The big picture
Despite Alan Greenspan and his committee’s efforts in the early 1980s to ensure the solvency of Social Security until the 2050s, current projections indicate its trust fund will be depleted by 2034.
What they’re saying: At a Harkin Institute retirement conference, Stephen Goss, Social Security Administration’s chief actuary of over 20 years, provided an intriguing insight.
By the numbers:
- Birthrates have declined since 1965 during the acceleration of the Vietnam War and OPEC testing its ability to cause oil shocks, but that’s old news.
- The decline in mortality is in line with expectations, being “remarkably accurate,” Goss mentioned.
The unexpected factor? Inequality.
- Between 1983-2000, incomes of the top 6% grew by 62% after adjusting for inflation. For the remaining 94%, it increased only 17%.
- A significant part of U.S. income growth surpassed the Social Security tax cap, with taxable incomes plunging from around 90% in the early ’80s to 82% by 2000.
From the source: “This is a massive change in the distribution of earnings, causing a much smaller share of all covered earnings falling below our taxable maximum,” Goss highlighted.
The Only Serious Solution
Sen. Bernie Sanders (I-Vt.) pushed a legislative solution earlier in the year. His aim? Augment Social Security retirement benefits and solidify its finances, targeting corporations and the wealthy.
Context: Sanders had tabled similar bills, including one in 2022. But this latest version is especially relevant amidst a heightened national discourse involving President Joe Biden and congressional Republicans.
Sanders’ standpoint: “Our job is to expand Social Security so that every senior in America can retire with dignity,” he remarked, advocating for the protection and expansion of the program amidst a backdrop of seniors struggling on incomes below $25,000 annually.
What’s next: Though the chances of the Social Security Expansion Act becoming law are close to zero, it is an actual solution to fix this issue, forego benefit reductions, ensure younger generations have a retirement, and reconcile the funding gap.
- Social Security is unique, being entirely self-funded and refraining from borrowing.
- By 2035, without interventions, the program can cover only 80% of promised benefits, translating to a 20% universal benefit reduction.
- Sanders’s proposal would implement a 12.4% tax on earnings exceeding $250,000. Presently, only incomes up to $160,200 are taxed. Additionally, he’s eyeing taxes on investment incomes surpassing $200,000.
- Sanders envisions an updated benefit formula, potentially elevating the payouts for low to moderate-income beneficiaries by approximately 15%.
- Sanders also proposes indexing these benefits to a consumer price metric, reflecting the elevated living expenses of older people.
The other side: Opposition to not just Sanders’s proposal but Social Security itself is fierce. Republicans and some Democrats advocate for the complete termination of Social Security, either all at once or slowly.
Worth noting: With the Baby Boomer generation entering retirement, the trajectory and fate of Social Security remains a critical concern.