Originally posted on Economic Policy Institute's blog.
Since the season of top 10 lists is upon us, here’s the Social Security Scrooge version:
- Social Security costs are escalating out of control. No. Costs are projected to rise from roughly five to six percent of GDP before leveling off.
- Americans want benefits but aren’t willing to pay for them. Wrong again. Americans across political and demographic lines support paying Social Security taxes. They also strongly prefer raising taxes over cutting benefits as a way to close the projected shortfall. The most popular option is raising taxes on high earners, since earnings above $106,800 aren’t taxed. But Americans prefer to close the gap on the revenue side even if asked to pay more themselves.
- Our children and grandchildren will drown in debt if we don’t cut the social safety net. No, future generations will drown in debt—their own or the federal government’s—if we don’t address health care cost inflation. Cutting Medicare or Medicaid benefits just pushes costs onto the private sector. And there’s no reason to lump Social Security in with other programs since it’s funded through dedicated taxes and prohibited by law from borrowing.
- The Baby Boomers will sink us. No, we saw them coming. Social Security began building up a trust fund in the early 1980s in anticipation of the Boomer retirement. The trust fund will keep growing for another decade to around $3.7 trillion, enough to last through the peak Boomer retirement years.
- We’re living longer, so we need to work longer. No—only some of us are living longer, and most of us are already working longer. Gains in life expectancy have been concentrated among people with higher incomes and more education, especially men. Meanwhile, the labor force participation of older workers is close to the postwar peak.
- We just need to save more for retirement. That’s a reason to expand Social Security, not shrink it. The average household has a retirement income deficit of $90,000, a conservative measure of how far behind they are in saving and accumulating benefits for retirement—and that’s without further cuts to Social Security. Retirement insecurity is increasing due to earlier Social Security cuts and the shift from secure pensions to do-it-yourself retirement accounts. (If anything, budget hawks should look to trim 401(k) tax breaks, two-thirds of which go to taxpayers in the top fifth of the income distribution and have little impact on saving.)
- Seniors are greedy. No, they’re struggling to make ends meet. By any reasonable measure, seniors and other beneficiaries are worse off than working adults, so it makes sense to increase contributions rather than cut benefits. Older households have incomes roughly half those of working-age households. The “greedy geezer” myth rests on the fact that seniors have lower official poverty rates than children and working-age adults, though an improved measure that takes into account higher medical expenses for seniors shows that the three groups have similarly high poverty rates. In any case, cutting Social Security would increase poverty for all. Also, while older households typically have accumulated more savings than younger households, these savings are not enough to maintain their pre-retirement standard of living through retirement.
- Benefits are generous. No, they’re modest and shrinking. The average retirement benefit is $14,000 a year—less than a full-time minimum wage worker earns—and benefits constitute two-thirds of income for the average older beneficiary. For a medium earner retiring at 65, benefits replace 41 percent of pre-retirement earnings, down from 52 percent in 1981. This replacement rate is scheduled to drop in the next 15 years to a meager 36 percent.
- We’ll just cut benefits for people who don’t need them. No, proposed cuts would hurt the middle class now and the poor later. Because benefits for high earners are modest and wealthy retirees few, supposedly “progressive” plans actually go after middle-class benefits in order to yield significant cost savings. Social Security’s enduring popularity rests on the fact that people earn the right to participate by working and contributing, in keeping with core American values. Moving from a universal social insurance program toward a need-based one would doom Social Security to the same fate as targeted programs like Medicaid, which are being squeezed even as demand for them grows. An even worse idea is cutting cost-of-living adjustments, which would have an impact on all beneficiaries, but especially the oldest old, who are also the poorest old.
- Social Security won’t be there for us. Only if we fall for these arguments. Social Security can pay full promised benefits for another quarter-century. Even if nothing is done to shore up the system, Social Security can continue to pay three-fourths of promised benefits after the trust fund runs out. Though this would be far from ideal, it’s certainly no reason to preemptively cut benefits. Instead, we should devote a small portion of the economic growth projected over Social Security’s next 75 years to continuing to build economic security on the cornerstone laid by President Franklin D. Roosevelt.