We have been inundated for years about how Social Security is going to go broke. Is it going broke? If so, how do we fix it?

Each year the Social Security and Medicare Boards of Trustees issue a report on the health of the trust funds. In April of 2012 the latest report came out. These key statements from the report sum it up nicely:

The actuarial deficit in Social Security increased largely because of the incorporation of updated economic data and assumptions. Both Medicare and Social Security cannot sustain projected long-run program costs under currently scheduled financing, and legislative modifications are necessary to avoid disruptive consequences for beneficiaries and taxpayers.

Lawmakers should not delay addressing the long-run financial challenges facing Social Security and Medicare. If they take action sooner rather than later, more options and more time will be available to phase in changes so that the public has adequate time to prepare. Earlier action will also help elected officials minimize adverse impacts on vulnerable populations, including lower-income workers and people already dependent on program benefits.

According to the report Social Security will go broke in 2033. Going broke means expenditures exceed revenue and reserves. In 2010 and 2011 expenditures exceeded revenue for the first time since 1983 and continues to accelerate negatively.

An article in Forbes from April 24th by Rick Ungar nicely sums up how we got here and what our government did in 1983 to shore up the system.

Mr. Ungar discusses the Greenspan Commission, led by the inimitable Alan Greenspan, and how they came up with a solution to deal with the retiring baby boomers based on certain assumptions. The critical assumption by the Greenspan Commission was the “expectation that 90 percent of income would stand as the tax base for Social Security contributions.” The problem is that, “our current circumstance whereby only 83 percent (or less) of income is being taxed for the Social Security fund as more money flows into the pockets of those earning more than the cap.”

The cap Mr. Ungar is talking about is that only the first $110,100 of income is taxed for Social Security revenue. Anybody making more than $110,100 per year in payroll taxed income stops paying the 6.2% at that mark.

If Mr. Greenspan accurately calculated that 90% of all income needs to be taxed for Social Security and we now only tax 83%, isn’t the simple solution to raise the cap to whatever it needs to be for 90% to be covered? How much is that?

From a Congressional Research Service report in 2010 that number would be $150,000 of income taxed at 6.2% to ensure proper coverage of Social Security.

Congress could pass a law pegging the cap for Social Security to the 90% number the Greenspan Commission used to eliminate this problem and we could end this discussion now. Our current Congress has not only done that, they did worse.

With a bipartisan majority, the Democrats and Republicans have undermined Social Security and our federal budget by slicing 2% from workers Social Security taxes. And where is that 2% coming from? The general fund portion of the federal budget is making up the difference!

How can this be? We already have a terrifyingly large federal budget deficit and instead of addressing the issue at hand, the fools in Washington are putting all of us deeper in debt.

Congress needs to immediately get this straightened out. End the payroll tax holiday now. Fix the cap on taxable income to the 90% level that the Greenspan Commission and the bipartisan vote of Congress in 1983 supported. Incidentally President Reagan supported this position and rightfully signed the law.