Hillary's plan for Social Security

Hillary Clinton spoke recently to AARP and was in full pander mode.

Democrat Hillary Rodham Clinton promised retirees that if elected president she will not cut Social Security benefits, raise the retirement age or privatize the taxpayer-funded system.

Hmmm, what does that leave for fixing the problems that everyone acknowledges exist in funding the retirement benefits as the baby boom generation starts retiring? You guessed it, boys and girls. Raising taxes on those who are working. Just read what the Board of Trustees of Social Security and Medicare reported in 2007.

The annual cost of Social Security benefits represented 4.2 percent of Gross Domestic Product (GDP) in 2006, is projected to increase to 6.2 percent of GDP in 2030, and then rise slowly to 6.3 percent of GDP in 2081. The projected 75-year actuarial deficit in the combined Old-Age and Survivors and Disability Insurance (OASDI) Trust Fund is 1.95 percent of taxable payroll, down from 2.02 percent in last year's report. This decrease is due primarily to revisions in key assumptions and to changes in methods. Although the program passes our short-range test of financial adequacy, it continues to fail our long-range test of close actuarial balance by a wide margin. Projected OASDI tax income will begin to fall short of outlays in 2017, and will be sufficient to finance only 75 percent of scheduled annual benefits in 2041, when the combined OASDI Trust Fund is projected to be exhausted.

Social Security could be brought into actuarial balance over the next 75 years in various ways, including an immediate increase of 16 percent in payroll tax revenues or an immediate reduction in benefits of 13 percent or some combination of the two. Ensuring that the system is solvent on a sustainable basis beyond the next 75 years would require larger changes. To the extent that changes are delayed or phased in gradually, larger adjustments in scheduled benefits and revenues would be required that would be spread over fewer generations.

So what is left from Hillary Clinton's promises to the AARP? Taxing the rest of us, especially younger workers to pay for the benefits due to their baby boom parents.

I wonder what this will do for the vaunted youth vote that is supposed to be out there to support Democratic politicians. I teach students just as they are getting their first jobs and beginning to understand what those initials FICA mean on their paycheck. And they're not pleased, not pleased at all to learn all about how Social Security works and what "pay as you go" means to their earnings. Of course, those elderly voters turn out in much greater numbers than younger voters. But promising rosy scenarios that people have come to realize are impossible to fulfill without major burdens on working Americans might not fly anymore. Fred Thompson has said that one of his major issues will be reform of Social Security. If he can make it clear what is at stake with Hillary's approach, he will be doing a major favor for the voting population to understand what is entailed by her catering to the demands of the AARP voters.