The trustees of Social Security recently reported that the retirement system can pay full benefits until 2035, when it will be able to pay about three-fourths of promised benefits. That is not a crisis. It is a manageable problem.
The system needs to be restored to long-term health, but policy makers must realize that broad-based benefit cuts are not really a viable option. For most people, the ability to finance a secure retirement has been ruined by stagnating wages, repeated stock market busts, diminished home equity and weakened or nonexistent pensions. Social Security, whose average monthly retirement benefit is $1,268, is pretty much all that is left. Most people age 65 and older get two-thirds to all of their income from Social Security. And yet, in the deficit-obsessed, anti-tax world of Washington, closing the shortfall in Social Security has come to mean broadly cutting benefits. That would be a mistake. Targeted cuts — like lower payouts for upper-income recipients who live longer and draw larger benefits — could improve the system’s finances and fairness.
But those who promote across-the-board cuts are not interested in strengthening the system. They want to reduce the budget deficit. And even though Social Security is not a cause of today’s deficits, they would rather cut benefits than improve the system’s finances by imposing tax increases on higher-income taxpayers or phasing in a modest payroll tax increase over decades.
The focus on benefit cuts also conveniently ignores the fact that benefits are already shrinking. Under current law, benefits are being reduced by the higher retirement age, which has been gradually rising from 65 to 67 for those born in 1960 or later. That translates into lower monthly benefits for those who retire at 65 or fewer years of benefits for those who work until 67. For example, a worker entitled to a $1,000 monthly benefit upon retirement at age 67 will get only $867 if he or she retires at 65.