OPINION:
When looming catastrophe settles on the horizon, it begins to look like part of the landscape. It’s the way human nature copes with troubling times — until it’s too late. Washington officialdom has heard warnings of approaching insolvency of the Social Security system for years and has responded by kicking the solvency can down the road. The can, though, contains the fortunes of more than 66 million Americans due a monthly benefit. As the day of reckoning draws closer, smart solutions become more urgent.
The Social Security trustees reported on March 31 that the nation’s retirement fund is on course to run short of sufficient money to pay full benefits as soon as 2033, a year earlier than previously estimated. “At that time,” reads the advisory in dispassionate language, “the fund’s reserves will become depleted, and continuing program income will be sufficient to pay 77 percent of scheduled benefits.” Medicare faces similar shortfalls.
Forced cuts in short order to Social Security would mean compromises to living standards for older Americans. Accordingly, President Biden has called for “protecting and strengthening” the program, in principle.
Bravo, but how?
Raising the full retirement age from 67 to 70 would stretch Social Security dollars and surely extend the program’s viability. Witnessing the violent backlash in France over President Emmanuel Macron’s retirement-age hike from 62 to 64, it’s a solution fraught with political danger. That Americans’ life expectancy has declined to 76.1 years means “the golden years” of retirement would more quickly fade to black.
Unsurprisingly, income redistributionists Sens. Bernie Sanders, Vermont independent, and Elizabeth Warren, Massachusetts Democrat, like the idea of saving Social Security by taxing the rich. The 2023 cap on income subject to the wage tax stands at $160,200. Their plan would exempt wages between that level and $250,000, then reimpose the tax on income above.
Los Angeles Times columnist Michael Hiltzik recommends simply doing away with the wage cap altogether and making currently exempt investment income subject to the employee’s 6.4% portion of the Social Security tax. That is, he writes, “the one sure-fire method of providing all the revenues the system needs to fully cover its obligations.”
The Congressional Budget Office in December projected that increasing taxable earnings to the $250,000 figure would raise $1.2 trillion between 2023 and 2032. An alternative option — making 90% of all earnings subject to the tax — was calculated to bring in $670 million over the same period.
These options, however, would violate Mr. Biden’s oft-repeated pledge not to raise taxes on Americans making less than $400,000 per year.
Sens. Bill Cassidy, Louisiana Republican, and Angus King, Maine independent, are reportedly pondering the creation of a sovereign wealth fund that would invest some $1.5 trillion worth of borrowed money in a diversified portfolio of stocks and real estate. Such an alternative is worthy of serious consideration.
Big Government types who dominate Washington instinctively regard higher costs as an opportunity to raise taxes, and the impending Social Security shortfall is no different. Securing the safety net for older adults is imperative. Still, Americans need smart solutions for securing the retirement fund that, rather than simply grabbing a larger slice of their hard-earned income, enlarge the nation’s economic pie.
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