What they're not telling you about Social Security and privatization
"Crisis," like so many other words, used to have a definite, concrete, commonly understood meaning. Nowadays, it has taken on a postmodernist, if not Alice-in-Wonderland, tinge and means whatever its user wants it to mean.
For example, if you read most newspaper articles and watch TV news, you probably think that Social Security is in a "crisis" and might not be there for our children and grandchildren.
The fact is this: If we do nothing at all to Social Security, and even if the economy grows at an average annual rate of only 1.9%, Social Security will be in perfectly fine shape until 2042 (and well beyond that with only modest changes). And if the economy does grow at such a slow average annual rate between now and then, any retirement investments in private accounts likely would be devastated.
I'm not saying privatization is a good or bad idea. I don't know the answer to that question. But I do know that a lot of people who ought to know better are throwing around the word "crisis" as if Social Security were in immediate or medium-term danger. It is not. And if the facts are readily available, one must assume either that these people either haven't checked the facts or have some other reason for saying things that are so blatantly untrue.
So: no Social Security crisis. But Medicare and the government's general fund, on the other hand .... well, I'll just let economist Brad DeLong lay it out for you ...
UPDATE: Social Security would remain fully funded for the duration of its 75-year planning calendar if the amount of income subject to FICA withholding is increased from its current level, roughly $87,000, to about $110,000. This change would affect only the top 15 to 20 percent of wage-earning households while eliminating any need for benefit cuts. Just an observation, not advocacy.
