Social Security Research Paper
Social Insecurity Social Security, which has been an entitlement program since 1937, is in danger of having inadequate funding for future retirees. This iconic program that almost everyone is counting on to help fund his or her retirement is paying out more money than it collects (Sanger-Katz). Opportunities to help Social Security remain a viable entitlement program lie within our abilities to revise existing policies that are currently unsuccessful. Our current Social Security structure requires reform to secure the necessary resources to fund this failing system. Eliminating the tax cap maximum, raising the minimum retirement age, and introducing means testing are policy shifts that will provide the needed changes to restore the Social Security system. Americans are
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counting on this program to help them with retirement and it is time for our government to do what is necessary to ensure that this system is alive and well for many generations to come.
Social Security is one of this nation’s oldest and renowned government operated programs in our existence. The U.S. Social Security Administration website provides an extensive history database that marks the earliest arrival of English colonists and is the most comprehensive source for Social Security history available today. “When the English-speaking colonists arrived in the New World they brought with them the ideas and customs they knew in England, including the “Poor Laws”…which were fashioned after those of the Poor Law of 1601” (“Social Security History”). The laws featured local taxation to support the destitute and all relief was a local responsibility (“Social Security History”). As early America matured and life for colonists grew more complicated, diverse and mobile, the civil systems of poor relief were strained (“Social Security History”). Eventually the original colonists started to age and began to struggle economically and since there was no program in place to help them, social leaders collaborated to solve the problem. One of the leaders to propose a scheme for retirement security was Revolutionary War figure Thomas Paine (“Social Security History”). He played an important role, breaking new ground to what was to become our road to Social Security. The end of the Civil War landmarked a time when it became evident that some type of social entitlement program was needed in our country. The proportion of the population that was disabled or survivors of deceased breadwinners was at its highest point than at any time in America 's history (“Social Security History”). This led to the development of the Civil War Pension program which provided benefits “linked to disabilities incurred as a direct consequence of . . .military duty” (“Social Security History”). Soon after the Civil War Pension program was implemented, the Social Security Act was signed by Franklin Delano Roosevelt on August 14, 1935 (“Social Security History”). The program was enacted to help our nation’s elderly with funding that would allow them to live out their days with dignity and honor (“Social Security History”). Social security taxes were collected for the first time in January of 1937 and the initial “one-time,” lump-sum payment was made that same month with regular ongoing monthly benefits starting in January of 1940 (“Social Security History”). Since that celebrated day in our history when the unsettled future of our nation’s elderly was strengthened, the Social Security system has been amended multiple times to adjust for our nation’s growth. What started in 1937, with 53,236 recipients receiving benefits totaling $1,278,000 ($24 each), has expanded to help over 51 million beneficiaries receiving a total of over $700 billion in benefits per year (“Social Security History”).
“Social Security funds that help to finance millions of beneficiaries in the United States will be exhausted by the year 2035” (Faler). The funding deficit is further complicated by the extended life expectancy of men and woman today (Collins). Reported by Collins in his 2012 New York Times article, the average life expectancy that was once only 60 years of age in 1937 is now over 78 years of age. Politicians are positioning for what could be the most controversial issue in American history and it involves every one of us that plans on living beyond our days of employment. Social Security benefits are in doubt past the year 2035 and reform is needed quickly (Faler). The system, which has been responsible for providing financial assistance to countless aging Americans for the past 75 years, is nearing bankruptcy. “Millions of Americans rely on Social Security for income…and millions more will do so in the future,” said Treasury Secretary Timothy Geithner, one of the programs’ six trustees (Faler). The system that has the adequate resources needed to render benefits to the American people for 23 more years needs the U.S. government to look beyond today and take the necessary steps to protect this program for the future (Faler). Margot Sanger-Katz reports, in her article dated June 21, 2012 in the National Journal, “The graying of the population presents some difficult math, and it is complicated even more by the economic downturn 's hit on income-based entitlement programs, including Medicaid and food stamps, which have seen their enrollments surge.” Estimates published by the Congressional Budget Office show that Social Security will grow over 29 billion dollars in the next 25 years, further straining our economic situation (Sanger-Katz). More benefits are being distributed than funds are currently collected and those benefits are increasing. The future of the Social Security system is in doubt unless government reform is agreed upon and executed.
