Can Social Security be saved?

Last year, the Republican Study Committee, the largest group of House Republicans, released a plan that called on lawmakers to gradually raise the Social Security eligibility age to 70 before indexing it to life expectancy, and proposed withholding payments to those who retired early and had earnings over a certain limit.

Congressional Republicans have expressed a new willingness to push for Medicare and Social Security spending cuts as part of budget negotiations with President Biden. They have floated the idea that all federal laws should be reauthorized every five years. That would include Social Security and Medicare. For either program to continue, Congress would have to vote to reenact both, an outcome that would be far from guaranteed. And even if Social Security and Medicare were reauthorized, opponents of these programs would have an opportunity to cut earned benefits every five years.

How important is Social Security to Adams County? At the end of 2021, more than 20 percent of Adams Countians – 26,345 people aged 65 or older – were receiving monthly benefits. There were 20,730 retirees, 1,851 of their survivors – widows/widowers/parents/children – and 3,050 disabled workers.

Social Security – officially Old-Age, Survivors, and Disability Insurance – was signed into law by President Roosevelt in 1935. During the Great Depression, more than half of senior citizens lived in poverty. Today, their poverty rate is below 10 percent. Social Security touches more people than almost any other federal program; approximately 60 million Americans are receiving retirement, disability, or survivors’ benefits.

But will there be enough money to pay the rising number of beneficiaries? The problem is simply demographics. Approximately 74 million Baby Boomers were born between 1946 and 1964. Some of the oldest of them began receiving partial benefits at age 62 in 2008. The youngest will reach their full retirement age, 67, in 2031. And those retirees are living longer. When Social Security was created, the average life expectancy for those already 65 years old was into their late 70s. Now, a man aged 65 can expect to live until age 82 on average, and a woman aged 65 can expect to live to age 85; about one in four of today’s 65-year-olds will live past the age of 90, and one in 10 will live past age 95.

Social Security is, and always has been, an inter-generational transfer of wealth. But as more and more Baby Boomers retire, there will be more beneficiaries receiving benefits from taxes being paid by fewer workers. Because the Baby Boomers have not produced enough children to replace themselves, the number of taxpaying workers will shrink. By 2033, there will be 2.1 workers for each beneficiary, compared with 2.8 today.

The Social Security trust fund that many Americans rely on for their retirement income will be able to continue to pay out full benefits until 2034, one year later than the U.S. Treasury Department estimated last year. If Congress fails to act by the time the main Social Security trust fund is depleted, it would automatically cause benefit checks for retirees to be reduced by about 20 percent across the board.

What are our choices for making Social Security viable 75 years into the future? One is to immediately cut benefits by 17 percent for both current and future beneficiaries. This would hurt current beneficiaries who have low incomes; nearly a third depend entirely on their Social Security checks. Middle-income workers with inadequate pensions or savings would also be hurt. We could cut the benefits only for people in, say, the top 75 percent of income. Another choice is to raise the retirement age for full benefits. While this may be okay for people in many occupations and/or in good health, those in very physical or taxing jobs – construction workers come to mind – may not be able to work the extra years.

Still another choice is to freeze the purchasing power of the benefits, essentially a cut in benefits. The function of Social Security is to replace a portion of a person’s earnings. As earnings and living standards have grown over time, so has the income Social Security provides. We could end the earnings-replacement function and cap the purchasing power of benefits paid to future beneficiaries at the current level. But as wages and living standards rise, Social Security benefits would support an ever-shrinking portion of our standard of living.

What about increasing payments into the trust fund? We could lift the earnings cap on FICA. Currently, just the first $117,000 of a person’s earnings is taxed, which means that only 83 percent of all the earnings in the country is taxed; the other 17 percent goes to people who earn $118,000 or more. The cap could be raised to an amount that would include 90 percent of all the earnings.

If it were up to me, I’d choose to lift the earnings cap.

Seniors should be wary of politicians who claim to support Social Security and Medicare, but also advocate policies that would undermine both programs.

Mark Berg is a community activist in Adams County and a proud Liberal. His email address is MABerg175@Comcast.net.