Some politicians talk about Social Security as if it were a woolly mammoth -- not simply endangered, but, for all intents and purposes, extinct. Outdated. Unreliable. Doomed.
America's elite classes, and the politicians among them in particular, make up the majority of the people who are talking that way. Conversely, when asked, an overwhelming majority of ordinary Americans see a clear path to redemption for Social Security -- and the Congressional Budget Office says that path is not only navigable but relatively simple.
We need only muster the political courage to take it: Eliminate or move the payroll tax earnings cap for the top 5.2 percent of earners.
Ending that regressive exemption for the country's wealthiest would solve the Social Security system's funding crisis, according to the CBO. We could get Social Security back on track simply by requiring those who pay no Social Security taxes on income that exceeds the cutoff -- it's now $113,700 -- to start contributing based on the same formula as everyone else. Everyone, not just the middle class and below, would be paying 6.2 percent, an amount matched by employers.
Most Americans agree, both specifically and in principle. As Thomas B. Edsall, a professor of journalism at Columbia University, recently pointed out in The New York Times, 71 percent of Republicans and 97 percent of Democrats told the National Academy of Social Insurance that Social Security taxes should be increased on the wealthiest Americans. Separately, 62 percent of respondents in a 2012 Gallup Poll said wealthier Americans pay too little in taxes.
Social Security's survival would bolster the retirement years of middle-class retirees across the country -- but it would be especially helpful in Kern County, where the middle class has shrunk in comparison to high-income earners more drastically over the past five years than in the nation overall and the gap between poor and wealthy is greater. And with 13.7 percent of Kern County residents already age 65 or older, and another 13.4 percent in the 55-64 age bracket coming up behind them, Social Security benefits loom ever more important here.
A lifting of the cap need not be immediate, and it need not be total. If the cap number were gradually expanded between 2013 and 2022, for example, the gap would drop 71 percent, according to U.S. News & World Report. Instituted along with other gap reduction measures, we could surely eliminate the deficit completely.
And other measures are out there. One would be to gradually increase the contribution level from 6.2 percent to 7.2 percent by 2036, a move that would eliminate 53 percent of the plan's deficit. A bump to 7.6 percent, paid by both workers and their employers, would eliminate the Social Security deficit completely. Nearly 70 percent of Americans say they'd by OK with a 1 percent increase, according to a recent National Academy of Social Insurance poll.
Raising the retirement age is another possibility. The retirement age at which workers can collect full benefits is set to increase to 67 for everyone born in 1960 or afterward, and in a few years will jump to age 68. Raising it to 70 by 2050 would cut the deficit by 21 percent. It's not a particularly popular idea, but it's in the toolbox.
Something has to be done, because things are bad and delaying adjustments will only require bigger tax hikes or benefit cuts later. "Indeed, Social Security is in worse financial shape now than in 1983 when the Greenspan Commission 'fixed' the system's finances," notes Laurence J. Kotlikoff, a professor of economics at Boston University.
The tricky part of any fix will be ensuring equity for both ends of the income-earning spectrum while maintaining across-the-board stability. But we can clearly fix Social Security with one relatively simple change to the tax code -- by requiring those who are best able to pay to contribute at the same rate as everyone else in America. Additional strategies can ease the impact on the wealthy, certainly, but an eventual and complete elimination of the cap should be at the core of any makeover. The hard part is politics, not economics.