Nothing unites Democrats like Social Security. No program has worked so well, for so many, for so long. But what about making changes to Social Security? Well, that’s harder. On Thursday, my colleague Lori Montgomery reported that “Democrats are sharply divided over whether to tackle popular but increasingly expensive safety-net programs for the elderly, particularly Social Security.” They shouldn’t be.
I’m on record saying Social Security is the last place in the federal government we should look for cuts. It’s a lean, efficient program that, if anything, is too spartan. In 2009, the average monthly benefit was slightly more than $1,000 — hardly lavish. That makes it one of the stingiest national-pension programs in the developed world, actually. And once we finish phasing in the cuts passed in the ’80s, it’ll only replace about 31 percent of the average beneficiary’s income. In a time of underfunded 401(k)s and high unemployment, that’s just not enough for many retirees. Saying Social Security is too generous is like saying a Mini Cooper is too roomy.
Ezra Klein is the editor of Wonkblog and a columnist at the Washington Post, as well as a contributor to MSNBC and Bloomberg. His work focuses on domestic and economic policymaking, as well as the political system that’s constantly screwing it up. He really likes graphs, and is on Twitter, Google+ and Facebook. E-mail him here.
Most elderly beneficiaries rely on Social Security for the majority of their income. In June 2010, the average monthly benefit was $1,170.
But the program’s problems don’t end there. It’s underfunded, ill-designed for certain features and facts of the modern world, and — probably most important — overused. Beyond Social Security, America’s retirement system is, in general, patchy and insufficient, which leaves retirees too reliant on Social Security. They then learn the hard way that the program is not what they’d hoped. We should do better. And we can.
Gene Sperling is now the director of President Obama’s National Economics Council. But in 2005, he was just another Clintonista-in-exile with a desk at the Center for American Progress, watching in horror as the Bush administration tried to privatize the crown jewel of the New Deal. In response, he released his own proposal for “a true bipartisan agreement on Social Security reform that increases national savings, individual ownership and ultimately retirement security.” Perhaps predictably, Bush ignored it. Obama should not.
Sperling correctly sees that there are two separate problems in our retirement system: Social Security has too little money, and so, too, do most retirees. Fixing the former, as it happens, is the easier task. Sperling suggests a 3 percent surcharge on all income over $200,000, which would wipe out half of Social Security’s shortfall. He suggests the rest could be made up through bipartisan agreement on benefits cuts or tax changes. A simpler solution perhaps would be to uncap the payroll tax that funds Social Security. Right now, income over $106,000 is protected, meaning someone making $80,000 pays payroll taxes on every dollar of income while someone making $1 million pays on barely one of every 10 dollars. Does that make sense to you? Yeah, me neither.
Uncapping it would pretty much wipe out the shortfall on its own. Add in some changes to the benefit itself — perhaps benefits for the wealthy could grow more slowly, as they rely on it less — and you’re done. Social Security is fully funded.