THE UNAVOIDABLE SOCIAL SECURITY CRISIS
The main point of Brian Riedl’s article “The Entitlement Crisis Ignored” (March 19) seems to be that the 76.4 million Baby Boomers will cause the Social Security and Medicare funds to go bankrupt (creating an $83 trillion deficit in 30 years) when they retire. The author attempts to follow the money into the future without taking a serious look at the history of the Social Security Trust Fund.
The article states that “the existence of 74 million Baby Boomers retiring into Social Security and Medicare is an actuarial reality.” This assertion ignores the time value of contributions; the mortality rate for Boomers; the exclusion of most federal and state employees, including some teachers, firemen, policemen, etc.; the creation of the Federal Old-Age and Survivors Insurance Trust Fund and the Disability Insurance Trust Fund by using the surplus in the Social Security Retirement Trust to pay for these programs; and the use of the Social Security Retirement Trust Fund surplus for the general budget.
This “borrowed” money is the major part of the $5.1 trillion intra-governmental debt that must be repaid if the Social Security Retirement Trust cannot meet its obligations. The total federal debt is greater than $13 trillion.
The bottom line of the above information is that the projected bankruptcy of Social Security is due not to Baby Boomers’ living longer and healthier lives, but rather to the government’s using our retirement fund as a general fix for other budgetary problems. Congress needs to act immediately to add the Federal Old-Age and the Survivors Insurance Trust Fund and Federal Disability Insurance Trust Fund to the general budget, return the Social Security Retirement Trust Fund to being a pure retirement program, and repay to it the $5.1 trillion loan.
Brian Riedl responds: The CBO reports that the Social Security Trust Fund has a balance just under $3 trillion — which, if it had been saved, would merely reduce Social Security’s 30-year deficit from $19 trillion to $16 trillion (plus interest). The combined 30-year Social Security and Medicare deficit would merely fall from $82 trillion to $79 trillion. The narrative does not change.
The trust fund never made much sense. Washington has no mechanism to “save” trillions of tax dollars over several decades. Buying Treasury bonds simply converted it into a $3 trillion liability for future taxpayers who will have to redeem the bonds. But the idea that truly saving this $3 trillion would have averted the difficult choices we now face is mathematically false.
Additionally, yes, these projections account for mortality rates. The massive per-person deficits in the article are expressed in net present values that account for the time value of money. And bringing more federal and state employees into a system that runs a per-person lifetime deficit would worsen future liabilities, according to the program’s actuaries.
Demographics, benefit expansions, and rising health-care costs are driving these program deficits. A $3 trillion trust fund does not change that.