Social Security is a perennial crisis. Eighty-three percent of Generation X and 77% of millennials say they worry that the program will run out of money in their lifetimes, according to a June 2021 Harris poll for the Nationwide Retirement Institute. The latest report of the Social Security Trustees backs them up, finding that the Old Age and Survivors Insurance trust fund “will be able to pay scheduled benefits on a timely basis until 2034, one year later than reported last year.” That’s only 12 years from now. ...
I’ve updated my reform proposals:
• Raise the full retirement age further. ...
• Raise the early eligibility age. ...
• Change the way benefits are calculated for new recipients. [To cut benefits] ...
• Slow the growth of benefits for new and existing beneficiaries alike by changing the basis on which they’re indexed for inflation. ...
• Withhold some Social Security COLAs from higher-income retirees. ...
• Give the COLA not annually but every 14 or 15 months using the 12 months of lowest inflation.
• Tax Social Security income for higher-bracket taxpayers, and give them the option to forgo all or part of their monthly payment. ...
• Raise the payroll tax by 0.1% of wages every other year—half from withholding, half for the employer’s contribution—for 20 years, a total tax increase of 1%. ...
Social Security benefits are already taxed for high income recipients -- at least 85% of the benefits are taxed so that would be only a modest tax increase which would raise only a small amount of money. A rise in the FICA tax by 0.05%? That's hardly a token tax rise. No increase in the wage base. And all these cuts in benefits! That's what passes for a reasonable dialogue at Rupert Murdock's Wall Street Journal.
From Michael Hiltzik writing for the Los Angeles Times:
The army of perennial doomsayers about the financial condition of Social Security had to be a little crestfallen after the release of the program trustees’ annual report last week.
That’s because the report documented that the program’s condition had actually improved in the last year, if modestly.
More to the point, the trustees’ data underscored that the cost of maintaining Social Security benefits at current levels, or even expanding and improving them, is well within the capacity of the American economy at least to the end of this century, which is as far as the trustees looked. ...
This year, the trustees reckon, Social Security’s combined costs for retirees, those with disabilities and their dependents will come to about 4.98% of an economy valued at $25 trillion. Through the turn of the century, that percentage will peak at 6.18% in 2075, when GDP is estimated to be more than $208 trillion, then will fall to about 5.87% in 2100, when GDP is projected to be $574.5 trillion.
Is this “unaffordable”? Not by international standards. Some of our closest allies in the developed world spend much more than we do on public retirement and disability programs — Japan spends 10.5% of its GDP, France 15.3% and Germany 12.5%. ...
That’s the point of efforts in Congress to expand and increase Social Security benefits, as would be done by a bill dubbed Social Security 2100, introduced by Rep. John B. Larson and Sen. Richard Blumenthal, both Democrats from Connecticut.
The measure would increase benefits across the board by an average 2%, set a minimum retirement benefit at 25% above the federal poverty line and extend dependent benefits for students up to age 26 (the current cutoff is 19), among other improvements.
On the revenue side, the bill would eliminate, over time, the existing cap on wages subject to tax, which is $147,000 this year — a level that in effect gives the 1% a pass on their obligation to support this universal system. (The payroll tax is 12.4% up to that wage cap, shared equally by employer and employee.) ...
More could be done to provide additional revenue for Social Security. One option would be to make all income, not just wages, subject to the Social Security tax, thus bringing the capital gains and dividends that make up a disproportionate share of income for the wealthiest Americans into the revenue stream.
That option doesn’t get talked about much, perhaps because politicians know that the wealthy would go to the mat to protect their capital gains from higher taxes. ...
I'm with Hiltzik. The idea that we can't afford an increase in Social Security benefits is nuts. There is no justification for even talking about benefit cuts, especially a plan that talks of huge benefits cuts coupled with the tiniest increase in taxes for the wealthy.
Simply eliminating the cap on earnings, not just on those earning over $400,000 would eliminate about 90% of any projected shortfall for the next 75 years. A few other tweets like adjusting the benefit formula so that the highest bend point for benefits i is 10% not 15% or creating a higher category with 5% would probably take care of the rest. Increasing the tax by .2 or .2 percent for employees and employers could fund increased benefits at the bottom with a higher minimum benefit and an across the board increase.
ReplyDeleteThere are a whole lot of choices. The Wall Street Journal focuses almost entirely on benefit cuts while the 2100 Act increase revenues. Either works, as would a blend of the two. My choice is to increase benefits by essentially taxing teh wealthy at the same rate as everyone else by eliminating the cap asap.
What is not acceptable is doing nothing. Something will be done but the longer we wait, the more onerous the change will be.
The problem with taxing all income is this, like most things they say will tax only the wealthy will hit small business owners hard. Most small business owners are not wealthy. Everytime someone says they are going to tax the rich, the taxes tend to come down harder on the middle class. That's why the "tax the rich" mantra always scares me.
ReplyDeleteEliminating the cap would raise money but some rich will just be paid in ways that aren't subject to SSA taxes. The rich already pay the vast majority of taxes.
ReplyDeleteThe trouble with a minimum amount is that Joe may work barely enough to be insured for a paltry amount, knowing he'll still get the minimum. Steve may work many years at low wages, making way more than Joe but they end up with the same amount. We already have SSI for elderly with low incomes.
Raise the OAS part of the tax to 7%. The total with medicare would be 8.45%.
I have always said they would raise my retirement age again, get rid of early retirement, and I expect them to move Medicare eligibility plus raise my taxes.
ReplyDeleteI still dont think I will get all my benefits. 50 years of can kicking by a certain group is coming due, and like always, they will expect someone else to carry the burden.
4:02 Please elaborate on who you are referring to as a certain group. Unless you are referring to congress as a whole, you are just wrong. It's always been the third rail of politics for a reason because neither side is willing to compromise for the better of the program and the country. Pretending that this is a Republican or Democrat problem or a liberal or conservative problem is lazy and simply untrue.
ReplyDeleteI laugh at the fact that Rudy Boschwitz wrote this piece for the Wall Street Journal. He has to be 100 years old and very well off. He has no idea how much people rely on Social Security for retirement funds and for disability. He lives in a very protected world.
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