Guest columnist Keith Peterson: Courage needed now in Congress to shore up Social Security
The Social Security Administration's most recent report on the health of the trust fund that sustains the benefits for some 65 million Americans reported that its trust fund will be exhausted one year earlier, by 2033.
The trust fund was created in 1983 in anticipation of the strains that the baby boom generation would eventually put on the system and, at its peak, grew to $3 trillion.
With the youngest boomers (born in 1964) about to hit 60 next year, Social Security is paying out more to retirees than is coming in via the payroll taxes paid by employees and employers. Not even the deaths of nearly a million seniors from COVID have slowed the drain.
The projected date for the exhaustion of the trust fund has been moved up because of an anticipated slowing of economic growth and employment since the Federal Reserve currently has its foot on the brake, using higher interest rates to slow the economy.
Everyone knows this day has been coming and the solution is economically simple and politically difficult, but not impossible. You can cut benefits or you can increase revenue, or some of both.
During the 2020 campaign, President Biden pledged to shore up Social Security and increase benefits for those at the bottom of the income ladder, thus lifting an estimated 360,000 seniors out of poverty, by raising payroll taxes on the wealthy.
However, while there are tax increases in his proposed budget, more attention is paid to Medicare, the health insurance for the elderly, even though the SSA projects that the Medicare trust fund will last longer than previously thought, largely because of the COVID deaths of all those seniors.
Everyone - the president and the Congress - understands that the longer one waits to do something, the more expensive and painful it will be. And few believe the Congress would take the political heat if retirees were forced to take a more than 20 percent cut in their benefits in 2033, as is currently projected.
The cutting of benefits usually refers to the raising of the retirement age, as was done in 1983 from 65 to 67 for those born after 1960. The argument is that people are living longer. That is only partially true. People in the higher income brackets who reach 65 can expect to live another 21 years. Those in the lower income brackets can only expect to live another 16 years. As one economist has noted, making janitors work longer because lawyers are living longer is an untenable political position.
On the tax side, payroll taxes are currently paid on the first $160,200 of income. The argument is why should Warren Buffett and Bill Gates be done paying payroll taxes for the year on January 2nd? Eliminating the cap would eliminate three-quarters of the shortfall.
Means testing benefits, changing the formula that determines cost of living increases, adding those state and local workers currently not paying into the system, investing some of the trust in the stock market to get a higher return (or not), and increasing immigration would all help move the needle.
The demographic reality is that people are living longer and having fewer children, so the number of future workers supporting each beneficiary is shrinking. A bipartisan study group noted that if the Congress had passed immigration reform in 2013, it would have, by itself, extended the life of the trust fund by two years.
A recent Pew poll found that half of Americans under 50 don't believe Social Security will be there when they are ready to retire. Democrats don't want to cut benefits and Republicans don't want to raise taxes. The answer lies somewhere in between. A little courage, please.
• Keith Peterson, of Lake Barrington, served 29 years as a press and cultural officer for the United States Information Agency and Department of State. He was chief editorial writer of the Daily Herald 1984-86.