Social Security reform: truth or trash?

But no. Bush says Social Security’s going bankrupt. He touts costly plans to dismantle the program as we know it—jeopardizing our retirements and plunging our nation deeper in debt. Here are the facts, most coming from the Social Security Administration’s own status report, www.ssa.gov.

Bush said: “Thirteen years from now, in 2018, Social Security will be paying out more than it takes in.”

Truth: The fact that Baby Boomers would eventually retire wasn’t lost on anyone. That’s why, since tweaking Social Security in 1977 and 1983, feds have been packing money into a Social Security “slush” fund. This reserve fund, money over and above what’s coming into Social Security, is juicy. As Boomers hang up their hats, we’ll tap into this cash stash, causing reserve fund deficits as early as 2010. No surprise. Nothing to panic about.

“By the year 2042, the entire system would be exhausted and bankrupt.”

Trash: The reserve fund could run out as early as 2042. Boomers will be in their 90s by then. Social Security will hum along as usual until 2078.

“If steps are not taken to avert that outcome, the only solutions would be dramatically higher taxes, massive new borrowing or sudden and severe cuts in Social Security benefits.”

Trash: Yes, an increase in payroll taxes or a reduction in benefits or some combination of both would keep Social Security solvent beyond 2078. But that’s not the only solution.

Sample many reform options at the Social Security Game, www.actuary.org/socialsecurity. On my first try, I saved Social Security by phasing in a higher retirement age—she who lives longer should work longer—and by reducing benefits for wealthy folks who don’t need them. Boo-ya.

Or how about having the wealthy pay the same percentage of their income in Social Security as the rest of us? Right now, those who make more than $90,000 a year don’t pay Social Security tax on anything more than the $90,000. If you’re a corporate exec pulling in a modest $300,000 a year, $210,000 of that money is exempt from Social Security deductions. How is that fair to the guy who makes $30,000 a year and is taxed on every penny?

“Your money will grow, over time, at a greater rate than anything the current system can deliver.”

Trash: Try telling this to Chilean worker Dagoberto Saez, 66, interviewed by The New York Times recently. Chile privatized its pension system in 1982, during the authoritarian regime of Gen. Augusto Pinochet. Saez signed on. After 24 years of contributing 10 percent of his pay to the private plan, his pension will pay out around $315 a month for 20 years. His coworkers, taxed the same amount under the old system, will retire with $700 a month for life. Workers who make less than Saez won’t pull in the minimum pension of $140 a month.

Bush cites Chile’s plan as a model.

“We’ll make sure the money can only go into a conservative mix of bonds and stock funds. We’ll make sure that your earnings are not eaten up by hidden Wall Street fees. We’ll make sure there are good options to protect your investments … We’ll make sure a personal account cannot be emptied out all at once.”

Truth: Americans’ reliance on a Father-Knows-Best federal government will not be reduced with private accounts. Caring for our money comes with a cost. Estimates of the cost of Bush’s plan run as high as $15 trillion over the next four decades.

See the investment bankers drool.