[Via CEPR] Last month the Social Security Trustees published their annual report on the state of Social Security. Although two of the appointed trustee positions are vacant and the Trump administration has repeatedly called for cuts to the program, the Trustees (all Trump appointees) agree the program’s long-term outlook is optimistic.
Social Security, the program that provides retirement and disability benefits to millions of Americans every year, has a projected shortfall equal to 3.21 percent of taxable payroll over the next 75 years. The program’s benefits are fully funded through 2034, after which they are 79 percent payable, assuming no changes are ever made.
The projected shortfall means that to fully fund the program, payroll taxes would have to be increased by 3.21 percentage points. This is an increase from last year’s 2.78 percent projected shortfall, likely due to the decreased projections in average wage growth over the next 50 years. In 2019 the trustees predicted that average real wages would grow by 1.42 percent annually over the next 30 years; this year, they predict only 1.29 percent annual growth.
An increase in taxes is never trivial, particularly for low-income workers. However, even with this year’s lower wage growth projections, it is clear that growing wages have a much greater impact on the average worker’s financial situation than the increased taxes. These amounts are compared in Figure 1 below.
While it is unlikely that the Trustee’s projections will hold up over the next 50+ years, they still illustrate the relative importance of wage growth compared to the tax increase. Figure 2 shows what would happen to a salary of $50,000 per year in 2020 over the next 30 years. Based on the average wage increase, this salary would grow to $68,084 at the current payroll tax rate, and $65,754 if the tax were increased to fund the program fully.
In addition to being easily fixable, it is important to note that the shortfall in the Social Security trust fund is not an indicator of the function of the program itself. A large portion of the shortfall is directly tied to the increase in income inequality. The payroll tax which funds the program is only levied on the first $137,700 of wage income per year (in 2020), allowing many higher-income workers to escape paying into the program at the same rate as the rest of the population. When that cap was first established in 1983, only 10 percent of wage income was over the maximum, but by 2016 it was more than 17 percent. In this same time frame, the lower-earning population who pay a greater effective tax rate have not experienced the same wage growth as high earners.
With such compelling evidence of its value and near-universal support from the American people, there is no reason Social Security should be viewed as “struggling.” Moreover, solutions to the projected shortfall are many: 1) slightly increase the payroll tax (as discussed above); 2) remove the tax cap on very high earners; or 3) to simply add money to the trust fund.
Full article (including downloadable graphics): CEPR »
[via CNBC] Retirees who feel their Social Security benefits aren’t stretching as far as they used to aren’t imagining it.
Retiree costs are going up at a rapid clip, and Social Security cost-of-living adjustments are not keeping up with those growing expenses, according to a recent report from The Senior Citizens League, a nonpartisan senior advocacy group.
For example, someone who retired in 2000 would have seen their average Social Security benefit of $816 per month increase to $1,246 this year. But to keep up with inflation, they would need $1,626 — an extra $380 per month — the report found.
The group also predicts that the Social Security cost-of-living adjustment, or COLA, for 2021 could be zero. That’s based on data from the Bureau of Labor Statistics’ Consumer Price Index through April. That index is used to calculate the annual Social Security COLA.
The official COLA is announced every year in October, so the current prediction could change by then. Just last month, the group predicted the COLA would be 0.8% in 2021. The Social Security adjustment has been zero before, in 2016, 2011 and 2010.
A lack of any increase at all would come at a time when seniors are already feeling squeezed financially. The Senior Citizens League found that Social Security benefits have lost 30% of their buying power since 2000.
While benefits increased by 53% from January 2000 to January 2020, the costs of goods and services retirees use most jumped by 99.3%.
[via Pittsburgh Post-Gazette] Ronnie Sturccio is not your typical 68-year-old senior citizen. Her regular routine includes lifting weights at the gym, running up to 5 miles a day, figure skating and working two part-time jobs that she is nowhere near ready to retire from.
Yet she has been forced to leave the workforce earlier than she had planned on two occasions since reaching retirement age.
The first time was when her father became terminally ill five years ago and she ended her 28-year career as an alternative school therapist in order to care for him. Most recently the COVID-19 crisis caused her to be laid off from her part-time jobs working the ticket booth at Alpha Ice Complex in Harmarville and also her substitute teaching jobs in the East Allegheny and Gateway school districts.
“I’m not ready to quit working,“ said Ms. Sturccio of Plum. “Financially I’m taking a hit. I was making money. Now that money is gone. I’m living on just Social Security now and my money is tight.”
Like many workers who expect to retire on their own terms, Ms. Sturccio has found life has a way of throwing curve balls.
