Commentary: On August 14, 1935, President Franklin Delano Roosevelt signed the Social Security Act into law. Today, some 82 years later, the program is strong—and its protections more important than ever.
By any measure, social security has been a resounding success. Prior to its enactment, 50% of Americans above the age of 65 were poor. That number has dropped to 9.5%, thanks to social security. The program also provides critical support to widows and widowers, as well as working-age individuals who suffer from serious disabilities.
The program’s impact in New Mexico is difficult to overstate. Statewide, hundreds of thousands of people receive social security benefits, including 267,000 retirees, 65,000 individuals with disabilities, and 30,000 children. Without these benefits, 155,000 people—about 7.4% of our population—would fall below the poverty line.
Social security has proven to be remarkably reliable: in 82 years, it has never missed a payment. It is also remarkably efficient: with administrative expenses constituting less than 1% of total expenditures, social security puts even the most efficient private charity to shame.
Despite the program’s tremendous success, it is perennially under attack from the right. Proponents of social security “reform” argue that it is necessary to cut benefits and raise the retirement age to avoid bankrupting the program. Not so. Social Security is expected to remain solvent, without any changes, through 2034. Even after that, the program will be able to meet 79% of its obligations through existing revenue streams.
This shortfall is modest—approximately 1% of GDP. And the fix is simple: fund social security the same way we fund Medicare. Both programs are funded by payroll taxes. But while the Medicare tax applies to all earned income, the social security tax applies only to the first $127,200 a worker earns in a year. And while the Medicare tax applies to investment income for individuals earning over $200,000 a year, the social security tax does not apply to investment income at all. Funding social security the way we fund Medicare would eliminate the impending shortfall and allow social security to remain strong for generations to come, without any increase in taxes on the middle class.
The conversation we should be having is not about whether to cut social security, but about whether, and how, to expand benefits and eligibility. The argument for expanding retirement benefits is straightforward. Due to the Great Recession and decades of stagnating middle class wages, the typical family nearing retirement has only $14,500 in savings. As a result, most new retirees can expect to experience a decline in their standard of living upon retirement. In the richest nation on earth, we can afford to do better. A few simple fixes, like switching to the more accurate Consumer Price Index for Elderly Consumers to calculate cost-of-living adjustments, and increasing the minimum benefit amount to 125% of the poverty level, could go a long way to improving the lives of American seniors.
There is also a powerful argument for expanding eligibility. According to one study, 47 percent of jobs in the United States are at risk from automation in the next 20 years. The McKinsey consulting firm warns that “[w]orker displacement [will] create[] the potential for labor unrest,” absent a massive investment in worker retraining. Even as we develop worker retraining and public works programs to deal with the coming wave of automation, we must strengthen our safety net to protect workers who are displaced by automation and unable to transition to new work.
One way to do that is to make the disability insurance program fairer and more reflective of economic reality. At present, an individual’s application for social security disability benefits will be denied if the government determines that the individual is capable of preforming any type of work “which exists in significant numbers” in the national economy. The government does not need to show that the individual would actually be able to find a job performing that type of work. As a result, many people who are genuinely disabled and who have no real hope of finding a job are unable to collect disability benefits. That is unconscionable. The system should be reformed so that disability claims are not denied unless the government can point to specific employment opportunities available to the individual.
Social security is perhaps the most direct embodiment of our social contract: we all pay in when we are young and able to work, and we all receive benefits when we become elderly or disabled. The program ensures that millions of Americans are able to live with dignity and independence, and contributes to our economy by putting money in the hands of low-income folks, who are the most likely to spend it. It’s time to do the patriotic thing and strengthen this vital program for the benefit of all Americans.
David Baake is a candidate for the Democratic nomination in New Mexico's 2nd Congressional District.