By Stephanie Kelton
It happens every few years. The Trustees of the Social Security Administration release a report projecting gloom and doom for the system’s “finances,” and the so-called reformers crawl out of the woodwork touting various schemes to “save” the system from bankruptcy.
For those that don’t understand how our monetary system works, the latest report is particularly alarming. The loss of millions of jobs has meant that fewer workers are paying into the system, and the Trustees have concluded that the Trust Fund will only be able to cover the emerging shortfall until 2037. After that, the Trust Fund will be exhausted, and payroll taxes will only be able cover about 75% of promised benefits. For those that want to destroy Social Security, this is welcome news.
But not everyone wants to run for the exits, handing the “problem” over to Wall Street’s financiers (i.e. privatizing the system), who will rake in billions of dollars in fees and commissions in exchange for creating and managing our new “personal savings accounts” (more on this here). For example, Sen. Herb Kohl, Chairman of the Senate Special Committee on Aging, has said that “modest changes can be made over time” to keep the system solvent.
The minor “tweaks” being considered by the Senate Committee include various schemes to keep costs down and revenues up. To reduce the costs of running the program, the Committee suggested that Congress could gradually increase the retirement age or reduce the annual cost-of-living adjustment. To boost revenues, the Committee suggested that Congress could raise the payroll tax or eliminate the income cap so that wages above $106,800 become subject to the payroll tax.
According to Sen. Kohl, D-Wis., reform is a foregone conclusion. “Modest changes,” he told the Associated Press, “can be done and will be done.” To soften the blow, he insisted that the reforms “are not draconian.”
The problem, as we have argued many times on this blog, is that the federal government is not revenue constrained. It can afford the promises is has made to current and future retirees. It cannot, as Alan Greenspan admitted, “go broke” as long as the payments are denominated in US dollars. This means that Social Security (and Medicare) face NO FINANCIAL CRISIS today or in the future.
Sen. Kohl’s heart may be in the right place, but he doesn’t understand how the monetary system operates. As a result, millions of Americans could be forced to suffer undue hardship in the years ahead – delaying their retirement, paying higher taxes and receiving fewer benefits.
We call on those in Congress (as well as those seeking Congressional office) to affirm their commitment to protecting and preserving Social Security by signing the following pledge: