Some excerpts from a piece by
Paula Span in the Health Section of the New York Times:
We’ve long heard warnings that the
Social Security program that 52 million Americans rely on for their
retirement benefits could one day run out of money.
Analysts
say that’s not going to happen — if only because older people are such a
powerful voting force — but this year the system has hit a worrisome
milestone: the Social Security Administration reported that the retirement benefits paid out each month exceeded the tax revenues and interest that fund the program. ...
Making adjustments to keep Social Security solvent, crucial as that is,
represents only one of the issues confronting Congress. It could also
correct outdated aspects of a program that serves nearly 90 percent of
Americans over 65. ...
The fixes will likely include changes
designed to bring more money in and pay less out. Imposing a higher
payroll tax or raising the level of earnings subject to Social Security
taxes (as of January 1, they will apply to the first $132,900, already
an increase) would bolster revenues.
Money-saving
measures could include reducing benefits for high earners and trimming
the number of years that workers collect benefits by raising eligibility
ages. ...
Working longer and claiming benefits
later — trends already well underway — pay off in ways that extend
beyond Social Security itself. “It’s good for people, it’s good for
government tax revenues and it could fuel economic growth,” Dr. Johnson
[of the Urban Institute] said.
But as his report points out,
living longer doesn’t always mean people can work longer. Higher-income
professionals may opt to stay on the job, he said, but “health problems are increasingly concentrated among less educated workers
and they’re falling further and further behind” economically. Moreover,
even those who could work often discover that “employers don’t seem
eager to hire 62 year olds.”
By their
early sixties, his analysis of national survey data found, a quarter of
high school graduates and 37 percent of those without a high school
diploma report work limitations related to their health. Many say their
jobs require substantial physical effort. ...
While some think tanks and congressional staffs are exploring ways to
strengthen Social Security financially, others are looking into outmoded
provisions that penalize beneficiaries, primarily women.
Senator Bob Casey, Democrat of Pennsylvania, has introduced legislation
intended to help widows, widowers and divorced spouses qualify for
higher payments and receive benefits earlier if they’re disabled. ...
Speaking of women and Social Security, another effort would award work
credit for those who temporarily leave the labor force because of
caregiving responsibilities. ...
Let me make it clear. I oppose raising full retirement age or any other cut in Social Security. Raising full retirement age would have a devastating effect on working men and women who often can't make it to the current full retirement age which never should have been raised from 65. I have zero trust in any scheme dreamed up to alleviate this problem. Not only can this country easily afford the Social Security benefits currently available but this country can easily afford enhancements to those benefits. The cap on the payroll tax can be raised. Other tax revenues, such as an enhanced estate tax, can be devoted to Social Security. Solving the financing problem is easy if you really want to. If Democrats control Congress and the White House after the 2020 election it's a fantasy to think that they're going to push for some great compromise that cuts Social Security benefits. The Obama Administration's efforts to compromise with Republicans on health care are a vivid memory. GOP Senators stalled and drug out negotiations in bad faith. They never had any intention of voting for health care reform. No Democratic president will make that mistake again any time soon. Social Security reform will have to be accomplished solely with Democratic votes and on Democratic terms.
Let me see if I get this right...the largest population cohort in the history of the nation is getting older and retiring. During their time in power (and lets not forget that dozens of the beasts still roam the halls of Congress) they decided not to do anything in preparation for the retirement of the cohort. They did not raise the tax 1% to cover this highly predicted moment in time. They raided the system for money, and underfunded the agency.
ReplyDeleteNow the same cohort, slowly fading from power, sees that there are consequences to the lack of action, planning and forethought, but seem to forget those few pennies they "saved" by not increasing the tax to support them in their declining years. So, in a last ditch effort to save themselves, they do what they have been doing for decades and kick the can to the younger generation, forcing their own children and grand children to pay higher taxes, work longer than they did and enjoy less benefits than what they gave to themselves.
Pragmatic solutions cannot be divorced from politics. In our democracy, if you believe that private industry failed to take care of most of the people in the 1930s who prudently invested for their retirement in real estate, stocks and bonds, banks and 40-year employment with the same employer -- only to see them all bankrupted and turned to dust, then you cannot blame the people since that time who believed that their retirement was socially insured by the good faith of the government.
ReplyDeleteThose against Social Security want it to be fake and unsupportable-- and it will be if it is not fully supported by everyone, not just those making less than $133,000. Those that benefited by the inflationary growth of this country and make over $135,000 should pay for that privilege as Buffit and Gates suggested. Once everyone pays their fair share then let's look at expenses.
The actual retirement age is something of a fiction at this point. For many people, the age is 62 even though collecting at this point is now roughly 75% of what they would get if they wait until "full retirement age". They retire early for many of the reasons Charles says, for working people at physical jobs, 62 is all they can take. Sure, filing for disability at that point is an option, this is what most of us do for our clients that ask, but most people don't file for disability and, for many, even if they do they are denied.
ReplyDeleteThere is a way to increase the full retirement age in a way that only affects the wealthier retirees while preserving benefits for all with average or below average incomes. Simply, change the bend points and/or increase the payment at the first bend to 95% of AIME instead of 90$for the calculation so that the payments for the low earners stay the same or increase even though the official age for retirement goes up.
And, to completely balance the books, remove the cap on earnings subject to tax and for those at the top earning level, use a 5% payment after the AIME level at a certain point.
I have one thing to say: Any cut in benefits for those already receiving any form of SS, will lead to civil unrest in a very large way! This holds especially true for SSDI, where people are taken by surprise and have no more time to save and plan for their later years.
ReplyDeleteWho is going to be in civil unrest, a bunch of old and disabled. That shouldn't be hard to quell. A couple early bird specials and some free giveaways at a health fair should handle it.
ReplyDeleteTo 10:43 AM, The disabled have friends, and family and when millions of Americans stop paying their bills, default on their rent, become a burden to everyone around them as politicians continue to make $179,000 per year, you will see something that I hope you never will see.
ReplyDeleteSo, it is okay to force taxes on everyone else to support the lack of vision of the Boomers, or they riot. What a great generation!!! Set the examples, but remember, Soylent Green!!!
ReplyDeleteTo 12:44 (my last response)The government made certain promises, and they need to live up to them. I understand what the law says about "only being able to pay what they can pay" but the system should have been fixed a long time ago. If I got into an accident with my car, I would be furious if the insurance company told me that they owe me $3000 but are only going t pay $2000 because they have ignored a growing financial crisis from within their own organization, and have come up short. Now picture this on a nation wide scale. I hope the government has a plan, but to cut someones "extremely low" income when they 'medically' have no options is down right wrong.
ReplyDeleteNow please stop trolling, another response will not be forthcoming.
It's so crazy how this is always framed.
ReplyDeleteThat 20% or 25% cut to benefits that will just have to happen--it's always worded as though it would be automatic and unstoppable--when the incoming FICA taxes and (on hand) trust funds run out don't actually have to happen. Never, ever, ever forget what really would happen is that our national legislators would have to come up with that 20-25% themselves out of the general fund to keep making full benefit payments.
You see, they've raided the trillions (yes, multiple trillions) in excess FICA taxes collected over the decades to pay for imperialism, colonialism, and good ol' fashioned multinational capitalism across the globe and hefty tax cuts for the richest of the rich, and now they are going to act as though they have no responsibility or ability to repay all the IOUs they left in place of all that money now that we are entering a period where we need to rely on those reserves as a massive cohort of folks begins using SS benefits and fewer people are paying FICA taxes. That's the whole point of growing and keeping reserves--age/life/work cycles are cyclical!
So please do not entertain that framing. The benefits are owed and due, and the federal gov't could and should continue to pay them, it's just going to have to nip around the defense budget or something to make up the temporary shortfalls of current FICA intakes.
A 9:57am is right, it's how you frame the issue. In 1983, Reagan led a bipartisan solution for that time,raising the retirement age from 65 etc, which was designed to fully fund social security for the next 30 years. Now here we are, 35 years later, and another tweak needs to be made -- that is not surprising, as times change. But the fact that SSA will have to rely on those IOUs for paying some of the benefits is not the end of the world -- it is just like dipping into savings to pay bills. That's what the savings are supposed to do! So Baby-boomers have been paying their own way, but Congress raided the $$. The underlying problem is that Republicans now are actively trying to do away with social security, so they are not willing to make changes to keep it solvent for another 30-35 years. It's a given that saving for retirement hasn't turned out so well for folks who lost money in the stock market (rigged to benefit the big investors); haven't gotten much interest on savings for the past 10 years; and have lost equity in their real estate over the past 10 years. The 1% have done fine in the past 10 years -- now let them give back to their country to ensure the economic security of every U.S. worker. Starting with WWII and until the late 1980s, it was understood that a patriotic American would pay taxes to fund the war effort, interstate highways, the Great Society,etc. The tax rate was high on high earners, without protest. The US cannot exist without everyone paying their share, and lower wage-earners already are doing so. Time for high-wage-earners to step up!
ReplyDeleteAt 6:10, lovely statement, completely uniformed and incorrect but lovely statement.
ReplyDeleteFACTS
Since its inception, Social Security has featured a taxable maximum (or "tax max"). In 1937, payroll taxes applied to the first $3,000 in earnings. In 2011, payroll taxes apply to the first $106,800 in earnings. This policy brief summarizes the changes that have occurred to the tax max and to earnings patterns over this period. From 1937 to 1975, Congress increased the tax max on an ad-hoc basis. Increases were justified by the desire to improve system financing and maintain meaningful benefits for middle and higher earners. Since 1975, the tax max has generally increased at the same rate as average wages each year. Some policymakers propose increasing the tax max beyond wage-indexed levels to help restore financial balance and to reflect growing earnings inequality, as workers earning more than the tax max have experienced higher earnings growth rates than other workers in recent decades.
I always wonder about the mechanics of awarding work credit for those who temporarily leave the labor force because of caregiving responsibilities. How the heck does that get quantified (what is the value of such work - does it change with the number of people and ages and disabilities of the people being cared for?) And someone actually thinks the government would do a good job at this and could come up with "fair" policy? And who monitors these caregivers to make sure they are doing the work they are getting credit for? Another government agency, I guess, looking over their shoulders and completing forms. And would that then eliminate spousal benefits? Interesting that since society has changed so much, in terms of marriage and dependency, since the inception of Social Security, that no one advocates eliminating benefits that no longer match society. Most women are no longer solely dependent upon husbands. The original SS legislation actually protected women by providing for widow (and not widower) benefits. Perhaps all spousal benefits should be eliminated.
ReplyDeleteBut that would be taking away benefits. Never going to be a popular idea. Would not play well on TV.