With the Social Security systems longevity at question, one of the most debated system fixing opportunities lies within the Social Security wage tax cap. The “wage tax cap” is the maximum amount of taxable wages that can be taxed by the U.S. Social Security Administration (“Social Security History”). Added to the system in 1937, the reason for adding the tax maximum is not entirely clear from the written record found within official documentation of the Social Security Committee 's proceedings (“Social Security History”). It is believed that in the spirit of helping the poor and destitute, the Social Security Administration added the cap to collect a reasonable amount from wage earners to adequately fund the system (“Social Security History”). Tax maximums have increased steadily from the 1951 tax maximum of $3600 per year to our current 2012 maximum of $110,100 per year (Gustman). Since the cap only taxes wages that are earned up to this maximum, any wages earned above and beyond this amount are not subject to Social Security taxation. Future cap increases are currently indexed to the growth of real wages in the economy and will likely increase each year (John). One very simple and efficient way of increasing the Social Security tax base would be to eliminate the maximum tax cap completely. Does this effortless policy adjustment seem too elementary for the U.S. government? The tax calculation adjustment made by the U.S. Treasury Department would not be difficult. However, It is likely that anyone making over the current maximum of $110,100 would have a dispute with the new policy. A group led by Alan Gustman has documented, in the Social Security Bulletin, a 13 page report in relation to increases of the maximum tax cap. In the report it states:
Forward-looking estimates of the effect of raising the tax max are available from a number of sources. The typical approach takes a population base, ages it, and makes assumptions about the values of certain economic variables (often using the Social Security Trustees ' intermediate assumptions for wage growth, interest rates, inflation, and other measures). Analysts using this approach then project or make assumptions about retirement age and the age at which benefits are claimed, condition their calculations on whether spouse and survivor benefits are included, perhaps also estimate behavioral responses, and then project the likely effects of changing the tax max. (Gustman)
In 2010, the Congressional Research Service projected a financial scenario based on elimination of the tax cap maximum and concluded that terminating the payroll tax cap would… “eliminate 95 percent of the trust fund’s shortfall over the next 75 years” (Spross). From the available information it is certainly possible that removing the tax cap would increase revenue needed to fund the failing Social Security system without any other policy shift. If opposition to a tax cap removal is to daunting a policy shift for the U.S. government, raising the minimum retirement age to delay the point in time that one can retire should reduce the lifetime amount of benefits that one receives sufficiently enough to repair this failing system. “In this era of intense partisanship, it often seems as if Republicans and Democrats wouldn 't be able to agree on the religion of the pope or the direction of the sunrise. So it is notable that inklings of a bipartisan consensus are forming about one highly contentious issue -- the age at which workers should be able to collect Social Security benefits” (“To Shore Up”). The U.S. government should slowly and modestly increase the minimum age for retirement from the current age of 67 to 70 years of age (“Slowly Increase Retirement”). Evidence of a possible bipartisan movement toward the increase in the minimum age for retirement is increasing. House Minority Leader John Boehner, R-Ohio, supports gradually raising the retirement age for full benefits to 70 from the current 67 (“To Shore Up”). Raising the minimum age needed to retire seems logical due to the fact that people are living longer. The average life expectancy of Americans is at an all-time high of 78 years of age and is increasing due to increased healthcare advancements (Collins). “Raising the age for full benefits to 70 would solve as much as two-thirds of Social Security 's long-term shortfall, depending on how quickly the increase is phased in” (“To Shore Up”). The Social Security administration passed a law in 1983 that elevated the current age for full benefits to 67 years of age and strengthened Social Security for a generation (“To Shore Up”). Another increase in the minimum retirement age would surely face opposition from those workers who are approaching or will be approaching the current retirement age. The dilemma that remains is; will the increase in the minimum age fix our failing system? Many think it will, however there are concerns. “One major problem associated with raising the retirement age, particularly the age for early benefits is that roughly 30% of the nation’s workforce is employed in manual labor. Many of these workers would have difficulty working longer, particularly if they have health issues” (“To Shore Up”). These workers may not be able to sustain their current level of physical fitness and health in order to continue working until the age of 70. But the U.S. government may not have a choice as reform is needed and it is needed now. The Social Security system is running at a deficit as a result of the recession and retirement of the “baby boomers” (“To Shore Up”). The longer policymakers wait to shore up the program, the more distasteful the choices will be. If Republicans and Democrats can come together to do it sooner rather than later, who knows what else they might be able to accomplish? (“To Shore Up”).
Because of the physicality and health concerns that go along with raising the minimum age needed to qualify for retirement, one of the more obscure ways to help the Social Security system recover from crisis would be means testing. A “means test” is an evaluation that determines the need for an individual to receive Social Security benefits from the government (McKinley). “Means testing was first proposed as a way to help solve the Social Security funding crisis by Ross Perot in 1992. However, few political candidates have suggested it since then; not surprising since it could alienate potential voters and campaign contributors who might be affected by such a proposal” (McKinley). Reported by Michael Kranish in his 2012 article from the Boston Globe, he quotes David John, a Social Security specialist as saying “It makes perfect sense…The idea is to put scarce resources where they are most needed and trim areas where they are not as essential. Means testing is a very simple, easy way to accomplish that.” Means testing would reduce benefits for those that really do not need to be subsidized by the government in order to live. Retirement eligible Americans that have enough money to live at a certain “means” would not receive Social Security because they really do not need it to supplement their primary forms of retirement income. The U.S. currently implements dozens of programs, including welfare and food stamps, that use the practice of means testing to insure that the aide benefits the people that need the most (Kranish). “The main purpose behind means testing would be to stabilize Social Security over the long term” (McKinley). Implementing means testing could be a system saving policy change that would allow the tax cap, and retirement age to remain unchanged.
Not everyone is in agreement that the Social Security system is in need of any major policy shifts. Some do not believe that a crisis exists at all. The annual release of the Social Security Trustees Report is believed to be a means to manipulate and misinform the public as to the status of the Social Security system (Richtman). Richtman suggests that the report is not backed up by facts and some argue that there is an unwritten policy to “never let a crisis go to waste” strategy being exploited by the U.S. government. He believes that there is no Social security crisis. What is essential is that common sense be used to slightly modify current policy to ensure long term funding of this program (Richtman). “Slightly modifying” current policy, to make up for a system projected by some of the most brilliant economists in our country to be completely bankrupt in as soon as 35 years, will not help to change the direction that out current Social Security system is heading. Basic math supports a common sense theory that would be to spend less than one is currently collecting. In order to do this, the solution remains as equally simple as the math supports; provide less benefits or collect more revenue to equate to the amount being spent. This financial conundrum is not about nickels and dimes. It is about dollars…billions of them; an amount so large that the word crisis does not do the situation justice. The situation at hand is real and is not a fallacy. Reports are readily available through the SocialSecurity.org website that support the numbers that Social Security may not be able to continue to pay benefits beyond 2047.
