Social Security is the bedrock on which most Americans build a secure retirement. Over 53 million Americans receive monthly Social Security checks, and for the majority of retirees, Social Security provides over half of their income.
Given the importance of Social Security in providing a guaranteed income for life and keeping the elderly and disabled out of poverty, we should not be contemplating cuts in benefits. In fact, at a time when private retirement plans have become less common and riskier, we should be talking about how to strengthen Social Security benefits, not cut them.
Yet benefit cuts have suddenly been pushed onto the public agenda. Ironically, cuts have been proposed as a means to "save" the system. Save it from what? From inadequate future revenues that would lead to cuts in benefits. That such proposals are being taken seriously is disturbing.
Even more disturbing is the level of illiteracy on the very basics of Social Security. Large majorities of younger Americans have been led by a campaign of disinformation to believe that Social Security is bankrupt, that the trust fund is worthless or has been spent, so that there will be no money to pay benefits when they retire. All of this is nonsense.
Benefits to retirees have always been paid from the Social Security contributions of current workers, and always will be. The work force is not going to disappear, and Congress is not going to abolish the most successful and popular social program in the country.
The only threat to Social Security benefits for the present young generation is from those who want to cut their benefits. And such cuts are proposed in the name of deficit reduction, despite the fact that Social Security does not and by law cannot add to the deficit.
The trust fund is invested in secure high-interest federal bonds; it has not been spent. The trust fund is now worth $2.6 trillion and is growing. The trust fund will indeed be depleted at some point, but this is the intent of the fund in the first place - to be drawn down to sustain benefits through the years of baby boomer retirement.
It is true that in 2035 or 2040, possibly later, the trust fund will have been used up and the payroll taxes of workers will be sufficient to pay only about three-fourths of scheduled benefits. But the main cause of this problem is the growing wage inequality over the past 40 years.
Social Security taxes are paid only on the first $108,400 in wages and salaries (an amount that increases each year by the rate of inflation). Since most of the wage gains have gone to the highest earners, while the average worker's wages have barely kept up with inflation, a larger and larger share of wages are above the cap, contributing nothing to Social Security.
The solution is simple: Raise the wage cap. This would put the Social Security system on a sound financial footing for the rest of this century, able to pay full benefits with no increase in the retirement age beyond 67. Make no mistake - increasing the retirement age is a benefit cut, for all future retirees. No matter whether you decide to retire before, on, or after your full benefit year, you will get about 13 percent less than under the current system if the retirement age rises from 67 to 69.
The underlying agenda of many of those pushing cuts is to weaken Social Security and undermine support. That will make it easier to privatize the system, which would produce an enormous windfall for Wall Street and a catastrophic retirement for millions of Americans who would find themselves at the mercy of the whims of the stock market.
We should not be scared and fooled into such a disastrous course.
