“We’re going to protect Social Security. I will not privatize it. I will not cut the benefits. And we’re going to be fiscally responsible. And we will take care of Social Security.”
With those words in the third presidential debate, John Kerry told the American workers of today andtomorrow that taxes will have to go up if he is elected.
No, he didn’t actually say “taxes.” But if he won’t let workers invest in private accounts and he won’t cut benefits, then the only way to “take care” of Social Security is to raise taxes—to the tune of some $10.4 trillion dollars.
According to the Social Security trustees’ report this year: “For the Social Security benefits to be adequately financed for the infinite future, the contributions or benefits of current and future participants in the system must be adjusted to fully offset the shortfall due to past and current participants.” The report goes on to point out that “the remaining long run financing gap that program reforms must ultimately close is $10.4 trillion in present value.”
For an idea of how big this shortfall is, look at the U.S. economy. The Commerce Department reports that gross domestic product in 2003 was $11 trillion. But it may be worse: the trustees’ report includes a phrase that suggests the $10.4 trillion is too low.
That phrase? Present value. That means the value of today’s dollar, not the value in the future, after the effects of inflation.
Assume the inflation rate is 2 percent a year. Then this year the shortfall will reach $10.6 trillion. Next year, it would be $10.8 trillion—all to cover the present value of $10.4 trillion today.
Kerry’s pledge to “take care” of Social Security is really a pledge to raise taxes.