The financial meltdown shows just how risky it is to rely on the whims of the stock market for a retirement fund. But by expanding Social Security benefits, we can offer today’s workers and retirees the dignified and secure retirement they deserve for a lifetime of hard work.
The annual Social Security Trustees Report report shows just how sound the program is — and why you can safely ignore the usual misleading soundbites about Social Security’s imminent demise.
In 2008, between Social Security’s $79 billion surplus and the program’s projected future tax receipts, funds were reported sufficient to pay full benefits through at least 2040 – even with below average economic growth for the next three decades. (More from EOI on the 2008 Trustees Report here.)
Those numbers don’t factor in the increase in buying power retirees will experience either. For example: In 2050, current Social Security taxes will finance benefits for the typical retiree worth more than $20,000 in 2008 dollars. Today’s average annual benefit is $12,800.
Social Security’s success hasn’t gone unnoticed among economists. As James Ridgeway writes in Mother Jones News:
In fact, as Dean Baker of the Center for Economic and Policy Research has pointed out, Social Security has proved far more solvent and sound than anything Wall Street has produced.
James K. Galbraith, University of Texas economist…wants to see a simple but decisive change: Increase Social Security benefits to the point that people can live off them, leaving the 401(k)s, in effect, to swing in the wind.
(Full disclosure: Dean Baker is also an EOI board member)
Social Security is a public pension plan – the latest of many that have been part of the American social landscape since the 1600’s. Private, company-sponsored pensions were once part of that picture as well. But steady lobbying by corporations eager to shed their pensions has instead created:
…two separate and unequal pension systems: Executives get the equivalent of antebellum mansions, while workers get leaky shacks liable to collapse at the first harsh economic wind.
The upshot: Pensions have been replaced by 401(k), 403(b) and other “alphabet soup” retirement vehicles that enrich money managers at the expense of middle-class economic security:
|Company assumes risk of investing||Employee assumes risk|
|In addition to wages||Taken out of wages|
|Benefit depends on your salary, work history||Benefit depends on stock market|
|Guaranteed by federal government||No guarantee|
|Employer pays fees and expenses||Employee pays|
|Company must contribute unless plan shut down||Company can suspend contributions
Social Security has proven its worth time and again. But how exactly could an expansion of benefits be funded? One simple way is to raise the ceiling on the Social Security payroll tax.
In 2008, people who earned less than $102,000 paid Social Security tax on their entire income. Those who earned paid Social Security taxes only on the first $102,000. Removing the cap and making all earnings subject to the Social Security payroll tax would increase revenue and make more money available to pay Social Security benefits.