Keeping security social

In his State of the Union address last January, President Bill Clinton opened a national discussion about how to "Save Social Security." Clinton proposed that any federal budget surplus (now estimated at $75 billion or more) be dedicated to shoring up the anticipated shortfall in Social Security revenues in the coming century. At present, Social Security runs a $100 billion annual surplus, money the federal government does not actually hold in trust but uses to balance its own annual budget. It is the Social Security taxes (FICA) of current workers that pay for the benefits of retirees.

And therein lies the problem. By 2013, as the baby-boomer generation begins to retire in large numbers, the system will start to pay out more than it takes in annually. By 2029 the Social Security surpluses now being generated and credited to the system by the government will no longer exist. Although most Americans think of Social Security as a kind of individual retirement plan administered by the federal government—politically, that was how FDR sold the program—it is better described as a social convenant between generations. That’s why numbers count. In 1960 the payroll taxes of five workers paid for every Social Security beneficiary. Currently three workers support each retiree, and by 2029 there will be only two workers paying into the system for each beneficiary. It is because of such demographics that payroll taxes have...

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