Social Security
By Wanda Williamson for The Madison Institute
We are committed to maintaining the stability of the Social Security program. This is the most successful economic program of the past century, in terms of its efficiency, intention, and outcomes. Three or more generations of retired citizens have been largely saved from poverty, and many younger surviving spouses and orphaned children have been supported during their time of need. Workers suffering from disability have received a modest income before retirement age.
Since 1983, workers have been subject to payroll taxes sufficient to build a surplus in the Social Security Trust Fund, anticipating the demographic bulge due to start retirement in a few years. It would be bad faith to deprive current workers of the benefits they have earned with these augmented payments during their working years.
Under current arrangements, the program is adequately funded for the next several decades. This is longer than valid projections can be made, since actual funding could be affected by unforeseen changes in environment, health care, and public policy. In the present political climate, it is perhaps unwise to open the door to any direct changes in revenue or benefits, and in the near term none are needed.
Estimates of longer-term viability depend on economic conditions, possible physical or health disasters, changes in wage policies, and other public decisions which cannot be predicted ahead of time. There are several ways that revenues to the trust fund could be enhanced, and any effort to enhance trust fund income should be directed toward such policy changes.
· An increase in the minimum wage, and indexing to keep it at a reasonable level.
· A return to less disparity in income distribution.
· Changes in the amount and type of income taxed.
· Changes in private pension policy to encourage older workers to continue working, perhaps at part-time or less-taxing jobs, without loss of earned pension benefits; and a public effort to increase the availability of such jobs.
During the years since Social Security became effective, we have seen the average life expectancy increase significantly, adding to the time period when benefits are payable. A small adjustment was made recently in the age to be eligible for full retirement benefits under Social Security. If this trend toward increased longevity continues, and particularly if many of our retirees stay healthy longer, it would be wise to encourage such healthy people to delay full retirement. Private pension plans often work against such a decision, linking the level of pension payments to a final few years of employment income. This is not “one size fits all” since certain occupations are not hospitable to older workers, requiring physical strength and quick response time, rather than experience and judgment. The goal should be to remove impediments to working, and to encourage the creation of part-time or otherwise less physically demanding “bridge jobs” which could be performed for a decade or so after retiring from full-time work. The income from such work would be subject to the payroll tax and should accrue some additional benefits.
In any discussion it is important to stress that Social Security is an insurance program, not a savings or investment program. It offers several benefits not available from a private savings account:
a. Family survivors are covered in the event of the worker’s death.
b. The worker is covered if he should become disabled.
c. Retirement benefits are guaranteed for life.
In order to replace these benefits privately, three separate insurance policies would be needed, at much greater cost to the worker, and correspondingly greater profits to insurance companies. Many lower-wage workers do not have the discretionary income to purchase such insurance, even if they could be convinced at a young age to see the need for it.
To read document discussing the Social Security revenue income gap, click the link below: