“What’s responsible for this major shift in Social Security, you ask? For one, it’s a combination of demographic factors, such as increased longevity, and the ongoing retirement of baby boomers, which is weighing down the worker-to-beneficiary ratio.”
– Sean Williams, Motley Fool via USA Today, 2018 1113
I’m not picking on Williams, Motley Fool, or USA Today here, because these facts are common knowledge reported in various forms throughout the news media. You can hardly come across any reference to the future of Social Security without encountering these bits of conventional wisdom. The problem is they’re wrong.
What? Everybody knows people are living longer, and that this is amping up the retiree to worker ratio. This demographic problem is causing SS to have to pay out more than it takes in and threatening the sustainability of the program. These facts are beyond dispute. Right?
No. Within this wording lies a framing choice that goes well beyond the hard facts. This is made clear by an alternative way of framing the facts to place the blame not on we the people, workers and retirees, but on a defect in the program itself.
The problem is not one of people living longer. We’re always looking for ways to live longer; actually succeeding at that is hardly a crisis, it’s cause for celebration. The problem is that while reality changes, the program remains static. The age to which we live goes up, but the age at which we become eligible for benefits does not.
Now really, which is the real problem? Living longer? Or a flaw in the law?
That it is the latter is obvious because once you remove that rigidity the problem vanishes.
The alternative is for people to start dying younger.
There is no reason why the worker-to-beneficiary ratio has to change. Just adjust the age of benefit eligibility so that the ratio remains constant. Doing it the other way around and holding the age constant while changing the worker-to-beneficiary ratio is a choice, not a law of nature.
It’s sure not a demographic problem.
Some may object that allowing the eligibility age to rise would be politically unfeasible. But that’s demonstrably false, too, because we’ve done it before. What was once a fixed age 65 parameter was changed in the 1980s to gradually rise to age 67 depending on birth year. If that adjustment process didn’t stop there there would be no funding shortfall. Therefore we can conclude that the problem is the cessation of the adjustment process.
And it’s not a natural problem; it’s purely man-made. More specifically, government-made. Only politicians could turn a wonderful thing like living longer into a crisis.
Of course there are other proposed “solutions”, including playing tricks with inflation adjustments, as if just burying the fact that you’re cutting benefits in statistical legerdemain isn’t going to cut living standards. Any technocrat pushing such trickery should be ashamed of himself. Another perennial favorite is “means testing”. As if that would be something new. Means testing is already being done via the tax code, which takes back some of the benefit from higher earners by subjecting it to income tax. If that’s not enough, tax it some more, but don’t pretend you’re not already doing means testing and slap on a whole new layer requiring beneficiaries to file another raft of income documentation with the Social Security Administration … with the requisite Paperwork Reduction Act Notice included.
It becomes even more obvious that these “solutions” aren’t really solutions at all when you consider that when longevity increases further you will have to “solve” the same problem all over again. Only indexing the eligibly age to longevity can lay claim to the title of solution.
Let the solution fit the problem. The problem is the choice to cease adjusting the age of eligibility for longevity. So the solution is to not cease. It’s a fundamental, inescapable reality. As long as the age at which people stop receiving benefits rises, the age at which they begin receiving benefits must rise as well, or the root of the problem remains to grow back over and again.
Amazing how simple solutions became once you accurately identify the problem.
the problem with raising the age for benefits is that longevity is highly correlated with both wealth and [secondarily] geography. the difference is as much as 10-15 years!
more generally, people who do hard physical labor cannot work into older age as well as those with less physically demanding jobs.
so i don’t think the solution is so simple.
That would fall into the category of “it’s not simple because it fails to solve a problem other than the one we set out to solve”.
SS does not now guarantee benefits for when we’re too old to be NFL linebackers or ballerinas; just for when we’re too old to work any job.
So imposing that as a requirement for qualification as a solution to the so called SS “demographic crisis” would be ADD at best. Not to mention that SS is not intended to supplant all individual responsibility; it’s only one piece of the retirement picture and far from the only option to provide for one’s middle years. To pass on fixing a basic flaw in SS that would crash it for everyone on the assumption that a twenty-something lumberjack or longshoreman can’t change his job or accumulate any savings over the course of decades would be bizarre.
Yet SS in its present form does provide a pathway to elect early benefits for those who need or want them, and indexing ages to life span wouldn’t take that away. Disability benefits are available for those who become unable to work prior to retirement age, and age indexation wouldn’t change that either.
socialism for the wealthy, capitalism for the rest.
social security is supposed to provide some kind of safety net, but your “solution” strengthens support for those who don’t need it, while taking it away from those who do.
and people who are over 50, let alone those over 60, have a VERY hard time finding employment.
alternatives: raise the cutoff on income subject to social security tax; means test the benefit in some fashion; raise the taxable amount of the benefit to 100% for those beyond a certain income level. i’m sure there are other solutions as well.
basically, our society treats working people [that is laborers, the people who used to be able to get a good paying factory job] like garbage. your “solution” will hasten their trips to an already early [relative to the better off] grave.
This post is specifically about the so-called “demographic crisis”, not every aspect of Social Security, retirement, or income distribution. It clearly explained why these putative alternatives are fundamentally incapable of solving the problem of mismatch between the increasing age at which benefits cease against a fixed age at which they begin. Your reply doesn’t acknowledge, let alone refute, the central point of the post. Instead it advances redistribution wishes that aren’t germane to the point and measures SS by them without considering whether there are other means to achieve them, despite the fact that some have already been identified here.
As pointed out at the outset, but not acknowledged in your reply, “means testing” is already being done. Let’s be clear … what you’re demanding here is more means testing. Then what happens in another twenty years when people are living longer still and that isn’t enough? And what happens as people begin to realize saving for themselves is becoming increasingly fruitless? That people aren’t saving enough for their own retirements already is a huge problem; adding disincentive to it with more means testing would only hasten the arrival of calls for yet more means testing.
It doesn’t take a genius to figure out that means testing isn’t a solution to adapting SS to longer life spans. It’s just another attempt to equalize outcomes for all, which might have more credibility if we didn’t have a plethora of other programs to do that already. We have welfare for the poor. Social Security is supposed to be for everybody.
It wouldn’t even put a dent in the “socialism for the wealthy” your boilerplate protests. No one is getting rich off of their Social Security benefits. Government transfers to the rich come via things like monetary policy and financial insurance and run well into the trillions. Attempts to mitigate the exploding wealth and income gap via tweaks to taxes and SS are like having a thief mug you, steal your coat, shoes and wallet, and then feeling sorry he has mistreated you, hand you a bus token to get back home on.
I don’t see anything fundamentally wrong with bringing 100% of income under the tax umbrella, but it’s already 85% and another 15% isn’t going to go very far without addressing the root of the problem. Likewise raising the income threshold may have merit but would still only kick the can a little further down the road.
This leaves us right back where we started. Only flexibility in the eligibility age responsive to changes in lifespan can lay claim to the title of sustainable solution.