Social Security

Increase Your Benefits

Summary:  Every projection shows Social Security is running out of money and our future benefits will have to be reduced. But a new bill in Congress will stabilize and increase your benefits for the rest of your life. After reading this article, tell your congressman or congresswoman to pass the Social Security 2100 Act. It doesn't matter what political party you belong to -- your retirement depends on this.

Securing Social Security's Future

Feeling their progressive oats after a few years in the wilderness, House Democrats on Tuesday revived a proposal to increase and expand Social Security benefits while making the program more solvent for the foreseeable future.

The Social Security 2100 Act, introduced by Rep. John Larson (D-Conn.) with 200 Democratic co-sponsors, would make the program more relevant to today’s workers by increasing benefits for all retirees, improving cost-of-living increases by changing the formula, and increasing the minimum benefit for the lowest-income households. (Actually, it’s re-introduced: A nearly identical version was brought before the then-GOP controlled House in 2017 and went nowhere.)

Although all employees would pay a slightly higher payroll tax over time, the measure would make sure that the richest Americans, who largely get a pass on their responsibilities to fund the program, would finally pay their fair share. We’ll get to the details in a moment.

Observing that “Congress has added no new protections nor voted increases in benefits for over half a century,” Nancy Altman, president of the advocacy group Social Security Works, called the bill’s introduction “a new and positive chapter” in the history of the program.

Let’s hope she’s right. Republicans in Congress have spent years — really, decades — bashing the program as an undeserved “entitlement” and suggesting that it’s responsible for federal budget deficits (untrue, as a matter of law) and sluggish economic growth (untrue, as a matter of fact).

Back in October, Senate Majority Leader Mitch McConnell (R-Ky.) called Social Security and the government’s other social insurance programs, Medicare and Medicaid, “the real drivers of the debt” and called for them to be adjusted “to the demographics of the future.”

He was talking about cutting benefits, but he wasn’t alone. Sen. Marco Rubio (R-Fla.) and former House Speaker Paul D. Ryan (R-Wis.) each had made exactly the same point in previous months.

The American public responded to these threats to their retirement security, among other noxious GOP policies, by handing the Republicans an epic beat-down at the polls in November, giving Democrats the House majority.

In political terms, expanding Social Security is a good counterweight to the grousing by billionaires and their congressional mouthpieces about proposals to raise their taxes. Most recent case in point: putative presidential candidate Howard Schultz, the founder of Starbucks, declaring Elizabeth Warren’s proposal for a wealth tax on the super-rich “ridiculous.” Schultz’s estimated net worth is $2.9 billion.

As Larson said at the launch event for the bill Wednesday, years of economic stagnation for the middle class and the shifting of responsibility to provide for their own retirement has “heightened the urgency” for improving Social Security.

Let’s examine the details of his plan.

The big picture first. According to the office of the chief actuary of Social Security, the authority on all such calculations, Larson’s bill would ensure Social Security’s solvency for at least the next 75 years, but in practical terms into the almost limitless future. The program’s trust fund would reach a steady state of about $2 trillion in present value by 2063 and stay there, providing a cushion of about two and a half times annual benefits.

The bill does so via modest tax increases in middle- and working-class workers and much sharper increases on the wealthy. Under existing law, everyone pays a payroll tax of 12.4% of wage and salary income (split evenly between employer and employee), up to an earnings cap that is set for 2019 at $132,900. No one earning more, even our millionaires and billionaires, pays more than the maximum of $16,480. For someone earning, say, $1 million in wages, the payroll tax comes out to only 1.64%.

Larson would increase the payroll tax gradually, by one tenth of a percentage point a year starting in 2020, to an employer/employee combined 14.8% by 2043. On the other hand, Larson would reduce the income tax on Social Security earnings, giving middle- and lower-income workers a bit back.

The wealthy would pay the tax on all wage earnings up to the current cap, and wages above $400,000. Since the cap tends to increase every year due to inflation, the actuaries estimate that by 2048 it will reach $400,000, and therefore at that point everyone will be paying the tax on all their wage income. That’s the source of the biggest gain in the program’s income, which funds the benefit increases.

The most important increase is an improvement in Social Security’s minimum benefit, which was established in 1972 for the lowest-income workers. The minimum is indexed to price inflation, but workers’ initial benefits are indexed to wage inflation, which tends to run a bit higher.

As a result, the minimum benefit, which currently is about $830 a month or $9,960 for workers with 30 years of earnings, has fallen short of the federal poverty line and of the lowest benefit earned by even very low-income workers. Almost no one has qualified for it since the 1990s. Larson would raise the minimum to 125% of the federal poverty line, which would set it at about $15,175 a year now.

Larson also would increase all benefits and key annual cost of living increases to a consumer price index that overweights goods and services especially important for seniors, such as medical care. That index tends to rise by about 0.2 percentage points faster than the traditional CPI used by Social Security today.

The actuaries calculate that Larson’s measure would increase the benefits of the lowest-earning workers by as much as 44% compared to current benefits (mostly due to the improved minimum), for low-income workers averaging $23,000 in lifetime annual income by about 10%, for moderate-income workers with $52,000 in lifetime annual income by about 2.1%, and those earning the maximum taxable wage by about 1.5%. The richest wage earners would get a nice percentage bump of up to 8.3%, but that’s mostly because their benefits are very low compared to their total incomes, and they’d receive a bit more in recognition of their higher taxes.

What’s especially important about the Larson bill is the line it draws between the Democratic/progressive approach to Social Security and that of the Republican Party. Republicans like McConnell. They talk incessantly about the necessity of reducing cost-of-living increases, about how Social Security recipients are making out like bandits, and about how the nation can barely afford to keep them out of poverty.

The subtext in all these arguments is that the nation needs to be made safe for millionaires and billionaires.

The math done by Social Security’s own experts shows that the nation can well afford to make retirement even more secure. Under current law, the cost of Social Security is estimated to rise from about 5% of gross domestic product today to 6.12% in 2092. Larson’s measure would raise it to about 6.44%. You really want to tell me that difference will bring about the downfall of the republic?

The nation’s political leaders in 1935, led by Franklin D. Roosevelt, understood the necessity of keeping seniors out of poverty, because they had the example of the evisceration of the American working class in front of their eyes. That example seems to have faded for our political leaders, but the sponsors of the new bill had a way of underscoring the program’s heritage. Wednesday, Jan. 30, the day of its introduction, was the 137th anniversary of FDR’s birth.

Article by Michael Hiltzik, Los Angeles Times, February 6, 2019, Page C1. An online version of the article can be found here, under the title "A new proposal to expand Social Security would make it much better for working Americans."

https://www.latimes.com/business/hiltzik

Michael Hiltzik and colleague Chuck Philips shared the 1999 Pulitzer Prize for articles exposing corruption in the entertainment industry.

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