Increasing the payroll tax by 4% is a number which can scare people who are scared by numbers. But in fact you would not feel it. It would not change your standard of living. Most workers would only see a two percent increase and would not notice it at all except for the non-partisan liars and politicians. While the tax rate is going up one or two tenths of a percent per year real wages are expected to go up one full percent per year. That is, by the time the tax increase reaches 4%, real wages will have increased about 40%. You will have more money in your pocket after paying the tax, and you would have paid for a retirement that starts when you are 67, or 62 if you value your time more than money and lasts the rest of your life.

I guarantee you will need it. At least you will be glad you paid for it. No one is going to pay it for you. Not the rich. Not the government. Not even the stock market…all of those things will find a way to make sure you pay for it (higher prices, lower wages, higher taxes, lower returns) . . . the only difference being that you won’t own your retirement: they will. So, they can tell you when you can retire. You won’t be able to retire when you want to even though you have already paid for it. “Oh, no,” they will say, “you owe us for more years of work,” even if they won’t give you a job.

And you will end up paying for it twice.

There may be other ways to tradeoff between higher taxes today and higher taxes tomorrow, but they don’t seem to me to be worth the bother…neither having enough benefit over the other to make a real difference.

For example, right there on the page of the Social Security Trustees Report the Trustees tell you that an “immediate and permanent” tax increase of 3.5% would pay for Social Security for the next seventy-five years. That’s about half a percent less than paying for it gradually over the next ten years. or about one percent less than paying for it more gradually over the next twenty years . . . while your income is going up.

Or you can wait ten years and not raise it at all until 2035 or so and then raise it 4% all at once and take a chance that the liars will not stampede the people into accepting benefit cuts or a higher retirement age.

And find a way to tell your congressmen that it is worth their jobs to listen to you.