If there is a crisis on the horizon within the Social Security system, agreeing on how to fix the failing system will not come easily. David C. John, a scholar in economic policy from the Heritage foundation, and Rea S. Hederman Jr., a senior data analyst, believes that lifting or eliminating the tax cap would not positively affect the Social Security system (John). John believes that changing the tax cap dramatically would hurt the current unstable economy and it would not guarantee future benefits for our children. While the argument against a major Social Security policy shift is being heard throughout the country, one fact remains. The Social Security system will soon be bankrupt if reform is not agreed to and enforced. When a program requires more resources than are currently available, the program is either eliminated or goes into debt. If an argument exists advocating that our current Social Security system is stable and financial healthy, the resources that have been researched to date have not supported that position. Social Security is failing financially and if not resurrected will break one of the most important promises ever made to retiring people in this great country. Eliminating the tax cap is an achievable option that will establish a means to secure the future of this needed entitlement program. The Social Security system trustees are on record confirming a shortage of funding for future retirees. Policy shift is needed and eliminating the tax cap is supported by financial forecasting reports to be a viable option for the future longevity of these benefits.
When programs are counted upon that affect so many people, the thought of one day having to live without those benefits is extremely controversial and stressful. From the very first day that one works a job, Social Security taxes are collected and held by the U.S. government in trust. We entrust, to the government officials that we elect, guardianship over income that will help to protect our final chapter of life. Social Security has been around since 1937 and has promised future benefits to every American that has ever paid into the system. As our country’s citizens grow old, they are comforted by the assurance that when they reach retirement age, they will be able to live out their days without significant financial discomfort. Social Security will provide the needed economic base so that life can be enjoyed and continued without any major social changes. America is about to break that promise. Our current Social Security structure requires reform to secure the necessary resources to fund this failing system. Eliminating the tax cap maximum, increasing the minimum retirement age, and introducing means testing are policy shifts that will provide the essential changes to restore this iconic system. The Constitution of the United States was written to provide much more than a guarantee of our safety, liberty and justice. It was created for our future and within its body is the promise of welfare for impending generations. We the People of the United States of America have earned the right to benefits promised by our fathers and those that have preceded them. Social Security must be protected from becoming a failing program that results in future generations burdened with “Social Insecurity.”
Works Cited
Collins, Gail. “A Big Day 's Coming.” New York Times 1 March 2012 late ed.: A31. Global Issues in Context. Web. 7 November 2012.
Faler, Brian.
“Social Security Fund to Run Out in 2035, Trustees Say,” Bloomberg. N.p., 23 April 2012. Web. 7 November 2012.
Gustman, Alan L., Thomas L. Steinmeier, and Nahid Tabatabai. “The Growth in Social Security Benefits among the Retirement-Age Population from Increases in the Cap on Covered Earnings.” Social Security Bulletin 2012: 49-61. ProQuest Research Library. Web. 7 November 2012.
John, David C., and Rea S. Hederman. “Lifting the Social Security Wage Cap Will Not Save the System.” Social Security. Ed. Mitchell Young. Detroit: Greenhaven Press, 2010. Gale Opposing Viewpoints in Context. Web. 7 November 2012.
Kranish, Michael. “Future Seniors may see Benefits tied to Means Testing.” Boston Globe. N.p., 10 October 2012. Web. 7 November 2012.
McKinley, Kristine. “Social Security Means Testing – Can Means Testing Save Social Security? Most Say No.” Social Security Retirement Coach. N.p., 6 March 2012. Web. 7 November 2012.
Richtman, Max. “There 's no Social Security Crisis.” USA Today 27 Apr. 2012: 8A. Global Issues in Context. Web. 7 November 2012.
Sanger-Katz, Margot. “The Reckoning Looms.” National Journal 2012: n. page. Gale Opposing Viewpoints in Context. Web. 7 November
2012.
“To Shore Up Social Security, Raise the Retirement Age.” USA Today 21 September 2010: Newspaper Source. Web. 7 November 2012.
“Slowly Increase Retirement Age.” Wisconsin State Journal, The (Madison, WI) 03 May 2012: Newspaper Source. n. pag. Web. 7 November 2012.
“Social Security History.” Social Security Online.org. 1 November 2012. Web. 7 November 2012.
“Social Security and Medicare Board of Trustees.” Social Security Online.org. 1 November 2012. Web. 7 November 2012.
Spross, Jeff. “Democratic Senator Introduces Bill to Lift Social Security’s Tax Cap, Extend its Solvency for Decades.” Think Progress. N.p., 16 November 2012. Web. 19 November 2012.
http://www.bloomberg.com/news/2012-04-23/social-security-fund-to-run-out-in-2035-trustees-say.html http://www.ssa.gov/history/ John, David C., and Rea S. Hederman. "Lifting the Social Security Wage Cap Will Not Save the System." Social Security. Ed. Mitchell Young. Detroit: Greenhaven Press, 2010. Opposing Viewpoints. Rpt. from "Raising the Wage Cap No Painless Solution to Social Security 's Fiscal Woes." Heritage Foundation Web Memo. 2007. Gale Opposing Viewpoints In Context. Web. 7 Nov. 2012.
