The conversation around Social Security sometimes seems to take place in two separate worlds. On one side, there are people who believe the program is unsustainable in its current form, and that as the share of the population that is older than 65 continues to grow, Social Security will need to be adjusted to reflect that reality. On the other side are people who point out that not only is Social Security not particularly generous (it only replaces about 40 percent of pre-retirement income), but also we need to both alter its funding and what it pays out to account for the age of inequality, which is simultaneously increasing people’s dependence on the program even as it further undermines the program’s finances.
One man firmly in the latter camp is Sen. Bernie Sanders (I-VT.), who is bringing back his Social Security Expansion Act on Wednesday. The day selected is no accident: Wednesday also marks something Social Security activists call Scrap the Cap Day, an annual event designed to highlight how little millionaires pay into the system.
As the Center for American Progress (CAP) notes in a report also released Wednesday, the Social Security trust fund would contain a lot more money if it weren’t for the payroll tax cap, which is set at $132,900. In 1983, 90 percent of total earnings were taxed by Social Security. Today, it’s 83.4 percent. The reason? As the wealthy’s income rose while that of the remainder of the population essentially stagnated, the cap shielded an increasing percentage of funds from Social Security taxes. As the CAP report goes on to explain, based on the $694 million annual income Donald Trump claimed he earned in a 2016 debate with Hillary Clinton, “he ceased contributing to Social Security 40 minutes into the new year.”
Sanders would like to do something about that. His plan shares a lot of similarities with one introduced by Rep. John B. Larson (D-Conn.) two weeks ago. Both would increase payments to lower-income recipients. Both would also change the cost-of-living calculation to account for the fact that older Americans experience more inflation than their younger peers, courtesy of their greater need for health care.
But there are differences. Sanders’s bill would allow children of people who are disabled or have died to collect benefits till they are 22 as long as they are in school full-time. (This benefit currently cuts off at age 18.) The finances of the two bills are slightly different as well. Larson eliminates the tax cap at $400,000 in income, and doesn’t count investment earnings. At the same time, he would raise the payroll tax by a small amount on everyone. Sanders’s effort, on the other hand, doesn’t raise the payroll tax but eliminates the system’s tax cap at $250,000 and counts all earnings toward that number. “We are living at a time of massive wealth and income inequality, and much of the income [of the wealthy] comes from dividends and capital gains. If we are serious about making sure those people pay their fair share, those need to be included as well,” he told me in a Tuesday interview. This change, he says, would impact just under 2 percent of workers.
On the downside, neither Larson’s or Sanders’s effort offers a caregiver credit, something that disproportionately impacts women, who are more likely than men to take significant time out of the paid workforce to take care of everyone from children to elderly relatives — and see their ultimate Social Security tally fall as a result. When I asked Sanders about this, he told me, “I think the issue of caregivers is very important,” but added, “You can’t do everything in every bill.” An aide added that Sanders is a co-sponsor of Sen. Chris Murphy’s (D-Conn.) Social Security Caregiver Credit Act.
The average yearly Social Security benefit is just under $18,000. Minus Social Security, approximately 40 percent of the recipients would live below the official poverty line. Older Americans, as a rule, aren’t frivolous spenders, buying computers, large-screen televisions and the like. They spend their money on food, on housing and on medical services. “The truth if many seniors are hurting financially,” Sanders says. “In Vermont, there are people who cut their pills in half, and they go cold in the wintertime because they can’t afford to heat their homes.”
Moreover, the elderly of today are not the elderly of tomorrow. The drying up of pensions in the private sector and, in many cases, the need for older parents to pay for children’s colleges, have combined to weaken the financial position of many members of Generation X, who collectively face bleaker prospects in retirement than the baby boomers before them. Lower-income people are hit particularly hard by all this. A study released Tuesday by AARP and the Center for Financial Services Innovation found a majority of moderate- and low-income women over the age of 50 were struggling with at least some portion of their financial lives.
Sanders tells me that he believes momentum on the issue has shifted in recent years. As recently as a decade ago, even many Democrats agreed with Republicans that Social Security needed to be trimmed back. Now among his bill’s co-sponsors are several declared and potential presidential candidates, including Sens. Cory Booker (D-N.J.), Kirsten Gillibrand (D-N.Y.) and Jeff Merkley (D-Ore.). “I think most elected officials would be terribly, terribly unpopular if after giving a trillion-dollar tax cut to corporations and wealthy Americans,” they voted to take benefits away from those living on a Social Security stipend, Sanders said. (Note that Republicans, including Senate Majority Leader Mitch McConnell (Ky.), have stepped forward to argue just that.) Sanders’s office says an analysis by the Social Security Administration’s Office of the Chief Actuary says his bill would solidify the system for about 50 years. Larson’s bill would take us to the end of the century. So why not take the opportunity to simultaneously improve lives and bulk up Social Security? I can think of a lot of worse ideas.