How to protect recipients from benefit cuts

Social Security is going bankrupt. A new report by the Trustees of the Social Security Trust Fund says that if the program’s finances aren’t shored up, workers will see their benefits cut by nearly one-fourth when the Trust Fund runs dry in 2036. That includes workers in their 20s, 30s, and 40s who expect to get benefits when they retire, and Americans in their 50s and 60s who are counting on their benefits when they are in their 80s. In 2036, payroll contributions will fall 23 percent below current benefits, and there will be no money in the Trust Fund to help make up the shortfall. That will automatically trigger a 23 percent benefits cut.
 
Some in Congress want to pretend that this looming crisis doesn’t exist. But demographics are inescapable. The first of more than 75 million Baby Boomers will turn 65 this year. The largest age group in our history will also live longer, with average life expectancy climbing toward 80. These developments will exhaust Trust Fund reserves and outstrip projected payroll tax contributions by future workers – by as much as $6.5 trillion over the next 75 years. 
 
For those who believe raising taxes is a good solution, the Trustees’ new report calculates that payroll taxes would need to rise quickly to 14.55 percent in order to make up the coming shortfall. For American workers and families, however, these increased taxes would mean fewer jobs and even slower economic recovery. With unemployment above 9 percent, we need to create jobs, not destroy them.

The Trustees have also proposed cutting core benefits now. According to the Trustees’ report, there would need to be an immediate 13.8 percent cut in current benefits to prevent Social Security from running out of money in 2036. For me, this is off the table.
 

There is a better solution, and it doesn’t include crippling tax hikes or massive benefits cuts. If we start now, Social Security can be made solvent, without raising taxes or cutting benefits, by increasing the retirement age in small increments and adjusting future cost-of-living increases. 

 
Under current law, the normal retirement age of 66 is gradually rising to 67 by 2022. The early retirement age remains at 62. 
 

Since we are living longer, it makes sense to increase retirement age thresholds slightly – without impacting those who are about to retire.  Under this proposal, anyone who is currently 58 or older would not be affected. For everyone else, the normal retirement age would increase by 3 months each year, starting in 2016. It would reach 67 by 2019, 68 by 2023, and 69 by 2027.
 
Extending the retirement age would solve about one-third of the Social Security shortfall. Lowering the annual cost-of-living adjustment (COLA) by one percent would slowly close the rest of the $6.5 trillion gap. Over the past 10 years, the average Social Security COLA has been 2.2 percent.  Trimming it by one percent could prevent tax increases or core benefits cuts. 
 
The new plan would also reduce federal deficits and avoid adding to our $14.3 trillion national debt. Business-as-usual would have us cover the $6.5 trillion Social Security benefits shortfall over the next 75 years with ruinously higher taxes, benefits cuts on middle class and poor senior citizens, or a surge in federal borrowing. Today’s working Americans – tomorrow’s retirees – deserve better. 
 
We must act now to implement sensible, gradual reform. The longer we delay, the steeper the climb – in age and COLA adjustments, taxes, or basic benefit cuts. This proposal can be modified to achieve a majority vote in Congress and a Presidential signature. But that requires a discussion … a start. Failing to take action in advance of the guaranteed shortfall is irresponsible and reckless. 

 

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