Document URL http://ic.galegroup.com/ic/ovic/ViewpointsDetailsPage/ViewpointsDetailsWindow?failOverType=&query=&prodId=OVIC&windowstate=normal&contentModules=&mode=view&displayGroupName=Viewpoints&limiter=&currPage=&disableHighlighting=true&source=&sortBy=&displayGroups=&zid=&search_within_results=&action=e&catId=&activityType=&scanId=&documentId=GALE%7CEJ3010685216&userGroupName=ecc_main&jsid=b343d2ab00c5b1157b9bd0afe7b27032 Sanger-Katz, Margot. "The Reckoning Looms." National Journal (2012). Gale Opposing Viewpoints in Context. Web. 7 Nov. 2012.
Controversy P source
Document URL http://ic.galegroup.com/ic/ovic/AcademicJournalsDetailsPage/AcademicJournalsDetailsWindow?failOverType=&query=&prodId=OVIC&windowstate=normal&contentModules=&mode=view&displayGroupName=Journals&limiter=&currPage=&disableHighlighting=true&source=&sortBy=&displayGroups=&search_within_results=&action=e&catId=&activityType=&scanId=&documentId=GALE%7CA294197083&userGroupName=ecc_main&jsid=0918c30aa49d77cd61ce3890752fef5a Richtman, Max. " 'There 's no Social Security crisis '." USA Today 27 Apr. 2012: 8A. Global Issues In Context. Web. 7 Nov. 2012.
Controversy Source 2
Document URL http://find.galegroup.com/gic/infomark.do?&source=gale&idigest=1b36dbe0342b7c71ffb0ad20093f4e14&prodId=GIC&userGroupName=ecc_main&tabID=T004&docId=CJ287897778&type=retrieve&contentSet=IAC-Documents&version=1.0 Controversy Source 3
The Washington, Post. "The problem with means-testing." Washington Post, The 12: Regional Business News. Web. 7 Nov. 2012.
Doc URL http://search.ebscohost.com/login.aspx?direct=true&db=bwh&AN=wapo.29c3134a-316a-11e1-8c61-c365ccf404c5&site=ehost-live "A Year in the Life of Social Security." New York Times 27 Apr. 2012: A26(L). Global Issues In Context. Web. 7 Nov. 2012.
Document URL http://find.galegroup.com/gic/infomark.do?&source=gale&idigest=1b36dbe0342b7c71ffb0ad20093f4e14&prodId=GIC&userGroupName=ecc_main&tabID=T006&docId=A287784561&type=retrieve&contentSet=IAC-Documents&version=1.0 "First Social Security check 72 years ago." USA Today 3 Feb. 2012: 11A. Global Issues In Context. Web. 7 Nov. 2012.
Document URL http://find.galegroup.com/gic/infomark.do?&source=gale&idigest=1b36dbe0342b7c71ffb0ad20093f4e14&prodId=GIC&userGroupName=ecc_main&tabID=T006&docId=CJ278917299&type=retrieve&contentSet=IAC-Documents&version=1.0 "Lift cap on Social Security tax." USA Today 11 Feb. 2010: 7A. Global Issues In Context. Web. 7 Nov. 2012.
Document URL http://find.galegroup.com/gic/infomark.do?&source=gale&idigest=1b36dbe0342b7c71ffb0ad20093f4e14&prodId=GIC&userGroupName=ecc_main&tabID=T006&docId=CJ218784688&type=retrieve&contentSet=IAC-Documents&version=1.0 Collins, Gail. "A Big Day 's Coming." New York Times 1 Mar. 2012: A31(L). Global Issues In Context. Web. 7 Nov. 2012.
Document URL http://find.galegroup.com/gic/infomark.do?&source=gale&idigest=1b36dbe0342b7c71ffb0ad20093f4e14&prodId=GIC&userGroupName=ecc_main&tabID=T006&docId=A281645416&type=retrieve&contentSet=IAC-Documents&version=1.0 Gustman, Alan L., Thomas L. Steinmeier, and Nahid Tabatabai. "The Growth in Social Security Benefits among the Retirement-Age Population from Increases in the Cap on Covered Earnings." Social security bulletin 2012: 49-61. ProQuest Research Library. Web. 7 Nov. 2012 .
Document URL http://search.proquest.com/docview/1021977576?accountid=10715 Gorin, Stephen, H. "Why We Should Keep The Social Security Retirement Age." Health & Social Work 37.2 (2012): 67-70. CINAHL with Full Text. Web. 7 Nov. 2012.
Why the retirement age should stay the same.
Doc URL http://search.ebscohost.com/login.aspx?direct=true&db=c8h&AN=2011693899&site=ehost-live "EDITORIAL: Slowly increase retirement age." Wisconsin State Journal, The (Madison, WI) 03 May 2012: Newspaper Source. Web. 7 Nov. 2012.
Slowly raise the retirement age.
Doc URL http://search.ebscohost.com/login.aspx?direct=true&db=nfh&AN=2W62209224580&site=ehost-live Smith, Andrew. "Experts: Don 't count on Social Security for retirement." Newsday, (Melville, NY) 25 Mar. 2010: Newspaper Source. Web. 7 Nov. 2012.
The end is coming for SS.
Doc URL http://search.ebscohost.com/login.aspx?direct=true&db=nfh&AN=2W63627074929&site=ehost-live "To shore up Social Security, raise the retirement age." USA Today n.d.: Newspaper Source. Web. 7 Nov. 2012.
