Ever since the Roosevelt Administration, when right-wingers claimed that Social Security was a fake and would never pay anyone a dime, Republicans and Democrats alike have prophesied its doom. Bill Clinton wanted to cut benefits, raise the retirement age, and partially privatize the system. Even Barack Obama, as part of a larger budget deal with congressional Republicans, suggested cutting benefits and raising the retirement age to 69. Fortunately, the deal broke down.
Social Security has well over $2 trillion in reserves, and operates far more efficiently than private retirement plans. (Administrative costs of as a percent of benefits in the Social Security system are 0.6% compared to between 1% and 2% for private annuities.) Nonetheless, it projects that the reserves will be used up by 2035.
That doesn’t mean Social Security is broke. It has regular tax and interest income, which if nothing is done, would still pay 80% of current benefits. The shortfall is largely a result of people living longer and a declining birth rate. Rising inflation and the loss of better-paying middle class jobs are also part of the problem. It is unfortunate that the Democrats didn’t solve this while they had control of both houses.
Much More Than a Pension Plan
Until they need it, many people, especially younger ones, don’t realize that Social Security is more than a pension. It is also disability insurance and a life insurance policy to benefit widow(er)s and children. For a young worker with average earnings, a spouse, and two children, that’s equivalent to a life insurance policy with a face value of nearly $800,000 in 2020, according to Social Security’s actuaries.
Social Security will be most peoples’ only source of guaranteed retirement income that is not subject to investment risk or financial market fluctuations.
Once someone starts receiving Social Security, their benefits increase to keep pace with inflation, helping to ensure that people do not fall into poverty as they age. In contrast, most private pensions and annuities are not adjusted (or are only partly adjusted for inflation.)
Over 65 million people, or more than one in every six U.S. residents, collected Social Security benefits in January 2022. While older adults make up about four in five beneficiaries, another one-fifth of beneficiaries received Social Security Disability Insurance (SSDI) or were young survivors of deceased workers.
The Warren-Sanders Plan to Strengthen Social Security
Senators Elizabeth Warren and Bernie Sanders have introduced the Social Security Expansion Act, which not only makes Social Security solvent for the next 75 years, but also increases benefits, especially for lower-income workers and current retirees. For decades, Democrats and Republicans alike have said that saving Social Security would require benefit cuts, yet this legislation expands benefits.
The Chief Actuary of the Social Security Administration produced a detailed twenty-five page analysis of the bill and said, “We estimate that enactment of these provisions would extend the ability of the OASDI program to pay scheduled benefits in full and on time throughout the 75-year projection period.” (See chart above.)
Here are the bill’s highlights:
- Raise the Payroll Tax Cap. The Social Security payroll tax is capped so that millionaires and billionaires pay exactly the same tax as a person making $160,200 a year. No one pays Social Security tax on any income above that $160,200 figure. The Warren-Sanders bill will gradually eliminate the cap until all of a person’s salary is taxed. They calculate that 93% of households will not see any increase.
- Tax Wealth, not Just Wages. Paychecks are taxed for Social Security but investment income isn’t. For individuals making more than $200,000, there will be a 12.4% tax on investment income. This percentage is the same as the combined employee/employer payroll tax.
- Increase Benefits. The Act will give all retirees a raise of $2,400. Although the Labor Department has a Consumer Price Index for the Elderly, which gives more weight to health care and housing, it isn’t used to determine Social Security COLA adjustments. Under the Act, it will be used instead of the more common index for all workers. This is expected to bring larger adjustments.
- Raise the Minimum Benefit. A person living on the Social Security Special Minimum Benefit for low-wage workers is even poorer than poor, 16% below the poverty line, which in 2023 is $14,580 for a single person. The Act would raise the Minimum Benefit to 125% above the poverty line.
The Warren-Sanders Bill would bring Social Security a little closer to the world average benefits. Many Americans think that we have the best retirement benefits in the world. The truth is that, rich as the United States is, our Social Security benefits rank below Latvia. If a small country like Latvia can do better, why can’t we?
Then What’s the Problem?
In the last weeks, millions of French citizens have been demonstrating against raising the retirement age from 64 to 65, with over 500 recent arrests in Paris alone. Here in the United States, the retirement age went from 66 to 67 with barely a peep from anyone. The Republican Study Committee plan calls for gradually raising the retirement age to 70.
So, if making the rich pay their fair share of taxes can bring Social Security solvency for the next 75 years and increase benefits, why isn’t there more enthusiasm for doing it? Well, of course, the rich don’t like it, and as we know, the rich have their ways. The bigger problem is that everyone else has been so deceived and misinformed about the future of the system that too few people believe they will benefit from it no matter what.
In a 2021 Harris Poll survey of 1,853 people, weighted to reflect the U.S. population as a whole, 47% agreed with the statement, “I will not get a dime of the Social Security benefits I have earned.” A Pew Research report found that 84% thought they would get either less benefits than now, or none.
The Warren-Sanders bill is unlikely to move in this Congress, and unfortunately, although it is actually a winning issue, many Democrats will be afraid to talk about increasing Social Security benefits during the 2024 election period.
Abraham Lincoln once said, “Public sentiment is everything. With public sentiment, nothing can fail. Without it, nothing can succeed.”
A recent Data for Progress Poll of 1,335 likely voters showed that ”82% of voters want Congress to raise Social Security benefits across the board and that 83% of Democrats, 73% of independents, and 73% of Republicans want to strengthen Social Security and pay for it by making the wealthy contribute their fair share.” So there you have it, 82% want higher benefits and 84% percent believe they will get less or no benefits when they retire. Our job is to tell the truth about Social Security wherever we can, to the voters and to our elected officials. We need to move people past their fear and pessimism to demand and vote for what they really want.
A longer version of this article appeared in the newsletter of the Three Parks Independent Democrats in New York City.