For as long as I can recall, every candidate for federal office has spoken about the need to rescue Social Security. I remember one Presidential debate, at least twenty years ago, in which one of the candidates referred to two unrelated opinion polls. One had asked young adult Americans whether they believed Social Security would still exist when they were ready to retire. The other had asked a similar demographic whether they believed that space aliens were visiting the Earth in UFOs. The result of the comparison was that more Americans believed in space aliens on UFOs than believed in Social Security.
Social Security was part of the New Deal enacted by Congress under President Franklin Roosevelt. Contrary to its name and to popular perceptions of the program, Social Security is a tax on working people used to pay other people—mostly the elderly and the disabled—not to work. The goal of the program, when it was created in 1935, was to open jobs for more workers and reduce unemployment by giving incentives to certain workers to leave the work force.
In 1935, the median average lifespan of Americans was seventy years. Today it is more than eighty years. This means that, when Social Security began, roughly half of the Americans who retired at age sixty-five could be expected to draw from the program for five years or less. Now, given better nutrition and health care than existed in the 1930s, more than half the Americans who retire at age sixty-five will draw from the program for fifteen years or more. No wonder many Americans doubt that Social Security can survive for another generation!
In 1935, each working American was taxed two percent of his or her income, but only up to $3000; money earned above that amount was untaxed. The tax was further hidden by requiring employers to match employee contributions, making the apparent tax only one percent. Today, the tax (including Medicare, which was added in the 1960s) is 15.3%, although it still seems less because employers are still matching employee contributions, making the tax appear to be less than eight percent (except for people who are self-employed). The ceiling of taxable income has risen from $3000 to $137,700.
Employment rates, salaries, longevity figures, and other numbers vary from year to year. Each year projections are offered to guess how long Social Security can continue to fund disabled and retired persons given current numbers. The dire prospect of running out of money for Social Security usually projects only a few more years of survival for the program, but somehow Social Security has continued to remain solvent even as some of the early years for its projected failure have passed.
The easiest way to keep a balance in Social Security are to raise the tax rate and to reduce the benefits paid. Neither of those options are popular in today’s political climate. Other questions can be addressed that might also help preserve Social Security as a government program for the foreseeable future:
- Why place a ceiling on taxed earnings for Social Security? This practice causes Social Security to be more of a burden on low-income and middle-class taxpayers than on the wealthy. Removing the ceiling would generate more income for Social Security without adding any costs to the program.
- Social Security earnings have never been taxed, but many recipients of Social Security are drawing more total income from various retirement programs and investments than the average American worker can earn. Replacing the ceiling on taxed earnings with an income above which Social Security is subject to withholding tax would generate income for the government without harming the average disabled or retired recipient of Social Security.
- Retirement age needs to be reconsidered. Retirement at sixty-five (and early retirement at sixty-two) removes productive workers from their jobs while stressing the Social Security system. I plan to work full-time until I am seventy; I think most people my age are capable of doing the same. (Both my parents and all four of my grandparents lived into their eighties—two of the six into their nineties.)
- Understand that Social Security never promised to provide a sustainable living income for retirees. Social Security is meant to supplement other investment and retirement income. Unlike life, liberty, and the pursuit of happiness, Social Security is not a God-given right. Social Security is a government program of taxation and payment of benefits which can be adjusted by the government whenever it chooses (remembering that the members of government are subject to replacement by the voters whenever they make and enforce unpopular laws).
- Understand that currently Social Security is generating more government income than it is costing government expense. Predictions of the collapse of Social Security always depend upon extending current trends. Adjustments made over the years have sustained Social Security well beyond earlier forecasts of shortfalls. Continued adjustments will be more significant than any massive overhaul of the system.
In short, candidates for political office often threaten the end of Social Security as a way of scaring voters. Real assessments of the program show no need for worry or fear. Like other panics over illnesses, environmental changes, technological failures, and political confrontations, news of the collapse of Social Security is largely exaggerated and used to manipulate public opinion. J.