Social Security is the largest single program in the federal budget. And according to a December report by the Congressional Budget Office (CBO), 96% of revenue going into the program’s trust funds comes from payroll taxes on 169 million American workers.
But as our retirement planning expert Nilus Mattive warned on Nov. 29,
“… the Social Security system is currently underfunded to the tune of $32 trillion.”
Sure enough, the CBO found that in 2016, total outlays exceeded total revenue by 7%.
The CBO noted,
“As more people in the baby-boom generation retire over the next few decades and as longer life spans lead to longer retirements, that gap will widen.
“If current laws governing taxes and spending stayed the same and if benefits were paid as scheduled, the combined balances of the two trust funds will be exhausted in calendar year 2029, requiring a 29% reduction in benefits payable in 2030.”
Trump’s in a tough spot …
During the presidential campaign, Donald Trump said little about the train wreck ahead for Social Security. What’s more, he promised that there wouldn’t be any cuts.
Then later in the summer, he rallied against the rising debt level.
He even went so far in an earlier interview to boast that he could eliminate the debt in eight years by cutting better trade deals. He has since backed off such claims.
According to a recent report from the CBO, federal debt is projected to soar by nearly $10 TRILLION over the next decade. Rising healthcare costs and Social Security spending that come with an aging population make up a big chunk of that increase.
Then there’s the $1 trillion in infrastructure spending, more money to build up our military, and the big tax cuts that Trump had promised. Although there hasn’t been a solid plan on how to accomplish it all without issuing more debt.
That puts our new president in a tough spot: Stick with his promises of no cuts in Social Security while spending more on other programs … or choose fiscal prudence to slow down skyrocketing federal debt.
Incoming dose of economic reality
Now, Trump may have a dose of economic reality heading his way from his budget director hopeful, Rep. Mick Mulvaney (R-S.C.).
The congressman is one of the most-outspoken debt and deficit hawks in the House. He backed the One Percent Spending Reduction Act of 2016 (Penny Plan), which was meant to cut one penny of every dollar in federal spending. In theory, it would eliminate the deficit in five years.
Last month Mulvaney told the Senate Budget Committee,
“It’s going to take difficult decisions today in order to avoid nearly impossible ones tomorrow.”
Mulvaney said he’d propose raising the retirement age for Social Security to 70, but he doesn’t want to cut benefits for current beneficiaries. He further clarified his position by saying,
“I’m not making my parents go back to work. They are 74 years old.”
And he’s all for means-testing to qualify for Medicare.
Some are skeptical. That list includes one well-known working 75-year-old. Senate Budget Committee ranking member Sen. Bernie Sanders (I-Vt.) said,
“The idea and opinions of Mr. Mulvaney are way out of touch. And more importantly, they are way, way out of touch with what President Trump campaigned on.”
Democrats let it be known that they were unlikely to support Mulvaney based on his record in the House. And they were alarmed at his statements on entitlements. Sen. Debbie Stabenow (D-Mich.) said,
“After that exchange, I think folks on Social Security and Medicare should be really worried.”
Federal deficit set to soar
The one thing you can take to the bank is that if Congress doesn’t pull in its reins on spending — or raise taxes — the federal deficit will continue to grow. The size of the shortfall is hard to imagine, according to projections by the CBO:
“As deficits accumulate in CBO’s baseline, debt held by the public rises from 77% of GDP ($15 trillion) at the end of 2017 to 89% of GDP ($25 trillion) by 2027. At that level, debt held by the public would be the largest since 1947 and more than twice the average over the past five decades in relation to GDP.”
“It’s going to take difficult decisions today in order to avoid nearly impossible ones tomorrow.” — Proposed budget director Rep. Mick Mulvaney (R-S.C.)
What do you think?
Should Washington raise the retirement age for Social Security and Medicare … say by two or three years? Or remove the income cap, which is $127,200 — on Social Security payroll taxes?
How about means-testing Medicare — requiring higher-income beneficiaries to pay more?
At the same time, you might want to tell them to knock it off with the dopey ways they spend our money. You can cite some examples from Sen. Jeff Flake’s (R-Ariz.) Wastebook, such as:
$1.7 million for a comedy club starring holograms of dead comedians
$74 million for a program that allows taxpayer-backed loans to be repaid with peanuts
$5 million to study the partying habits of fraternities and sororities
$3.5 million to learn why people are afraid of going to the dentist
$3.4 million for hamster cage fight matches
One idea for cutting spending that we here at the Sound Dollar Campaign like is H.R. 646, or the No Pay Raise for Congress Act. Introduced by Rep. Vern Buchanan (R-Fla.), the bill prevents pay raises for congressional lawmakers if they do not pass a balanced budget for the current fiscal year.
In a statement, Buchanan said,
“Successful businesses do not reward an employee who fails to do their job. This same common sense must be used in Washington. Members of Congress should not be eligible for pay raises if they cannot fulfill one of their most basic responsibilities.”
Buchanan also cited the looming $20 trillion number of the federal debt, calling its continued growth “downright immoral” on the part of lawmakers.
We couldn’t agree more.
The Sound Dollar Campaign Staff