Thinking about over $11 trillion dollar debt already looming over the United States citizens and the large deficits that are we are committed to in the years to come is enough to make any levelheaded concerned citizen feel overwhelmed. A problem this big can be daunting; where could we possibly begin? The crux of the problem is easy enough to explain; the government is spending more money than it receives through taxes. The root of the problem is more difficult. While citizens wish to benefit from government services, they are not particularly fond of paying taxes. How do we balance these conflicting sentiments? An important step to solving this problem is to examine social security as a society and to reduce costs and increase revenue.
Americans need to find a consensus, and the only way to do so is to bring this discussion to the forefront. Families should be discussing the deficit at the dinner table. Teachers should be holding open dialogue about taxes in the classroom. Friends should be explaining their values and ideas about Medicare to each other. This is the beginning of finding solutions, and what I have tried to do recently by bringing up the issue of social security with anyone who will listen. Entitlements are increasingly a burden to the government’s budget. According to the Riedl, it accounts for 53% of program spending and 11% of GDP (7). The only way to find our way out of budget deficits is to reform programs such as social security.
There is clearly a generational gap in thinking when it comes to social security. Generations that are close to retirement have based their financial decisions on having this benefit when they retire. “The government made a promise to me,” my dad explained “and I expect them to keep it. I need them to keep it” (Douglas). I have to empathize with him. It would seem quite unfair to have such an important promise broken, especially so close to retirement.
Unfortunately, in order to keep all that we have promised to our aging population, we would have to break an implicit promise to our future generations; the promise of better future. To fund social security, we currently have to borrow the money. As any credit card carrier will explain, borrowing can lead to a mountain of payments as interest increases. Even at incredibly low interest rates, the amount of interest that must be paid is staggering. In March 2009 alone, the government paid $19,829,502,462.91 (CB0, 1). This type of commitment will lead to a lower standard of living for many generations to come.
So it is clear that we have two very significant issues facing us when we think about the future of social security; that of those who will soon be entering retirement and that of sustainability and the burden on future generations. To me, it seems clear that the only way forward use the two-pronged approach of reducing costs and increasing revenues, through way of taxation.
Reducing costs is necessary, as social security cost $615, 256 million (Riedl, 4)I think the best way to do this would be to raise the age requirements of social security and implement requirements based on income. Right now, there is no sort of wealth or income test required to receive social security. This is no longer a viable option. We need to focus on the people who need social security the most, not just those who want it. This does mean the government will have to break their promise, and that is not ideal, but we find ourselves in a tough situation in which everyone is going to have to make sacrifices.
In order to reduce the need for social security, the United States should enact changes in tax policy to encourage saving, especially in private retirement plans. Americans are notorious for their poor saving habits. These habits are shaped in part by government policy that discourages saving. These policies need to be eliminated or revised to encourage saving. By encouraging saving, we can reduce the need for people to have governmental support in retirement.
Other changes need to be made to the tax policy as well in order to increase revenue. America has an aging population, and that is a challenge that we will continue to face in the coming decade. In order to support this generation, we are going to have increase the money collected even if we cut benefits. This means making social security a pure proportional tax that does not end after a certain income level is reached. It may also mean increasing the tax percentage. No one wants to pay taxes, but what we do not pay for today will be paid by increased interest payments for years to come. The short-term pain is well worth avoiding the long-term consequences in this situation.
Recently, Michael J. Fox said in an interview with David Letterman that ‘there is a time to broaden our shoulders and a time to lighten the load’. Well, right now is a time to do both. Current taxpayers and those receiving entitlements need to broaden their shoulders and make concessions in order to help get our budget under control. This will lighten the load for our country in the long range. This is a problem that has been building for a long time, and no one expects for our challenges to be resolved overnight, however now is the time for action. Change may be slow, but it is necessary. We can resolve this issue if we take a clear-eyed approach to the problem, talk openly and honestly about the choices we have to make, and if we are willing to enact new policies that are not always pleasant.
“CBO Report: March 2009,” 2009. Congressional Budget Office. 18 April 2009, http://www.treasurydirect.gov/govt/reports/ir/ir_congressbo.pdf.
Douglas, Kent. Personal Interview. 12 April, 2009.
Fox, Michael J. The Late Show with David Letterman. CBS. April 2, 2009.
Riedl, Brian M., “Federal Spending by the Numbers 2008,” 2008. The Heritage Foundation. 18 April 2009 http://www.heritage.org/Research/Taxes/upload/FederalSpendingByTheNumber....