Social Security must be fair for everyone, not just retirees

A version of this post originally appeared on The Washington Post. social_security_cards_rectangle2

+What should the next president do to make Social Security more sustainable?

No one should assess Social Security policy in isolation. What is fair in Social Security must relate to what is fair for the national budget as a whole.

Congressional Budget Office projections indicate that by 2026 we’ll be 21 percent richer, and that tax revenues will rise at a slightly higher rate. That means we stand before an ocean of opportunity. But of the expected $850 billion in additional real revenues, about 150 percent (or about $1.3 trillion) is committed entirely to increasingly expensive payments to Social Security, health care and interest on the debt. And as a result of these commitments, almost anything that represents investment — in our children, infrastructure or the basic functions of government — takes it on the chin.

[The problem with Social Security lies in its history] 

Even as revenues grow, the number of workers available to pay for Social Security benefits is falling rapidly, meaning that either benefits must be cut, taxes increased, or both. Every delay puts more of the cost on the young.

Social Security maintains a design built around an economy and family structure of the past. People aged 65 now live about six years longer and retire even earlier than they did in 1940 when the system first paid benefits. That means families like Clinton’s, Trump’s and mine will be getting hundreds of thousands of dollars more in lifetime benefits than they would have when the system was first created, while many future elderly will still be left in poverty.

So what must be done? Slow down and reorient the growth in benefits scheduled for future retirees. A typical couple retiring today gets more than $1 million in lifetime Social Security and Medicare benefits; millennials are unrealistically scheduled to get $2 million.  That growth can be slowed without being stopped and shifted more toward those who are truly old with low- to moderate-incomes. While Social Security’s long-recognized shortfalls inevitably mean someone must pay, those with above-median incomes are the ones with the money.

Still, no Social Security benefits need to be cut for those currently retired. To do better for those elderly with median or lower lifetime incomes, we should raise minimum benefits and give credit for raising children. We should also fix absurd rules around spousal and survivor benefits and other sources of inequity.

[Social Security needs to return to its anti-poverty roots] 

The current system discourages work in late-middle age, something that is no longer easily affordable and which reduces economic growth, personal income and tax revenues. Congress should reduce Social Security’s natural disincentives for work both by adjusting the retirement age as we live longer and saving a larger share of lifetime benefits for later ages, when health needs rise and work is less possible. As lifespan increases, Social Security now promises a typical newly retired couple aged 62 an average of more than 28 years of benefits (today, one of them is likely to make it to 90 years of age). That’s more than enough; there are greater societal needs than the desire for more retirement years.

Finally, the tax issue. While some broadening of the Social Security tax base is possible, government needs to concentrate on raising revenue for high priorities apart from Social Security: our growing national debt, and vital investments such as education, infrastructure and support for working families. Campaigns are about giveaways, but true reform requires looking at what must be done and how, whether we want to or not.

Photo courtesy of The Social Security Administration, Public Domain.

6 Comments on “Social Security must be fair for everyone, not just retirees”

  1. Chip Watkins says:

    This post is interesting, but doesn’t describe the proposed changes specifically enough. E.g., raise the retirement age to 70; reduce or cap benefits for taxpayers with AGI of more than $200,000.

  2. Diana Kahlenberg says:

    You are absolutely right that government is encouraging able bodied people to drop out of the work force. I haven’t heard anyone else make this point. I wish you would carry this message to the general public through television appearances. It’s not only bad financially for society, it’s also bad physically, mentally and in other ways for most people. I’ll be 80 in a few weeks and I’m still working. It keeps me mentally alert, physically fit and maintains self esteem. Developers and retirement states spend millions selling the retirement idea. No one is selling the upside of working.

  3. Jeff says:

    I would like to see a division of the financing of actuarially sound retirement and insurance benefits from the redistributive elements of Social Security. By doing so, I’d expect the redistributive elements to be subject to useful scrutiny, viewing them in the context of other social welfare spending. I don’t see why social welfare through done through the Social Security system should be financed by a flat tax on just wage income and then only up to a certain point or why certain government employees should be exempted from paying the system’s taxes on their wages.

  4. Shaza Ahmef says:

    My name is shaza I received social security disbity income but it’s 2 low to pay even my rent I was working 2 job full time Iam only get Now 758 dollers iam now suffer to get place that mon is not enough And Idnot know why it should be more than that I want fair distion

  5. Michael Bindner says:

    The answer to the the problem of higher net interest is obvious: higher taxes on the economic strata of those who receive it, which includes the wealthy and the upper middle class who can afford to save.

    Social Security does need more revenue, with lower benefits for the rich and better benefits for poorer retirees. We can do that by lowering the income cap on the employee contribution while crediting the employer contribution equally, raising credits enough to also put in an income floor so that we can end the EITC and raise the Child Tax Credit (which is the best way to expand the economy). The advanced version of reform has personal retirement accounts holding employer voting stock, which would remove the public liability for retirement savings while ending the power of capitalists.

  6. I agree with your suggestion. I think where people get nervous is when suggestions are made about cuts to those currently on benefits. I agree that something must be done to make it more sustainable and fair, however, when you suggest that people who are about to retire should get cuts in benefits they are expecting, or those who are on benefits who have clearly earned it, then that’s where the issue comes in.

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