7 Ways to Make Social Security Solvent

BOSTON (TheStreet) -- Celebration of the 75th anniversary of Social Security, of its benefits to the elderly and disabled, is tempered by doubts about the system's solvency.

People are living longer, after all, and that means more will collect benefits for longer periods. The 79 million baby boomers on the bleeding edge of retirement could break the system, some say, especially considering a persistent plunge in employment and the payroll taxes that is the life's blood of the system.

But defenders of the system, which was signed into law Aug. 14, 1935, say it can be fixed. Some of their ideas are simple tweaks, and others are radical and complicated: eliminate the income cap; ease into a payroll tax increase; claim the estate tax; implement a tax on some market transactions; raise the retirement age; add a degree of privatization; and switch from government sale of Treasuries to government purchase of a "global index of all stocks and bonds."

SEEING A DECLINE: Fears of insolvency have been stoked, rightly or wrongly, by the annual report of the Social Security Board of Trustees. The combined assets in the trust funds of the Social Security Old-Age and Survivors Insurance and Disability Insurance, known as OASDI, will be exhausted in 2037, it estimates. Program costs will exceed tax revenues this year and next. From 2012 to 2014, costs drop back behind revenues, but will permanently exceed tax revenues starting in 2015.

The annual cost of Social Security benefits represented 4.8% of GDP last year and is projected to increase gradually to 6.1% in 2035, then decline to about 5.9% by 2050 and remain at about that level, the report says. Projected OASDI tax income will be sufficient to pay about 75% of scheduled annual benefits in 2037 through 2084 after the combined trust funds are projected to be exhausted.

"There are lots of cross-currents when it comes to information about Social Security," says Nancy Altman, chairwoman of the board of directors of the Pension Rights Center, a nonprofit organization dedicated to the protection of beneficiary rights. "Some people think it needs to be modernized. I don't think it needs to be modernized. Some people say it is broken and needs to be fixed. I don't think that's right either. It is actually the most fiscally conservative and prudent program [the government has]. It is the only program that gets projected out 75 years. It is a much longer valuation period than private pensions or other countries use."