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
the program.
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?
Stay tuned.
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