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Q: If Social Security’s financial problem is so long-term, why do we need to fix it now?
A: Addressing the problem now allows the burden of reform to be spread over more generations, and gives younger people more time to adjust their own retirement planning decisions. As the Trustees of Social Security, the Comptroller General of the United States and the Chairman of the Federal Reserve Board
have said, the sooner we address the
problem, the smaller and less abrupt the
changes will be. The independent, bipar-
tisan Social Security Advisory Board has
said: “As time goes by, the size of the
Social Security problem grows, and the
choices available to fix it become more
limited.” Addressing the problem now
will allow today’s younger workers planning for their retirement to have a better assurance of the future of Social Security.
Q: What are the alternatives for modernization and reform?
A: The four basic alternatives that are being discussed—singular or in combination with each other—are (1) increasing payroll taxes, (2) decreasing benefits, (3) using other financing sources such as general revenues, or (4) pre-funding future benefits through either personal savings accounts or direct investments of the trust funds.
Q: Would a “lock box” fix Social Security’s problems in and of itself?
A: No. As Social Security’s Chief Actuary has stated, “The implementa- tion of a Social Security ‘lock box’ would not alter the U.S. Treasury commitment and thus would have no direct effect on the future sol- vency of Social Security. However, if the effect of a ‘lock box’ were to require that the non-Social Security Federal budget be in balance or surplus for the years in which Social Security makes investments, then
New Views About Retirement 7
The economy depends about as much on econo- mists as the weather does on weather forecasters.
~Jean-Paul Kauffmann