Taming Social Security?
While enjoying some spring training baseball this week, I’ve had interesting conversations with my fellow fans in the stands. A number of them are approaching retirement, and when they learn that I teach about health care and aging, the first thing they want to know is, “Will I have Social Security?” This question weighs heavily on those approaching retirement, especially those whose IRAs plummeted in value at the hands of wall street brokers. The women I speak to are especially concerned because, like it or not, most of them will outlive their husbands, not to mention their husbands’ pensions.
They are also following the budget fight in Washington, and ask me if it’s true that social security and Medicare benefits need to be cut. To be sure, the Social Security trust fund faces tough choices: we are approaching the social security tipping point – as the ratio of contributors to beneficiaries steadily heads downward. Unless income and expenditures change, the Social Security fund is projected to be insolvent by 2037. While not an immediate emergency, this is a situation that needs to be addressed thoughtfully in order to keep Social Security viable for generations to come.
But House Speaker John Boehner would have us believe that it is an emergency. Despite the fact that over 75% of Americans in a recent poll oppose cuts to Social Security, he argues that they simply don’t understand the facts. In a recent interview with the Wall Street Journal, he argues, “People in Washington assume that Americans understand how big the problem is, but most Americans don’t have a clue… Once they understand how big the problem is, I think people will be more receptive to what the possible solutions may be.”
Rep. Boehner wants Americans to believe that we are trapped in a burning building and that cuts to our entitlement programs are the only buckets in our brigade. If Americans only knew the facts, we would agree with him about raising the retirement age to 70, introducing means-testing for benefit recipients, and cutting cost-of-living increases. Sadly, Rep. Boehner and his colleagues seem to prefer frightening citizens by framing the problem as either accepting cuts or losing the program altogether.
Rep. Boehner’s proposal presents a classic example of Hobson’s choice – a choice that is no choice at all. There are other options – none of which seem to be on the bargaining table at the moment. Recently Robert Reich did the math and found that raising the cap on the 7.5% social security income tax from $106,800 to $180,000 would solve the insolvency problem for the foreseeable future. My seatmates at the baseball game didn’t even know that Social Security taxes HAD a cap. When I explained it to them, they, like two-thirds of Americans surveyed in a 2010 poll, argued that there should be NO cap, not just a raised cap. Similarly, when people learn that terminating the Bush tax cuts to the top 2% of earners would also make Social Security solvent, most argue in favor of raising taxes. However, most polls keep Americans “clueless” by framing any tax increase as affecting all taxpayers equally and not directly asking Americans what they think of taxing the rich.
Social Security is the most popular entitlement in America, even though it is largely based on regressive taxation. As a percentage of total income, the bottom 50% of earners pay more into social security than do the top 50%. The bottom 50% of earners also rely more heavily on Social Security, lacking significant retirement savings, pensions, or other investments.
My conversations at the ballpark were enlightening, for me and for my fellow fans. I learned that many people facing retirement don’t know how social security is funded and they are only aware of solutions to the fund’s insolvency that Speaker Boehner and his Republican friends offer. When they hear about other solutions, like “clueless Americans” everywhere, they argue for raising or abolishing the cap, or for abolishing tax cuts for the rich? Clueless? No. Misinformed. Deliberately.