On the 80th birthday of Social Security, we should recognize the program’s immense achievements, keeping millions of Americans out of poverty, not undermine its credibility using fear tactics not based in fact.
Social Security has been attacked since its inception by those who have believed that the government has no place creating safety nets for its most vulnerable citizens. Currently, the attackers are claiming that the program is unsustainable and that its funding shortfall is “beyond comprehension,” throwing around figures in the trillions. In reality, Social Security’s financial challenges — and the solutions to those challenges — can be explained with figures that are easy to understand.
The fact is, anyone can throw around large numbers that seem frightening as was the case in recent article in The Olympian headlined, “Things to know about Social Security as program turns 80: Is it time for another overhaul?”
That is why experts acknowledge that the most appropriate and informative way to discuss the long-term affordability of Social Security is to compare the cost of benefits to the size of the economy. In other words, what share of U.S. economic output (also known as gross domestic product, or GDP) will be needed to support the benefits provided by the program?
The answer is surprisingly simple. Right now, Social Security benefits are equal to roughly 5 percent of GDP. As the Baby Boom generation retires, spending on Social Security is expected to increase to roughly 6 percent of GDP before leveling off. As a matter of fact, if we increase Social Security revenues by a little more than 1 percent of GDP, we can fully fund Social Security for the next 75 years — the forecast window used by the Social Security Administration.
Even better, there’s a simple and fair way to raise this revenue, without reducing benefits or increasing taxes on low- and middle-income American families. Right now, Social Security taxes are only collected on the first $118,500 of a person’s yearly earnings. This means that while most Americans are contributing 6.2 percent of their pay to Social Security, the wealthiest Americans contribute just a small fraction of their earnings.
If we simply eliminated this cap and collected equal contributions from high-income earners, the 75-year shortfall would be nearly eliminated.
Social Security was created in 1935 when 70 percent of seniors lived in poverty. Today that number is around 10 percent due in large part to the program. It is important to acknowledge that incredible achievement and to work together to maintain it as an affordable, efficient, and absolutely necessary piece of our societal structure.
Maria Britton-Sipe is executive director of the Retired Public Employees Council of Washington.