Social Security:

Or Isn't It?

It's really quite bizarre, the Social Security debate.

I must say, I don't know what to believe. On the one hand, you have the people - and W is one of those - who say the system is in crisis and we need to do something right away.

Yet others say, nah, it's fine. Sure, it has some problems, but nothing to worry about right now.

I checked out what The 2004 Social Security Trustees Report says.

(I think this is where W got a lot of his info for the State of the Union speech.)

The Social Security Board of Trustees states that, unless something changes, Social Security's currently scheduled benefits can't be sustained for the long term.

In the 2004 Annual Report to Congress, the Trustees announced:

• The projected point at which tax revenues will fall below program costs comes in 2018.

• The projected point at which the Trust Funds will be exhausted comes in 2042 - also the same as the estimate in last year's report.

• The projected actuarial deficit over the 75-year long-range period is 1.89 percent of taxable payroll.

• Over the 75-year period, the Trust Funds require additional revenue equivalent to $3.7 trillion in today's dollars to pay all scheduled benefits. This unfunded obligation grew $200 billion from last year.

So, on the face of it, it would seem that something needs to be done.

Here's what David C. John, a research guy at the decidedly conservative Heritage Foundation says.

"The Social Security trust fund is really only an accounting mechanism. The trust fund shows how much the government has borrowed from Social Security, but it does not provide any way to finance future benefits. The money to repay the IOUs will have to come from taxes that are being used today to pay for other government programs. For that reason, the most important date for Social Security is 2018, when taxpayers must begin to repay the IOUs, not 2042, when the trust fund is exhausted.

"Social Security's financial crisis will begin far sooner than many politicians claim. In less than three years, the first baby boomer will reach retirement age. Once that happens, Social Security (and Medicare) will be on a slippery slope toward insolvency. While Social Security can continue to use its tax receipts to pay full retirement benefits until 2018, Congress cannot wait that long to act. Misleading the public into believing that Social Security is secure until 2042 or beyond will only make the impending crisis more difficult to avoid.

"... The best way to fix Social Security is to provide younger workers with the opportunity to invest part of their Social Security taxes in personal retirement accounts."

And then there's Michael Tanner, director of health and welfare studies at the Cato Institute. The Cato Institute labels itself as "Libertarian" or "Market Liberal."

Tanner says this:

"Social Security's failing finances are one reason why we need to update this outmoded New Deal legacy. But there is another, equally important, problem with Social Security.

"Quite simply, Social Security is a bad deal for most Americans, a situation that is growing steadily worse for today's young workers. Payroll taxes are already so high that even if today's young workers receive the promised benefits, such benefits will amount to a low, below-market return on those taxes. Indeed, ... most Americans working today will actually receive a negative return - less than they paid in.

"If keeping Social Security solvent were the only concern, that could be done by raising taxes or cutting benefits. ... But raising taxes or cutting benefits would only make the return on Social Security even worse.

"... The only way to simultaneously solve Social Security's financing problems and provide higher benefits is to privatize the system, allowing young workers to redirect their payroll taxes to individually owned, privately invested accounts, similar to 401(k) plans or Individual Retirement Accounts. At the same time, the government should cut current spending and sell assets to guarantee benefits to those currently receiving benefits.

"Privatizing Social Security in this way will end the current pyramid scheme and guarantee the system's future solvency. At the same time, by allowing workers to earn the high returns available from private investment, privatization will allow people to retire with much higher benefits.

"... The poor return from Social Security leaves tomorrow's seniors at severe financial risk. ... An increasingly poor return from Social Security means that many elderly Americans will find their financial security at risk. In contrast, privatization would allow today's young workers to retire with the same financial dignity as their parents."

OK, so two of the top public policy think tanks in the country, representing a wide swath of the political spectrum, both conclude that Social Security needs fixing and that private retirement accounts are the way to go.

Yet, there are plenty of other people - like Mark Weisbrot and Dean Baker, co-directors of the Center for Economic and Policy Research and co-authors of "Social Security: The Phony Crisis" (University of Chicago Press) - who say things like this:

"The bottom line is that Social Security is more financially sound today than it has been throughout most of its 69-year history, according to Social Security trustees' numbers. If workers in 2050, who will be earning on average 68 percent more in real, inflation-adjusted dollars than they are today, have to pay 1 or 2 percent more of their income in taxes - as they have in the past - they won't be able to complain much. They will still enjoy higher living standards than we do today. And Social Security will provide much larger real annual benefits for longer retirements when their turn comes.

"The impending crisis of Social Security is a myth. Without it, however, (President) Bush's initiative to slash benefits and partially privatize the program wouldn't have a prayer."

How is this possible? Who do you believe?

Frankly, I don't know. But I do know this: W is going to have a tough time selling his privatization plan.

Social Security is the crown jewel of all social programs. Democrats are not going to let W fiddle with it without a fight.

My sense of this issue is that it boils down to whether you like W. If you like him, you probably think Social Security needs work. If you don't like him, you think he's manufacturing a crisis.

But here's something to consider.

Social Security was enacted in 1937. The government set the age to receive maximum benefits at 65. At the time, the average life expectancy in America was 60.

So the government offered up this program knowing full well that the average American would never collect a dime.

I guess the lesson is, whether in 1937 or today: Be wary, be very wary when the government tries to help you.