What’s your plan?

Patrick Gibbons

U.S. Senate candidate Sharron Angle supports private accounts for Social Security, so Harry Reid is busy attacking and demonizing her and her idea. But what is Reid’s plan to save the floundering and unsustainable program? That is the question Michael Tanner of the Cato Institute asks in a recent Las Vegas Review-Journal column.

First let’s address the problem facing Social Security. According to Mr. Tanner,

Thanks to the economic downturn, Social Security is running a temporary cash-flow deficit today. That deficit will turn permanent in just six years. Of course, in theory, the Social Security Trust Fund will pay benefits until 2037. That’s not much comfort to today’s 35-year-olds, who have faithfully paid into the program their entire working lives but will face an automatic 27 percent cut in benefits unless the program is reformed before they retire.

Unfortunately, the trust fund is made up of U.S. Treasury Bonds, which function just like an IOU from the government (the government borrows your money to supplement current spending and then promises to pay you back later). Tanner continues,

Even if Congress can find a way to redeem the bonds, the Trust Fund surplus will be completely exhausted by 2037. At that point, Social Security will have to rely solely on revenue from the payroll tax – and that won’t be sufficient to pay all promised benefits. Overall, the amount the system has promised beyond what it can actually pay now totals $15.8 trillion.

There are only three ways to address the issue, and even Bill Clinton gets it: 1) raise taxes 2) cut benefits or 3) allow private investment.

So if Senator Reid is attacking Angle for her support of private investment, what is his plan? Michael Tanner may have figured it out:

Since Reid is attacking Angle for her support for private investment, one can logically conclude he must therefore favor tax increases and/or benefit cuts. And mighty big tax increases they would have to be — a 50 percent increase in the payroll tax, or the equivalent. The benefit cuts would be no less draconian.