Social Security is conservatively funded and managed. It has no borrowing power and cannot run into a deficit. To ensure that all benefits can be paid in full and on time, the Social Security Board of Trustees reports to Congress each year, projecting the program’s revenues and expenses over three-quarters of a century. This is a longer assessment period than private pensions or most other countries provide for their counterpart programs.
When such a long period is used, the projections sometimes show unexpected surpluses or deficits. Not surprisingly, Social Security administrators are reporting a manageable deficit in more than a decade. It should be closed by increasing dedicated Social Security revenues.
A widely mentioned and popular approach is to eliminate the income ceiling on which Social Security insurance contributions are assessed. Currently, most workers contribute to social security throughout the year. But the highest-paid workers stop contributing once their earnings hit the cap – $147,000 in 2022. Depending on how quickly the cap was removed and how much of the extra contributions are credited toward future benefits, the Eliminating it would make up the shortfall considerably.
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As an example of this approach, Social Security 2100: A Sacred Trust (HR 5723 and S. 3071), which has more than 200 cosponsors in the House of Representatives, expands benefits while phasing out the 30-year cap, starting with revenues over $400,000. It eliminates more than 60% of the expected shortfall.
Another example is the Social Security Expansion Act (S. 4365 and HR 8005), which increases benefits by $200 per month and eliminates the 75-year deficit. It does this by phasing out the cap over 20 years, starting with income over $250,000, and assessing Social Security taxes on unearned investment income and earned income.
Both bills increase benefits without reductions. It is critical. Restoring Social Security to a long-term actuarial balance is important. But we should also consider whether the benefits are large enough and how to finance them fairly.
Social security is more universal, secure, equitable and efficient than its private sector counterparts. Its only flaw is that its perks are too low by virtually any measure. Due to its insufficient benefits and the disappearance of private sector pensions, the country is facing a retirement income crisis. Cutting already weak Social Security benefits would exacerbate this crisis.
While eliminating the cap on social security contributions is both popular and sensible, it’s essential to recognize that it simply requires the highest-earning workers to pay the same rate across all of their earnings as 94% of all workers currently do so, including the lowest paid. . Progressive income, where the wealthy pay a higher percentage, is now only 3% of total dedicated Social Security income. Progressive additional revenues should be devoted to social security.
The nation faces growing and destabilizing inequality in income and wealth. In addition to its other harms, rising inequality has cost Social Security billions of dollars in income each year due to rising incomes above the Social Security ceiling. Expanding modest Social Security benefits while forcing the wealthiest to pay more is a solution to the retirement income crisis and the economic strain on working families. It also tackles inequalities.
There are many options. The late Robert M. Ball, the longest-serving Social Security Commissioner and widely recognized as the foremost expert on our nation’s Social Security system at the time of his death, proposed that the estate tax be spent on the social Security. Other possibilities include a financial transaction tax, a wealth tax, and a surtax on income over $1 million.
The expansion of Social Security is unquestionably affordable. The cost of social security as a percentage of gross domestic product is close to the level for the next three-quarters of a century and beyond.
Whether to increase or decrease benefits is a matter of values, not affordability. Fortunately, as polarized as the nation is on many issues, polls show that Americans overwhelmingly agree that Social Security should be expanded, not cut. They also agree that the richest, who have benefited greatly, should pay more for the common good. It is the best policy.
Altman is president of Social Security Works and president of the Strengthen Social Security Coalition. She wrote this for InsideSources.com.