A new study released on June 21 by the Senior Citizens League estimates that Social Security benefits stretch 34 percent less far than they did in 2000. The costs of goods and services are rising faster than benefits, forcing seniors to find other ways to pay for things in retirement. For the first time since Ronald Reagan was president, Social Security will have to dip into its trust fund to pay out benefits this year. Earlier this month, the trustees released a report stating that both trust funds are expected to be completely insolvent in the next 16 years.
This basically affirms what people have been thinking for a long time: a 2014 Pew Research survey found that half of millennials believe they will get no Social Security benefits when they retire.
According to the Congressional Budget Office, in the next 30 years, federal spending for people age 65 or older who receive Social Security, Medicare, and Medicaid benefits will account for about half of all non-interest spending. This may be the partial cause of millennials’ cynicism. We can no longer ignore the harsh reality: as long as current law is upheld and baby boomers continue to age and retire, entitlement programs, especially Social Security, will simply run out of money.
More people are collecting Social Security than paying into the system, depleting the trust fund at an alarming rate and forcing the need for reform. It’s easy to see that when people are collecting at a faster rate than people are paying in, the solvency of the program shrinks. Both the Old-Age and Survivors Insurance Trust Fund (which pays retirement and survivors benefits) and the Disability Insurance Trust Fund (which pays disability benefits) are projected to be completely insolvent by 2034.
Unfortunately, politicians are quick to propose a disheartening solution – increase benefits and tax the rich!
Fifty years ago, there were five workers paying for each retiree. Today that ratio has dropped to a ratio of three workers paying for every one retiree. In the next decade or so, it will reach two-to-one. Up until 2010, retirees received benefits that were higher than what they paid into the system, but that is not the case anymore. A couple that turned 65 in 2010 would have paid $600,000 in taxes, but could expect to collect only $579,000, and it’s only getting worse.
To try and fix this problem, the Social Security 2100 Act has been introduced with 172 Democratic sponsors or cosponsors in the House. Introduced in the House by Rep. John Larson, D-Conn., and by Sen. Richard Blumenthal, D-Conn., in the Senate, the legislation modifies the formula so that all beneficiaries would receive benefits equal to at least 125 percent of the federal poverty level, or about $30,000 annually for a family of four. It also implements a 2 percent increase in benefits for all current and future beneficiaries. Their pay-for is straightforward: lower taxes for some and increase it for others.
For the millions of beneficiaries who make less than $50,000 annually, or $100,000 for couples, they would pay no payroll tax. The increase in revenues come from demanding that the rich “pay their fair share.” In 2017, an individual paid their payroll tax on only the first $127,000 they earn. The bill would increase that number to $400,000 and would abolish the payroll tax cap on income altogether by the mid-2030’s.
Last year, the federal government taxed people $3.3 trillion dollars and spent even more. It is dishonest to blame the public for not saving when they are taxed and promised benefits from a trust fund that the government digs into whenever a new budget is passed. This isn’t a problem of too little benefits: the government should let people handle their own money instead of taxing it on their behalf and forcing others to make up the difference after it’s spent.
The cost of living across the nation continues to skyrocket. It’s no wonder politicians want to increase benefits for their constituents. This move, however, does not fix the problem – cutting spending, lowering taxes, and letting individuals save for themselves does. Politicians preach they are trying to help as they overspend and raise taxes later to pick up the slack.
Jake Grant (@thejakegrant) is outreach director for the Coalition to Reduce Spending and a contributor for Young Voices. The views expressed are his own and do not necessarily represent the views of his employer.
