Pro & Con: Cut benefits, raise retirement age to save Social Security?

Worse, its long-term financial picture is bleak. Social Security has promised $7.7 trillion more in benefits over the next 75 years than it will take in from payroll taxes. The deficits begin in about six years.

Doing nothing is not an option. Social Security can cover all promised benefits for now. But if changes aren’t made fairly soon, all retirees will eventually face 22 percent benefit cuts.

Fixing Social Security will not be easy. No silver bullet can painlessly eliminate the deficits and enable the program to keep paying the same level of benefits that it has. Fixing Social Security will require a combination of several reforms — some more difficult than others.

One needed reform is to increase the Social Security retirement age. This should be accompanied by other incentives, such as eliminating the Social Security payroll tax for employees who are willing to work beyond their normal retirement ages.

Increasing the Social Security eligibility ages would simply reflect longevity improvements that have already taken place. Future retirees will live much longer on average than their grandparents did. Social Security must reflect that increased longevity by increasing retirement ages for both full benefits and early retirement benefits. Otherwise, recipients will spend an ever higher proportion of their lives living at the expense of their children and grandchildren.

Life expectancy has already increased substantially since 1950. Males born in 2004 can expect to live almost 10 years longer than those born in 1950; women can expect to live nine years longer.

When the Social Security program was created in 1935, 65-year-old men could expect to spend about 13 years in retirement — 16 percent of their lifetime. Women of the same age averaged 15 years — or 18 percent of life span — in retirement. However, only a little more than half of all adults over age 21 lived to reach retirement age.

Today, a male retiree born in 1940 will spend 19 percent to 25 percent of his life collecting Social Security benefits — depending on whether he retired at age 65 or chose early retirement. A woman born in the same year will collect benefits for 21 percent to 27 percent of her life.

Social Security has not kept pace with these changes. Congress has not changed the age for receiving full benefits since 1983, when it approved a phased increase leading to retirement at age 67 in 2022. The early eligibility age remains unchanged since 1961.

Eligibility should be increased to age 68 by 2023 for full benefits and to age 65 for early retirement, but it’s not a step that I recommend lightly.

Many who wish to work longer may have health issues or other disabilities that make it impossible to delay retirement. Workers with physically demanding jobs are most likely to face these issues. They should not be penalized by higher age requirements. Instead, they should receive benefits through Social Security’s Disability Insurance program until they reach the new retirement ages.

Social Security is and should remain a key part of Americans’ retirement security system. Congress must have the courage to let some of today’s workers know they will need to work longer before they can receive Social Security benefits.

This may not be a pleasant message, but it is a fair one. Further delay will only force Congress to make an even more unpalatable decision as Social Security’s finances continue to worsen.

David John is a senior research fellow in retirement security at The Heritage Foundation.

NO: Life expectancy is not rising for the poor; later retirement is unjust.

By Mark Weisbrot

According to a recent CNN poll, 60 percent of Americans under 60 and 70 percent of those under 50 believe that Social Security will not be able to pay them a benefit when they retire.

In reality, the likelihood that any living American’s Social Security benefits will not be paid to them when they retire is about the same as the probability that there will be no U.S. government at that time.

Is anybody banking on that? Of course if you are going to take something away from people, the first step is to convince them that it wasn’t really there in the first place.

What makes the whole deception even more fascinating is that everyone is using the same assumptions about the future — and the same numbers.

The common source for everyone writing and talking about Social Security is the annual Social Security Trustees Report. This shows that the program can pay all promised benefits for the next 27 years, without any changes at all. If nothing is done over the next 27 years, only about 75 percent of scheduled benefits would be payable in 2037; but that would still be more than what retirees receive today, after adjusting for inflation.

So, according to the assumptions and facts that everyone who writes or talks about Social Security is using, there is no basis for the belief that the majority of Americans under 60 hold.

Since this deception is not about Afghanistan or some country on the other side of the world, but about a program that mails a check to nearly 25 percent of American adults each month, it is all the more amazing.

The enemies of Social Security have pulled off one of the greatest public relations scams in U.S. history.

What makes this subterfuge unique is that it is all based on verbal and accounting trickery.

For example, it is common to combine Social Security and Medicare spending and say that their costs will become unsustainable. The trick here is that it is Medicare, not Social Security, that leads to the explosion in public spending.

And perhaps more important: It is not the aging population or Medicare itself that is the problem, but the United States’ private-sector health care costs. If these were in line with any other high-income country such as Germany or Canada, our long-term budget deficit would turn into a surplus.

Not that Social Security has contributed anything to the budget deficit — the program is still running a surplus. The granny-bashers try to weasel their way around this too by pretending that the Social Security Trust Fund — currently at more than $2.5 trillion — doesn’t exist.

But the Treasury obligations held by the Trust Fund are as real as the U.S. government bonds held by any private mutual or pension fund, or the $10 bill in your wallet.

Of course all this deception would not be possible if the media did its job and reported the basic facts — as when someone says President Barack Obama is a Muslim, the media notes that he is a Christian. Of course, some people will still believe whatever, but we wouldn’t have a majority lost in the fog on this issue.

This huge scam is the most obvious reason to reject any benefit cuts to Social Security — including raising the retirement age.

This is a very regressive cut that hurts lower-income workers the most, since many have jobs that are too physically demanding to work longer; and since their life expectancy has not increased along with that of higher-income employees.

We need at least a decade just inform the public of the basic facts, before we can decide how to make the relatively small adjustments that Social Security may need to maintain long-term solvency.

Mark Weisbrot is co-director of the Center for Economic and Policy Research.