Opinion: The (secret) way we can save Social Security – Community News
Social Security

Opinion: The (secret) way we can save Social Security

So it looks like Joe Biden and the Democrats will finally approve their nearly $2 trillion “Build Back Better” tax and infrastructure bill. I must confess that I have found this to be the most boring saga since the Kardashians. Now that it seems to be over, I have one question for all the solons in Washington.

If we can find $2 trillion in additional tax dollars for these new spending plans, then maybe we can find an additional $20 trillion to close the Social Security hole?

Like most Americans, my retirement plans rely in large part on the premise that the gigantic retirement plan that I’ve had to pay year after year during my working career would, in return, meet its obligations to me. Social Security is becoming vital for all but the very wealthy retirees — not just because of the size of the checks, but also because they’re an inflation-protected lifetime annuity that you can’t get anywhere else right now.

The plan could become technically insolvent within 10 years, depending on whether you believe the trustees or the independent Congressional Budget Office. According to the latest figures, Uncle Sam needs to find $20 trillion to close the gap — at least to bridge the next 75 years.

Some might argue that the latest budget deal has nothing to do with Social Security, that these are completely separate issues. After all, it’s not even clear whether the latest deal will increase or decrease the deficits.

The Biden administration says the deal will reduce future deficits by raising taxes more than spending. Rating agency Moody’s seems to think the deal will at least pay for itself. The same goes for Congress’s Joint Taxation Committee.

The independent think tank the Center for a Responsible Federal Budget is not so sure. In a recent statement, President Maya MacGuineas warned that several budgetary “gimmicks” may be underestimating costs, and she feared that actual spending over the next decade could end up costing an additional $2 trillion on top of what has been agreed.

Meanwhile, the Wharton School at the University of Pennsylvania sees a net cost of $300 billion over the next 10 years, and estimates that the latest deal will add 2% to the national debt by 2050.

A simple plan

Call me a cynic, but I’ll be pleasantly surprised—actually, I’ll be amazed—if this burst of new government spending falls below forecasts, or even comes close.

But even if this latest deal doesn’t widen the deficit, we’re still in trouble. According to the most recent forecasts from the Congressional Budget Office — outdated for several months — we were already looking at nearly $13 trillion in additional federal deficits over the next 10 years, on top of the $6 trillion accumulated over the past two years, meaning that that by 2031, we’re looking at a government debt of $36 trillion, or about 106% of annual gross domestic product.

Where are we going to find another $20 trillion?

Money raised through additional taxes to pay for one thing, such as infrastructure, of course, cannot be used to pay for something else, such as Social Security.

But let me end on a slightly more optimistic note. One of the hallmarks of the deal is a major increase in IRS enforcement to fight tax fraud. This is not a trivial matter, especially at a time when the country’s main pension system is in crisis.

The best estimates in Washington are that tax fraud — euphemistically known as “the tax gap” — dodges about 16% of all federal tax money owed each year. Even taking enforcement results into account, it still comes out at about 12%, or one dollar for every $8 people would have to pay.

Oh, and those numbers refer to about 10 years ago, before the government cut the IRS’s enforcement staff by 36% (yes, really). So you have to consider that cheats get away with a lot more these days.

Why does this matter? Well, it’s simple math. If tax fraudsters are evading 12% of the taxes they owe, and this year taxes are expected to be about 18% of GDP, then tax evasion is, according to my calculations, about 2.2% of gross domestic product.

The Social Security Funding Gap? According to the trustees’ average forecast, that will average about 1.7% of GDP over the next 75 years. In other words, the whole hole in the Social Security budget could – in theory – be paid without cutting benefits, putting them to the test, raising taxes or raising the retirement age, but simply by catching people doing it. cheating on their taxes. If we can find a way to do it.