For more than a decade, my mother resided in the bucolic hamlet of Ludlow, Vt. Those of you who enjoy winter sports may recognize the town as home to Okemo, one of the Green Mountain State's wildly popular ski areas. But nearly 70 years ago, the town received notoriety for something other than downhill racing or snowboarding. For it was on Jan. 31, 1940, that the town's Ida M. Fuller became the first citizen to receive an old-age monthly benefit check under the newly passed Social Security law. For those keeping score at home. Mrs. Fuller paid in $24.75 between 1937 and 1939 on an income of $2,484. Her first check was cut in the amount of $22.54.
But that was then and this is now.
Social Security reform, once among the hopeful centerpieces of the George W. Bush presidency, has been buried and long forgotten under a slew of proposals such as ObamaCare.
Contrary to popular belief, I was not around in 1940, but I was in 2005 when then-President Bush formed a bipartisan panel to examine Social Security reform, and subsequently proposed to transition the program to a combination of a government-funded program and private accounts.
Needless to say, the idea bombed faster than Nancy Pelosi at a comedy club. For the record, the current president opposes privatization but supports hiking the payroll cap, which is currently set at $106,800 (although it rises with inflation) and the payroll tax, which is 12.4 percent of wages.
I'm quite sure I'm not bombarding you with unheard-of information when I say that the Social Security program operates on a pay-as-you-go basis, with the money coming in paying for the benefits of the current population of retirees. Back in Mrs. Fuller's era, and even a generation beyond that, the system worked well when the ratio of workers to retirees was on the order of 16:1. But with 77 million Baby Boomers poised to retire, the amount the rest of us currently contribute won't cover all the new retirement checks and will reconfigure that worker-to-retiree ratio to a level of about 3:2.
Depending on which report you read, in either 2016 or 2018 Social Security will begin paying out more than it collects. Add to that scenario mounting job losses and a rise in early retirement claims from seniors who have been laid off from their jobs. In fact, applications for retirement benefits have risen 23 percent over the year-ago figure. And the Congressional Budget Office claims that Social Security is already in the red: $10 billion this fiscal year and $9 billion next year.
On the positive side, Social Security can just extract funds to cover those shortfalls from its trust fund, which is about $2.5 trillion.
Therein lies a potentially big problem, however: Uncle Sam has been methodically tapping into that fund for unrelated spending. But those IOUs have been excluded from the overall deficit figures - courtesy of Lyndon Johnson - perhaps not a bad thing considering the current deficit levels.
Several times in this space, I've chronicled how former Auditor General David Walker traveled the country on his "Fiscal Wake-Up Tour," warning an unsuspecting public about the mind-numbing insolvency stemming from the trio of current entitlements - Social Security, Medicaid and Medicare.
However, with the public backlash over the current crop of entitlements, the reformation of the Social Security program is perhaps one of the last discussions that the administration wants to have at this time. Otherwise, they would have to try and sell their new package of entitlements while admitting that the current ones are nearly broke.
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