US could increase, not cut, Social Security benefits

The army of eternal pessimists about the financial situation of Social Security must have been a little discouraged after the publication of the annual report of the administrators of the program last week.

This is because the report documented that the state of the program had actually improved over the past year, albeit modestly.

Specifically, the administrators’ data underscored that the cost of maintaining Social Security benefits at current levels, or even expanding and improving them, is well within the reach of the U.S. economy at least until the end. of this century, which is also as far as the trustees were looking.

To be more specific, the trustees project that the depletion of Social Security trust funds would occur in 2035, compared to 2034, as calculated in last year’s report.

At this point, enough money would come in, mostly from payroll taxes, to cover 80% of benefits then projected, up from 78% projected a year ago.

This improvement is partly due to the surprisingly strong economic rebound from the brief pandemic-related downturn in 2020.

This slight improvement has not stopped news agencies and budget deficit hawks from sounding their usual alarm bells. The Washington Post’s editorial board has warned of “the Social Security and Medicare disaster” that is looming.

The Committee for a Responsible Federal Budget, a hive of budget hawks, warned that “the latest Social Security projections show the program is rapidly heading toward insolvency.”

The committee has always been closely tied to a foundation created by billionaire investor Peter G. Peterson, whose hostility to Social Security was synonymous.

Perhaps the most important numbers in the 268-page Trustees’ Report are those in an appendix on page 218. These numbers project the cost of Social Security as a percentage of gross domestic product, i.e. as a percentage of the US economy. .

They show that the program is eminently affordable – indeed, that there will be plenty of room in the economy, thanks to its continued growth, to expand the program and increase benefits.

This year, administrators estimate that the combined Social Security costs for retirees, the disabled and their dependents will reach about 4.98 percent of an estimated $25 trillion saving. At the turn of the century, this percentage will peak at 6.18% in 2075, when GDP is estimated to be over $208 trillion, and then drop to around 5.87% in 2100, when GDP is expected to reach $574.5 trillion. dollars.

Is it “unaffordable”? Not by international standards. Some of our closest allies in the developed world spend far more on public pension and disability programs than we do – Japan spends 10.5% of its GDP, France 15.3% and Germany 12, 5%.

Is spending up to 6.18% of GDP unsustainable? Given that the United States has spent far more on unproductive programs in our recent history, this does not appear to be the case.

Military spending reached 9.4% of GDP in 1967, during the Vietnam War, without crying that the country was bankrupt. Defense still consumed 6.8% of GDP in 1982, seven years after the end of that war, and still accounts for around 3.7% of GDP today.

Either way, defense spending is treated in Washington as sacrosanct, while support for the elderly, disabled and their families is a threat to national wealth.

The idea that we can’t afford Social Security and Medicare is a shibboleth of conservatives, Republicans, and their anti-tax voters.

In 2018, then-Senate Majority Leader Mitch McConnell, R-Kentucky, identified “entitlements” — that’s Washington’s parlance for Social Security, Medicare and Medicaid — as “the real drivers debt” and called for their adjustment. “to the demography of the future.”

Translation: He wanted to cut benefits.

A year later, Sen. Joni Ernst, R-Iowa, said members of Congress should hold Social Security discussions “behind closed doors … so we don’t get scrutinized by this group or the other.” She meant “voters.” And yes, legislation is always easier when it takes place out of public view.

Then there’s Sen. Rick Scott, R-Florida, whose “Rescue America” ​​manifesto calls for the abolition of all federal programs, including Social Security, after five years. His plan calls for requiring Congress to “issue a report each year telling the public what it intends to do when Social Security and Medicare fail.” Since these programs can only fail if Congress colluded to make it happen, this is a curiously tautological mandate.

Scott, by the way, is the wealthiest member of the Senate, with an estimated personal fortune as of 2020 of nearly $260 million.

“This discussion is really about politics and values, not affordability,” said Eric Kingson, president and co-founder of advocacy group Social Security Works.

This point is lost on too many commentators in the media. The editorial board of The Washington Post bolstered its alarmist headline with the ridiculous claim that “the vast expansion of spending on the elderly” planned for Social Security and Medicare “would drain the government’s ability to spend on education, infrastructure, anti-poverty programs and other investments in working-age children and adults.

The Post repeated the claim, without examining it, that “any plausible future settlement would require a combination of modest benefit adjustments and tax hikes.” (What is a “benefit adjustment”? If editorialists are talking about benefit cuts, they should say so. This is how conservative attacks on the welfare of ordinary Americans suddenly become “plausible.” .

McConnell, as it happened, had things backwards when he suggested that “future demographics” justified cutting benefits. The demographics of the future pointed to increased economic inequality, making Social Security, Medicare, and Medicare more important to the average American, not less.

That’s the goal of congressional efforts to expand and increase Social Security benefits, such as a bill called Social Security 2100, introduced by Rep. John B. Larson and Sen. Richard Blumenthal, both Connecticut Democrats. .

The measure would increase benefits at all levels by an average of 2%, set a minimum retirement benefit at 25% above the federal poverty level, and extend dependent benefits to students up to age 26 (the current threshold is 19), among other improvements.

On the revenue side, the bill would, over time, eliminate the existing cap on wages subject to tax, which is $147,000 this year — a level that effectively gives the 1% a free pass. on its obligation to support this universal system. (Payroll tax is 12.4% up to this salary cap, shared equally by employer and employee.)

More could be done to provide additional income for Social Security. One option would be to subject all income, not just wages, to Social Security tax, thereby bringing the capital gains and dividends that make up a disproportionate share of the income of the wealthiest Americans into the income stream.

This option isn’t talked about much, perhaps because politicians know the wealthy would go all out to protect their capital gains from higher taxes.

What is troubling about discussions of the future of Social Security in recent years is the emerging assumption that doing something about the financial state of the program requires a combination of higher incomes and reductions in benefits. Although the first is imperative, the last option should be taken off the table.

The most misleading claim from those advocating for fixes is that they must be done now because waiting will only make the required reforms tougher.

It makes absolutely no sense. Making the program fully solvent for the next 75 years, the CRFB says, would require a payroll tax increase of 3.24 percentage points today, but 4.07 percentage points if delayed until later. in 2035. the board today, but 25% if postponed to 2035.

It means depriving workers of more than a decade of benefits or charging them more than a decade of higher taxes, just to make the ultimate changes more politically palatable. Workers earn nothing in these scenarios. It should be obvious that these are “fixes” for social security in the same sense as one “fixes” a cat or the gangsters “fixes” a saddle pigeon – the improvements are not felt by targets, that’s for sure.

There are good reasons to consolidate the financial position of social security. They grow stronger every day as the wealth of the 1% continues to outstrip the income of ordinary families and household resources fall even further short of a sustainable and comfortable retirement.

Social Security is the most successful program in American history, and surely the most popular.

“Part of the reason this program should be understood as a public service and a public good is that it’s one of the few things that we all pretty much agree on, and we greatly need today,” Kingson told me. “The calm that emerges from this year’s trustees’ report reminds us that we all have a stake in this system and that it is working well.”

Michael Hiltzik is a columnist for the Los Angeles Times.

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