Social Security ensures dignity for millions of Washingtonians — here's what lawmakers need to do to keep it that way

[Economic Opportunity Institute] Social Security improves the economic security of more than 1.3 million Washington residents and their families, and contributes significantly to economic stability and growth across the state. While it is currently on sound fiscal footing, federal lawmakers should act now to remove Social Security’s cap on taxable earnings, raise benefits and make other improvements to ensure it meets the needs of today’s workers, families and retirees.

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Social Security improves economic security, stability and growth in Washington

  • Social Security provides income for 30 percent of the state’s households. More than 1.3 million Washington residents receive Social Security benefits, representing 18 percent of the state’s population.[1] Of people receiving benefits, 77 percent (more than 1 million) are age 65 or older, 17 percent (230,000+) are age 18-64 and 6 percent (73,000+) are under 18. Nine in 10 residents age 65 or older receive benefits; 55 percent of those (568,000+) are women.[2]
  • Social Security dramatically reduces poverty among the elderly in Washington. Without Social Security, elderly poverty rates would climb from 7.2 percent to 34.4 percent.[3] Even though average retirement benefits are just $1,490/month ($17,880/year), Social Security kept an estimated 317,000 Washingtonians age 65 or older from living in poverty in 2018.[4]
  • Social Security is the primary insurance protection for 95 percent of Washington’s 1.8+ million children and families. In the event a parent or spouse were to die or be disabled, more than twice as many children would live in poverty if there were no Social Security benefits.[5][6] In 2018, nearly 108,000 widow(er)s and children in Washington received an average $1,291/month ($15,489/year) for survivor’s benefits; more than 207,000 disabled workers and their families received an average $1,301/month ($15,616/year).[7]
  • Social Security significantly boosts Washington’s economy. In 2018, benefits were equivalent to 5 percent of state total personal income – generating an estimated $42.3 billion in economic activity, more than 268,000 jobs and nearly $2.2 billion in state and local tax revenue.[8][9] In December of 2018 alone, more than $1.9 billion in Social Security benefits went directly to local economies – from populous King County ($450 million to 295,000 people) to rural Garfield County ($889,000 to 665 people).[10]

Why Congress should “scrap the cap” to bolster the Trust Fund

In the early 1980s, Congress increased payroll taxes and reduced future benefits for millions of Americans in order to build a surplus in the Social Security Trust Fund for the Baby Boomer generation’s retirement.[11] It worked as planned; the latest Trust Fund report projects Social Security can pay all benefits in full and on time until 2035, and three-fourths of scheduled benefits thereafter, even if Congress takes no action.[12]

But lawmakers need to step up. Cuts to Social Security – whether benefit reductions, more limited COLAs, or retirement age increases – will diminish economic security for nearly every American. It will disproportionately affect low- and middle-income families, women and workers of color, who (unlike wealthy individuals) often do not have significant retirement savings and must work further into old age in more difficult and demanding jobs.[13]

To avoid this, Congress should “scrap the cap” to bolster the Trust Fund. Today, workers and employers each pay 6.2 percent of wages to finance Social Security, but there’s a cap on taxable wages ($132,900 in 2019).[14] So while 94 percent of workers pay Social Security tax on every paycheck, most of the earnings of the top 1 percent, and especially the top 0.1 percent, escape being taxed.[15]

Ensuring every American pays the same effective tax rate on their wages would eliminate 85 percent of the Trust Fund’s projected shortfall.[16] Only the richest 6.1 percent of workers (less than 1 in 15) would pay more.[17] And it’s a popular idea: two-thirds of Americans support requiring high-income workers to pay Social Security taxes on all of their wages (as is already the case with Medicare taxes).[18]

How America can create a more equitable and secure retirement — for everyone

As the nation’s most efficient, secure, universal and portable source of retirement income, Social Security has all the advantages (and none of the disadvantages) of both traditional pensions and 401(k)s – and it offers benefits unavailable in the private sector, like automatic inflation adjustments and benefits for divorced spouses.

Federal lawmakers should take steps to expand and improve Social Security for today’s workers and families by:

Raising benefits overall: Adjusting the benefit formula to raise benefits for those who have had careers in low-wage occupations – such as childcare, restaurant service, or home health care – would better protect the financial security of people just scraping by, particularly older women and people of color.

Protecting the very elderly: Living to extreme old age, or living without a spouse greatly increases the risk of poverty. “Bump-ups” in benefits for seniors living past a certain age and increasing benefits for elderly widow(er)s would reduce financial insecurity among these vulnerable people.

