Social Security is a true government benefit, in the sense that the benefits paid out frequently exceed the amount of Social Security taxes paid in by the citizen. Here are the official FAQs.
This is the rare case of a huge government program that can be fixed with relatively minor pain to most American citizens, resulting in a huge political win for whichever legislature fixes it. Progressive legislators should be on this, right now, in a major way. Bills should be introduced, widely publicized, and debated. I doubt there is a single working-class person in America who wouldn’t support Social Security reform that meant they could stop worrying so much about retirement.
If the incoming administration focuses instead on punishing DJT’s past and present opponents, handing more fat government contracts to his billionaire sycophants, and stripping civil rights from minority Americans, they will prove to everyone (not just to progressives) that their agenda has nothing to do with making America great.
When Social Security was created in 1935, life expectancy was around 60 years and the full retirement age for benefits was 65. Note, life expectancy takes into account infant and child mortality. People who lived into adulthood could expect to live past 65, many collecting benefits for a decade or more even in the early years of the program.
Now, life expectancy in the US is around 77 years, but full retirement age has only risen to 67 (for everyone born 1960 or later). People who make it to 77 often live another 10 or more years.
The Social Security trust fund is expected to “run dry” in 2033; based on current income from Social Security taxes, that would produce a 21% drop in all benefits. Note, current income includes over $27 billion a year from taxes paid by undocumented immigrants, who don’t receive any pension benefits in the US and who also are threatened with a massive deportation effort by the incoming administration.
According to economist Alicia Munnell, a 3.5% increase in the payroll tax (currently 12.4%, half paid by the employee and half by the employer; the self-employed pay the full amount) would remove most of this funding insecurity. Obviously, that’s the first fix our legislators should implement.
The next (and even simpler) fix is to raise the wage cap. Currently, only wages up to $168,000 are subject to payroll tax. Raising that cap to $300,000 would make a huge difference – and this particular fix would be paid for by people who are already high earners, well able to save for retirement.
The average salary in the US is $65,000. It’s not easy to save anything on that.
The next logical step toward making this program sustainable is to increase full retirement age to 70 for everyone born 1965 or later (this includes me, by the way).
The maximum benefit is $3822/mo – but that rises to $4873/mo if you don’t retire until three years past “full retirement age.” Obviously, there’s a strong incentive to delay claiming benefits. Thus, a further logical step toward making this program sustainable is to cap the benefit at $3850/mo.*
The Social Security benefit is calculated in part on lifetime earnings. If you’ve worked and paid taxes, whether through payroll or by paying self-employment taxes, that’s considered for the purposes of qualifying for benefits. If you don’t earn income and pay taxes for a big chunk of your life, though, you may not be eligible for benefits. A nonworking spouse may be eligible for a survivor benefit when their working spouse dies. There are also some disability benefits under this program.
Providing a degree of income support for citizens who can’t work is the humane thing for any government to do. A modern, rich country like the US cannot justify ending or privatizing this program.
There’s currently no means testing for Social Security. If you’re a citizen and a taxpayer, you’re eligible. Once funding is stabilized (which should include an expedited path to citizenship for undocumented immigrants who are already working and paying taxes in the US), we should consider a statutory minimum benefit, provided to every citizen, regardless of earned income and taxes paid.
A one-bedroom apartment in the US costs an average of $1000/mo. Thus, one might say that a humane retirement or disability income support program would provide a minimum benefit of $1000/mo. The minimum benefit should not be taxed.
We should also look at a needs-based calculation. People who own multiple homes or have over $5 million in assets, for example, shouldn’t be receiving more than a minimum benefit. They don’t need it, plus people that rich tend to live longer, which means many less-wealthy working-class people are helping pay for luxurious retirements for a few high-income workers.
People who receive any other kind of retirement pension along with Social Security should pay tax on their pension income. I’d also increase the minimum capital gains tax from 0% to 2%; there is no good argument to be made for people who make money on investments instead of wages to pay zero when self-employed people pay all 12.4% of their “payroll” tax on income from their labor.
*A maximum benefit of $3850/mo is enough to pay for a two-bedroom apartment outside of our major cities, or enough to pay the carrying costs on a modest residence that someone owns.
The Housing Part of the Equation
I’d like to see the states (with or without federal help) build more multi-family housing. The first step to getting a decent job and paying taxes is to have an address (the second step is having a decent education, but more on that later). States could attract more employers if they provide enough housing for all the potential workers. More jobs equals more taxpayers. Low-income retirement housing for the many older citizens who prefer to live independently will also generate jobs, in construction, maintenance, landscaping, medical offices, site security, and more.
Housing of this sort could be constructed anywhere there’s a nonviable shopping center or motel. Boarding-house lodging is the most efficient use of space and could also address social isolation. Residents could have a private living space (bed-sit style with an ADA compliant bathroom and kitchenette) with access to private outdoor space, built around a shared large kitchen and gathering space, with shared laundry facilities.
A decent life shouldn’t be reserved to those who can work or those who are rich.