May 18, 2016
Pull any three political leaders or pundits together, and you’re likely to get five different opinions on the state of Social Security. But there’s only thing on which most agree — a fix is critical.
With 10,000 baby boomers retiring each day, the math doesn’t work on the continued solvency of the program.
This does not mean that those nearing retirement who are counting on Social Security need to panic. The system’s trust fund, with no changes will remain solvent for another 20 years. At that point it would not collapse but would begin paying out benefits equal to 70 cents on the dollar. Part of the problem is that Social Security premiums, benefits and other standards haven’t been adjusted since 1983.
Recently, Sonoma County’s two congressional representatives, Mike Thompson, D-St. Helena, and Jared Huffman, D-San Rafael, were in town with Rep. John B. Larson, D-Conn., showing support for Larson’s common-sense solution to saving Social Security.
The obvious solutions to the problem are to raise the cap on income for which payroll taxes are charged, bump up worker contributions or raise the retirement age. Larson’s bill, the Social Security 2100 Act, calls
for a combination of these and other ideas — all except raising the age.
At the moment, payroll taxes are not collected on wages of more than $117,000 a year. This legislation would apply the payroll tax to wages above $400,000. At the same time, it also would call for a phased-in increase in the contribution rate over 20 years. The net result would be that by 2037, workers and employers would pay an additional 1 percent. For the average worker, that amounts to about 50 cents more per week, according to Larson.
In exchange, beneficiaries would see a 2 percent increase in benefits and would also stand to see a built-in cost-of-living adjustment tied to wage increases.
Meanwhile, more than 11 million Social Security beneficiaries
would receive a tax cut as the gross income threshold for taxation on benefits
would increase from $25,000 to $50,000 for single taxpayers and from $32,000 to
$100,000 for married taxpayers filing joint returns, beginning this year.
The Larson bill also would open the gate for Social Security to
earn a higher rate of return by allowing some of its reserves to be invested in
equities, much like every other pension plan. Experts say this provision would
generate billions of dollars in reserves, which now total some $21 trillion.
Although it’s an election year, and the odds of a fix for Social
Security getting Republican votes in this Congress is small, the push for such
a fix is growing. Blue state senators such as Elizabeth Warren of Massachusetts
and Bernie Sanders of Vermont as well as red-state Sen. Mark Begich of Alaska
have thrown their support behind the idea.
And what is the alternative? This is a far better solution than
the drastic and dismantling proposals of those on the far right who call for
slashing benefits or privatizing Social Security.
The system works. It just needs a common-sense fix. This is one
way to see it done. And while we have little hope that it will be approved
during an election year, it benefits us all to at least make sure it is a chief
topic of discussion during one.