Doc URL http://search.ebscohost.com/login.aspx?direct=true&db=nfh&AN=J0E146357661410&site=ehost-live Social Security benefits: Means testing…most say NO
Doc URL http://www.socialsecurityretirementincome.com/social-security-means-testing/ Future seniors may see benefits tied to means testing http://www.bostonglobe.com/news/nation/2012/10/09/mitt-romney-and-president-obama-see-means-testing-key-way-entitlement-reform-but-differ-method/Dnogt4axHflREPy5AWDKnI/story.html Means testing to bolster SS
Doc URL http://www.washingtonpost.com/business/economy/means-testing-to-bolster-social-security-its-already-happening/2012/02/28/gIQAP0zLlR_story.html the problem with means testing
URL
http://www.washingtonpost.com/opinions/the-problem-with-social-security-means-testing/2011/12/28/gIQAt8iBRP_story.html
Inside the Social Security Wage Cap Issue
Merrill Goozner 4/22/2011 http://www.thefiscaltimes.com/Blogs/Gooz-News/2011/04/22/Gooz-News-Inside-the-Social-Security-Wage-Cap-Issue.aspx#page1http://www.thefiscaltimes.com/Blogs/Gooz-News/2011/04/22/Gooz-News-Inside-the-Social-Security-Wage-Cap-Issue.aspx#page1 http://www.ssa.gov/OACT/TRSUM/index.html
counting on this program to help them with retirement and it is time for our government to do what is necessary to ensure that this system is alive and well for many generations to come.
Social Security is one of this nation’s oldest and renowned government operated programs in our existence. The U.S. Social Security Administration website provides an extensive history database that marks the earliest arrival of English colonists and is the most comprehensive source for Social Security history available today. “When the English-speaking colonists arrived in the New World they brought with them the ideas and customs they knew in England, including the “Poor Laws”…which were fashioned after those of the Poor Law of 1601” (“Social Security History”). The laws featured local taxation to support the destitute and all relief was a local responsibility (“Social Security History”). As early America matured and life for colonists grew more complicated, diverse and mobile, the civil systems of poor relief were strained (“Social Security History”). Eventually the original colonists started to age and began to struggle economically and since there was no program in place to help them, social leaders collaborated to solve the problem. One of the leaders to propose a scheme for retirement security was Revolutionary War figure Thomas Paine (“Social Security History”). He played an important role, breaking new ground to what was to become our road to Social Security. The end of the Civil War landmarked a time when it became evident that some type of social entitlement program was needed in our country. The proportion of the population that was disabled or survivors of deceased breadwinners was at its highest point than at any time in America 's history (“Social Security History”). This led to the development of the Civil War Pension program which provided benefits “linked to disabilities incurred as a direct consequence of . . .military duty” (“Social Security History”). Soon after the Civil War Pension program was implemented, the Social Security Act was signed by Franklin Delano Roosevelt on August 14, 1935 (“Social Security History”). The program was enacted to help our nation’s elderly with funding that would allow them to live out their days with dignity and honor (“Social Security History”). Social security taxes were collected for the first time in January of 1937 and the initial “one-time,” lump-sum payment was made that same month with regular ongoing monthly benefits starting in January of 1940 (“Social Security History”). Since that celebrated day in our history when the unsettled future of our nation’s elderly was strengthened, the Social Security system has been amended multiple times to adjust for our nation’s growth. What started in 1937, with 53,236 recipients receiving benefits totaling $1,278,000 ($24 each), has expanded to help over 51 million beneficiaries receiving a total of over $700 billion in benefits per year (“Social Security History”).
“Social Security funds that help to finance millions of beneficiaries in the United States will be exhausted by the year 2035” (Faler). The funding deficit is further complicated by the extended life expectancy of men and woman today (Collins). Reported by Collins in his 2012 New York Times article, the average life expectancy that was once only 60 years of age in 1937 is now over 78 years of age. Politicians are positioning for what could be the most controversial issue in American history and it involves every one of us that plans on living beyond our days of employment. Social Security benefits are in doubt past the year 2035 and reform is needed quickly (Faler). The system, which has been responsible for providing financial assistance to countless aging Americans for the past 75 years, is nearing bankruptcy. “Millions of Americans rely on Social Security for income…and millions more will do so in the future,” said Treasury Secretary Timothy Geithner, one of the programs’ six trustees (Faler). The system that has the adequate resources needed to render benefits to the American people for 23 more years needs the U.S. government to look beyond today and take the necessary steps to protect this program for the future (Faler). Margot Sanger-Katz reports, in her article dated June 21, 2012 in the National Journal, “The graying of the population presents some difficult math, and it is complicated even more by the economic downturn 's hit on income-based entitlement programs, including Medicaid and food stamps, which have seen their enrollments surge.” Estimates published by the Congressional Budget Office show that Social Security will grow over 29 billion dollars in the next 25 years, further straining our economic situation (Sanger-Katz). More benefits are being distributed than funds are currently collected and those benefits are increasing. The future of the Social Security system is in doubt unless government reform is agreed upon and executed.
