Opinion

Social Security's Enduring Truths

Despite the naysayers, the system's finances are sound

by: James Roosevelt Jr. | from: AARP Bulletin | June 1, 2011

There is a saying that if you repeat something often enough it becomes the truth. Nothing better illustrates that point than the notion that Social Security will be bankrupted by the boomers.

Indeed, the generation of Americans born between 1946 and 1964, who drew their first Social Security checks in 2008, will place heavy demands on the system as they reach their retirement years. But this is also a generation that has been paying into the system since they started working in the early 1960s. Much of the money that boomers are and will be drawing from Social Security is and will be their own.

But these important factors are usually left out. Instead, the purveyors of fear want you to believe that boomers are retiring on the backs of their children and grandchildren. If you buy that, they have statistics showing fewer contributors supporting more beneficiaries — "proof" that the program is unsustainable.

These utter distortions, however, are nothing new. My grandfather had to contend with them. In the 1936 presidential campaign, the Republican nominee, Alf Landon, labeled Social Security a "hoax." In dismissing the program as "unworkable," the GOP platform of that year stated that Social Security would be unable to pay benefits to two-thirds of retirees. My grandfather would not be surprised by the fear mongering today. Indeed, Social Security's critics have been casting the same aspersions on the program for 75 years.

Let's take a true measure of where we are. Social Security has not only been the most effective government program, it has been the most responsible government program. Social Security costs are funded out of its own dedicated revenue stream. It does not and cannot borrow money to finance its operations. There is no deficit financing. Social Security is the epitome of Yankee frugality. It could not be better managed. The administrative cost is .09 percent. It returns more than 99 cents to beneficiaries on every dollar collected. I dare you to find a private retirement plan that can claim that.

By the end of 2010, the Social Security trust fund had a positive balance of $2.6 trillion. As a result of interest earned on the trust fund balances, the fund's surplus will continue to expand to approximately $3.67 trillion at the end of 2022. After that year, it is projected that the balance will begin to decline. Still, reserves will be sufficient to pay full benefits through the year 2036. After that, Social Security would still be able to pay for 77 percent of benefits.

Since when is news that a program is completely solvent for 25 years bad news? Even in year 26 and thereafter it could still fund three-fourths of anticipated benefits. This is decidedly not a program that is broke or going broke. In fact, this is quite a remarkable achievement.

James Roosevelt Jr. is president of Tufts Associated Health Plans Inc. and grandson of the nation's 32nd president.