April 5, 2005
When public policy debates become acrimonious, those on opposite
sides tend to disagree on the most basic things. For those
grappling over the future of Social Security, the extent of the
disagreement extends even to when the program's much-documented
difficulties ripen enough to require Congress to intervene and save
Lawmakers typically refer to one of three "drop dead" dates: 2052, 2041 and 2017. Let's examine them in that order, and then I'll explain why the real date to watch is actually much earlier than even 2017.
2052: Democrats seeking to minimize the severity of Social Security's fiscal problems invariably hang their hats on 2052, which is when the Congressional Budget Office projects that the trust fund, which supposedly harbors trillions of dollars of excess Social Security payroll tax payments, will finally expire, thus leading Senate Democrats reassure their constituents that recipients will be able to get all their promised benefits until 2052 and that "major surgery" on the program is simply unnecessary.
2041: According to the trustees of the Social Security program, the date of Social Security's official insolvency comes in 2041, more than a decade sooner than CBO's estimate and a year earlier than the trustees' previous projection. President Bush used that date in his most recent State of the Union address to assert that, if steps are not taken now, "the only solutions would be dramatically higher taxes, massive new borrowing, or sudden and severe cuts in Social Security benefits or other government programs."
2017: This is, as Sen. Lindsey Graham (R.-S.C.) puts it, "an important date. It is a historic date. It is the first time in the history of this program we [will] pay out more in benefits than we collect in taxes." Bush argued during his State of the Union that this date is more imminent than some may think. "If you have a 5-year old," he said, "you're already concerned about how you'll pay for college tuition 13 years down the road." And for those with older children, "the idea of Social Security's collapsing before they retire does not seem like a small matter."
When the impact really begins--2009: Because members of the baby boom generation are in their peak earning years, and their Social Security payroll tax burden is so onerous, the system currently generates a large annual surplus, projected by the program's actuaries to be more than $73 billion in 2005. This surplus, moreover, is projected to increase for the next few years until it peaks at approximately $112 billion in 2009.
What happens next has received very little attention in official Washington, but represents the first real and palpable effect that the baby boomer retirements will have on how Washington works. Because Congress uses these surplus revenues to underwrite a hefty portion of its annual budget--spending your payroll tax dollars on schools, housing, defense, NASA, medical research and veterans' care, among other things--it has become dependent on them to satisfy its boundless appetite for more and more spending. Like the spendthrift child of fortune who bemoans the loss of his trust-fund check, the moment that this surplus begins to decline will be a defining moment indeed.
In 2010, the surplus will drop by more than $12 billion; by 2012 it will plummet by another $20 billion. In 2014, the last year documented in the trustees' latest report, it will have declined by more than $60 billion per year from its peak.
So, the real gnashing of teeth will commence almost a decade before the date set forth by the President, as Congress is forced to confront, in annual increments measured in tens of billions of dollars, the ugly reality and stark choices brought on by the baby boomer retirements.
Will lawmakers actually prune wasteful programs by some $60 billion per year--and rising inexorably each and every year thereafter--to make up for the loss of revenues? If so, will they eviscerate our national security and intelligence-gathering capabilities in the process? Or, will they seek to raise taxes, perhaps by allowing the economically beneficial Bush tax cuts to expire and taxes to increase by more than $100 billion annually?
Mr. Franc, who has held a number of positions on Capitol Hill, is vice president of Government Relations at The Heritage Foundation.
First appeared in Human Events