It’s been a signature issue for AMAC to shore up the Social Security system since 2013. The goal of AMAC’s Social Security Guarantee (SSG) is to preserve and modernize this 1935 program so that it can continue for successive generations. The “problem” is well known to most and has been written about by AMAC extensively in on-line articles and in the magazine for over a decade. And yes, members of Congress understand the problem, though they fear political retribution for talking about it. Checks that go out in 2032 will only be about 76% of what they would otherwise be.
The “why” is a mix of people now living about 18 years longer on average than in 1935 coupled with families having far fewer children. Further, the Social Security payroll tax (FICA) is not capturing the historical average of about 90% of the totality of all wages earned in America. The tax cap does increase yearly but at a far slower rate than the wages earned, such that the FICA tax is only applied to about 82.5% of wages earned by Americans.
The “fix” is some combination of these three broad options: cut benefits (generally advocated for upper income beneficiaries who least need higher benefits), raise payroll taxes on all workers, or increase the retirement age gradually for future beneficiaries. AMAC’s plan suggests a number of things to consider in these three broad areas such as computational year changes (from the current 35 to 38 or 40 working years), changes to cost of living adjustments to prioritize they be targeted at lower income beneficiaries, eliminating the earnings test which penalizes early retirees who work and collect benefits, and reducing the final bend point percentage such that less income replacement goes to higher income folks, among other ideas.
But note, AMAC’s SSG is a “menu of options” for policy makers, and we indeed use that term. It is not a proposed bill. There is no bill number. It will be up to Congress to determine how to rescue Social Security, as it last had to do in 1983. That 1983 “fix” involved each of the three broad options noted here. Make no mistake— doing nothing is not an option. The consequences of across-the-board cuts for all would devastate the most vulnerable.
Social Security was created as an anti-poverty program in 1935, and it has generally served that purpose well for nearly 100 years. But, as even the liberal Washington Post noted in an op-ed last month, the program has in some ways been allowed to lose its way. The paper noted that a retired, married couple with high earnings throughout their 35-year careers receiving the maximum monthly Social Security benefit would collect over $100,000 annually. Who among us would argue that is in keeping with what an anti-poverty program was designed to do?
Tough choices will soon need to be made, and time is running out. The longer Congress waits, the more draconian any program changes will be.
