Right now, Social Security, with its $2.2 trillion surplus, is by all accounts doing quite well.
But if nothing changes, economists predict that in just 33 years, the entire surplus will be spent and the program will begin operating in the red.
It’s a sobering announcement that raises an obvious question of concern with younger workers — will Social Security be around when I retire?
As a local spokesman for the Social Security Administration, it’s a question Larry Jones gets asked all the time.
“A lot of people say ‘I don’t think it’s going to be there for me,’” Jones said. “And my response to that is ‘Where’s it going to go?’ I mean you are paying taxes, aren’t you? Then there is a system in place that works. It’s successful and it’s very popular.”
John Milner, an economics professor with Oklahoma City University, said when the basic idea for the Social Security Act was pitched in the 1930s, it was an easy sell.
“If you start with a program that was pay as you go where a very small population lives long enough to collect Social Security, and those that do collect it would only collect for a small number of years ... this is not a program that is difficult to create and support,” he said.
But over time some things changed. There was the population spike by the baby boomer generation, and there were advances in medicine, which have allowed more people to live longer, meaning more people collect Social Security for much longer periods, Milner said.
And with 77 million expected to be on Social Security by 2030, Jones said every day 10,000 people turn 62, making them eligible for Social Security.
“That’s 10,000 today, 10,000 tomorrow, and so on,” Jones said.
The other demographic factor affecting Social Security is how much America’s birthrate dropped after the boomers, Milner said. Before 2007, the largest number of American births occurred in 1957.
“You really have two major problems,” he said. “There are more people going into retirement and fewer people entering the workforce. One thing the people who thought about Social Security never saw happening was a rapid decline in birthrate.”
Those combined factors have not affected the program adversely up to this point, Milner said. But it’s coming.
“Social Security looks really good, right now,” he said. “Just make sure you don’t put on the glasses and look very far into the future.”
Jones acknowledges that the next presidential administration will most likely be given the burden of “fixing” Social Security.
There’s no easy answer on how to best fix it, and there some very different plans on how the nation should address the issue. Jones, however, is not worried.
“I have confidence that changes will be made to avoid the solvency issue,” he said.
Milner is not as confident.
“I’m concerned,” Milner said. “I’m fairly certain that politicians are not going to demonstrate the willpower necessary to bring the population around to facing reality.”
There are a series of proposed Band-Aid solutions that would possibly sustain the program for the immediate future, but most of the strategies Milner said he hears politicians talking about are simply “fiddling at the edges.”
One solution that was generating controversy eight years ago was to invest the money and let Wall Street handle it. But with the recent financial meltdown, Milner said he expects those arguments to go away for a while.
“When we take a look at what has happened with investment banks ... if Social Security had truly been (privatized) and these investment banks had been handling it, we would now have an awful lot of destitute seniors,” he said.
And because the American government is a social environment, it would now be helping to pick up the checks as it is doing for some of the investment banks, Milner added.