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Social Security’s Insolvency…A “Warning” of Sorts
Former NBC “Today Show” financial editor Jean Chatzky offers commentary on Social Security’s projected insolvency, teaming up with Washington Post personal finance writer Michelle Singletary to describe the steadily developing train wreck facing America’s seniors in just a few years. The essence of these remarks is summarized in a post by TheStreet’s editor and reporter Jeffrey Quiggle in a recent post on their website…click here to read it.
Both Chatsky and Singletary focus on what could occur as soon as 2033 (some projections time it sooner than that), but avoid discussion on the causes of Social Security’s long-term financing crisis: the disconnect between benefit payment commitments and extended life expectancies, the impact of a steadily shrinking taxpaying workforce, and an imbalance in the dispersion of taxable earnings in today’s economy.
This last point is, by many accounts, the most severe of the problems facing Social Security’s revenue, since it represents a departure from the premise set in the amendments adopted over forty years ago which assumed 90% of all payroll would be subject to FICA tax. Currently, about 82.5% of earnings are FICA-taxed, meaning that about 7.5% of earnings tend to escape the 6.2%/12.4% payroll tax —a significant amount when considering the total workforce payroll, which is around $12 to $13 trillion.
The Chatsky/Singletary commentary also discusses one example of legislative action addressing the problem — the Sen. Cassidy/Sen. Kane sovereign wealth proposal and its relationship to the controversial issue of privatization. There are, of course, many other suggestions on the drawing board, including the AMAC Social Security Guarantee proposal and others that can be found on the SSA.gov website.