“For The Moment, The Ghost Of FDR Must Be Smiling”: 2016 Is Turning Into A Historically Great Year For Social Security
Not that very long ago, Republicans were almost universally united in favor of a strategy of “entitlement reform” that included various benefit cuts — some overt, like changes in the formula for cost-of-living adjustments, and some indirect, like retirement-age increases — in Social Security. Most Republicans also favored, in principle at least, some sort of partial privatization scheme for the signature New Deal program. Meanwhile, Democrats were generally divided into a large camp trying to keep the program exactly as it was, and a smaller group — including, at least in theory, President Barack Obama — that was open to such “entitlement reforms” as part of some budgetary “grand bargain” with Republicans.
How things have changed in 2016.
The Republican presidential nomination has been won by a candidate who conspicuously refused to climb aboard the “entitlement reform” bandwagon. Since rank-and-file Republicans have never much bought into Social Security (or Medicare) cuts, it was not surprising this particular Trump heresy troubled party elites but no one else.
Meanwhile, both Bernie Sanders and (to a lesser extent) Hillary Clinton have both been talking about enhancing Social Security benefits, with their main argument being over the financing mechanism, with Clinton being reluctant to embrace a lift in the payroll tax cap that would hit upper-middle-class voters.
But now along comes another potential game-changer: President Obama.
Not only do we need to strengthen its long-term health, it’s time we finally made Social Security more generous and increased its benefits so that today’s retirees and future generations get the dignified retirement that they’ve earned,” Obama said in an economic call to arms in Elkhart, Indiana. “We could start paying for it by asking the wealthiest Americans to contribute a little bit more.”
Now you can interpret Obama’s shift any way you want — as a response to leftward pressure from the primary contest, or as proof he was never serious about “entitlement reform” to begin with, or simply as a parting middle-finger-gesture to the GOP, whose leaders were probably less serious than Obama about reaching some “grand bargain” that included high-end tax increases. But the fact remains that the combination of forces in favor of Social Security benefit cuts — or even for simple maintenance of the status quo — has been reduced significantly.
You’d have to say 2016 is becoming the best year for Social Security since at least 2005, when George W. Bush devoted most of his post-reelection political capital to a partial privatization scheme and had his presidential ass handed to him as congressional Republicans headed for the hills while Democrats failed to rise to the “bipartisanship” bait. There will continue to be extensive and fractious arguments over how to improve Social Security benefits and how to keep the whole system solvent. Meanwhile, nobody should take Donald Trump’s assurances on the subject to the bank, any more than anything else the mogul says. And if he loses in November, conventional Republican economic policy, including “entitlement reform,” could make a comeback. But for the moment the ghost of FDR must be smiling.
By: Ed Kilgore, Daily Intelligencer, New York Magazine, June 3, 2016
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Free market capitalism is telling us that many businesses will discard workers when they reach the age of 50 to 55, despite laws against age discrimination. Let us then reduce the retirement age under Social Security and Medicare to 55. Recently President Obama has voiced support for increased Social Security benefits, a good first step. Workers who lose their job in their early to mid-50s usually cannot find work at comparable pay, and not everyone wants to work as a greeter at Walmart. Reducing the current retirement age from 67 to 55 is a good idea, in my humble opinion.
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I could not agree more!
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Social Security is running out of money as it is now. Lifting the cap and applying Social Security taxes to all kinds of of income would help it stay solvent, but not much more – it won’t nearly be enough to pay to lower the retirement age from 67 to 55, because it means that Social Security fund will have to collect taxes for 12 fewer years, will lose 12 years of interest on these taxes, and will pay benefits for 12 more years while still granting yearly increases. So while it would be nice to be able to retire with full benefits at 55, it would probably require doubling the tax, and more than doubling if we expect that age 55 retirement would apply to those who have been making contributions for decades aiming for age 67. Remembering that the actual SS tax is 12.4%, not 6.2% we see on the W2 because the employer pays half out of our salaries before we even see it, “doubling” means extra 12.4% in tax, not extra 6.2%. That’s what I think it will be like if we set age 55 for the people who are just entering the workforce – if it were apply to everyone right away, it could mean extra tax of 20% or more.
I think lifting the cap is a good first step, but I don’t expect to live to see the retirement age go down.
I agree that age discrimination is real, but I think if federal government wanted to help the age 50-55 workers, I think it would do better to hire them to not let these years of experience go to waste.
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In order to maintain Social Security and reduce the retirement age in steps to 55, I support the Robin Hood tax on financial transactions, not an increase in payroll taxes. I do support lifting the cap on upper income contributions to Social Security.
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I support the financial transactions tax, and lifting the cap on Social Security taxable wage, and applying Social Security taxes to all types of income.
But here’s the thing (I did some math and reading up): Social Security pays out about $870B a year and currently collects roughly the same amount, I believe. Allowing full retirement at 55 rather than 67 would require Social Security to collect about 2 times what it does now, which means around 800b more.
However, a financial transactions tax is not going to bring in nearly enough money – it would depend on the exact rates and other factors, but from what I saw for other countries that have it, it would bring maybe 30-100 billion a year.
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I don’t know the details, but I think that it is doable, given the political will.
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Per Fix the Debt and The Concord Coalition, we do need to make changes to shore up the Social Security financial shortfall. Serious consideration needs to be give to a variety of possible solutions, the easiest and most effective of which is to increase the FICA taxable wage base, which will draw in more contributions from employees making more than the current $118,500 and their employers, while increasing benefits on that income at a lesser rate. All candidates need to speak to this and the greater debt problem, especially Trump whose tax plan will increase the debt by over 60% or $12 trillion in the next ten years – his claim to pay of the debt in eight years is impossible to achieve with his tax plan. But, Clinton and Sanders need to address these issues as well.
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