Let's Beef Up Social Security Benefits Instead of
The best way to improve Social Security's value is by
increasing benefits to better serve the neediest workers
and expanding its reach to cover workers and dependents
who have been excluded.
By Michael Hiltzik
Los Angeles Times
April 25, 2012
Advocates for strengthening Social Security have come to
dread the release of the annual report of the program's
That's because the event has become the basis for more
hand-wringing about Social Security's fiscal condition
and calls to cut benefits for current and future
retirees. This week's release of the 2012 report is no
If you concentrate on what is sure to be the headline
figure, you're led to believe that the program has
seldom been in lousier shape. Largely because of
disappointing economic growth, high unemployment and an
unexpectedly large cost-of-living increase for
beneficiaries, the date of exhaustion of the program's
trust fund has been moved forward three years to 2033
since last year's report.
What won't be adequately explained is that the program
isn't "insolvent" or "bankrupt." Even if you accept the
dire forecast, it's still two decades off. Economic
recovery alone will improve the program's fiscal
condition, and the trustees say that even if Congress
does absolutely nothing, in 2033 there still will be
money to pay about 75% of currently scheduled benefits.
And by the way, despite facing the worst economic
conditions in its history, the program ran a surplus of
$69 billion last year, increasing the trust fund to
nearly $2.7 trillion.
The greater danger in all the panicky talk that will
come from politicians and pundits, not to mention Wall
Street grandees, about this manifestly conjectural
projection is that it will keep people from focusing on
the most important figure in the trustees' report. It
appears on Page 2, and what it says is that right now
Social Security is providing benefits to 55 million
That testifies to the reach of a program that keeps 20
million Americans out of poverty and helps stabilize the
economy by putting money into the hands of people who
will spend it on goods and services. And it points to
the best way to improve Social Security's value for all
Americans: by increasing benefits to better serve the
neediest workers, and expanding its reach to cover
workers and dependents who have been cheated by or
excluded from the system for far too long.
Yes, you heard me right. It's time to shut down the talk
of cutting benefits, which serves nobody, and pump up
the volume on making them better.
The idea has been around for years, but its supporters
have been hunkered down against a conservative campaign
to cut, cut, cut. It's emerging from its foxhole now
because the long recession and two stock market crashes
have put the final bullets into the hopes of millions of
Americans for a secure retirement.
Of the customary three legs of the retirement stool, two
- personal savings and employer-paid pensions - have
been shattered into smithereens by the markets, high
unemployment and changes in workplace benefits. Social
Security is the third leg.
"What we really should be doing is beefing up the third
leg of the stool, and not breaking it too," says Kelly
Ross, a retirement expert at the AFL-CIO. The union is
calling for increasing benefits across the board,
changing the cost-of-living formula to an index geared
to the real costs faced by seniors, and scrapping the
cap on wage income subject to payroll taxes, which has
been set for this year at $110,100.
Similar provisions are found in the most comprehensive
congressional proposal to upgrade Social Security,
introduced by Sen. Tom Harkin (D-Iowa) in his Rebuild
America Act. Social Security's actuaries calculate that
the tax increase in Harkin's measure, to be phased in
over a decade, would virtually eliminate any Social
Security deficit until mid-century while paying for an
across-the-board monthly benefit raise of $65 after 10
Harkin would also base retiree cost-of-living raises on
the CPI-E, an inflation index that overweights goods and
services that consume a lot of elderly people's budgets,
such as medical care. The CPI-E rises at about 0.2
percentage points a year faster than the regular CPI,
which makes a big difference over time.
Other proposals to shore up the income and retirement
security of historically overlooked segments of society
deserve serious consideration. One is to create a
"caregiver credit" to counteract Social Security's
consistent shortchanging of women. Although retirement
benefits are based on the best-paid 35 years of one's
working life, women on average spend only 27 years in
the workforce. Why? Because they tend to spend years
raising children or caring for elderly or disabled
family members. Social Security counts those years as
big zeros, wage-wise, which translates into lower
"Instead of having zeros, she should have something,"
says Terry O'Neill, president of the National
Organization for Women. One common proposal backed by
NOW and other women's groups would be to assign
caregiver years a value equivalent to half the median
wage for full-time work, which is about $41,000.
Now that we've been regaled for weeks by politicians
paying lip service to the valor and value of women
working in the home, this one should be easy, right? In
a sane political world, Democrats and Republicans alike
would be falling all over themselves to put their money
where their mouths are. So here's an idea: Next time
Mitt Romney or Barack Obama waves to the crowds from the
I'm-for-motherhood parade float, let's get them on the
record in support of the caregiver credit.
Another underserved group is students. Since 1939,
Social Security has supported dependents or survivors of
disabled or deceased workers up to the age of 19 if they
were in school. In 1965, Congress added benefits for
those in school or college through age 21. But it took
them away in 1981 as part of a Reagan administration
Since college graduates earn 60% to 70% more than high
school graduates over their lifetimes on average,
keeping kids in college would easily pay for itself.
"That should be a no-brainer," says Thomas N. Bethell,
visiting scholar at the national Academy of Social
Insurance. Brave words, considering the brainlessness of
much of the Social Security debate in Washington.
Modernizing Social Security is crucial today because the
actions of government and industry have increased
Americans' dependence on the program. Defined-benefit
pensions, which inoculated retirement security from
investment risk, have been on a trend line to extinction
since 1980, when 38% of all private sector workers were
covered. Today the figure is 20% and falling.
They've been supplanted by defined-contribution plans
such as 401(k) accounts, into which workers place a
certain amount per paycheck (sometimes augmented by an
employer contribution), and cross their fingers that the
investment markets won't abscond with their retirement
dreams. But 401(k)s haven't proved to be up to the
challenge. The average balance for workers in their 60s
is less than $160,000. That sounds like a lot, but it
won't bring you a happy retirement. If you use it to buy
an annuity that will pay off through your and your
spouse's lifetime, it would produce annual income of
about $8,400; add inflation protection of up to 3%
annually, and you start with less than $5,500 a year. (I
used the federal employee Thrift Savings Plan's annuity
calculator to crunch the numbers.) By contrast, Social
Security is a lifetime benefit, protected from inflation
no matter how fast prices rise.
Undoubtedly you're going to hear that improving Social
Security will bankrupt America. This is the mating cry
of the haves-and-want-mores, and it's malarkey. Federal
taxes - personal, corporate and excise combined -
amounted to about 15.4% of our gross national product
last year, according to the Office of Management and
Budget. That's lower than the level of every other
industrialized country, according to the Organization
for Economic Cooperation and Development.
Isn't it curious that the same people who insist that
America is the greatest, richest country in the world,
ever, are those who insist that there's no way we can
afford to provide for our elderly, our disabled and the
survivors of our deceased workers to the same degree as
the rest of the industrialized world?
The received wisdom among political insiders is that
today's hyper-partisan atmosphere in Washington makes
any talk of raising Social Security benefits a non-
starter. But maybe this is exactly the moment to turn
the conversation around. Every member of Congress will
be out on the stump, along with the leaders of their
parties, facing the voters.
"This is an important thing for constituents to be
talking to their candidates about," NOW's O'Neill says.
"Are you with us, or are you against us - that's the
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