Federal Budget Deficit
|July 26, 2003||Posted by Staff under Progress Report, The Progress Report|
Concord Coalition on Social Security
One of the biggest public issues during the next 18 months will be Social Security and attempts to refinance or reform it. Entitlement reform will be talked about everywhere, by everyone. Anyone who has an interesting idea for fiscal or tax reforms should seize this opportunity to be heard. Got that, tax reformers?
Now here’s a news release from the Concord Coalition on this subject.
WASHINGTON April 7 – The Concord Coalition today released a primer on Social Security designed to dispel the most common myths surrounding the program and establish a set of criteria for its reform.
The primer, titled “Saving Social Security: A Framework for Reform,” describes the serious challenges facing the program early in the next century once baby boomers begin retiring in 2008.
“When considering Social Security reform options, policymakers need not, and should not, choose sides between young and old,” according to the Concord primer. “What is important is that all Americans, regardless of age, be convinced that Social Security reform is in their best interest.”
The document explains in detail the serious dilemma facing the Social Security system in 2012, when the program begins paying out more than the annual revenues it takes in.
“By 2012, Social Security will begin running an annual cash deficit,” the Concord document states. “From that point on, absent change, Social Security will represent a large and growing drain on the federal budget. Social Security’s cash deficit will grow from a modest $9 billion in 2012 to over $600 billion in 2029, the last year of supposed ‘solvency.’
“On paper, interest income and liquidation of principal will allow the Social Security trust fund to show a positive balance through 2029,” continues the Concord primer. “But the cash needed to make good on these obligations – both interest and principal – will have to come from tax increases, spending cuts, or public borrowing, all of which would constrain the budgetary options of future policy makers. The key point in this regard is that the ‘assets’ now accumulating in the trust fund represent future general fund liabilities. As such, they cannot ease the burden on tomorrow’s workers and taxpayers.”
Concord believes Social Security’s problems can be fixed. The question is how to do it. When judging Social Security reform plans in the future, The Concord Coalition will use the following criteria:
1. Social Security reform should ensure a reasonable standard of living for older Americans, protecting them against poverty and loss of income.
2. Reform should ensure that annual outlays under the pay-as-you-go Social Security program do not exceed annual tax revenues.
3. The Social Security system should not add significantly to the publicly-held debt.
4. Social Security reform should contribute to an increase in net national savings.
5. Social Security reform should reflect generational equity by improving the rate of return on contributions for future workers.
6. The burden of Social Security reform should be borne fairly by age and income groups.
7. Public confidence in the Social Security system should be bolstered by ensuring adequate protection against both political and investment risks.
8. Prudent assumptions should be used to evaluate all reforms.
“Action must be taken soon to put Social Security on a fiscally sustainable and a generationally equitable basis,” according to the Concord primer. “The challenge is to reform Social Security in a way that retains its beneficial effects for retired and disabled persons without overburdening workers or the economy.”
ADVISORY: The primer is available in pdf format via the “What’s New” link on The Concord Coalition’s website at www.concordcoalition.org.
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