On April 4th, the Bristol Herald Courier printed “Social Security: no easy answers” by Media General’s Washington bureau chief Marsha Mercer. In reality, there is an easy answer to the problem Social Security will face in 2037, and it has been around for many years. It has been formally before Congress as a recommendation since it was placed there in the 2005 report to Congress of the Social Security Actuary Department. The report recommended that we lift the cap on wages subject to Social Security contributions.
When Social Security began in 1940, the US average annual earnings for white males was $2,984.00. White women averaged $771.69, Black men averaged $537.45, and Black women $331.32. Currently the average for US workers is $36,000 to $42,000. The income limit subject to Social Security contributions in 1940 was $3,000.00, which certainly included all of the middle class, and this cap has been adjusted many times over the years so that it is now around $108,000. Increases have been based on the cost of living index. Currently with increasing concentration of earnings in the top 2% of earners, a larger concentration of wealth at the top actually demands a change in this formula. Until the most recent two decades, most of the money earned in the United States was subject to Social Security contribution because most of it was earned in the old fashioned way by regular people. Currently working people have a smaller share of earnings, so Social Security contributions, while they have kept pace with the cost of living to this point, will begin to fall short in 2037 if we keep the same formula.
As wages have increased and the disparity between rich and poor has widened, Social Security has never run a deficit. It has a surplus now and is not part of the deficit we hear so much about. Cutting it will not cut the deficit. Privatizing it will produce a windfall for financial institutions — again widening the gap between Main Street and Wall Street. If Wall Street were placed in charge of Social Security, private for-profit financial institutions would develop an array of retirement plans which they would spend money to market to consumers, deduct their money for marketing, take a healthy fee for managing our money, and invest our mandated retirement savings in the stock market. They would make money, and we would be at risk.
Social Security is insurance that protects all of us. We pay in as a federally-mandated contribution and are entitled to stated benefits owed to us in return. These benefits mean seniors can maintain their homes and purchase goods and services. Families do not have to support their elders while paying for school and college for their children. Businesses can sell goods and services to seniors, and young families can afford to purchase more goods and services since their seniors have their Social Security benefits. These benefits accrue not only to people who draw Social Security benefits but to their children and grandchildren, to people and businesses that sell them goods and services, and to the economy at large. Social Security is a continuing economic stimulus, a savings plan, and a foundational economic support that we cannot afford to discontinue or to weaken by privatization.
The simple solution for the continuance of Social Security was given to Congress in 2005 in a report by the Social Security Actuary Department. They recommended that the cap on earnings subject to Social Security contributions be lifted. Currently we pay Social Security tax on the first $108,000 ($106,000?) of annual earnings. The Actuary Department recommended including all earnings in the Social Security Tax and keeping benefits as they are. This small change would affect only the highest-paid 3% of us, since around 97% of wage earners make less than the current cap and already pay the Social Security contribution on all of their earnings. The change would, according to the calculation of the Actuary Department, make Social Security solvent for another 75 years.
See the version of this post edited to 300 word limit published in The Bristol Herald Courier