The army of longtime exterminators of the Social Security Administration’s financial well-being was left baffled a bit after the release of the program trustees’ annual report last week.
That’s because the report documented that the program’s status did indeed improve in the last year, if modestly.
Furthermore, the trustees data highlights that the costs of maintaining Social Security benefits at current levels, or even expanding and improving them, are well within the reach of the US economy. at least until the end of this century, which is as far as the trustees looked.
This discussion is really about politics and values, not about affordability.
– Eric Kingson, Social Security Works
More specifically, the trusts predict that the depletion of the Social Security trust fund will take place in 2035 – up from 2034 as calculated in last year’s report.
At that point, there will be enough money, mainly from payroll taxes, to cover 80% of subsequent scheduled benefits, up from a projected 78% a year ago.
Get the latest from Michael Hiltzik
Commentary on economics and more from a Pulitzer Prize winner.
You may occasionally receive promotional content from the Los Angeles Times.
This improvement was due in part to an unexpectedly strong economic recovery following a short-term pandemic-related downturn in 2020.
This small improvement hasn’t stopped news organizations and budget deficit hawks from broadcasting their usual warning. The Washington Post editorial board warned of a “Social Security and Medicare disaster” ahead.
The Committee on a Responsible Federal Budget, an organization of budget advocates, has warned that “the latest Social Security projections suggest that the program is rapidly approaching insolvency.” solvency”.
The committee has always been closely linked to a fund founded by billionaire investor Peter G. Peterson, whose hostility to Social Security is mere word of mouth.
The most important figures in the 268-page trustees’ report can be abbreviated in the appendix on page 218. These figures reflect Social Security costs as a percentage of gross national product. domestic – that is, the share of the US economy.
They show that the program is amazingly affordable – there is indeed plenty of room in the economy, thanks to continued growth, to expand the program and increase benefits.
This year, the commissioners calculate, the combined cost of Social Security for retirees, people with disabilities and their dependents will represent about 4.98% of a $25 trillion economy. la. Turning the century, that ratio will peak at 6.18% in 2075, when GDP is estimated at over $208 trillion, then decline to around 5.87% in 2100, when GDP is projected is 574.5 trillion USD.
Is this “inability to pay”? Not according to international standards. Some of our closest allies in the developed world spend more than we do on retirement and disability programs – Japan spends 10.5% of GDP, France 15.3% and Germany 12.5 %.
Spending as much as 6.18% of GDP is unsustainable? Given that the United States has spent more on ineffective programs in our recent history, that is unlikely to be the case.
Military spending reached 9.4% of GDP in 1967, during the Vietnam War, without sparking calls that the country was on the verge of bankruptcy. Defense still accounted for 6.8% of GDP in 1982, seven years after the war ended, and even today it accounts for about 3.7% of GDP.
Somehow, defense spending is seen as sacrosanct in Washington, while the support of seniors, people with disabilities, and their families is a threat to the nation’s wealth. .
The notion that we can’t afford Social Security and Medicare is an avoidance of conservatives, Republicans and their anti-tax constituencies.
In 2018, then-Senate Majority Leader Mitch McConnell (R-Ky.), identified “entitlements” — that is Washington’s way of talking about Social Security, Medicare, and Medicaid — as “dynamic true force of debt” and called for their adjustment “For the demographics of the future.”
Translation: He wants to cut benefits.
A year later, Senator Joni Ernst (R-Iowa) said that members of Congress should hold Social Security discussions “behind closed doors… so we don’t get caught up in this grouping.” or scrutinized by the other group.” What she meant was “voter.” And yes, legislation is always easier when it’s out of the public eye.
Then there was Senator Rick Scott (R-Fla.), whose “Save America” proclamation called for the cessation of all federal programs, including Social Security, after five years. His plan favors requiring Congress to “put out an annual report telling the public what they plan to do when Social Security and Medicare go bankrupt.” Since those programs can only go bankrupt if Congress agrees to do so, this is a curious research mandate.
By the way, Scott is the richest member of the Senate, with an estimated personal fortune in 2020 of nearly $260 million.
“This discussion is really about politics and values, not affordability,” said Eric Kingson, president and co-founder of advocacy group Social Security Works.
That point is lost on too many commentators in the media. The Washington Post’s editorial board bolstered its alarm headline with the silly assertion that the “major expansion of seniors’ spending” expected on Social Security and Medicare “will deplete government’s ability to spend on education, infrastructure, anti-poverty programs and other programs that invest in children and working-age adults. ”
The Post repeated the argument, without examining it, that “any future reasonable settlement would require some modest benefit adjustments and tax increases.” (“What is interest adjustment”? If editors want to cut benefits, they should. This is how conservative attacks on the welfare of ordinary Americans suddenly became “reasonable”.
McConnell, as it happens, takes things back when he implies that the “demographics of the future” justifies the reduction in benefits. Future demographics show increased economic inequality, which makes Social Security, Medicare, and Medicaid more important to the average American, not less.
That’s where Congress worked to expand and increase Social Security benefits, like the Social Security bill 2100, introduced by Rep. John B. Larson and Senator Richard Blumenthal , both Democrats from Connecticut.
This measure would increase benefits across the board by an average of 2%, set the minimum retirement benefit 25% above the federal poverty level, and expand dependent benefits for students up to age 26 (current limits). is 19), among other improvements.
On the revenue front, over time, the bill would eliminate the current limit on taxable wages, which is $147,000 this year — a level where, in effect, 1% would bypass their obligations in supporting this universal system. (The payroll tax is 12.4% up to that wage limit, divided equally between the employer and the employee.)
Much more can be done to provide additional revenue for Social Security. One option is to make all income, not just wages, subject to Social Security taxes, thus bringing capital gains and dividends that make up a disproportionate share of income for the richest Americans into the stream. turnover.
That option is not talked about much, perhaps because politicians know that the wealthy will go to great lengths to protect their capital gains from higher taxes.
What has been troubling in discussions about the future of Social Security in recent years has been the emerging assumption that doing something about the program’s fiscal health requires a combination of high revenue and cut benefits. Although the first option is mandatory, the second option is out of the question.
The most erroneous claim made by proponents of the corrections is that they must be done now because waiting will only make the required reforms more stringent.
This makes absolutely no sense. The CRFB asserts that making the program fully solvent enough over the next 75 years would require a 3.24 percentage point increase in payroll taxes today but 4.07 percentage points if delayed until 2035 The program could be fixed, by a 20% benefit cut. table today, but 25% if deferred to 2035.
That means stripping workers of benefits for more than a decade or charging them more than a decade in higher taxes, only to make the final changes more politically relevant. Workers gain nothing in those situations. It’s clear that these are “fixes” for Social Security in the same sense that one person “fixes” a cat or bandits “fix” a poop pigeon – the improvements are not felt. received by the goals, that’s for sure.
There are good reasons for reducing Social Security’s financial well-being. They get healthier every day as the wealth of the 1% continues to outstrip average family incomes and family resources fall further and further behind what is needed for a sustainable retirement. stable and comfortable.
Social Security is the most successful program in American history, and certainly the most popular. “Part of the reason this program needs to be understood as a public utility and a public good is that it is one of the few things we can all agree on, and we really need it today. today,” Kingson told me. “The calm coming from this year’s trustees report is a reminder that we all have a stake in this system and it works well.”
https://www.latimes.com/business/story/2022-06-07/social-security-trustees-report-that-the-u-s-is-rich-enough-to-expand-not-shrink-benefits Hiltzik: Social Security is as healthy as we want it to be