Because the Cost of Living Adjustment (COLA) for social security is currently based on the Consumer Price Index (CPI) and the index is up for the first time in three years, social security recipients may be looking at an increase in 2012. Analysts are calculating the increase to be about three and a half percent.
Social security has become a hot issue since republican presidential candidates have made it a key election campaign issue. Texas Governor Perry has said that the system doesn’t really fund itself. The money from today’s donors will be gone this year. Future recipients will be dependent not on their own contributions but on the contributions of future payers. So he accuses the system of being a Ponzi scheme, which works in much the same way.
However, Ponzi schemes ultimately fail because there are forces at play that make future contributions less likely. Things like a declining economy, declining population, jobs shifting overseas and declines in productivity all have the potential, almost certainty of reducing funds available to the social security program and making the program anything but secure.
Reforms to the program are possible but all of the proposals have significant costs and risks both economic and political. Some would like to see a change to the retirement age. Others have proposed shifting the program to be privatized investments or individual managed investments much like 401K plans. Still others on the socialist front have suggested that wealthier Americans receive less and poorer receive more.
Other suggestions include collecting more money in payroll taxes. This would also have the effect of taxing higher earners more, another wealth redistribution scheme. The idea is not only unpalatable to the wealthy but also to those who support the program because of the principle that those who contribute more today stand to collect more in the future.
All agree that something must be done. If nothing else, the Left doesn’t want Gov. Perry to be proven right that the system is a Ponzi scheme. Unless something changes he is sure to be proven correct.