Social Security: The 1% Solution
Back in the early 2000s, when I received my annual Social Security projected earnings statements, they always included a warning at the bottom: without significant adjustments to the program’s revenues, it might only be able to pay 74 percent of projected benefits by 2034.
I never got overly concerned about that forecast, figuring Congress had three decades to do something. Surely they would, right?
Now we’re less than 15 years away and nothing much has happened. If anything, we’ve gone backwards.
For those who forgot, in 2011-12 Congress approved a temporary 2 percent reduction in Social Security withholdings as an economic stimulus measure.
That pales by comparison to President Trump’s recent executive order suspending these taxes the last four months of 2020 for anyone making less than $100,000.
Affecting the System
When I saw the news conference where the president proclaimed the cut “won’t affect Social Security,” I wondered: how exactly does depriving the system of millions in revenue not affect it?
Granted, in these COVID-affected recessionary times, the extra 6.2 percent that would otherwise go to Social Security will help middle- and lower-class taxpayers.
But there are two problems with this scenario:
1) If it becomes permanent, it will seriously damage the program.
2) If the temporary suspension doesn’t turn into a permanent one, the delay could wind up causing serious problems for anyone who spends the bonanza instead of sticking it in a savings account.
However, the point is Social Security needs more revenue, not less, no matter what the current state of the economy.
Some interpreted Trump’s move as a ploy to put a stake in Social Security’s heart by depriving it of funds.
Whether that is the case or not, there are some who remain constant critics of Social Security, labeling it a Ponzi scheme that is bound to collapse.
But I say: after 85 years it’s time to stop the sniping. We need to shore up Social Security before it is unable to pay adequate benefits, creating chaos and threatening the millions of people who rely it on for survival.
Instead of suspending payroll taxes, I think it would be better to boost them a modest 0.5 percent per person. Coupled with a matching 0.5 percent from employers, Social Security would gain an extra 1 percent.
Spreading that out over millions of taxpayers’ earnings starts to add up to some real money, which could well mean an end to the dire 2034 forecasts.
For that matter, I could see lifting the cap on earnings on which Social Security is due—this year set at just under $138,000. Just because someone makes more money, I’ve never understood why they should be able to (in effect) “opt out” of payroll taxes on the higher amount.
The point is we need to act now to boost the program’s revenue, not wait until Dec. 31, 2033, when some torch-carrying mobs descend on Washington, D.C., to scream for action.
If Congress does the sensible thing and moves to strengthen Social Security in the coming year, it will be much less painful now than in the future.