Social Security; The candidates hold its future in their hands

Posted 8/21/12

The federal Social Security program turns 80 years old this month. President Franklin Roosevelt signed the Social Security Act into law on August 14, 1935. While he was most concerned with helping to …

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Social Security; The candidates hold its future in their hands

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The federal Social Security program turns 80 years old this month. President Franklin Roosevelt signed the Social Security Act into law on August 14, 1935. While he was most concerned with helping to pull the country out of the Great Depression at the time, he appointed people from both political parties to come up with a plan to provide people with dignity once they became too old to work.

Ever since, there have been predictions that the program would not be there for the next generation, that it would run out of funds, and some have argued that it never should have been created in the first place.

With the recent publishing of the yearly Social Security Trustee’s Report, and with 2016 presidential candidates roaming the country addressing any number of topics, Social Security is frequently the topic of media reports.

Scott Walker, the governor of Wisconsin who is running for the Republican nomination, thinks that any person who was born before he was, in 1967, should still receive the Social Security benefits they have been counting on for retirement for so long. But he added, “For people my age and younger, we live in a whole different world. We live in a 401(k) society, we’re ready for reform. I think we think it’s realistic not just for ourselves but our children and someday our grandchildren that we put in place reforms.”

It’s a safe bet that before people who are younger than about 48 years old would jump on his bandwagon, they would first want to see the details of the kinds of reform he is talking about.

Another Republican candidate, Jeb Bush, the former governor of Florida, has said that Social Security needs reform, and it should come in the form of an increased retirement age. He said recently on the campaign trail, “We need to look over the horizon and begin to phase in, over an extended period of time, going from 65 to 68 or 70… And that, by itself, will help sustain the retirement system for anybody under the age of 40.”

Some analysts don’t agree. First, full retirement age is now 66 and has been for some years. People already have the option of receiving Social Security benefits at anywhere from age 62 to age 70, so it’s not clear exactly how much revenue might be saved by increasing the minimum retirement age.

Ohio Gov. John Kasich, another Republican candidate, recently reminded an audience at a campaign event that when he was a member of the U.S. House of Representatives he endorsed a plan that would allow workers to divert some portion of Social Security taxes into private investment accounts. That plan was vigorously opposed by Democrats.

Republican candidate Donald Trump, the businessman who has so far shot to the top of the polls by slandering undocumented workers and harshly criticizing other politicians, is one Republican who is calling for no reform of Social Security, and has said in the past any politician that does so won’t be elected to the office of president.

On the other side of the aisle, Democratic candidates are calling for an expansion of Social Security benefits. Hillary Clinton has not released any detailed plans but has said she would “defend” Social Security and said she would work for “enhanced” benefits.

Bernie Sanders, the congressman from Vermont who is running for the Democratic nomination, goes quite a bit further. He introduced a bill in the House in March that would raise benefits by about $65 a month for most beneficiaries. He said, “At a time when more than half of the American people have less than $10,000 in savings and senior poverty is increasing, we should not be talking about cutting Social Security benefits. We should be talking about expanding benefits to make sure that every American can retire with dignity.”

Martin O’Malley, the former governor of Maryland, has made expanding Social Security benefits a focal point of his campaign, and he has proposed raising the income limit for the Federal Insurance Contributions Act (FICA) tax, which is currently applied only to the first $118,500 in income.

So the politicians are split on the need for reform, and whether, in fact Social Security is in trouble. According to the National Committee to Preserve Social Security and Medicare, the latest trustees’ report shows that, “Social Security remains strong, and will be able to pay full benefits for many years to come—until 2034. Thereafter, there will still be enough income coming into the program to pay 79% of all benefits owed... In 2015, Social Security’s income will exceed its expenses by over $9.2 billion.”

While there are long-term funding deficiencies in the program, there are a number of ways to fix the long-term outlook without reducing benefits and raising the retirement age. For instance, changing the FICA tax so that it covers all income rather than only income up to $118,000 per year would eliminate funding shortfalls into the distant future.

Now, as the election cycle is revving up, is a good time to get clear on the stances of the candidates who will be our future executive and lawmakers.

And just as important, let them know what you think.

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