David Walker, the former Comptroller of the United States from 1998 to 2008, is warning the general public that Social Security is untrustworthy and is on the cusp of insolvency. Get ready.
It has been a while since Walker has been front and center in the mainstream media. Walker was one of the very first government officials to publicly warn Americans about the nation’s dire financial pressures. He has touched upon the country’s colossal debt problems, immense budget deficits and the $120 trillion unfunded liabilities and expenditures that will soon come due.
Citing the enormous costs of Social Security, public pensions and healthcare, Walker believes your retirement funds are at risk. Remember, this isn’t just a conspiracy theory from a YouTube commenter or Alex Jones.
The Social Security Administration (SSA) has already confirmed that the Disability Insurance Trust Fund could be out of money as early as next year. This means approximately 11 million depending on such monthly payments could be left out in the cold. Overall, Social Security is scheduled to run out of money by 2033 and Medicare could be insolvent in less than 10 years.
According to Walker, the government will likely apply a temporary, short-term band-aid that likely won’t solve the problem at all. One of the measures he thinks Congress will put forward is a reallocation of payroll revenues from the retirement element to the disability portion.
“According to the trustees, it’s supposed to go to zero, the so-called trust fund in 2016,” said Walker on Sunday in an interview with CNBC. “Washington has a tendency to put band aids on open wounds, rather than trying to actually do what needs to be done.”
For years, people have been discussing the very real threat of Social Security extinction. Walker alluded to the “trust fund” and the fact that the federal government tends to purport “words that don’t mean the same thing as Webster’s Dictionary.” Walker believes you can’t really trust the trust fund because what’s inside is just government debt. However, there’s enough government debt to make Social Security benefits payments for less than two decades.
Despite the troubles of Social Security, “Medicare is in much worse shape than Social Security” because the government, including President Obama’s Affordable Care Act (ACA), “overpromised” on its healthcare obligations. Walker posits that healthcare inflation remains one of the greatest threats to the federal government amid changing demographic trends.
In order to solve the looming federal Social Security crisis, Walkers suggests three moves:
- Increase the retirement eligibility age for younger workers.
- Revise the benefit formula to offer more money for low-income retirees.
- Boost the payroll tax cap to $200,000, but not raise the tax rate above 6.2 percent.
Moreover, another disastrous threat is the matter of underfunded state pensions and healthcare given to retirees. The issue, Walker says, stems to governments promising very generous and lucrative pensions to state and municipal employees even when the money wasn’t there – last year, U.S. state pensions were only funded 80 percent, down from 97 percent in 2008.
To solve this state problem, Walker recommends imposing new plans for new workers and eradicate the abuses, otherwise known as “double-dipping.” Also, Walker wants a cap placed on indexing benefits to increase with inflation.
What are the odds of anything really being done? Very little, says Walker, because of the “great partisan and ideological divide.”
“They need to understand the longer we wait, the more dramatic the changes, both on the spending side and the revenue side,” stated Walker. “Making tough choices sooner rather than later is the way to go.”
We know politicians and, more importantly, the voters. Any time there is talk of entitlement reform, even if it means raising the retirement age, it generates vitriol, anger and back-pedaling, not to mention the influx of accusations that you detest old people and the working man.
Don’t remember David Walker? Perhaps this video below will serve as a reminder.
The payroll taxes are the worst way to tax because they reduce both jobs and take-home pay needed to stimulate the economy. The revenue could easily be replaced by a small 4% VAT and elimination of unnecessary bus tax expenditures.
The new tax base would grow with the economy and provide secure funding for Social Security for decades to come. The change would also encourage full employment and higher salaries for all workers.