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Increasing Social Security Benefits: An Idea Whose Time Has Come
Archaeologists of the future will sift through our newspapers, websites, and other ephemera and marvel at the inverted shape of our political debate. They’ll be particularly surprised to discover that, at a time when retirement security was being destroyed for an entire generation, politicians were posturing over how to make the problem even worse by cutting Social Security.
And they’ll marvel over how long it took us to agree on the right solution: Increasing Social Security benefits instead.
The concept of increasing Social Security has been around for a while. Strengthen Social Security, a coalition of 320 groups, reviewed the program’s ability to meet current and future needs and concluded that benefits should be increased rather than cut. The National Academy for Social Insurance proposed increasing benefits for vulnerable groups. The AFL-CIO has called for raising benefits. We got in the game, too, suggesting that a 15 percent increase in 2011 be included as part of a forward-thinking progressive agenda. (That earned us our only Rush Limbaugh rant so far – that was fun).
Now the idea may be re-entering the national id, beginning on the left. In a USA Today op-ed, economist and influential blogger Duncan Black (Atrios) proposed a 20 percent increase in benefits. So did Joan McCarter at the widely-read Daily Kos site.
There’s no reason not to make this change, starting now. No reason except one, that is – the refusal of our political leadership to see what must be done and do it.
But it’s not really a “left” position. As a recent survey from the National Academy for Social Insurance revealed, strong majorities of independents and Republicans think the idea has merit. In fact, pretty much everybody agrees – except the parties who are talking about making a “Grand Bargain”: Republican leaders who are out of step with their own rank and file, and the President and some other Democratic power players (who are really out of step with their rank and file).
Here’s Duncan Black:
“…(E)mployees fortunate enough to have employer-based retirement benefits have been shifted from defined benefit plans to defined contribution plans. We are now seeing the results of that grand experiment, and they are frightening … Let me be alarmist for a moment, because the fact is the numbers are truly alarming. We should be worried that large numbers of people nearing retirement will be unable to keep their homes or continue to pay their rent.”
This fear for the fate of Baby Boomers is warranted, and the fortyish Black isn’t expressing it out of self-interest. This squeeze was brought about in part by the end of fixed corporate pensions and the rise of 401(k) plans which Black calls a “grand experiment” turned “disaster.” But I consulted with major corporations on benefit plans during the rise of 401(k)’s, and from my experience it wasn’t an experiment at all. It was a calculated wealth shift away from workers and toward employers.
The long-term implications weren’t always obvious – to employees or policymakers – especially because these changes were often buried in complicated “cafeteria style” benefit plans. But corporate executives knew. As one famous CEO said to me of his company’s cafeteria plan and 401(k): “I want to give them less and make them think it’s more.”
The other reason Baby Boomers are in dire shape is because the vast bulk of their net worth was in real estate, which siphoned their assets off to Wall Street in a handy two-step: First they were told that home ownership is a can’t-miss investment. Then mortgage transactions created a massive housing bubble. Banks took all the profits and let the public (including the same homeowners) rescue them.
Profits for large corporations are at record highs. Income inequality in the United States is greater than at any time since the Great Depression – and is higher than any other developed nation except Israel, Mexico, Korea and Turkey. And yet the perpetrators of this multi-generational scam have somehow convinced leaders in both parties that we need to cut Social Security – either through the “chained CPI” benefit cut, by raising the eligibility age even further, or both.
How would we pay for an immediate benefit increase? Based on the CBO’s figures, a 20 percent increase in benefits would cost roughly $2 trillion over the next ten years. The NASI survey shows that the public’s willing to step up and pay its fair share in payroll taxes to do it. Additional funding would be needed to make the increase start right away. That could be done most effectively by lifting the payroll tax cap and adding a financial transactions tax.
Immediate action would stave off the impending crisis among Baby Boom elders, while strengthening the financial security of generations to follow.
There are other benefits to increasing Social Security benefits. More near-seniors than ever are saying they don’t plan to retire, mostly because they can’t afford it. If more of them can be convinced to change their minds, that would create job openings for the younger generations who desperately need work. That would ease the jobs crisis. It would would mean lower government costs in areas like unemployment insurance and financial assistance.
An increase in benefits could also arguably have a stimulus effect, as consumers who are less gripped with fear begin to spend more — and as cash-strapped seniors are able to purchase more goods and services.
The argument in favor of lifting the tax cap and adding a financial transaction tax isn’t just fiscal, either. These moves would also redress the unjust imbalance in income created by the corporate and millionaire/billionaire wealth grab of the last thirty years. And a transaction tax would reduce the volume of risky high-transaction, computer-driven trading.
There’s no reason not to make this change, starting now. No reason except one, that is – the refusal of our political leadership to see what must be done and do it. Voters have stood by as their leaders blatantly disregarded of their needs, their wishes, and economic common sense. The retirement crisis is relatively easy to fix, compared to that puzzle. Those archaeologists of the future will have their hands full trying to figure that one out.