An amendment to the Senate budget resolution, entered by Sen. Elizabeth Warren (D-Massachusetts), didn’t muster through on March 27. It did, however, indicate more and more that the Social Security program needs revision, and without any age-raising or benefit-reducing methods, either.
While short in content, her bill called for both protection of the program and expansion of its benefits, and through a deficit-neutral reserve fund. And even though Resolution 11 failed, supported by only 42 Senators (none of whom are Republican), that’s still a big improvement, notes Pena Levy in her recent Mother Jones article on the topic. Just two years ago, Levy reports, congressional Republicans and Democrats alike were talking about cutting those benefits.
While many regard Social Security as shaky and at-risk, the problem isn’t that it’s costing so much; it’s simply not collecting enough. And that’s because only about a third of all earned income contributes to it.
This year, the income ceiling for Social Security deductions is $118,000. Up to that amount gets charged 12.4 percent (split in half between the worker and the employer). Any earnings over that amount, though, aren’t subject to the charge.
The total collected by Social Security in 2014 came to $648.8 billion, the agency says. Dividing it by that 12.4 percent means this amount resulted from about $5.2 trillion in earnings. But the total for individual personal income that year totaled approximately $14.7 trillion.
And that means roughly $9.5 trillion – about 65 percent of all the money earned by Americans last year – avoided Social Security deductions. If it had been applied to all income, the Social Security Trust Fund would have collected over $1.8 trillion. Since its distribution for 2014 amounted to about $863 billion, that means there could have been almost $1 trillion left over.
And what could we do with that $1 trillion? Distribute it through Social Security, of course, and back to the same people who paid into it.
And here are six quick and undeniable reasons why we need to fix Social Security:
1. Social Security payments could dramatically increase
The average Social Security payment to retired workers is $1,331.44. For 75 percent of those recipients, that’s all or almost all they earn, and over a third of American seniors have nothing left at the end of the month after using it to pay all their expenses.
With a full application of the deduction to all income, though, those monthly payment could easily double, allowing seniors to earn more than the Federal Poverty Level ($2,662.88 per month versus FPL of $2,452.08 for an individual).
2. Unemployment could be reduced
Currently, 7.97 million Americans of ages 65 and older are employed, but not necessarily because they want to be. It’s financial need that keeps many of them on the clock (U.S. seniors have an average credit card debt of $9,283).
Imagine if those seniors had guarantee of improved Social Security, though. If only a quarter of them took the retirement option, that would open up the doors to about 2 million jobs. And that would cut the number of unemployed (currently 8.6 million) by almost 25 percent.
3. The age for full eligibility could be lowered
The current “full retirement age” to receive full Social Security benefits is 65. It gradually increases for persons born in 1954 or later, though, maxing at age 67 for persons born in 1960 and later. This delay in eligibility is supposed to help the program accommodate anticipated annual costs. Conservative groups frequently suggest raising the eligibility age even higher, too, up to 70.
If Social Security had significant funding, though, this gradual age increase could be halted – and even reversed. If the qualifying age were immediately knocked down to only 63, that would make another 4 million employed Americans eligible. If only a quarter of them retired, that would generate another 1 million job openings for younger Americans to fill.
4. The economy could be boosted
America’s seniors number 45 million. Their current 14-percent share of the U.S. population is expected to be 19 percent in the next 15 years, too. And in these current circumstances, in which Social Security will be all/just about all earned by three-quarters of them, that means about 15 percent of all consumers will be kept from the marketplace. No spare income means no purchases, which means no business revenue.
With a benefits increase, though, this sizable group can be active consumers. They could purchase more. And more consumer activity means more job growth, which will add to the number of job openings they’ll create upon retirement. Younger Americans who get those jobs will spend their new earnings, too, generating more growth and additional jobs.
5. The rate charged for Social Security could be lowered
Social Security could pay out about $865 billion in 2015. If benefits were doubled, that would amount to $1.73 trillion. And if the ceiling cap were removed, resulting in $1.822 trillion in collection, there’d be $92 billion left over. With such a high remaining balance, the rate could be reduced to match the need (0.6 percent, in this case). And those $92 billion in savings could be split by workers and their employers.
6. The American people want it
A whopping 79 percent of registered voters believe Social Security benefits should be increased, and by eliminating the income ceiling. That’s nonpartisan support, too – Democrats, Republicans and independents.
And giving elected officials more reason to support this concept (and Elizabeth Warren another reason to reintroduce it), 63 percent say they’re more likely to support a candidate who voted for increased benefits.
So if voters were to call out their representatives on this issue, perhaps a few more in congress will support amendments like Warren’s the next time the subject comes up.