We are facing huge long-term problems: a real unemployment rate of 18%, dysfunctional banks that are "too big to fail", a regressive tax structure that's stifling economic growth, prisons that are bursting at the seams, urban schools that are struggling, a health care system that still needs major reform, the lack of a coherent national energy policy that will protect our economy and the environment, and a government that has been encroaching on our civil liberties. For decades we have lived with irresponsible public policies from career politicians in Congress who care more about increasing their party’s power and getting re-elected than they care about solving long-term problems. They haven’t been honest with us, and they have been lousy public servants.

I’m different. I do not want to be a career politician. I am not a Democrat or a Republican. I’m a Problem Solver. I want to force members of Congress to be responsible, and implement sustainable solutions to real problems. Please read the positions I present on this website, and spread the word to friends and family.

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Monday, August 17, 2009

Social Security

Please view the episode of my monthly television show that discusses how to solve the huge problems we face with Social Security, in two installments:
Part 1:
Part 2:

Social Security is a huge fiscal issue that Congress should have addressed a long time ago. The longer we wait, the more painful the solution will be. Members of Congress haven’t addressed it because they care more about the power struggle between the two parties and getting re-elected than they care about doing what is right for the American people. They’re afraid that if they talk about the hard choices that must be made to keep Social Security solvent in the long term, they may lose votes in the next election. The end result: they ignore the problem, and they don’t develop solutions.

Here are the facts about Social Security:
69% of benefits go to retirement payments
17% of benefits go to disability payments
14% of benefits go to survivor payments (mostly widows)

Social Security provides 100% of the income of 20% of all retirees.
Social Security provides 90%+ of the income of 33% of all retirees.
Social Security provides 50%+ of the income of 65% of all retirees.
These numbers show that social security is critical to the well-being of our elderly.

In 1960, there were 5 workers for each social security beneficiary. At present, there are 3.3 workers for each social security beneficiary. This number will drop to 2.1 workers per social security beneficiary by the year 2031. After 2031 it will remain around 2.1 for the rest of this century. This is the crux of the problem, and is a result of the "baby boomers" entering retirement age, and increases in life expectancy. As a result, somewhere between the years 2017 and 2019 social security will begin running an annual deficit, and if no changes are made, we will have a TWELVE TRILLION DOLLAR debt in the social security fund in this century. (These numbers were calculated by the U.S. Government Accountability Office in 2005.)

Many young people I talk to during the campaign say “I don’t care about social security. I’m not going to get it anyway.” But ignoring the problem does not solve a $12 trillion debt that will occur if we don’t make some changes.

What is the SOLUTION?
We can keep social security in the black FOREVER with the least amount of pain if we make changes NOW. This requires increases in revenue, and decreases in expenditures. There's no question it's going to be very painful, but the sooner we make changes that will save social security, the less painful it will be.

Here are two articles that discuss different combinations of options that will solve the problem:



Note that the latter was written by the late Senator from Illinois, Paul Simon, in 2002. That was seven years ago, and Congress still hasn't made a serious attempt to address this issue. I favor the solution that Paul Simon suggested then: removing the cap on the amount of income subject to the payroll tax that funds Social Security. Currently, social security tax is paid only on the first $106,800 of annual income. Why should someone who makes $1,000,000 a year pay the same social security tax as someone who makes $106,800? This would close a large portion of the $12 trillion gap. However, the increased revenue must be saved, not spent on other things, by the federal government.

I also agree that a reform package should include changes on the expenditures side:
-a small change in the formula by which growth in benefits is calculated for current workers, and how the annual cost-of-living adjustments are made to benefits (as discussed in the first article above).
-reduce benefits for some new eligible beneficiaries through a 30 year, phased-in, progressive system. The reductions would be means-tested: this means retirees with high annual incomes would experience the cuts in social security benefits.
These two changes would result in a reduction in social security expenditures of about 10% by the end of this century, and in combination with removing the cap on the amount of income subject to the payroll tax, would solve the problem.

More details of these options can be viewed here:

None of these components are particularly attractive, but hard choices have to be made. If this combination of sacrifices were implemented, Social Security would remain in the black forever, and the security of our loved ones would be guaranteed for their retirement years.

One note: A few years ago, President Bush discussed a privatization plan for social security. It would have done nothing to solve the $12 trillion dollar problem. It would only have allowed younger people to opt out of a significant amount of their participation in social security without changing the revenue/outlay balance. We still would have ended up with a $12 trillion dollar problem. And, the terrible losses of the stock market in the last year illustrate the pitfalls of allowing people to opt out of social security and rely on their own investments for their retirement. I do not support a privatization plan.

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John Mertens for U.S. Senate
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