In less than seven years, Social Security’s retirement trust fund is projected to go insolvent. The result is unthinkable: a legally required across-the-board 24% benefit cut for both current and new beneficiaries. Yet despite knowing this, lawmakers have done nothing. In fact they’ve done worse than nothing; they’ve passed legislation accelerating the program’s insolvency.
Why? Because they know it is the third rail of American politics. Simply talking about responsible ways to fix the program could lead to attacks by political opponents and demonization by outside groups, threatening their political survival.
Many factors have created this situation. For starters, Social Security is a political hot potato due its high popularity among federal programs and the fact that seniors — who make up most of the program’s beneficiaries — vote at disproportionately high rates.
In our win-at-all-costs politics, both parties often choose to use Social Security as a hammer against their opponents rather than champion those who seek to offer or even discuss solutions.
The public’s understandable lack of knowledge about how the program works allows politicians to perpetuate false promises and mythical solutions which convince many voters that difficult choices can be avoided.
For example, one common scare tactic is to attack any idea that might alter benefits in the future as amounting to slashing “earned” benefits. Setting aside the fact that doing nothing guarantees benefits will be slashed (by 24% in 2032!), this myth relies on the false idea that seniors collect Social Security benefits from their own contributions. In fact, Social Security is a pay-as-you-go program, which means benefits are paid for by today’s workers. A typical retiree today will collect over 20% more in benefits than they paid in taxes, accounting for the interest they could have earned on those taxes.
Social Security’s problems come down to hard math. Due to demographic changes like longer life expectancy and declining fertility rates, the ratio of workers paying taxes to current beneficiaries has dropped significantly, from 16-to-1 decades ago to under 3-to-1 today. The system must be updated, not because people didn’t “earn” their checks, but because the numbers don’t add up.
Another pervasive myth states that we can save Social Security by eliminating waste, fraud and abuse or by taxing millionaires and billionaires. But improper payments, for example, total less than 1% of the program’s costs, while the shortfall is over 17 times as large. And while bringing in additional revenue can help a lot, it would be impossible to save Social Security just by raising current taxes on the very rich. Even taxing all wages above the current taxable maximum of $184,500 would only close one-half to two-thirds of the program’s long-term structural gap.
Every myth about Social Security represents a barrier on the road to reform. They imbue both lawmakers and the public with a sense of false hope that either the problem will go away or that someone else down the line can easily fix it.
But securing Social Security will require difficult choices and trade-offs. Some may have to pay higher taxes while others may receive lower benefits than scheduled, or some combination of both. As a result, any proposed solution tends to become horribly demagogued.
Politicians, activists and interest groups such as AARP blast those who propose even minor changes. Even the idea of simply establishing a bipartisan commission to study and propose reforms has been viciously attacked by opponents. And that’s in spite of the fact that, back in 1983, the last time Social Security faced imminent insolvency, it was a commission that helped set the stage for saving Social Security on a bipartisan basis for 50 years.
With less than seven years left until insolvency, Americans urgently need solutions for righting Social Security’s financial ship. The upcoming Senate elections are an opportunity not only for candidates to present their ideas to save the program, but also for voters to demand more honesty from candidates on the issue while calling them to account when perpetuating any myths or false promises.
Texans — and the country — should ask for nothing less.
Maya MacGuineas is the president of the bipartisan Committee for a Responsible Federal Budget.
This is the second in a series of columns about Social Security and federal debt.
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