For example, throughout the recent Great Recession and current slow recovery Social Security has performed precisely as designed – that is, as a giant and indispensable economic shock absorber.
With wages stagnating and large numbers of Americans still out of work, contributions to Social Security from workers’ earnings have been rising less than expected, while at the same time millions of laid-off workers have started collecting retirement benefits sooner than they had planned. These twin developments, both recession-driven, have kept Social Security’s income below expectations while increasing outgo. Yet the program has continued to reliably pump money into the economy month after month – roughly $775 billion in benefits last year alone.
Since the first Social Security benefit was paid more than seven decades ago, the system has never missed a payment. And today, despite the impact of the Great Recession, Social Security is still building reserves for the future. It can pay all promised benefits for about 20 years and, even without changes, the lion’s share of benefits due after that. This is in sharp contrast to 1983, when Social Security faced the only immediate crisis in its history and Congressional action in the spring was necessary to enable the program to pay full benefits due in the summer. Today’s program is far more stable.
And it’s affordable. At about 5 percent of the economy now, it will increase to just over 6 percent when all baby boomers are retired, and then is projected to remain at about 6 percent thereafter.
What do lawmakers need to do to keep Social Security strong? They could schedule sensible changes – such as gradually raising the contribution rate, raising or eliminating the taxable earnings cap, and/or broadening the sources of program income – to fully finance benefits for 75 years and beyond. And they could enact sorely needed benefit improvements to help vulnerable families make ends meet and set a sound foundation for Americans approaching retirement, many of whom have suffered irreversible losses in other anticipated sources of retirement income such as 401(k) plans.
A recent public opinion survey conducted by the National Academy of Social Insurance found strong support — across generations, income levels, and political party affiliations — for such sensible and affordable changes. Large majorities of Americans say they don’t mind paying for Social Security because they value the program for themselves, for their families, and for the security and stability that they know it provides for millions of disabled and retired workers and for the children and spouses of deceased workers.
Most Americans would rather pay more than see benefits cut. More than 7 in 10
of those participating in the online interactive survey chose a package of policy changes that would raise revenues, improve benefits, and eliminate the program’s long-term shortfall — without cutting benefits. Among other things, the preferred package would increase, not reduce, Social Security’s Cost-of-Living Adjustment (COLA) to keep up with inflation that seniors face.
This year marks the 78th anniversary of the Social Security Act. Let’s celebrate Social Security for what it is: the essential foundation that allows American capitalism to thrive by protecting families against the downside risks of a volatile economy. Those risks — including financial devastation triggered by the unexpected loss of a breadwinner’s earnings — aren’t going away. But with just the common-sense changes that most Americans favor, Social Security can continue to serve as America’s family protection plan for another 78 years and more.
The authors are chair and chair-elect, respectively, of the Board of Directors of the National Academy of Social Insurance – a nonprofit, nonpartisan organization made up of the nation’s leading experts on social insurance.