Funds Investing

In the spirit of politics, lawmakers tend to paint rival Social Security reform proposals in extremes: If one privatizesand another preserves, then never the twain shall meet. The polarized way in which proposals are debated, morethan the actual substance of the proposals, makes compromise difficult. However, compromise doesn’t have to be so daunting a task. Considerable overlap exists among reform proposals presented by lawmakers on both sides of the aisle. Agreement can be found in the following areas.

Save the Surplus

Democrats and Republicans began competing in 1999 to create the best “lock box” with which to protect Social Security’s surplus. Until then, it was common for Congress to allow deficits in other parts of the budget to exceed the size of the Social Security surplus. Read the rest of this entry »

1. Why Is Reform Needed?

Social Security and other government entitlement programs for the elderly and near-elderly:

• Provide benefits that are growing at unsustainably high rates. Due to real growth in annual benefits combined with longer retirement, an average-income one- earner couple retiring at age 65 in 1960 could expect lifetime Social Security cash benefits to total $99,000 (in 1993 dollars). Today those benefits total $223,000, and in 25 years, $313,000.
• Have an enormous impact on the federal budget. These programs now comprise almost half of federal expenditures, and Social Security alone represents more than one-quarter of all federal expenditures other than interest on the national debt. By contrast, in the early 1950s, expenditures on retirement, disability, and health occupied less than 10 percent of federal expenditures.

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