You know what I like most about Social Security? It’s not just the fact that it keeps millions of seniors out of poverty, or helps kids who’ve lost a parent, or even that it’s just a really successful program. The aspect of the program I love most is the sheer ambition of it all: Social Security created an inter-generational compact that has been the backbone of our American community and ensures that, after decades of hard work, everyone can retire with dignity. Think about that – it’s the promise of dignity one generation makes to another, knowing that the same promise will keep passing down from one generation to the next.
Unfortunately, even though it is widely considered America’s most successful social program, 60 percent of working Americans think that Social Security will not be there when they retire. The Republicans have used this common misperception to try and push through three major policy changes that would make Social Security disappear in the name of “strengthening” it. These changes – sometimes couched in moderate, earnest-sounding proposals are raising the retirement age, chained CPI, and means testing. The purported “benefits” of these policy changes short-changes working Americans somewhere down the line and actually does very little in the way saving any money. All the while, we are missing the most common sense solution for maintaining Social Security for decades to come… closing the Social Security tax loophole.
But first, let’s start by taking a closer look at these policy proposals by the right, starting with raising the retirement age. While it might be easy for a white collar worker to spend a couple more years behind a desk, try asking the bricklayer, carpenter or restaurant worker if they want to be forced to work a few more years past 65 or 67. In many cases it is not a matter of wanting to work longer, but simply not being able to do it. In a 2010 study the GAO found that raising the retirement age, would in fact shift more people from standard retirement benefits to disability benefits as health issues would impact their ability to work. The most telling finding is that some changes to the retirement age could actually reduce rather than improve the solvency of Social Security. Even worse, some economists argue that raising the age of retirement will have a trickle down effect on job openings for those entering the work force, with young people finding it difficult to find work as older employees stay in their jobs even longer.
While many have tried to paint Chained CPI as the grand solution for maintaining Social Security years to come, the truth is that it’s a benefit cut, plain and simple. The Chained CPI keeps the growth of payments each year at a fixed rate, which sounds all well and good except for that this fixed rate is actually less than the cost of inflation. So a .25 percent cut your first year of retirement is a 2.5 percent cut after 10 years of retirement. What’s worse is the Bureau of Labor Statistics has recently found that, when looking at items seniors buy, their inflation rate is actually higher than standard rate of inflation. Meaning the chained CPI is an even deeper cut than many initially thought.
The next “fix” put forward by those on the right is means testing, which is the biggest fallacy of them all. For means testing to have any significant savings it would have to cut benefits for those making $60,000 a year or less. That is not exactly what I would call a wealthy American. There are a myriad of other reasons why means testing is just plain bad news for working families, chronicled here by our friends at the AFL-CIO.
Here are the facts: Social Security doesn’t add one cent to the deficit because it is funded entirely separately of the federal budget, but if we really want to sure it up for decades to come, there is one logical solution— ending the Social Security tax loophole.
Many people don’t know this, but the method we use to fund Social Security is incredibly regressive. People only pay the FICA tax on the first 113,000 dollars they make. After that, you no longer have to pay a dime more. That means, if you earn $60,000 a year, Social Security taxes are taken out of 100% of the income you earn. Meanwhile, f you make $1.1 million a year, FICA taxes are only taken out of 10% of your income. Ending the Social Security tax loophole would eliminate this discrepancy and require that all income is taxed under FICA, significantly strengthening Social Security.
When we end this loophole, Social Security goes from being secure for the next 25 years to being secure for 75 years into the future. This makes it sufficiently funded into the future further than any other government program in existence, securely cementing Social Security as America’s most successful social program for generations to come.
Ending the Social Security tax loophole would actually increase benefits across the board. First, recognizing that wealthy Americans would be paying in more, they would receive more benefits in return. In addition, ending this loophole would also allow us to lift benefits across the board for all retirees by shifting the system to the “CPI-E” which is a more accurate measurement of inflation on goods that seniors buy, and is a bit higher than a standard CPI.
Get ready for the best part… This plan isn’t just a pipe dream, but a real piece of legislation introduced by Senator Mark Begich. If Congress were to act, this bill could be in place starting tomorrow.
The bottom line, the Tea Party and its allies in Congress are trying to use budgetary scare tactics to systematically dismantle a shining beacon of success for the progressive values they hate. If they were truly serious about strengthening Social Security as they say they are, they would be supporting the movement to end the Social Security tax loophole, not these schemes to dismantle this vital program that allows millions of Americans to retire in dignity.