Reducing gender and racial inequities: Caring for children or aging family members can cause many people, especially women, to reduce time in the workforce, greatly affecting their retirement benefits. Reducing the number of years’ earnings used to calculate benefits from 35 to 28 can eliminate the caregiving penalty. It would also help those with reduced access to employment due to recessions, discrimination, local economic conditions or disasters, and other barriers.

Restoring student survivor benefits: Before 1981, children of retired, deceased, or disabled workers continued receiving benefits through age 22 if they attended college. Now benefits end once a young person both turns 18 and finishes high school. Reinstating college benefits could help children and their families achieve their dreams, as well as reduce socioeconomic barriers to education and lifetime opportunities.

Adopting the CPI-E inflation index: Over the past decade, Social Security’s existing cost of living adjustment (COLA) formula has led to average increases of about 1.4 percent per year.[19] However, comparatively larger increases in Medicare premiums have often meant many seniors see no additional income from COLAs. Adopting the consumer price index for the elderly, or CPI-E, would more accurately calculate adequate COLAs for retirees.

Restoring office access & services: The Social Security Administration’s (SSA) expenses are self-funded and account for less than one penny of every dollar spent. But from 2010 to 2019, its operating budget fell nearly 11 percent in inflation-adjusted terms — even as the number of Social Security beneficiaries grew by 17 percent. SSA staffing levels have declined by 12 percent since 2010, hampering its ability to perform its essential services.[20] Restoring full funding would help ensure people have dependable and easily accessible in-person service at Social Security offices, often at critical moments in their lives.

Promising federal legislation that needs your support

Congress is considering several measures that would improve Social Security in one or more of the ways outlined above, including: the Social Security 2100 Act (H.R. 860/S. 269), the Social Security Expansion Act (H.R. 1170/S. 478), the Strengthening Social Security Act (H.R. 2654), the Protecting and Preserving Social Security Act (H.R. 2302/S. 1132), and the Social Security for Future Generations Act (H.R. 4121).

You can send a message here to call on your member of Congress to take action on these and similar bills: https://socialsecurityworks.org/take-action-sign-petition-expand-social-security/.

Download this post as a PDF.

References

[1] American Community Survey, “Table DP03 – Selected Economic Characteristics, 2018 1-year estimates”, http://data.census.gov/; U.S. Social Security Administration, Office of Retirement and Disability Policy, Office of Research, Evaluation and Statistics, “OASDI Beneficiaries by State and County 2018,” https://www.ssa.gov/policy/docs/statcomps/oasdi_sc/2017/.

[2] U.S. Social Security Administration, “OASDI Beneficiaries by State and County 2018,” https://www.ssa.gov/policy/docs/statcomps/oasdi_sc/2018/.

[3] Center on Budget and Policy Priorities, “Social Security Lifts More Americans Above Poverty Than Any Other Program,” July 2019, https://www.cbpp.org/research/social-security/social-security-lifts-more-americans-above-poverty-than-any-other-program; American Community Survey, “Table DP03 – Selected Economic Characteristics, 2018 1-year estimates”, http://data.census.gov/; American Community Survey, “Table S0103 – Population 65 Years and Over, 2018 1-year estimates”, http://data.census.gov/.

[4] U.S. Social Security Administration, “OASDI Beneficiaries by State and County 2018”, https://www.ssa.gov/policy/docs/statcomps/oasdi_sc/2018/.

[5] U.S. Social Security Administration, “Social Security Program Fact Sheet,” https://www.ssa.gov/OACT/FACTS/; American Community Survey, “Table DP03 – Selected Economic Characteristics, 2018 1-year estimates”, http://data.census.gov.

[6] Social Security Administration Office of Retirement Policy, “Child Beneficiaries and Poverty,” March 2015, https://www.ssa.gov/retirementpolicy/fact-sheets/children-poverty.html.

[7] U.S. Social Security Administration, “OASDI Beneficiaries by State and County 2018,” https://www.ssa.gov/policy/docs/statcomps/oasdi_sc/2018/.

[8] Calculations based on: 1) Personal Income Data from Bureau of Economic Analysis, “Table SA1 – Personal income summary,” https://www.bea.gov/ and 2) U.S. Social Security Administration, “OASDI Beneficiaries by State and County 2018,” https://www.ssa.gov/policy/docs/statcomps/oasdi_sc/2018/.

