At least that's the title of an article by Susan Lee that appears on the editorial page of today's Wall Street Journal. Here, according to Dr. Lee, is the crux of the problem:
All benefits are based on something called the primary insurance amount. This amount, in turn, is based on a worker's earnings, indexed to the growth in average real wages...
So every retiring worker gets to take advantage of overall economic productivity...
Simply put, it's the real wage growth component that is at the heart of Social Security's problem. The wage index functions like a little pituitary gland because rising productivity causes wages to grow faster than prices.
The fix, then, seems pretty simple.
Obviously, wage indexing is not financially sustainable. If benefits were indexed to prices, however, Social Security would, at this very minute, be in balance over the long-term...
Problem solved? Not quite.
But solving Social Security's long-term financial crisis is not the same thing as solving its spiritual problem. Why, at the dawn of the 21st century, are workers forced into a government retirement program that will, very soon, deliver unto them a rate of return that is very visible?
She goes on to express a preference for changes -- one of the options provided by President Bush's Commission to Strengthen Social Security, in fact -- that would combine a shift to price indexation with a partial privatization scheme. (Specifically, workers would be allowed to allocate a part of their Social Security taxes to a private saving account, in exchange for accepting some reduction in promised benefits.)
Nice article, well worth checking out if you are interested in this issue.