Part-time Columnist

Dallas Morning News Column - November 19, 2004

The best thing we can do for our kids
12:41 AM CST on Friday, November 19, 2004


By MAHESH SHETTY


The impending deficits in Social Security, if not corrected, can create a huge overhang on the economy in the form of greater interest rates, lower benefits and/or greater taxes.

In the 2000 census over 5 percent of the Collin County population was over 65 years old. That number is expected to grow rapidly as the first of the baby boomer population starts retiring in five years. In the 2004 Collin County budget 8 percent ($8.3 million) has been set aside for health and welfare. This burden will increase and will be passed on to taxpayers in the form of higher property taxes.

Tom Brokaw's book The Greatest Generation described in anecdotal form the sacrifices the World War II generation made and how that made this country the greatest nation on the planet. I see Social Security as an opportunity for the baby boomer generation, often called the "selfish generation," to make sacrifices to ensure that they leave this country in a better shape for our children.

I offer, then, a humble attempt to start the debate and offer up some ideas to address the deficit:

• Increase retirement age: The current retirement age is 65 and is expected to increase to 67 for people born after 1959. I recommend that the retirement age be raised to 72 in increments over the next five years. While unemployment continues to dominate our attention, the real problem over the next few years is expected to be a labor force slow down that will require a greater percentage of the elderly population to be part of the work force. The alternative would be to dramatically increase immigration to ensure continuity of current Social Security benefits.

• Eliminate Social Security benefits if retiree income from other sources exceeds $120,000. In exchange, offer tax credits of $120,000 on estate taxes. This would shift wealth to future generations and reduce the current burden on Social Security.

• Raise the cap on Social Security taxes to $150,000 for baby boomers: This should not be mistaken for a tax increase. Let's call it a contribution by the taxpayers to ensure the financial stability of the economy. Alternatively, baby boomers can elect to opt out of Social Security and contribute the difference into a retirement account.

• Make Social Security contributions tax deductible: Employers deduct their contributions for taxes. There is no reason why taxpayers cannot. If Congress decides to raise the contribution rates or limits, tax deductibility will make it more palatable.

Starting in 2005 the over-65 population in the United States is expected to double to 70 million in 2030. Unlike earlier generations and thanks to the miracles of modern medicine this generation will be healthier and live longer. We can also expect to work longer.

Will this take care of the deficit? Not entirely, but it will make a huge dent and significantly reduce the debt burden we will leave behind for our children. As debt service becomes an increasing part of the national budget, it will reduce our flexibility to improve our society and makes us more susceptible to the political changes in nations that hold our debt. It is time for us to step up and take charge of our own destiny.


Mahesh Shetty is a Richardson finance executive and a Voices of Collin County volunteer columnist. His e-mail address is msshetty@aol.com. Different Voices columnists appear every Friday.

posted by Mahesh Shetty @ 9:04 AM