[9] Derived from research produced by AARP Public Policy Institute, “Social Security’s Impact on the National Economy,” October 2013, https://www.aarp.org/content/dam/aarp/research/public_policy_institute/econ_sec/2013/social-security-impact-national-economy-AARP-ppi-econ-sec.pdf.

[10] U.S. Social Security Administration, “OASDI Beneficiaries by State and County 2018,” https://www.ssa.gov/policy/docs/statcomps/oasdi_sc/2018/.

[11] National Academy of Social Insurance, “Strengthening Social Security for the Long Run,” November 2010, http://www.nasi.org/sites/default/files/research/SS_Brief_035.pdf.

[12] Social Security and Medicare Boards of Trustees, “A Summary of the 2018 Annual Reports,” June 2019, https://www.ssa.gov/oact/TRSUM/.

[13] Center on Budget and Policy Priorities, “Raising Social Security’s Retirement Age Cuts Benefits for All Retirees,” January 2016, http://www.cbpp.org/blog/raising-social-securitys-retirement-age-cuts-benefits-for-all-retirees.

[14] Set by Congress in 1977 and indexed to average wage growth, the cap was intended to cover 90 percent of all wages. But over the past several decades, wage growth for low- and middle-income Americans has slowed, while wages at the top have grown dramatically. As a result, the cap now covers just 83 percent of aggregate wages. See: Center on Budget and Policy Priorities, “No COLA for 2016 Will Affect Medicare Premiums and Social Security Finances,” October 2015, http://www.cbpp.org/blog/no-cola-for-2016-will-affect-medicare-premiums-and-social-security-finances and Social Security Administration, “Table 4.B1 – Number of workers with taxable earnings, amount of earnings, and Social Security numbers issued, selected years 1937–2017,” https://www.ssa.gov/policy/docs/statcomps/supplement/2018/4b.html.

[15] Social Security Office of Retirement Policy, “Taxable Maximum Earners,” released March 2015, https://www.ssa.gov/policy/docs/population-profiles/tax-max-earners.html.

[16] Congressional Research Service, “Social Security: Raising or Eliminating the Taxable Earnings Base,” September 2019 (updated), http://fas.org/sgp/crs/misc/RL32896.pdf.

[17] Center for Economic and Policy Research, “Who Would Pay More if the Social Security Payroll Tax Cap Were Raised or Scrapped?,” January 2015, http://cepr.net/documents/ss-cap-update-2015-01.pdf.

[18] Social Security Works, “Polling Memo: Americans’ Views on Social Security,” September 2016, http://www.socialsecurityworks.org/wp-content/uploads/2016/10/Updated-polling-memo-10-17.pdf.

[19] Social Security Administration, “Cost of Living Adjustments,” http://www.ssa.gov/OACT/COLA/colaseries.html.

[20] Center on Budget and Policy Priorities, “Senate Bill Would Cut Social Security Operations Again,” October 2019, https://www.cbpp.org/blog/senate-bill-would-cut-social-security-operations-again.

Commentary: Social Security isn’t doomed for millennials, Gen Xers

Photo courtesy of AFP

Even the worst-case scenario shows that the program will still pay out benefits.

[Portland Press Herald] I have good news for younger generations worried that they won’t be able to claim their Social Security benefits because we older generations have ripped them off and will be leaving nothing behind: Your fears are unfounded.

Don’t just take my word for it. Consider the work of my colleague Charles Blahous at the Mercatus Center at George Mason University, who is a relative pessimist (some would say an alarmist) on this issue. His reputation commends his work as a good benchmark for where Social Security really stands.

According to his estimates, if no further steps are taken to shore up the finances of Social Security, the system will stop being able to meet its scheduled payment obligations sometime in the 2030s. (Note that benefit hikes are part of the schedule.) That would be bad, but even under this scenario the system is still paying out a roughly constant level of inflation-adjusted benefits over time, at least as those benefits are defined as a percentage of workers’ taxable earnings (about 13 percent). Of course, to the extent those taxable earnings rise, the benefits will be rising, too, even if not at a spectacular pace.

Keep in mind that this is the worst-case scenario offered by a relative pessimist.

