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Journalist Philip Moeller answers your questions about health, aging, and retirement. Phil is the author of the book, “Get What’s Yours for Medicare,” and co-author of “Get What’s Yours: The Revised Secrets to Maxing Out Your Social Security.” Send your questions to Phil.
Hours before last week’s Democratic presidential debate, Sen. Elizabeth Warren, D-Mass., released her plan to reform Social Security. It’s unfortunate the topic did not come up in the debate because there are very real problems with Social Security and the nation’s broader retirement security programs.
However, these issues are near the back of a very long line of serious challenges – health care, climate change, immigration and refugee crises, crumbling infrastructure, worsening economic inequality, and global trade issues. It can be exhausting just to list them, let alone figure out what to do.
Social Security’s problems have been exhaustively researched and quantified for decades. Program trustees publish what amounts to a doomsday clock for the program every year in their annual status report. The latest report projects that the trust funds now relied upon to pay Social Security benefits will run out of money in 2035 – about 15 years away – and that payroll taxes from existing workers will then cover only 80 percent of the benefits that have been promised to retirees.
Numerous reform packages have been proposed over the years, and the office of Social Security’s chief actuary has produced detailed reports on how they would work. Warren’s proposal is thus based on a lot of solid evidence and, like her other policy proposals, includes extensive details.
Warren’s proposals go beyond those contained in the leading Democratic plan – the proposed Social Security 2100 Act, sponsored by Rep. John Larson, D-Conn., and co-sponsored by more than 200 House Democrats. His measure would raise payroll taxes on all workers, require wealthier earners to pay higher payroll taxes, raise benefits for the neediest retirees, and put the program on solid financial ground for at least the rest of this century. So long as Republicans control the Senate, Larson’s bill is likely a non-starter.
The odds are, if anything, even more daunting for Warren’s plan. It would:
Warren says her plan would not raise general payroll tax rates. Instead, it would balance the system for an additional 20 years (until 2055) and generate a $1 trillion reduction in government deficits by imposing new and higher payroll tax rates on the wages of higher-earning workers and levying wealth taxes on these households as well.
Progressives will likely love her proposals, and her plan merits a careful reading, especially the extensive independent research reports that are linked to from within her plan. Mark Zandi, the chief economist at Moody’s Analytics, also has written a largely supportive report about his firm’s assessment of Warren’s plan.
However, her proposal to fund all the improvements by sticking it to the rich would counter enormous political opposition. It also would fundamentally change the nature of the program, Zandi said in his assessment.
“It weakens the link between the amount of taxes that workers pay into the system and the benefits they receive,” he wrote. “Historically, that link has been an aspect of Social Security considered important to its widespread popularity and political insulation. Calling upon high-earning people to pay substantially more into the system than they receive in benefits, as the senator’s reform plan envisages, could hurt its political appeal.”
Warren’s plan also implies that Social Security is failing retirees. “Social Security will replace just 41 percent of what they used to make,” her plan states. “That’s well short of the 70 percent many financial advisers recommend for a decent retirement.” True enough, but Social Security was never designed to be the primary provider of our retirement income. It aimed to provide a modest component, along with workplace pensions and private savings.
Over time, private pensions have largely disappeared, and decades of stagnating wages have forced many workers to spend all of their wages on living expenses, leaving little if anything for a retirement nest egg.
Expecting Social Security to fill this entire gap is a tall order for the program in its current form. Turning it into a means-tested benefit program that addresses private-sector failings and the effects of rising economic inequality may be appealing to Warren and those who agree with her. But it will earn a big “socialism” label from opponents.
Phil Moeller is the author of “Get What’s Yours for Medicare: Maximize Your Coverage, Minimize Your Costs” and the co-author of the updated edition of The New York Times bestseller “How to Get What’s Yours: The Revised Secrets to Maxing Out Your Social Security,” with Making Sen$e’s Paul Solman and Larry Kotlikoff. On Twitter @PhilMoeller or via e-mail: email@example.com.