FRA Setbacks, Means Testing, and the Inevitability of Tax Increases–One Viewpoint - morningstar.com
In a follow-on to last week’s GOP Presidential Candidate Debate, and after considering suggestions put forth by candidates Nikki Haley and Chris Christie regarding adjustments to the full retirement age and incorporating additional means testing into the benefit formulas, financial writer Brett Arends provides an assessment of how these suggestions–by themselves–tend to fall short of the goal line on avoiding Social Security’s forecasted 2034 insolvency.
On the full retirement age question, his post (carried on morningstar.com) cites the fallacy of imposing the change on people in their “40s, 30s, or even 20s,” noting that the lag between setting the age and realizing the change in program revenue will not provide relief in time to avoid the looming catastrophe. On the means-testing isssue, he cites the dearth of a sufficient number of “very rich” earners to make enough of a difference in the larger problem. Then, too, there’s the philosophical angle that means testing in fact alters the very basis of Social Security as an earned retirement benefit program, leaning it further toward a form of welfare. (By the way, keep in mind that Social Security’s very formulas, with their progressive design, are already a form of de facto means testing.)
The Arends post, which you can access here, puts a fine point on the analysis by ending with this statement: “Reality? One way or another, taxes are going to go up.”
While it’s easy to poke holes in the suggestions made by these two candidates, it should be viewed as a positive sign that the Social Security dilemma may be getting some attention. Many other candidates have avoided comment on the problem, in effect pledging to not touch Social Security–a position that tacitly endorses kicking the can further down the road toward a catastrophe less than ten years from today.
What’s needed now, while there is still time to make changes with as little disruption as possible, is meaningful dialog on how to right the ship. As an example of the leading thoughts on reforming Social Security, the Association of Mature American Citizens (AMAC, Inc.) believes Social Security must be preserved and modernized. This can be achieved without tax increases by slight modifications to cost-of-living adjustments and payments to high-income beneficiaries plus gradually increasing the full (but not early) retirement age. AMAC Action, AMAC’s advocacy arm, supports an increase in the threshold where benefits are taxed and then indexing for inflation, and calls for eliminating the reduction in people’s benefits for those choosing to work before full retirement age. 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.