OPINION:
Last month, the Social Security Fairness Act took a step forward in Congress, sending a blunt message to future retirees that they are less important than the special interests that infest Washington today.
This proposal would eliminate Social Security’s windfall elimination provision and government pension offset, a change that would cost the cash-strapped program $196 billion over the next decade.
While the language sounds technical, these provisions simply protect the rest of us from overpaying retirees who opt out of Social Security for a portion of their careers.
Congress wants to shed that protection under the guise of fairness. Instead of fixing the rules, lawmakers are content to allow the nearly bankrupt program to reward those who opt out of Social Security while putting the rest of us at yet more risk of being left on the short end of its financial woes.
That risk is already substantial. According to the latest numbers from Social Security Administration experts, the average 80-year-old expects to outlive the program’s ability to pay scheduled benefits. Against this background, more than 300 lawmakers have signed on to increase the exposure of those of us 79 and younger to an additional $200 billion in benefit cuts.
In theory, the rules exist to ensure the equitable treatment of all participants by ensuring that the program doesn’t overpay retirees who have worked for an employer that decided not to participate in Social Security. In practice, these rules fuel resentment among older Americans who feel cheated, rightly or wrongly, by the adjustments to benefits.
Social Security embraces a societal benefit that protects those who have worked long careers at low pay and those who could not find stable careers in their working years, such as a housewife who dedicated her career to home and family. It is a societal valuation that these retirees deserve a break on the cost of Social Security benefits.
As the system is structured, those who have earned more in wages over their career should subsidize those who haven’t. People who have worked longer should subsidize those unable to get a foothold in the workforce.
Given that these subsidies have existed for nearly 100 years, one has to assume that they have been embraced by voters and workers alike.
The Social Security Fairness Act would extend these breaks to civil servants whether they were highly paid or not. This legislation is not about fairness. It is a societal judgment that our civil servants who opted out of Social Security deserve a helping hand.
In other words, Congress is considering creating a financial incentive for mid-career workers to opt out of Social Security. This is a terrible idea.
For a bit of background, not everyone works for wages covered by Social Security. Nearly 20 million people have at some point opted out of Social Security by working for an employer that has chosen not to participate in it. Whether workers realize that they have opted out of Social Security may be a problem, but it does not merit a financial reward.
To illustrate the problem, imagine two teachers who are identical other than their choice of employer. One teacher pays into Social Security, while the other contributes to a state pension fund. For the sake of discussion, both are married to members of Congress whose record would entitle their spouses to family benefits.
While these hardworking teachers are almost identical, one would not be entitled to spousal benefits, while the other might collect as much as $30,000 per year. Where is the fairness in the discrepancy of retirement benefits?
Why should anyone be given such an amount simply because they chose to opt out of Social Security? These questions have been given to both of the lawmakers who co-sponsored the proposal, and neither has replied.
These provisions date back to the 1970s and have fueled resentment ever since. Instead of handouts, Congress should fix these rules by giving retirees a choice of providers in which the retiree would use one pension to buy credits in the other pension. Given an informed choice, it is likely that the retiree would accept the windfall elimination provision and government pension offset as adjustments rather than view them with the bitterness of reductions.
In this case, another name for freedom is totalization. The concept has been around for decades and could easily apply to those states that have made a business choice to run a pension independent of Social Security.
Freedom is real fairness. Further, it would spare the rest of us the temptation of Congress to spend nearly $200 billion of our future on their future.
• Brenton Smith is a policy adviser with the Heartland Institute.
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