This may seem like an odd question to ask, but before we can truly work to solve the issues surrounding this nearly 80 year old program, issues that have no doubt been caused by bad policy decisions such as the Bush Tax Cuts, wars that in the previous decade has been waged without a tax increase to pay for it, etc, we have to answer this salient question.
Just what is Social Security? What do we want it to be?
Is Social Security a retirement fund or a safety net?
The answer to this question determines the scope of Social Security.
When Social Security was created in 1935, it was available to only a small swath of the population. In 1945 there were 41.9 workers per beneficiary. In 1955 there were 8.6 workers per beneficiary. 1975 there were 3.2 workers per beneficiary where it has been for the last 35 years.
(http://www.socialsecurity.gov/history/ratios.html)
In other words, we have fewer and fewer workers supporting each retiree as the years go by. This will, due to the coming demographic bulge with the retirement of the baby boomers beginning just a couple of years ago, cause issues with payout levels over the coming decades.
In general, we have several ways to address this problem:
1) Eliminate the FICA Social Security Tax cap limit. In a diary I wrote discussing the need for an increased gasoline tax, I researched how much this country could raise annually by taxing income above the current $106,800 FICA salary limit.
That amount? $169 Billion
What is the projected Social Security shortfall over the next 75 years?
$5.3 Trillion
What would a $169 Billion per year increase in revenues raise over 75 years? $12.675 Trillion.
2) Phase out benefits for those that generate a certain amount of retirement income. For example, if you can generate >$100k/yr in retirement from your assets, do you really need a social security check on top of that? Why does George H.W. Bush receive social security, for example? Or Bill Gates Sr?
Yes, their benefits are taxed whereas poorer recipients are not necessarily so. But taxing benefits at a certain percentage will not recoup those lost benefits in full.
3) Index Social Security benefits to inflation, NOT to wage increases.
By indexing benefits to inflation instead of wage increases, payouts will directly affect the every day lives of retirees in a more realistic fashion.
For example, if inflation is running at 10%, as it was in the 70s and early 80s, but wage increases are lagging in comparison, which benefits retirees better?
Conversely, if wage increases are averaging 4-5% a year while inflation is at 2-3% per year, retirees still see the benefits of increased income. It may not be as high in the good times, but it'll be more stable in the bad.
And as a safety net, that is what Social Security should be designed for.
4) Examine strategies to index retirement to type of work performed.
For example, should a healthy 65yr old with sound mind and body be able to retire and collect full social security benefits while a 55yr old coal miner with physical ailments cannot necessarily do so?
This would be exceedingly difficult, no doubt. How does one determine the "difficulty" of a job performed and the toll it takes on the human body accurately? But I do believe it could make things a bit more fair.
As a technologist who works at a computer, my potential lifetime "workspan" far exceeds that of a physical laborer.
I guess one could place this under quality of life in one's elder years, but it is indeed hard to properly quantify and apply fairly across the board.
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By implementing these fiscal strategies, Social Security could not only be extended indefinitely, it could also be pared down to what it should be. A retirement safety net to ensure the most vulnerable of us, and those who might not be able to live as comfortably in retirement, are taken care of.
But we have to decide what we want Social Security to be. We cannot have it as the "it's my retirement nest egg" paradigm going forward if we don't tax accordingly, nor can we profligately pay out benefits to those who don't even need them.
I truly hope that when moving forward to discuss Social Security we look at what we want the program to be, and then set policy for it accordingly. Unfortunately, I have a bad feeling that these problems will only be put off for another day.
I hope that doesn't turn out to be the case, but it's far too easy to play politics with this issue.