We are, once again, in the midst of another debate about Social Security. This is being fueled by contemporary fears about the deficit and debt. And lurking behind the scenes, as always, are the professional Social Security haters like Pete Peterson.
First off, we should dispense with the notion that Social Security is any sort of crisis. According to the trustees, the fund has sufficient revenue to last until 2037. While that is nearly thirty years away, it is not a bad idea to be proactive about ensuring Social Security’s long term stability. However, as I will argue below, raising the retirement age is not the right policy choice.
Current law dictates that the Social Security payroll tax is capped at an earnings level of $106,800. This presents policymakers with a host of revenue options, but two that are most appealing- (1) eliminate the earnings cap and pay out higher benefits to reflect the higher taxes collected; eliminate the earnings cap and pay no additional benefits. It is estimated that the first option would close roughly 95% of the trust find’s 75 year projected shortfall, which would necessitate a 0.1 percentage point increase in the payroll tax. Option 2 would actually do more than close the 75 year projected shortfall, and give policymakers the option of lowering the tax rate or banking the surpluses. (for full explanation, see here)
Either one would be a sensible, and simple, solution to addressing Social Security’s longterm soundness. Unfortunately, we live in a time where a tax increase is seen as some great scourge that will ruin our economy. Never mind that if given the option most voters would support lifting the earnings cap rather than cutting benefits.
Bolstered by an alliance between Tea Party, Republicans (yes, one in the same, I know), “fiscally responsible” Democrats and professional entitlement opponents like Peterson, we are now having a debate about raising the retirement age. The debate is dishonest from the get-go, as the retirement age at which someone can receive full benefits has increased since the 1930’s. It currently sits at 67 and provides incentives to wait until 70.
The notion of officially raising it to 70 seems to have the most appeal to people who, like myself, hold at least a four year degree and work in a white collar industry. It is particularly attractive to members of Congress and the wealthy, though. You see, retired Representatives and Senators enjoy a very generous defined benefit retirement plan. They do not have to rely on Social Security, even to help get by, as most other Americans do. And the wealthy, of course, have been able to bank significant retirement assets outside of the Social Security system.
But there are many others who support an increase in the age who are neither wealthy nor members of Congress. People who are not unlike myself. We work in offices, doing work that may be at times mentally stressful, but is never physically difficult. It’s easy to work that type of job until you’re 70 or 75 or maybe even 80+ if you wanted. But the key here is that people like me would be making a choice to work beyond normal retirement age because our jobs have not left us bruised and battered. Or worse.
If only the age-raisers would spend some time in the coal fields, or on an oil rig, in a factory or any other number of places where millions of Americans engage in backbreaking labor everyday maybe, just maybe, they would see that raising the retirement age to 70 is no solution at all. Do we really, as a society, want to tell 67 year old laborers- hang on, just a few more years, and you’ll be there? If so, then we are no society worth living in.