Americans tend to retire earlier than they expected, according to a recent study by Allianz Life Insurance Co. of North America, which found more than half of workers will be forced out of the workforce earlier than expected and for reasons out of their control.
In 1936, President Franklin D. Roosevelt spoke words that perfectly sum up the difference between Biden and Trump. In accepting his party’s nomination for a second term Roosevelt explained:
“Governments can err, Presidents do make mistakes, but the immortal Dante tells us that divine justice weighs the sins of the cold-blooded and the sins of the warm-hearted in different scales. Better the occasional faults of a Government that lives in a spirit of charity than the consistent omissions of a Government frozen in the ice of its own indifference.”
When Trump ran for president in 2016, he sought to hide his cold-blooded hostility toward Social Security and those whose economic security it protects. But he revealed his contemptuousness, his icy indifference, before running for office and again once in power.
In 2000, well before running for president, Trump displayed how elitist, how ignorant, how “frozen in the ice of [his] own indifference” he is about the lives of America’s working families. Advocating raising the Social Security retirement age to 70, Trump sneeringly asked “how many times will you really want to take that trailer to the Grand Canyon?” He added that he “plan[s] to work forever,” implying that everyone else should, as well — again completely indifferent to the lives of those not born multimillionaires and working as nurses, preschool teachers, cashiers and in other physically demanding jobs.
Trump made clear that he would like to end Social Security as we know it. He slandered Social Security and every political leader who supports it by calling it a Ponzi scheme, and urged that it be privatized and handed over to Wall Street.
Trump did reveal, however, that he understood how out of step his views are. In a 2011 interview with Sean Hannity, Trump said that Republicans should be very careful not to openly advocate cutting Social Security, or they would pay the price politically. Using that insight during the 2016 election, Trump said he would not cut Social Security. During the Republican primary, Trump used this as a key point of contrast with the other candidates, explaining that “they want to cut it very substantially, the Republicans, and I’m not going to do that.”
Trump was correct about the stance of the Republican Party, but lying about his own position. Once in the White House, Trump embraced Republican orthodoxy on a whole host of issues, including cutting Social Security. All of Trump’s budget proposals have included billions of dollars in cuts to Social Security. In a recent FOX News town hall, he pledged that “we’ll be cutting” entitlements. “Entitlements” is DC-insider speak for Social Security, Medicare and Medicaid.
Most telling of all is Trump’s response to the coronavirus pandemic. Over and over again, Trump has demanded that Congress enact an elimination of payroll contributions, which are Social Security’s dedicated funding. As a response to the coronavirus crisis, this makes no sense. It’s slow, inefficient, and fails to get money into the pockets of those who need it most. The only reason to support this policy over better targeted, more efficient measures is if your true goal is to undermine Social Security and its self-funded status.
If Trump retains the presidency, he and Senate Majority Leader Mitch McConnell (R-Ky.) have already signaled that Social Security will be under constant threat. The program will be considerably safer in Joe Biden’s hands. Biden’s history on Social Security is far from perfect, but he is far better than Donald Trump.
Never having forgotten his working class, economically-insecure roots in Scranton, Pa., Biden is committed to improving the lives of America’s working families. But despite that focus, Biden, like most other centrist Democrats, spent decades under the influence of a billionaire-funded crusade against Social Security. The campaign’s goal was to undermine Social Security by convincing politicians, the media, and the public of the lie that, notwithstanding our being the richest country in the world at the wealthiest moment in history, Social Security is somehow no longer affordable and must be cut.
Fortunately, grassroots activists, together with a few stalwart Congressional champions, defeated this conventional, but wrongheaded, thinking and the efforts it spawned. In doing so, they exposed the billionaire-funded lies and convinced the mainstream of the Democratic Party of the wisdom of expanding Social Security with no cuts. The movement to expand, not cut, Social Security gains momentum with every passing year. Now, not a single mainstream Democrat supports cutting Social Security — and that includes Joe Biden.
Biden’s platform rules out cutting Social Security, including specific benefit cuts such as means testing. Biden supports requiring the wealthy to pay into Social Security at the same rate as the rest of us. He plans to use the additional revenue to both strengthen Social Security’s finances and expand benefits.
In sharp contrast to Trump, Biden’s response to the coronavirus crisis is not to attack Social Security. Instead, he is championing a proposal (originally from Sens. Elizabeth Warren and Ron Wyden) to increase Social Security benefits by $200 a month for the duration of the crisis.