With the Social Security systems longevity at question, one of the most debated system fixing opportunities lies within the Social Security wage tax cap. The “wage tax cap” is the maximum amount of taxable wages that can be taxed by the U.S. Social Security Administration (“Social Security History”). Added to the system in 1937, the reason for adding the tax maximum is not entirely clear from the written record found within official documentation of the Social Security Committee 's proceedings (“Social Security History”). It is believed that in the spirit of helping the poor and destitute, the Social Security Administration added the cap to collect a reasonable amount from wage earners to adequately fund the system (“Social Security History”). Tax maximums have increased steadily from the 1951 tax maximum of $3600 per year to our current 2012 maximum of $110,100 per year (Gustman). Since the cap only taxes wages that are earned up to this maximum, any wages earned above and beyond this amount are not subject to Social Security taxation. Future cap increases are currently indexed to the growth of real wages in the economy and will likely increase each year (John). One very simple and efficient way of increasing the Social Security tax base would be to eliminate the maximum tax cap completely. Does this effortless policy adjustment seem too elementary for the U.S. government? The tax calculation adjustment made by the U.S. Treasury Department would not be difficult. However, It is likely that anyone making over the current maximum of $110,100 would have a dispute with the new policy. A group led by Alan Gustman has documented, in the Social Security Bulletin, a 13 page report in relation to increases of the maximum tax cap. In the report it states:
Forward-looking estimates of the effect of raising the tax max are available from a number of sources. The typical approach takes a population base, ages it, and makes assumptions about the values of certain economic variables (often using the Social Security Trustees ' intermediate assumptions for wage growth, interest rates, inflation, and other measures). Analysts using this approach then project or make assumptions about retirement age and the age at which benefits are claimed, condition their calculations on whether spouse and survivor benefits are included, perhaps also estimate behavioral responses, and then project the likely effects of changing the tax max. (Gustman)
In 2010, the Congressional Research Service projected a financial scenario based on elimination of the tax cap maximum and concluded that terminating the payroll tax cap would… “eliminate 95 percent of the trust fund’s shortfall over the next 75 years” (Spross). From the available information it is certainly possible that removing the tax cap would increase revenue needed to fund the failing Social Security system without any other policy shift. If opposition to a tax cap removal is to daunting a policy shift for the U.S. government, raising the minimum retirement age to delay the point in time that one can retire should reduce the lifetime amount of benefits that one receives sufficiently enough to repair this failing system. “In this era of intense partisanship, it often seems as if Republicans and Democrats wouldn 't be able to agree on the religion of the pope or the direction of the sunrise. So it is notable that inklings of a bipartisan consensus are forming about one highly contentious issue -- the age at which workers should be able to collect Social Security benefits” (“To Shore Up”). The U.S. government should slowly and modestly increase the minimum age for retirement from the current age of 67 to 70 years of age (“Slowly Increase Retirement”). Evidence of a possible bipartisan movement toward the increase in the minimum age for retirement is increasing. House Minority Leader John Boehner, R-Ohio, supports gradually raising the retirement age for full benefits to 70 from the current 67 (“To Shore Up”). Raising the minimum age needed to retire seems logical due to the fact that people are living longer. The average life expectancy of Americans is at an all-time high of 78 years of age and is increasing due to increased healthcare advancements (Collins). “Raising the age for full benefits to 70 would solve as much as two-thirds of Social Security 's long-term shortfall, depending on how quickly the increase is phased in” (“To Shore Up”). The Social Security administration passed a law in 1983 that elevated the current age for full benefits to 67 years of age and strengthened Social Security for a generation (“To Shore Up”). Another increase in the minimum retirement age would surely face opposition from those workers who are approaching or will be approaching the current retirement age. The dilemma that remains is; will the increase in the minimum age fix our failing system? Many think it will, however there are concerns. “One major problem associated with raising the retirement age, particularly the age for early benefits is that roughly 30% of the nation’s workforce is employed in manual labor. Many of these workers would have difficulty working longer, particularly if they have health issues” (“To Shore Up”). These workers may not be able to sustain their current level of physical fitness and health in order to continue working until the age of 70. But the U.S. government may not have a choice as reform is needed and it is needed now. The Social Security system is running at a deficit as a result of the recession and retirement of the “baby boomers” (“To Shore Up”). The longer policymakers wait to shore up the program, the more distasteful the choices will be. If Republicans and Democrats can come together to do it sooner rather than later, who knows what else they might be able to accomplish? (“To Shore Up”).
Because of the physicality and health concerns that go along with raising the minimum age needed to qualify for retirement, one of the more obscure ways to help the Social Security system recover from crisis would be means testing. A “means test” is an evaluation that determines the need for an individual to receive Social Security benefits from the government (McKinley). “Means testing was first proposed as a way to help solve the Social Security funding crisis by Ross Perot in 1992. However, few political candidates have suggested it since then; not surprising since it could alienate potential voters and campaign contributors who might be affected by such a proposal” (McKinley). Reported by Michael Kranish in his 2012 article from the Boston Globe, he quotes David John, a Social Security specialist as saying “It makes perfect sense…The idea is to put scarce resources where they are most needed and trim areas where they are not as essential. Means testing is a very simple, easy way to accomplish that.” Means testing would reduce benefits for those that really do not need to be subsidized by the government in order to live. Retirement eligible Americans that have enough money to live at a certain “means” would not receive Social Security because they really do not need it to supplement their primary forms of retirement income. The U.S. currently implements dozens of programs, including welfare and food stamps, that use the practice of means testing to insure that the aide benefits the people that need the most (Kranish). “The main purpose behind means testing would be to stabilize Social Security over the long term” (McKinley). Implementing means testing could be a system saving policy change that would allow the tax cap, and retirement age to remain unchanged.
