Social Security: It’s there for all of us

By Marilyn Watkins

For 75 years, Social Security has been the foundation of economic security for Americans. It represents the best of American values, rewarding hard work, looking out for family and community, and honoring the contributions retirees have made to our current prosperity.

Despite its success and overwhelming popularity, the program faces two serious threats – but not the ones mainstream media have focused on.

The first threat is that the majority of young people are convinced they’ll never get Social Security. A recent USA Today/Gallup poll found that three fourths of those 18 to 34 believe they won’t receive Social Security when they retire. Even 56% of retirees believe their benefits will be cut. That level of resigned skepticism means voters are less likely to demand that Congress protect and strengthen the program.

The second threat stems from the deficit reduction frenzy. President Obama’s commission to consider ways to reduce the federal deficit is to make recommendations to Congress by December 1. Congressional leadership has agreed to an up or down vote. Prominent among the “solutions” under consideration are cuts to future Social Security benefits.

But Social Security has run surpluses for decades. It is in no way responsible for the federal deficit, nor does it face any looming crisis that needs to be “fixed.” Let’s take a look at the facts.

Social Security is not only the main source of income for seniors. Young Americans and their children are protected by its disability and survivors insurance if the unthinkable happens. In 2009, 3.4 million children through age 19 received Social Security benefits directly, and more than 3 million children lived in households with a beneficiary.

Social Security is also solidly financed. Its resources can continue to provide growing benefits clear through the end of the century.

When Social Security did face a financing problem during the 1970s and early 1980s, Congress raised benefits, instituted automatic COLAs, and raised payroll taxes both to finance those improvements and to build up the Trust Fund for the retirement of the baby boomers. The Trust Fund has now grown to $2.5 trillion.

When we deposit money in the bank, we receive interest because the bank loans out those funds for investments in homes and businesses. So, too, the federal government “invests” the Trust Fund in college loans, Head Start, transportation projects, basic research, and public structures that benefit all Americans.

Such investments make the future workforce more productive and boost economic growth. In the long run this means more revenue for Social Security. Loans from Social Security also enable the federal government to borrow less from individuals and foreign governments, and to keep personal income and corporate taxes low.

Every year, the Social Security Trustees project the program’s finances 75 years into the future. Doing so requires making numerous assumptions about economic growth, productivity, wages, fertility, longevity, immigration rates, and other factors. Three scenarios are created.

Under the assumptions of the “low cost” scenario, the Trust Fund will never be depleted. Under the “Intermediate” scenario, the Fund is projected to continue growing until 2025. Then Social Security will draw down the Fund as planned. In 2037 the assets of the Trust Fund will be depleted and payroll taxes alone will cover 78% of benefits under the current formula.

By that time everyone will be richer because of continuing gains in productivity. Average wages after accounting for inflation are expected to rise from $43,000 in 2010 to $60,000 in 2037. Typical retirement benefits will increase from $17,676 to $24,700 annually. If the Trust Fund is exhausted in 2037, payroll taxes alone would cover benefits averaging about $1,600 more than today’s typical retiree receives after inflation.

If the Fund does run out, Congress could eliminate the arbitrary cap on income subject to payroll taxes (currently $106,800) or adopt some other strategy to maintain the promised level of benefits.

The loudest advocates for reducing Social Security benefits seem to be saying, “To avoid having to cut benefits in the future, we should cut benefits for future recipients now.” What cutting future benefits now really does is allow tax rates on the wealthiest to remain at historic lows.

The Bush tax cuts set the federal income tax on the wealthiest lower than at any point since 1931, except for the years from 1988 to 1992. The Congressional Budget Office says those tax cuts have already increased the deficit by $1.6 trillion, and if extended, will keep future federal revenues well below anticipated expenses – including the cost of making good on the Social Security Trust Fund.

Some argue we must cut benefits because people are living longer. But raising the retirement age or otherwise cutting benefits is both unnecessary and certain to cause hardship. Ongoing increases in productivity mean workers in coming decades will have higher standards of living and be able to support more retirees – just as today a few farmers can feed many urbanites. And people who are in physically demanding jobs or who face early disability often cannot work even to age 65, let alone to 70.

Rather than debating cuts, we should focus on ways to increase benefits for those who are struggling. People of color and women are especially likely to be poor or near poor in their later years. Both groups earn far less than white men and have less access to pensions. Women also live five years longer than men on average, and take more time out of the labor force for family care.

Social Security could be strengthened by:
• Increasing benefits for the lowest income earners;
• Increasing benefits for a surviving spouse to 75% of the couple’s pre-death benefit;
• Providing Family Care Credits; and
• Treating state-recognized same-sex couples and their families equally with heterosexual couples.

A well-orchestrated and lavishly-funded misinformation campaign by Social Security’s opponents, echoed by opportunistic politicians and rarely examined by the media, has convinced most Americans that Social Security is going bankrupt. A proactive campaign of positive reforms is the best way to reach the public with the truth.

Social Security is more important now than ever. Traditional pensions have all but disappeared. Assets have evaporated. Half the workforce has no retirement plan other than Social Security.

We can never predict who will become disabled, who will die young leaving behind dependent children, or who will live to be 100. But we do know that every year a certain percentage of Americans face these challenges.

Social Security is there for the lucky and the unlucky. It is there for all of us. It will continue to be there only if we fight to protect it.

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