I am always interested in articles that address Social Security’s looming insolvency. Today, I had the opportunity to read an article on WealthManagement.com titled, “Solving the Social Security Shortfall” by Mark Miller. The article’s subtitle read, “Solvency is the 800-pound Gorilla in the Room”. It may be the focus of a lot of hand-wringing and discussion, but it is a concern that isn’t valid.
Mr. Miller began his article with the following: “With fewer retirees receiving income from defined benefit pensions, the lifetime annuity income from Social Security will be even more important in the years ahead in protecting seniors from longevity risk.” We couldn’t agree more! The loss of a true retirement plan and significant income inequality have combined to create a potentially disastrous social and economic crisis for most of our workforce.
The issue that we should be focused on is how do we increase the monthly payouts (average is $1,360 or $16,320 annually) currently being received by beneficiaries and those to come for our future retirees. It is not through higher payroll taxes on either the employee or employer, as one will significantly reduce demand for goods and services, while the other will impact job creation.
What we need is the U.S. Treasury to provide additional funds to meet future obligations. Cutting benefits because of the misguided fear of insolvency, especially in an environment where life expectancy is rising, will force millions of Americans into years of poverty and greater dependence on the government’s social safety net.
The U.S. enjoys the benefits of having a fiat currency (unlike those in the Eurozone). As a result, the government never lacks for its own money. According to Warren Mosler from his book, “The 7 Deadly INNOCENT Frauds of Economic Policy”, “there is no operational constraint on the government’s ability to meet all Social Security payments”.
The additional Social Security payouts would stimulate economic growth, create additional jobs, and perhaps increase federal receipts, which would potentially reduce government support in the future. Congress seems preoccupied with tax and healthcare policies, but millions of Americans need substantive action on Social Security (read benefit enhancements) before the fear of insolvency leads to inapprpriate decisions by our legislators trying to “fix” a problem that doesn’t exist.