This is the year social insurance begins to pay off more than it brings in. Which could get very expensive for those of us who hope to one day retire.

The retirement program for retirees, their survivors, and the disabled built a trillion dollar reserve when the economy grew faster and retirees didn’t live as long. But with Employers hire fewer people and more workers retire, Social Security is selling their large stacks of government bonds to keep the checks up for a while.

Last Tuesday is the plan Trustee warned they assume that the money will be used up in 12 years. When this happens, the law requires Social Security to cut payments to retirees by about a quarter – forget about the cost of living increases – and survive on what it still collects from workers and their bosses.

For decades, a dwindling pool of workers has supported a growing number of baby boomer retirees. COVID-19 has exacerbated trends – decreasing the number of working people who pay into the system, while increasing the number of those who have left the workforce and started collecting from it.

All of this means that Congress and the President may have to do something painful – raise social security taxes or cut payments, raise the retirement age, or do all of these at once. What they have done in the past: particularly in 1983 when President Ronald Reagan joined the Democrats to raise contributions a bit and slowly raise the age for “normal” retirement to the current 67, making the system more solvent, at least until this generation of Washington politicians was certain to be dead.

Unfortunately, Reagan and Congress were overly optimistic about the future of the system. As social security historian Sylvester Schieber points out, the increase in income inequality has thrown an unexpected curve ball into the system as it exempts the ultra-rich from payments after their income exceeds the tax ceiling (currently $ 142,800). Removing the cap would produce a lot of money, but it hits the notion that Social Security checks should have a relationship with deposited money.

What should I do?

The trustees made many suggestions:

  • Reduction of the annual increases in social security. There are many suggestions for doing this that would affect different retirees in different ways.

  • Raising the normal retirement age from currently 67 to 69. Raising the early retirement age from 62 to 65 and increasing the number of years you need to be eligible. That would greatly relieve the system. But as the trustees report does not add, doing so would leave millions of people of the current retirement age in employment or reduce their income, which would lead to much more stress.

  • Increase wage taxes. Social Security already charges 12.4% of the gross wage of Americans, split between workers and bosses. At a more realistic 16%, the system would pay for itself by the next century, the trustees estimate.

And yes, that would be extremely expensive. Social Security would end up consuming about $ 1 for every $ 6 of gross employee wages. Up from currently 1 USD for 8 USD each.

Of course, smaller or later social security checks would also be terribly unpopular. Because of this, changes are made in silence over time.

Sens. Mitt Romney (R., Utah) and Joe Manchin (D., W.Va.) headed a bipartisan list of colleagues who in April called for a National Fix-it Expert Commission on Social Security, like the one who did the 1983, instead of debating what to do in Congress under the heat of the cameras and the threat of toxic party politics, changes what to do.

Isn’t 12 years a long way to go? Why the rush?

The longer we wait, the less money is left in the program. Wait until it goes broke and the cuts have to be much bigger, or the bailout much more expensive, or we have to repeat it very often. Another reason for the current situation, according to Schieber, a former chairman of the system’s advisory board, is that Congress used to often tinker with social security, only to lose its nerve after the fixes in the early 1980s.

Can’t we just borrow the money? That could be a way out. But the system is currently excluded from deficit financing. Changing this would destroy another of the leading and popular principles of the system – that it is a pay-as-you-go system, not welfare, but one in which people earn their payments.

Some senators – for example, the lame duck Pat Toomey (R., Pennsylvania) – are still warning that credit has a fiscal price. Sooner or later, you’ll pump so much money into the economy that prices skyrocket, slowing down new hires, making incomes less worthwhile, and putting pressure on more government aid. Indeed, in recent talks, for example with the York Rotarians last month, Toomey accused the Democrats of using borrowed money to fund increasing numbers of ways to make the middle class more dependent on government aid.

Of course, Social Security saw itself, Toomey in the same speech alongside other early 20th reforms, Sun Oil Co. head Joseph Pew even tried to convince professors at his family-funded Grove City College in Pennsylvania not to Participate in social security as it eased the natural moral pressures that forced people to work and save. (He was disappointed that only two economists agreed and rejected wage deductions.)

Some people would even benefit if social security contributions were cut. Winners in particular include large investment firms that could count on attracting more savings from the minority of workers who believe they can afford to provide substantial income for retirement.

But not all Conservatives opposed social security. Friedrich Hayek, a godfather of libertarianism, praised worker-funded pension and insurance plans in The Road to Serfdom – although he cautioned that attempts to socialize the costs beyond participants would arouse fierce opposition.

That, of course, is the problem Washington is facing today: Who pays our most expensive benefits – not just Social Security, but Medicare and highway spending, both of which also run out of long-term funding? Just the users, of whom so many have fewer left? Or all Americans, even the most successful? How can financing and expenditure be balanced and made fair?

This is the stuff we should expect from our candidates for the Federal Office and propose realistic solutions, many of which we will not like.