This is an interesting brief report on how to fix Social Security's projected revenue shortfall. The first major point we should remember is how successful Social Security has been at reducing poverty among older Americans: "Between 1959 and 2009, the poverty rate for Americans age 65 and older dropped from 35.2 to 8.9 percent."
Next, we must acknowledge that part of the "problem" with Social Security is that it is serving as an old-age pension for many recipients, instead of a buffer against poverty as originally intended. States the report: "Although the program was not designed to be the sole financial resource for retirees, in 2008 nearly a quarter relied on Social Security for 90 percent or more of their income." Obviously, this is not the system's fault.
Today SS is what it is, and American rely on it and want to keep it. Americans don't want it privatized. Nevertheless, after 2015 the system is projected to collect less than it pays out for the foreseeable future, so it must be fixed. There are 3 main fixes: 1) raise the cap on income subject to the payroll tax; 2) raise the retirement age; and/or 3) cut future benefits. The last one, in my opinion, is a non-starter because benefits already are not so big. (However, current retirees -- including mean, hypocritical welfare-receiving conservatives -- might support cutting the younger generation's benefits since it won't affect them.)
Regarding the payroll tax cap, the report states: "The share of earnings that falls under the taxable cap has declined from 90 to 84 percent over time as earnings have grown more unequal. Raising the taxable maximum to again cover 90 percent of earnings would reduce Social Security's 75-year deficit by more than a third."
Regarding raising the retirement age, the report states: "Increasing the full retirement age to 68 (for those born in 1960 or later) would eliminate over a quarter of Social Security's expected shortfall."
So, doing those two things could reduce SS's projected 75-year deficit by 60 percent.
Finally, as Republicans in the House talk about SS in the context of the fiscal deficit, let's remember: "Medicare and Medicaid are projected to rise rapidly from 5 percent of gross domestic product (GDP) in 2009 to about 10 percent in 2035. Social Security costs, in comparison ... are expected to go up from less than 5 percent to about 6 percent of GDP—not nearly as big a problem as ballooning health care costs or interest on the debt."
Congress hates to do hard things. Compared to cutting M&M, cutting SS is "easy," but let's not miss the big picture: those two programs are still the beasts devouring our tax dollars. If the teabaggers and fiscal conservatives are serious about the deficit and don't want to dance around the problem, they MUST confront M&M.
November 12, 2010 | The Urban Institute
URL: http://www.urban.org/uploadedpdf/412253-Social-Security-Solvency.pdf
URL: http://www.urban.org/uploadedpdf/412253-Social-Security-Solvency.pdf
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