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A Misguided Approach to Solving Social Security’s Financial Issue - Center for Retirement Research at Boston College
In this somewhat scathing indictment, noted economist Alicia Munnell discusses a proposal by U.S. Senators Cassidy and Kaine to solve the Social Security program’s financial woes through borrowed funding. The so-called Cassidy-Kaine Proposal suggests that the federal government borrow $1.5 trillion to be placed in a Trust Fund and invested in equities and market assets which would grow for the next 75 years, while at the same time borrowing another $25 trillion to fund SS shortfalls over the same period. Then, after 75 years, the assets in the new Trust Fund would be used to repay the U.S. Treasury principal (with interest) for the originally borrowed $1.5 trillion, with any leftover assets in the Trust Fund used to offset the government borrowing which kept the program working over the previous 75 years.
The problem, of course (according to this article) is the proposal would mainly serve to dramatically increase the national debt, already at an all-time high of $32 trillion and growing rapidly. According to Ms. Munnell, the national debt is headed for an astounding 120% of Gross Domestic Product (GDP) by 2036. The question is, how can anyone suggest even more government borrowing when the national debt is already project to be about $56 trillion in 10 years?
In short, the article suggests the Cassidy-Kaine proposal is a “flight of fancy” and Congress needs to get working on a more serious proposal to restore Social Security to solvency. Click here to read this article published at the Center for Retirement Research at Boston College.
As an example of leading thinking on reforming Social Security, the Association of Mature American Citizens (AMAC, Inc.) believes Social Security must be preserved and modernized to serve future generations. AMAC’s position is that this can be achieved without payroll tax increases through relatively minor program modifications, including changes to the cost-of-living adjustment (COLA) process and modifications to the formulas for calculating initial benefits for higher-income beneficiaries. Changes to the age for maximizing benefits are included in AMAC’s position, along with (1) an increase in the thresholds where benefits are subject to income tax; (2) indexing of these thresholds annually to account for inflation; (3) changing the taxable maximum formula to address the unintended loss of revenue; (4) improving survivor benefits, (5) eliminating the reduction in benefits for those choosing to work before full retirement age; and (6) improving savings tools for future retirees, including a savings account that builds estate value. AMAC is resolute in its mission that Social Security be preserved for current and successive generations and has gotten the attention of lawmakers in D.C., meeting with many congressional offices and staff over the past decade. See AMAC’s proposal for Social Security reform here.