These are important steps in the right direction, but Biden should do more to overcome his past misguided support for a bipartisan “Grand Bargain” that included cuts to Social Security. Some of his closest advisors and supporters championed those ignorant views — and may still hold them. One of his top bundlers is Erskine Bowles, who co-chaired the failed Bowles-Simpson Commission and pushed hard for a package with deep, harmful Social Security cuts.
To further reassure supporters of Social Security who are rightfully concerned about his past, Biden should surround himself with friends of the program — and avoid its enemies. If Biden’s transition team is led by staffers who are closely tied to the austerity politics of the past, it will —and should — set off alarm bells.
That being said, Biden’s record on many issues, including Social Security, shows that his inclination is nearly always to be solidly in the mainstream of the Democratic Party. He is not a maverick on the right or on the left. Thanks to the hard work of many activists, the mainstream Democratic Party position is now to support expanding, not cutting, Social Security.
Trump will undoubtedly attack Biden on Social Security and claim to be the real supporter of the program. But don’t be fooled. Don’t be taken in by Trump’s lies and dishonest promises. The two parties – and their respective candidates — are as far apart on Social Security as they have been in many decades. Unfortunately, no modern-day Republican politician can be trusted to protect our earned benefits. Quite the opposite.
Biden and the Democrats support expanding Social Security, with no cuts, and acting in the sunshine. Trump and the Republicans want to steal our earned benefits under the cover of darkness. For every American who supports Social Security, the choice is clear.
It’s welcome news that Treasury and the IRS will use the authority that Congress gave them to automatically provide stimulus payments to Social Security and railroad retirement beneficiaries who do not usually file a tax return, instead of making them file one. It’s imperative they do the same for some 3 million very low-income seniors and people with disabilities who receive Supplemental Security Income (SSI), as well as more than 200,000 low-income recipients of certain veterans benefits, many of whom could face real difficulties filing a return and therefore could miss out on crucial stimulus payments.
Recipients of SSI and Veterans Affairs (VA) pension benefits who don’t file returns and don’t receive Social Security retirement or disability benefits aren’t covered by Treasury’s decision yesterday to provide payments automatically to Social Security beneficiaries who don’t file. Filing a tax return would be difficult for many SSI recipients and veterans’ pension recipients even during normal times. They include very low-income seniors and people with disabilities, some of whom have cognitive disabilities and other challenges that make it difficult to complete the required tax forms without assistance, and veterans with disabilities who similarly can face challenges with red tape. But requiring these individuals to file a return during this pandemic is particularly unreasonable and dangerous.
Given stay-at-home orders and the public health imperative for all of us — but particularly those who are older or have health conditions — to assiduously avoid face-to-face contact with family, friends, and public and private entities, SSI and VA pension beneficiaries will be forced to rely on phone and the internet for any help with the forms. But many don’t have internet access or capacity to understand the forms on their own, and telephone-based help may be unavailable or ineffective for many. Many may not know they need to file to get their payments or may not be able to overcome that barrier, as happened with millions of intended beneficiaries of stimulus payments in 2008.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides the legal authority for Treasury to provide payments to these groups automatically and mandates quick action: “The Secretary shall, subject to the provisions of this title, refund or credit any overpayment attributable to this section as rapidly as possible” (emphasis ours). Within this legal mandate, the law allows Treasury to electronically deliver rebates to payees who receive tax refunds or a “Federal payment,” including federal benefits like SSI and VA pensions. This authority is similar to how the CARES Act enables Treasury to send payments directly to tax filers who filed a return for 2018 but not yet for 2019, and to how it authorizes Treasury to send payments directly to recipients of Social Security and railroad retirement benefits who have not filed a tax return.
Practically speaking, Treasury has access to the information it needs to issue the payments to these non-filers. As former senior Office of Management and Budget official Jack Smalligan has pointed out, Treasury can match its data against those from the Social Security Administration and Veterans Affairs to determine which SSI and veterans’ beneficiaries aren’t part of a tax filing unit (that is, they don’t already file tax returns and aren’t claimed as someone else’s dependent) and then issue them automatic payments. This is effectively the process that Treasury has already decided to use for non-filers among Social Security and railroad retirement beneficiaries.
The leadership and professionals at Treasury and IRS should be commended for doing all they can to prevent millions of Social Security beneficiaries from having to file a tax return unnecessarily during a pandemic. That same commitment is needed for recipients of SSI and VA pensions. Picture a young adult with Down syndrome, or an elderly woman who never made enough to qualify for Social Security, or a veteran who served their country but hasn’t filed a tax return in years. There are millions like them around the country.
These are important members of our communities living with additional burdens in this pandemic. There’s no reason to add to that burden by making them navigate filing a tax return when their government has all it needs to deposit a rebate in their bank account.