Not everyone is in agreement that the Social Security system is in need of any major policy shifts. Some do not believe that a crisis exists at all. The annual release of the Social Security Trustees Report is believed to be a means to manipulate and misinform the public as to the status of the Social Security system (Richtman). Richtman suggests that the report is not backed up by facts and some argue that there is an unwritten policy to “never let a crisis go to waste” strategy being exploited by the U.S. government. He believes that there is no Social security crisis. What is essential is that common sense be used to slightly modify current policy to ensure long term funding of this program (Richtman). “Slightly modifying” current policy, to make up for a system projected by some of the most brilliant economists in our country to be completely bankrupt in as soon as 35 years, will not help to change the direction that out current Social Security system is heading. Basic math supports a common sense theory that would be to spend less than one is currently collecting. In order to do this, the solution remains as equally simple as the math supports; provide less benefits or collect more revenue to equate to the amount being spent. This financial conundrum is not about nickels and dimes. It is about dollars…billions of them; an amount so large that the word crisis does not do the situation justice. The situation at hand is real and is not a fallacy. Reports are readily available through the SocialSecurity.org website that support the numbers that Social Security may not be able to continue to pay benefits beyond 2047.
If there is a crisis on the horizon within the Social Security system, agreeing on how to fix the failing system will not come easily. David C. John, a scholar in economic policy from the Heritage foundation, and Rea S. Hederman Jr., a senior data analyst, believes that lifting or eliminating the tax cap would not positively affect the Social Security system (John). John believes that changing the tax cap dramatically would hurt the current unstable economy and it would not guarantee future benefits for our children. While the argument against a major Social Security policy shift is being heard throughout the country, one fact remains. The Social Security system will soon be bankrupt if reform is not agreed to and enforced. When a program requires more resources than are currently available, the program is either eliminated or goes into debt. If an argument exists advocating that our current Social Security system is stable and financial healthy, the resources that have been researched to date have not supported that position. Social Security is failing financially and if not resurrected will break one of the most important promises ever made to retiring people in this great country. Eliminating the tax cap is an achievable option that will establish a means to secure the future of this needed entitlement program. The Social Security system trustees are on record confirming a shortage of funding for future retirees. Policy shift is needed and eliminating the tax cap is supported by financial forecasting reports to be a viable option for the future longevity of these benefits.
When programs are counted upon that affect so many people, the thought of one day having to live without those benefits is extremely controversial and stressful. From the very first day that one works a job, Social Security taxes are collected and held by the U.S. government in trust. We entrust, to the government officials that we elect, guardianship over income that will help to protect our final chapter of life. Social Security has been around since 1937 and has promised future benefits to every American that has ever paid into the system. As our country’s citizens grow old, they are comforted by the assurance that when they reach retirement age, they will be able to live out their days without significant financial discomfort. Social Security will provide the needed economic base so that life can be enjoyed and continued without any major social changes. America is about to break that promise. Our current Social Security structure requires reform to secure the necessary resources to fund this failing system. Eliminating the tax cap maximum, increasing the minimum retirement age, and introducing means testing are policy shifts that will provide the essential changes to restore this iconic system. The Constitution of the United States was written to provide much more than a guarantee of our safety, liberty and justice. It was created for our future and within its body is the promise of welfare for impending generations. We the People of the United States of America have earned the right to benefits promised by our fathers and those that have preceded them. Social Security must be protected from becoming a failing program that results in future generations burdened with “Social Insecurity.”
Works Cited
Collins, Gail. “A Big Day 's Coming.” New York Times 1 March 2012 late ed.: A31. Global Issues in Context. Web. 7 November 2012.
Faler, Brian.
“Social Security Fund to Run Out in 2035, Trustees Say,” Bloomberg. N.p., 23 April 2012. Web. 7 November 2012.
Gustman, Alan L., Thomas L. Steinmeier, and Nahid Tabatabai. “The Growth in Social Security Benefits among the Retirement-Age Population from Increases in the Cap on Covered Earnings.” Social Security Bulletin 2012: 49-61. ProQuest Research Library. Web. 7 November 2012.
John, David C., and Rea S. Hederman. “Lifting the Social Security Wage Cap Will Not Save the System.” Social Security. Ed. Mitchell Young. Detroit: Greenhaven Press, 2010. Gale Opposing Viewpoints in Context. Web. 7 November 2012.
Kranish, Michael. “Future Seniors may see Benefits tied to Means Testing.” Boston Globe. N.p., 10 October 2012. Web. 7 November 2012.
McKinley, Kristine. “Social Security Means Testing – Can Means Testing Save Social Security? Most Say No.” Social Security Retirement Coach. N.p., 6 March 2012. Web. 7 November 2012.
Richtman, Max. “There 's no Social Security Crisis.” USA Today 27 Apr. 2012: 8A. Global Issues in Context. Web. 7 November 2012.
Sanger-Katz, Margot. “The Reckoning Looms.” National Journal 2012: n. page. Gale Opposing Viewpoints in Context. Web. 7 November
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“To Shore Up Social Security, Raise the Retirement Age.” USA Today 21 September 2010: Newspaper Source. Web. 7 November 2012.
“Slowly Increase Retirement Age.” Wisconsin State Journal, The (Madison, WI) 03 May 2012: Newspaper Source. n. pag. Web. 7 November 2012.
“Social Security History.” Social Security Online.org. 1 November 2012. Web. 7 November 2012.
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Spross, Jeff. “Democratic Senator Introduces Bill to Lift Social Security’s Tax Cap, Extend its Solvency for Decades.” Think Progress. N.p., 16 November 2012. Web. 19 November 2012.
http://www.bloomberg.com/news/2012-04-23/social-security-fund-to-run-out-in-2035-trustees-say.html http://www.ssa.gov/history/ John, David C., and Rea S. Hederman. "Lifting the Social Security Wage Cap Will Not Save the System." Social Security. Ed. Mitchell Young. Detroit: Greenhaven Press, 2010. Opposing Viewpoints. Rpt. from "Raising the Wage Cap No Painless Solution to Social Security 's Fiscal Woes." Heritage Foundation Web Memo. 2007. Gale Opposing Viewpoints In Context. Web. 7 Nov. 2012.
