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Surely, We Must Be Off Course??

Surely, We Must Be Off Course??

December 11, 2023

Airplane! is the 1980 American comedy film written and directed by the brothers David and Jerry Zucker, and Jim Abrahams in their directorial debuts. It stars Robert Hays and Julie Hagerty and features Leslie Nielsen, Robert Stack, Lloyd Bridges, Peter Graves, and Kareem Abdul-Jabbar. It parodies the disaster film genre, including the 1957 film Zero Hour!, as well as Airport 1975 and other films in the Airport series. It is known for its fast-paced slapstick comedy, including visual and verbal puns, gags, and running jokes.

Source: IMDb.com

I was a freshman in high school when the movie was released, and it was immediately a huge hit with me and my friends. Whenever it is on television, I still watch at least a portion of it for a few laughs (much to the chagrin of Rachel). It appears that I am not the only one who holds the movie in such high regard. The movie has become more appreciated with time. It ranked sixth on Bravo's 100 Funniest Movies. In a 2007 survey in the United Kingdom, it was judged the second-greatest comedy of all time, behind Monty Python's Life of Brian (another favorite of mine), and in 2012 was voted #1 on The 50 Funniest Comedies Ever poll. In 2010, it was selected for preservation in the United States National Film Registry by the Library of Congress as being "culturally, historically, or aesthetically significant".

One of the running gags in the movie is “Don’t call me Shirley”. When Dr. Rumack, hilariously portrayed by Leslie Nielsen, discovers that the fish served during meal service has caused food poisoning which has incapacitated the entire flight crew, he turns to Ted Striker, a former fighter pilot who was traumatized during the war, and asks him to land the plane and save the passengers, “Can you fly this and land it?” Ted is surprised by the request and retorts, “Surely, you can't be serious.” This leads to Dr. Rumack’s famous, deadpan reply, “I am serious, and don't call me Shirley!” For those of you who need a reminder or a quick laugh, a YouTube link to the scene is included below.

Airplane 1980 - Surely You Can't Be Serious

Throughout the movie, we get scenes from the flight control tower in Chicago, where they are worried that Ted will not be able to land the plane and worse, that they could be miles off course due to all the issues that have occurred during the flight. This brings us to our topic of the day, the upcoming Social Security shortfall. The Social Security Administration is now projecting that the surplus that was built up since Social Security was last changed in 1983 will be completely depleted within the next 10 years. As Social Security is a foundational part of most retirees' income, this is an extraordinarily important topic, yet politicians on both sides of the aisle on Capitol Hill have continued to kick the can down the road instead of fixing the situation.

Alan Greenspan, who later became Chairman of the Federal Reserve Bank, led the Greenspan Commission which issued its report on how to fix Social Security to Congress in January 1983. You see, it was understood that the coming wave of baby boomers would eventually put strain on the Social Security system. The Commission recommended several changes, including raising the age for full Social Security benefits from 65 to 67 over several years, increasing the FICA tax rate for both employees and employers, as well as the taxation of Social Security benefits. These changes were adopted by Congress and allowed Social Security to begin building up a surplus that would be used to pay the benefits that baby boomers were counting on as they moved toward their retirement years. Unfortunately, no additional changes or adjustments have been made to the system in the last 40 years.

I have often compared flying a plane to creating a plan for long-term financial stability and viability. If you were getting on an airplane in Cleveland and flying to Los Angeles, LAX, you would expect your pilot and crew to have a flight plan. You probably also intuitively understand that as you fly west, if you find yourself off course, it is easier to make a minor, midcourse adjustment over Chicago, than it is to wait until you are over the Rockies and find yourself hundreds of miles off course. This same logic would hold true with fixing the upcoming shortfall in Social Security. As you can see in the chart below, the amount of FICA taxes paid began to be exceeded by the amount of benefits paid by Social Security around 2007, despite original projections showing that this would not happen until approximately 2018.

Source: CBO

The increase in outlays and the decrease in revenue coincided with the Great Financial Crisis that was precipitated by the collapse of the subprime mortgage market, and the subsequent failures of AIG and Lehman Brothers. This led to a significant recession and job losses over the next couple of years. You see, when people lose their jobs, they no longer pay FICA tax into the Social Security system. At the same time, many workers aged 62 and over decided to retire and start drawing benefits earlier than expected. This reduced the amount of reserves in the Social Security trust fund and brought forward the date at which it would run out of money.

No President since George W. Bush in 2005 has seriously tried to address this situation. Unfortunately, W's proposal to partially privatize Social Security didn't go very far and was probably misguided at best. However, it would have been much easier to make minor mid-course corrections 30 years before the trust fund ran out, than to find ourselves where we are today. Neither subsequent Presidents nor Congresses have taken any serious steps to fix the problem. We now find ourselves out over the Rockies, hundreds of miles off course, and the decisions and actions to fix the funding gap are becoming more difficult.

As you can see in the chart above, the projected benefits that can be paid from current taxes, once the surplus runs out, will cause a drop in benefits of approximately 25%. We know this would be devastating to many retirees. There are only a few levers that can be adjusted to fix the situation. This includes raising the age at which you can collect Social Security benefits, the FICA tax rate could be raised, the amount of wages you pay FICA tax on could be raised, or the cost-of-living adjustment formula could be reworked. None of these are fun solutions, and the longer we wait the more drastic the changes will have to be.

In the movie Airplane!, we learned that the trauma of war led our pilot hero, Ted Striker, to develop a drinking problem, as you can see below.

Source: Youtube.com

It is our sincere hope that somebody, anybody, on Capitol Hill begins to proactively address the Social Security shortfall that is now only a decade away. We hope that the trauma of the future changes to the Social Security system that will inevitably come do not cause any of our trusted friends and clients to develop a drinking problem like Ted. Surely, we are NOT joking about this!! The CFPs of Impel Wealth Management will do our best to continue to keep you informed and enlightened about these foundational retirement planning issues as we continue “Moving Life Forward.” And don’t call us Shirley!!

© 2023 Jesse Hurst

The views stated are not necessarily the opinion of Cetera and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.

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