Read more »

Why young people should support expanding Social Security

During the 1950s-1960s SSA published a series of comic books on Social Security-related topics, in an effort to reach the youth audience, which in those days used comic books as their hottest medium of communication. This comic is from 1956. Original: https://www.ssa.gov/history/john56.html

[The Hill] I’m one of the youngest Millennials, born in 1995. Every day, I work to organize young people to take back our government by electing leaders who will fight for our future instead of for corporate donors. That includes fighting to expand, never cut, Social Security’s modest benefits.

Wall Street and its allies have spent decades attempting to convince my generation that Social Security won’t be there for us—but that’s not true. In fact, Millennials and Gen Zs will rely on our Social Security system even more than our parents and grandparents do.

As long as people are working, Social Security can pay out benefits. It is true that in about 16 years, if Congress does nothing, Social Security will only be able to pay out about 80 percent of promised benefits. That’s definitely something that needs to be addressed—but it’s not a crisis, and it’s certainly not a reason to scrap the powerful economic security system we’ve built over the past 84 years. Instead, we must address wealth inequality and increase retirement security for all generations by giving our system a tune-up.

Rep. John Larson (D-Conn.) and over 200 House Democrats have a plan: the Social Security 2100 Act. The 2100 Act would ensure that young people today get our fully earned benefits when we retire.

Read more: The Hill »

Senate Bill Would Cut Social Security Operations Again

[Center on Budget and Policy Priorities] This summer’s budget deal between President Trump and congressional leaders offers enough total discretionary dollars to give the Social Security Administration (SSA) a much-needed funding boost in 2020, but the Senate majority plans to cut $2.7 billion in inflation-adjusted dollars from the appropriations bill that funds SSA operations. That bill, in turn, would reduce SSA funding by more than 2 percent in inflation-adjusted terms. The companion House bill would slightly increase SSA funding, but by barely enough to offset inflation in 2020 — and not nearly enough to offset years of underfunding before then. For SSA to provide high-quality service to a growing population, policymakers must boost funding substantially.

SSA’s years of cuts have taken their toll. From 2010 to 2019, its operating budget fell nearly 11 percent in inflation-adjusted terms — even as the number of Social Security beneficiaries grew by 17 percent. (See chart.) As a result, SSA has lost 12 percent of its staff since 2010, hampering its ability to perform its essential services, such as determining eligibility in a timely manner for retirement, survivor, and disability benefits; paying benefits accurately and on time; responding to questions from the public; and updating benefits promptly when circumstances change.

Social Security Administration Faces Increased Workload with Fewer Resources

As workloads and costs have grown — and budgets and staffing have shrunk — SSA’s service delivery has worsened:

  • Most callers to SSA’s national 800 number don’t get their questions resolved; as callers are on hold for longer periods, nearly half hang up before connecting. And a growing number get busy signals.
  • Due to understaffing, field office wait times have risen in every region of the country since 2010, with millions of visitors waiting longer than an hour.
  • SSA has been forced to close 67 field offices and shorten office hours in the rest, making it harder for taxpayers and beneficiaries to access service.
  • The average wait for a disability appeal is 16 months, causing hardship for hundreds of thousands of workers already struggling with a life-changing disability.
  • SSA has stopped mailing Social Security statements to most workers as legally required, citing budget constraints.
  • Millions of beneficiaries await benefit adjustments due to the agency’s backlog on its behind-the-scenes work, such as awarding benefits to widows when spouses die, issuing back payments, resolving complex claims issues, and adjusting benefits for early retirees and disabled workers with earnings. Some 3.2 million of these actions are pending, causing unnecessary hardship — and often overpayments.

SSA’s extremely tight budgets have been driven by two factors: (1) the 2011 Budget Control Act’s tight annual caps on total discretionary funding, and (2) policymakers’ failure to give SSA its fair share of funding increases from past budget deals that raised those caps on a temporary basis. For example, the budget deal for 2018 provided a 9 percent increase in non-defense discretionary (NDD) funding from the previous year in inflation-adjusted terms, but SSA’s budget rose only 2 percent. NDD spending rose nearly 1 percent in inflation-adjusted terms in 2019, but policymakers cut SSA’s budget by almost 2 percent, which helped convince SSA Commissioner Andrew Saul to impose a partial hiring freeze.

Annual funding bills for the departments of Labor, Health and Human Services, and Education, which also include SSA’s administrative budget, have faced large cuts since 2010. The President and Congress should provide sufficient funding in the final 2020 appropriations bill to cover SSA’s essential services.

