In a recent column, I tried to allay the fears of so many readers who expressed grave concerns about gloom and doom headlines from a few weeks ago that were predicting Social Security’s demise. I told people to chill out. We’ve been down this road many times in the program’s 80-year history. Eventually Congress will get around to instituting reforms that will keep the program going for generations to come.
I then offered eight relatively modest reform proposals — some that would trim future benefits and some that would raise future revenues. The reaction to that column was interesting and predictable — on two fronts.
First, I got a wave of emails from readers who blamed Congress for not doing anything so far to solve Social Security’s fiscal woes. And before I go on, let me address those woes. Many of you wrote and blamed Social Security’s problems on fiscal mismanagement or congressional chicanery with the system’s trust funds. I’ve addressed those persistent and false rumors many times in past columns and won’t do so here today. Social Security’s problems have nothing to do with mismanagement and everything to do with demographics — the baby boomer bubble. Ten thousand of us are retiring and signing up for Social Security every single day. The system has worked wonderfully for decades with a ratio of three workers supporting one retiree. But with all those boomers moving from the working and taxpaying end of the Social Security pipeline to the retired and benefit-drawing end, the system is heading for a 2-1 worker-to-retiree ratio. And it does not work AS IT IS CURRENTLY STRUCTURED at a 2-1 ratio. But with some relatively simple reforms, it can work.
So now, back to all the comments I got blaming Congress for not doing anything about fixing Social Security. I’m reminded of this line uttered by Cassius to Brutus in Shakespeare’s play, “Julius Caesar.” He is trying to explain to Brutus that we are all responsible for our own fate. He famously says, “The fault, dear Brutus, is not in our stars, but in ourselves.”
I would change that line just a bit and say: “The fault, dear readers, is not in our politicians, but in ourselves.” I think we citizens and voters must accept a large part of the blame for any inaction on the Social Security reform front. And here is why I think that. Let’s say I am Congressman Tom, and I have introduced legislation to reform Social Security. My plan calls for a slight long-range increase in the retirement age alongside a very modest increase of one-fourth of 1% in the Social Security payroll tax. These two changes alone will keep the system solvent for at least the next 75 years.
But then comes reelection time, and my opponent runs attack ads that essentially say: “Don’t vote for Congressman Tom. He’s got a plan to cut your Social Security checks and raise your taxes at the same time.” And guess what? Congressman Tom gets defeated. I’ve seen this happen dozens and dozens of times in past election cycles. So, do you see why politicians are afraid to touch Social Security with a 10-foot pole? If we voters would just not be so naïve and gullible, perhaps members of Congress would be more inclined to make important changes to Social Security.
And speaking of those changes, this gets me back to the second wave of reactions to my recent column that offered proposals to reform Social Security. And let me point out the reforms I offered in that column were not my ideas. I was simply pointing out some of the more commonly cited proposals for changes to Social Security.
Anyway, what I learned from the reactions I heard is this: People say they want Social Security to be reformed. But what so many of them really are saying is: “I like those reforms that cut the other guy’s Social Security check or raise the other guy’s taxes. But don’t mess with my Social Security!”
Here is an example of what I mean. One of the proposals called for a very minor cut, one-fourth of 1%, to the annual cost of living adjustment that all Social Security beneficiaries receive. I pointed out that most economists agree that the formula for figuring Social Security COLAs is too generous. Well, my goodness, you’d have thought the proposal called for cutting everyone’s Social Security benefit in half. Let me repeat, the suggestion was a one-fourth of 1% cut. Not a single older adult who reacted to that reform idea liked it. In fact, it would be fair to say they all hated it and vowed to never vote for anyone who even hinted at such a change.
And most of the emails from these folks bolstered my theory that many older adults also say, “raise the other guy’s tax, not mine!” And that’s because, by far, the most popular proposal was the one that called for wealthy people to pay more into the system. Specifically, the proposal was to remove the cap on taxable earnings. That cap is currently $142,800. In other words, Bill Gates only pays Social Security taxes up to that limit. Removing the cap would mean he would pay taxes on his billion-dollar annual income.
What I didn’t mention in that recent column is that benefits are tied to the taxable income a person has. So, if Bill Gates started paying taxes on his billion-dollar income, he might end up with a monthly Social Security check that’s in the millions of dollars! What you would have to do to make that proposal work is to remove the cap on taxable earnings and simultaneously place a cap on the amount of Social Security benefits they get in return.
I hope people see why Congress has such a hard time dealing with Social Security reform. For one thing, there are simply no easy answers. There are lots of potential reform ideas, but none of them are easy. In the end, someone’s benefit is going to get cut and/or someone’s tax is going to get raised.
The second reason why Congress finds it difficult to discuss Social Security reform is that they’d have to get the American people to agree on a set of reforms. We just can’t have everyone saying: “Cut the other guy’s benefit and raise the other guy’s taxes — not mine!” We’ve all got to be in this together.
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