No Quick Fix for Social Security System

Some of the reforms were intended not just to stem the bleeding back in the 1980s, but to create surpluses that would be needed in the middle of the 21st century to support baby-boomer retirees. The plan worked, but not as the commission intended.

Surpluses in both Social Security and in the national budget were piled high at the end of President Bill Clinton's second term, and he was prepared to enact reforms. Then along came Monica, and plans for reform were history.

President Bush inherited these surpluses when he came to office in 2001. But soon the terrorist attacks of 9/11 and a recession followed. His administration tried to stimulate the economy with a series of big tax cuts, which gave breaks to taxpayers across the board, but which opponents said favored the rich and only dug the nation deeper into debt.

As Bush prepares to start his second term, he recently sought and gained approval from Congress to raise the national debt to $8 trillion, to accommodate the rising $7.5 trillion record debt. The $1.5 trillion surplus from Social Security, which is invested in the form of Treasury notes, has been spent.

However, as Margenau points out, Social Security is not squeezed for cash now. Every month, he says, it pays out $35 million in Social Security benefits, and still has money left over. Last year it had $83 billion in surplus invested in special-issue Treasury obligations (which are part of the government's debt that it owes to Social Security).

The problem will come around 2030 when the ratio of workers to retirees drops from 3 to 1, down to 2 to 1.

When Social Security began, the payroll tax to fund it was 2%. It has since been raised numerous times. Today employers pay 6.2% and workers pay another 6.2%, while the self-employed pay the full 12.4%.