“It’s time we finally made Social Security more generous and increased its benefits so today’s retirees and future generations get the dignified retirement that they have earned.”
Guess who said that?
Bernie Sanders? Hillary Clinton? The Donald? Sen. Warren? Dean Baker? Me?
None of the above.
Those words were spoken by President Obama on Wednesday in his economics speech in Elkhart, Ind.
Here’s that part of the speech:
And then we have to tackle retirement security. That’s something that keeps a lot of people up at night. … Let’s face it — a lot of Americans don’t have retirement savings. Even if they’ve got an account set up, they just don’t have enough money at the end of the month to save as much as they’d like because they’re just barely paying the bills. Fewer and fewer people have pensions they can really count on, which is why Social Security is more important than ever.
We can’t afford to weaken Social Security. We should be strengthening Social Security. And not only do we need to strengthen its long-term health, it’s time we finally made Social Security more generous and increased its benefits so that today’s retirees and future generations get the dignified retirement that they’ve earned. And we could start paying for it by asking the wealthiest Americans to contribute a little bit more. They can afford it. I can afford it.
Here’s what I said (to Bloomberg Politics) about this on Wednesday:
Retirement insecurity is an obvious problem for middle- and low-income families, and both Social Security and Medicare are highly efficient programs. It took a while, but I think Democrats have come to realize that defending, strengthening and even expanding these security-enhancing programs is what makes them Democrats.
Why do I say so? Here’s why, with a little help from my Center on Budget and Policy Priorities peeps:
- Social Security provides a guaranteed, progressive, inflation-adjusted benefit. For someone who earned less than half the average wage and retired at 65 last year, Social Security would replace slightly more than half of their prior earnings. But for someone who earned the maximum taxable amount of about $120,000, Social Security would replace only about 25 percent of prior earnings. (Note: the latter benefit is still larger in dollar terms than the one for the lower-wage worker.)
- More than 40 percent of the elderly would be poor without Social Security; with it, 10 percent are poor. And if, like me, you think that 10 percent is unacceptable, then the president’s idea is even more resonant.
- Social Security is a highly efficient program, with administrative costs of 0.7 percent of annual benefits. Moreover, as the figure shows, that efficiency metric has come down over time and is at its lowest level on record. So much for feckless government bureaucrats who can’t do anything right. I’d like to see such an impressive record from private firms engaged in an endeavor of this magnitude.
- Its benefits are already modest, both in absolute terms and relative to those of other advanced economies. The average benefit for retired workers is about $1,350 per month, or $16,200 per year. According to CBPP, “The United States ranks 31st among 34 developed countries in the percentage of a median worker’s earnings that the public-pension system replaces.”
- Social Security provides particularly needed support for minorities. Based on their lower earnings, pensions or preparedness for retirement, Social Security benefits comprise about half of their income for 90 percent of blacks and Hispanics.
But wouldn’t it be fiscally reckless to expand benefits, say, for low-income retirees? Well, first, you heard the president suggest a “payfor,” by increasing taxes on those at the top of the scale. In fact, the increase in earnings inequality has interacted with “tax-max” — the maximum taxable earnings — such that there’s now a smaller share of covered earnings below the tax max: about 81 percent now vs. 90 percent a few decades ago. So there’s a real margin for new revenue to support the program.
Second, if you consider the three-legged retirement security stool — savings, pensions and Social Security — for many less well-off aging people, the latter is in the best financial shape of all. Social Security has the resources to pay full retirement benefits through 2034 and 75 percent of scheduled benefits after that, so, contrary to critics’ false claims, it ain’t exactly going broke.
That said, the big point here is that we should get the venerable program on a more solid fiscal trajectory, one that doesn’t just close the long-term funding gap but considers an expansion of the type the president suggested.
There are many ways to go about the latter, including increasing the benefit amounts for low-income future retirees or for some of the old-elderly who’ve outlived their savings.
It’s great to hear the president defending this essential, efficient, progressive program. And while I don’t expect to hear an expansion proposal from this White House so late in the administration’s tenure, Obama is clearly teeing the issue up for the campaign for his successor. Let the record show: Those who would be president, we’re all listening to what you have to say about this.