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Social Security: Financial Reality and Politics - Dollars and Sense
Those who focus on Social Security’s looming 2033 financial crisis know that there is a solution to the problem. The data are fairly easy to understand – Social Security must increase revenue while also reducing costs – to avoid an across-the-board reduction to everyone’s monthly benefit in the early 2030s. And it must do so soon.
That’s not a pretty picture or a pleasant outlook, because the benefit cut would likely be about 25% if the SS Trust Funds run dry. And that would spell disaster for many seniors (and others) who rely on Social Security to make ends meet. However, among all of the technical financial solutions proposed to fix Social Security’s funding issue, political considerations seem to wander aimlessly within the solvency discussion. Most politicians look at Social Security as “a third rail” which, if touched, would easily have an extremely severe outcome (e.g., not being reelected). As a result, Social Security reform seems to be inevitably hindered by political considerations and promises that “Social Security will not be touched.” Thus, as described in this insightful article by John Miller appearing at Dollars and Sense, it’s time to put the politics aside and focus on reforming Social Security. The article focuses especially on the “income dispersion” factor – revealing that far too much American income is exempt from Social Security payroll taxes. While solving that isn’t by itself a panacea, it would certainly be a very positive step in the right direction. Click here to read the Dollars and Sense article.
As an example of leading thinking on reforming Social Security, the Association of Mature American Citizens (AMAC, Inc.) believes Social Security must be preserved and modernized to serve future generations. AMAC’s position is that this can be achieved without payroll tax increases through relatively minor program modifications, including changes to the cost-of-living adjustment (COLA) process and modifications to the formulas for calculating initial benefits for higher-income beneficiaries. Changes to the age for maximizing benefits are included in AMAC’s position, along with (1) an increase in the thresholds where benefits are subject to income tax; (2) indexing of these thresholds annually to account for inflation; (3) changing the taxable maximum formula to address the unintended loss of revenue; (4) improving survivor benefits, (5) eliminating the reduction in benefits for those choosing to work before full retirement age; and (6) improving savings tools for future retirees, including a savings account that builds estate value. AMAC is resolute in its mission that Social Security be preserved for current and successive generations and has gotten the attention of lawmakers in D.C., meeting with many congressional offices and staff over the past decade. See AMAC’s proposal for Social Security reform here.