A new report from the National Academy of Social Insurance looks at a broad range of options for reducing Social Security's costs, increasing its revenues, and improving benefits. Here is the summary.
REPORT: Fixing Social Security: Adequate Benefits, Adequate Financing
Virginia P. Reno and Joni Lavery
The purpose of this report is to help analysts, policymakers, journalists, constituent organizations, and interested citizens consider how to bring Social Security into long-range balance in ways that address concerns about benefit adequacy. The report outlines approximately 30 options for putting Social Security's finances into 75-year balance and more than 10 ways to make Social Security more adequate for those who rely on it. All options have long-range cost estimates from Social Security actuaries.
Benefit adequacy options in the report target such financially vulnerable groups as:
- The oldest beneficiaries (over 85 years);
- Widowed spouses of low-earning couples;
- Low-paid workers generally;
- Workers with gaps in paid work due to childcare; and
- Students in college or vocational school who have lost parental support due to death or disability.
Other adequacy options would increase benefits across the board for current and future beneficiaries. Options to balance Social Security's future finances include:
- Lifting the cap (now $106,800) on the earnings from which workers and employers pay Social Security taxes;
- Broadening the base for Social Security taxes;
- Scheduling modest rate increases in the future when funds will be needed;
- Dedicating progressive taxes to pay part of Social Security's future cost; and
- Gradually lowering some future benefits.
The NASI project received support from the Ford Foundation's initiative on Economic Fairness and Opportunity and the Rockefeller Foundation's Campaign for American Workers.
View a webcast of the briefing releasing this report here.
"Fixing Social Security" is
"Fixing Social Security" is an irrational concept, because (1) it is only "broken" if one accepts the irrational premise that it must be fully funded via FICA SS (similar thinking to that which leads some to nonsensically think that Social Security contributes to our long-term fiscal imbalance only to the extent that a gap in FICA SS "funding" exists), and (2) it irrationally isolates Social Security from the rest of the budget as if it really were an island rather than merely part of the whole (overall revenues, overall spending, and overall deficits).
The problem we have, viewed rationally, is an OVERALL long-term fiscal imbalance, regardless of how much we spend on one program or another (e.g., Social Security), and regardless of the levels of projected revenues from particular taxes (e.g., FICA SS). To view Social Security as some isolated financial entity and focus on solving the problem of some "gap" or "insolvency" is like saying that the Education budget (just to pick a program that, like Social Security, is also a pay-as-you-go program funded by one generation for the benefit of another) is "broken" because there are zero dedicated revenues for it. Why don't people say that about the Education budget? Because Education is funded from the general fund. Just as we could fund any "gap" between Social Security spending and SS FICA revenues + "repayment" of the "trust funds" (which already will be a transfer from the general fund). Do people say that we must, now and in the coming decades, fully fund Medicare via Medicare FICA (plus premiums where applicable)? Will lightning strike us all dead otherwise -- i.e., with general fund revenues partially funding Medicare spending?
Again, what matters is the whole: projections of overall revenues, overall spending, and overall deficits (and of course, debt-to-GDP and GDP itself). That is the rational framework within which to decide how much we want to spend overall, how much on one program (e.g., Social Security) vs. another, how much we want to tax and in what ways to what respective degrees, and how much we want to borrow over time. Internal bookkeeping (e.g., balancing some particular program's dedicated tax revenues to its spending) is irrelevant.
If we want to spend more on Social Security than the amount of projected FICA SS revenues + "repayment" of the "trust funds", we obviously can do so with general fund revenues. Alternatively, if there were not Social Security "gap" at all, we could still improve our overall long-term fiscal imbalance by reducing projected Social Security spending. It's all part of the whole, and that would be the rational context for such decisions: Looking across ALL spending, ALL taxation and OVERALL deficits, is this much more of Benefit X worth this much more of Cost Y (or this much less of Benefit Y)?
Yeah, yeah, I know. The way things are currently structured is such and such. I'm just pointing out the utter, inherent irrationality of it.
Social Security Trust Fund
The rise in income inequality has caused a large amount of our total Adjusted Gross Income to excape the payroll tax.
In 1980 the top 10% of tax filers got 32.13% of the total AGI. Their share worked its way up until it was at 48.05% in 2007. The income level to be in the top 10% is high enough that the cap on SS tax earnings prevents the increase from being taxed. If this income had remained with the bottom 90% it would have been taxed.
Using an Excel spreadsheet I determined that at the end of 2007 the trust fund would have had 2 trillion dollars more if income distribution had remained as it was in 1980.
Also the gain of 15.92% of total AGI was not distributed very equally. The top 1% of tax filers got 90% of it.
A rising tide does not lift all boats and actually sinks a lot of things.
Here's a post and link to a
Here's a post and link to a CBO study which indicates that low-wage earners get three times the relative benefit as high-wage earners from Social Security :
http://socialsecurityhop.com/forums/other-social-security-issues/low-wag...