Don’t be fooled: increasing the retirement age is a benefit cut — unless you’re rich

[Washington Post] Poorer Americans are much less likely to survive into their 70s and 80s than rich Americans, a stark life-expectancy divide compounded by the nation’s growing disparities in wealth, according to a federal report.

Over three-quarters of the richest 50-somethings in 1991 were still alive in 2014, the report found. But among the poorest 20 percent of that cohort, the survival rate was less than 50 percent, according to the analysis by the Government Accountability Office, a nonpartisan congressional research agency.

The report finds that while average life expectancy increased over that period, it “has not increased uniformly across all income groups, and people who have lower incomes tend to have shorter lives than those with higher incomes.”

“Over time, the top fifth of the income distribution is really becoming a lot wealthier — and so much of the health and wealth gains in America are going toward the top,” said Harold Pollack, a health-care expert at the University of Chicago who was not involved in the creation of the report. “In these fundamental areas — life expectancy, health — there are these growing disparities that are really a failure of social policy.”

Full story: Washington Post »

Watch out, seniors: Trump just launched a stealth attack on Medicare

President Donald Trump signs an executive order about Medicare at the Sharon L. Morse Performing Arts Center, Thursday, Oct. 3, 2019, in The Villages, Fla. (AP Photo/Evan Vucci)

[Salon.com] This article was produced by Economy for All, a project of the Independent Media Institute.

Watch out, older Americans and people with disabilities! President Trump just announced a plan to give corporate health insurers more control over your health care. His new executive order calls for “market-based” pricing, which would drive up costs for everyone with Medicare, eviscerate traditional Medicare, and steer more people into for-profit “Medicare Advantage” plans.

Seema Verma, the Trump appointee who heads the Centers for Medicare and Medicaid Services (CMS), may not have warned Trump about the slew of government audits revealing that many Medicare Advantage plans pose “an imminent and serious risk to the health of… enrollees.” They also overcharge taxpayers to the tune of $10 billion a year.

In the last few years alone, CMS’ limited audits have highlighted major issues with Medicare Advantage plans. Reports from the Department of Health and Human Services Office of the Inspector General (OIG) and Government Accountability Office (GAO) have underscored these issues. They have recommended that CMS increase its oversight of Medicare Advantage plans and its enforcement efforts.

A Medicare Payment Advisory Commission report indicates that the problems with Medicare Advantage may be even more far-reaching than the government audits indicate. The Medicare Advantage plans have failed to turn over reliable and complete claims data, as required by law. Without this data, it’s not possible to know whether they are covering the health care services they are paid to provide or to oversee them to the extent necessary.

Last month, Senators Sherrod Brown, Amy Klobuchar, Chris Murphy, Richard Blumenthal, Bernie Sanders and Debbie Stabenow laid out several serious malfeasances by these corporate Medicare insurers — including UnitedHealth Group, Aetna, Cigna and Humana — in a detailed letter they sent to Verma.

The insurers’ wrongdoings are systematic. They are ongoing. They endanger the health and financial well-being of millions of people. They undermine the financial integrity of the Medicare program and harm the U.S. Treasury. Yet, to date, CMS has failed to develop, let alone execute, a plan to hold these insurers accountable for violating their legal obligations and to ensure their members get the health care to which they are entitled.

Read More »

Everyone should care about this report on Social Security

Writing for the Washington Post, Henry Aaron highlights a report recently released by the Social Security Administration which contains a comprehensive menu of actions that Congress can take to shore up the program’s finances and change benefits:

If you think that the best way to fix Social Security’s long-run financial shortfall is to cut benefits, the agency’s report shows ways Congress could do that. If you think that the way to close the long-term funding gap is to raise taxes while maintaining benefits, you will find a couple of dozen ways to do that, too. If you think that Social Security should give benefit credits to those who stay home to care for children, the elderly or people with disabilities, or that the very old should receive additional benefits because they suffer from higher poverty rates than the not-so-old, this is the place to go for a menu of ways to do those things and make a lot of other changes that you might not have thought of.

You’ll learn what those measures cost or save. You’ll be able to read brief and understandable explanations of each of them. The options come with color charts that show graphically how each change would affect Social Security’s finances. And, if you can’t tell the program without the players, you’ll be able to see which member of Congress or organization proposed them.

This is must-read material for anyone paying attention to the Democratic candidate debates now — or later, to the debates between the Republican and Democratic nominees. Understanding what the candidates propose to do about the nation’s No. 1 domestic program could help you decide which candidate you support.

Full column: Washington Post »