On Friday, the Social Security trustees released their annual report, and regardless of what you might hear otherwise from the chattering class, the underlying message is that there is no need to consider cuts in Social Security or Medicare benefits. In fact, we can and should increase benefits by taking a couple of basic, straightforward steps.
The condition of the Social Security trust fund is essentially unchanged from last year. Thanks to a projected surplus in 2013 of $28 billion, bringing the accumulated Social Security trust fund surplus to about $2.8 trillion, Social Security can meet its obligations to retirees through the year 2033 under current law.
The state of the Medicare trust fund is modestly improved, with its solvency extended two years, to 2026.
“The Social Security Trustees Report should give workers and their families renewed confidence,” said Nancy Altman of the Strengthen Social Security Campaign in a statement. “Social Security ran a surplus last year, is on track to run one this year, and has an accumulated surplus of $2.7 trillion. If Congress listens to the American people and requires millionaires and billionaires to pay their fair share, the Report shows that all benefits can be paid for the next three quarters of a century and beyond. Indeed, the Report makes clear that our nation, the wealthiest in the world, can afford increased Social Security benefits, as a number of Senators and Representatives have wisely proposed.”
Altman’s statement is different from the tone of many of the news stories about the trustees’ report, but she is fundamentally correct. Social Security, as did the rest of the economy, took a hit during the 2008 recession, when millions of workers lost jobs and thus were no longer paying into the Social Security system. Its recovery is slow because the recovery of the economy is slow. If the country were in the midst of an aggressive program of getting people off the unemployment rolls and into good jobs, so that we could more quickly close the jobs gap created by the recession, that alone would boost the solvency of the trust funds.
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More significantly, as Dean Baker points out in his analysis of the trustees’ report, “in the last three decades, the vast majority of wage growth has gone to those at the top end of the wage distribution” – in other words, to the very portion of wages that are exempt from Social Security payroll taxes.
As Altman and others have argued repeatedly, extending the payroll tax to incomes above the current ceiling of $113,700 would assure Social Security solvency at least through the 75-year projection of the trustees’ report, especially in the context of a growing economy.
Instead of reducing the Social Security cost-of-living adjustment through a “chained CPI,” which would mean a real cut in benefits over time, we could actually have the conversation we really should be having about increasing benefits, especially at a time when disappearing pensions and 401(k) plans vulnerable to the booms and busts of Wall Street have failed to provide for millions of seniors the economic security they need.
“The most important take-away from the 2013 Social Security Trustees Report is that, in good times and bad, our Social Security system works and it works well,” writes Eric Kingson, founding co-director of Social Security Works. “No institution does more to protect the financial security and dignity of Americans. No institution is more carefully monitored or more conservatively managed. No pension, housing or other form of savings, are nearly as well positioned to address the nation’s impending retirement income crisis. Fully affordable and structurally sound, Social security will meet all its obligations to the American people as far as the eye can see, with only a modest increase in revenues.”