Can Social Security Be Saved?

Unless our political leaders demonstrate both wisdom and political courage, Social Security will run out of money in nine years and beneficiaries will see their checks slashed automatically by 25 percent.  

And that will mean an average annual reduction of $17,000 or $18,000 per year, according to James B. Lockhart III, former Principal Deputy Commissioner and Chief Operating Officer of the Social Security Administration during the administration of President George W. Bush.  

“Either Congress can reform the program or at that point, it would take half a trillion dollars a year to make up for the difference of promised benefits,” says Lockhart on the Lean to the Left podcast. “What happens is, there's a trust fund and the trust fund was built up over the years. In the ‘83 reforms, the Greenspan reforms, they changed the retirement age and did some other things very slowly.

“And that trust fund is starting to be eaten into today because effectively the government borrowed the money from Social Security. And so now the government's paying back all of those bonds and in nine years, the bonds will disappear. The trust fund will disappear and there'll be a hole of a half a trillion dollars a year and growing every year thereafter.

So, how can Social Security be saved?

“The only way to cover that hole is reform," says Lockhart. "Our Congress has to pass a law that says, oh yeah, we're gonna spend another half a trillion dollars a year. Where they're gonna get that half a trillion given the deficits and the debt outstanding is a very big question.”  

Because it takes courage for politicians, including the president and members of Congress, to take the tough action needed to preserve Social Security for generations to come, they keep delaying action to avoid losing support from seniors and those nearing retirement age.  

A combination of both benefit and tax reform will be necessary to put Social Security on solid ground, says Lockhart, who calls for creation of a special commission to examine and reform federal entitlement programs, including Social Security and Medicare. Resulting recommendations would be put before Congress for an up-or-down vote.

But even that takes guts.

Currently, President Biden and Donald Trump both promise not to cut benefits or raise the retirement age, and Biden says his tax reform proposals – to increase corporate taxes and taxes on the wealthy -- would not affect anyone earning less than $400,000 per year.

Both are wrong in their approach, says Lockhart, explaining that less than 2 percent of Americans earn $400, 000 a year, so much more revenue would be needed.

About James B. Lockhart III

Author of the award-winning book, "America Underwater and Sinking”, Lockhart, who once served as an officer aboard a U.S. Navy nuclear submarine, is a senior fellow of the Bipartisan Policy Center. He served as the director of the federal housing finance agency, regulator of Fannie Mae, Freddie Mac, the federal home loan banks and its predecessor agency, the Office of Federal Housing Enterprise Oversight, as well as the Pension Benefit Guarantee Corporation.

During the George W. Bush administration, Lockhart co-chaired the Bipartisan Policy Commission on Retirement Security, which developed recommendations that he says would have put Social Security on solid footing forever. However, most of those recommendations have not been enacted because of the political risks involved.

What are Lockhart’s recommendations? What steps should be taken to save Social Security and prevent that automatic 25 percent benefit cut once the Trust Fund dries up?

Watch this episode to find out.

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