Document URL http://ic.galegroup.com/ic/ovic/ViewpointsDetailsPage/ViewpointsDetailsWindow?failOverType=&query=&prodId=OVIC&windowstate=normal&contentModules=&mode=view&displayGroupName=Viewpoints&limiter=&currPage=&disableHighlighting=true&source=&sortBy=&displayGroups=&zid=&search_within_results=&action=e&catId=&activityType=&scanId=&documentId=GALE%7CEJ3010685216&userGroupName=ecc_main&jsid=b343d2ab00c5b1157b9bd0afe7b27032 Sanger-Katz, Margot. "The Reckoning Looms." National Journal (2012). Gale Opposing Viewpoints in Context. Web. 7 Nov. 2012.
Controversy P source
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Controversy Source 2
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The Washington, Post. "The problem with means-testing." Washington Post, The 12: Regional Business News. Web. 7 Nov. 2012.
Doc URL http://search.ebscohost.com/login.aspx?direct=true&db=bwh&AN=wapo.29c3134a-316a-11e1-8c61-c365ccf404c5&site=ehost-live "A Year in the Life of Social Security." New York Times 27 Apr. 2012: A26(L). Global Issues In Context. Web. 7 Nov. 2012.
Document URL http://find.galegroup.com/gic/infomark.do?&source=gale&idigest=1b36dbe0342b7c71ffb0ad20093f4e14&prodId=GIC&userGroupName=ecc_main&tabID=T006&docId=A287784561&type=retrieve&contentSet=IAC-Documents&version=1.0 "First Social Security check 72 years ago." USA Today 3 Feb. 2012: 11A. Global Issues In Context. Web. 7 Nov. 2012.
Document URL http://find.galegroup.com/gic/infomark.do?&source=gale&idigest=1b36dbe0342b7c71ffb0ad20093f4e14&prodId=GIC&userGroupName=ecc_main&tabID=T006&docId=CJ278917299&type=retrieve&contentSet=IAC-Documents&version=1.0 "Lift cap on Social Security tax." USA Today 11 Feb. 2010: 7A. Global Issues In Context. Web. 7 Nov. 2012.
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Document URL http://find.galegroup.com/gic/infomark.do?&source=gale&idigest=1b36dbe0342b7c71ffb0ad20093f4e14&prodId=GIC&userGroupName=ecc_main&tabID=T006&docId=A281645416&type=retrieve&contentSet=IAC-Documents&version=1.0 Gustman, Alan L., Thomas L. Steinmeier, and Nahid Tabatabai. "The Growth in Social Security Benefits among the Retirement-Age Population from Increases in the Cap on Covered Earnings." Social security bulletin 2012: 49-61. ProQuest Research Library. Web. 7 Nov. 2012 .
Document URL http://search.proquest.com/docview/1021977576?accountid=10715 Gorin, Stephen, H. "Why We Should Keep The Social Security Retirement Age." Health & Social Work 37.2 (2012): 67-70. CINAHL with Full Text. Web. 7 Nov. 2012.
Why the retirement age should stay the same.
Doc URL http://search.ebscohost.com/login.aspx?direct=true&db=c8h&AN=2011693899&site=ehost-live "EDITORIAL: Slowly increase retirement age." Wisconsin State Journal, The (Madison, WI) 03 May 2012: Newspaper Source. Web. 7 Nov. 2012.
Slowly raise the retirement age.
Doc URL http://search.ebscohost.com/login.aspx?direct=true&db=nfh&AN=2W62209224580&site=ehost-live Smith, Andrew. "Experts: Don 't count on Social Security for retirement." Newsday, (Melville, NY) 25 Mar. 2010: Newspaper Source. Web. 7 Nov. 2012.
The end is coming for SS.
Doc URL http://search.ebscohost.com/login.aspx?direct=true&db=nfh&AN=2W63627074929&site=ehost-live "To shore up Social Security, raise the retirement age." USA Today n.d.: Newspaper Source. Web. 7 Nov. 2012.
Doc URL http://search.ebscohost.com/login.aspx?direct=true&db=nfh&AN=J0E146357661410&site=ehost-live Social Security benefits: Means testing…most say NO
Doc URL http://www.socialsecurityretirementincome.com/social-security-means-testing/ Future seniors may see benefits tied to means testing http://www.bostonglobe.com/news/nation/2012/10/09/mitt-romney-and-president-obama-see-means-testing-key-way-entitlement-reform-but-differ-method/Dnogt4axHflREPy5AWDKnI/story.html Means testing to bolster SS
Doc URL http://www.washingtonpost.com/business/economy/means-testing-to-bolster-social-security-its-already-happening/2012/02/28/gIQAP0zLlR_story.html the problem with means testing
URL
http://www.washingtonpost.com/opinions/the-problem-with-social-security-means-testing/2011/12/28/gIQAt8iBRP_story.html
Inside the Social Security Wage Cap Issue
Merrill Goozner 4/22/2011 http://www.thefiscaltimes.com/Blogs/Gooz-News/2011/04/22/Gooz-News-Inside-the-Social-Security-Wage-Cap-Issue.aspx#page1http://www.thefiscaltimes.com/Blogs/Gooz-News/2011/04/22/Gooz-News-Inside-the-Social-Security-Wage-Cap-Issue.aspx#page1 http://www.ssa.gov/OACT/TRSUM/index.html