Under Construction – my thought from three years ago – yet no action by Congress

Under Construction Richard Quinn  |  Oct 3, 2018

TO MY WAY of thinking, it is inexcusable that we’ve reached the point where there’s even the possibility that Social Security may not be able to pay full benefits 16 years from now. Americans are scared by the prospect. Some have even given up hope that the program will continue to exist.

Back in 2000, Social Security’s Trustees urged action: “In view of the size of the financial shortfall in the [Old-Age, Survivors and Disability Insurance] program over the next 75 years, we again urge that the long-range deficits of both the [Old-Age and Survivors Insurance] and [Disability Insurance] Trust Funds be addressed in a timely way.

It is important to address both the OASI and DI problems well before any necessary changes take effect, to allow time for phasing in such changes and for workers to adjust their retirement plans to take account of those changes.” Similar warnings, urging action sooner rather than later, are contained in every Trustees report since 2000.

And yet nothing significant has been done to solve the problem. To apply another band-aid, Congress in 2017 authorized the temporary reallocation of the payroll tax from the old-age fund to the disability fund for years 2016 through 2018. That was because the disability fund was running out of money sooner than the old-age trust.

It isn’t hard to craft a balanced combination of changes that will fix the problem. I cooked up my own solution using the calculator on the Committee for a Responsible Federal Budget website. These changes would make Social Security solvent for the next 75 years. You may have better ideas. But the point is, a combination of changes will easily fix Social Security and increase benefits.

My proposed fix:

Increase initial benefits by 5%.

Raise the normal retirement age by one year to 68.

Change the index for cost-of-living adjustments to CPI-E, which more closely reflects retiree costs.

Increase the payroll tax by 2.5 percentage points, with half coming from each worker and half from their employers. It could be less for workers, but only if the payroll tax increase was greater on employers.

Apply the payroll tax to 90% of wages, while also increasing benefits for those who end up paying more in payroll tax. This still generates additional net revenue, because today’s Social Security benefit formula favors lower paid workers (or, to put it another way, higher earners effectively receive a lower return on the payroll tax they pay).

Cover newly hired non-federal government employees who currently do not contribute to Social Security. This should allow states to adjust their public pensions and lower long-term liabilities.

Apply the Social Security payroll tax to the cafeteria plans offered by many employers. When employees pay for health benefits offered through their employer, they pay with dollars that are not only income-tax-free, but also escape the payroll tax.

Diversify a portion of the Social Security Trust funds away from Treasury bonds and into other investments, including stocks, with a view to earning higher returns. Given the long-term nature of Social Security’s financial obligations, such a move would involve minimal risk.

With the above plan, no current retirees are harmed, while the impact on current workers is modest. Nobody likes higher taxes of any kind. But let’s face it: Social Security is part of our social and economic fabric. Americans will continue to rely on Social Security for a significant portion of their retirement income—and we need to agree on a fix.

Source: Under Construction – HumbleDollar


  1. “And, they are more concerned with gaining or losing votes, than they are with whether the plan is best for the nation.”

    The prime directive is to stay in office, because otherwise you are powerless to make changes you regard as necessary. To stay in office, sometimes it is necessary to agree to legislation you believe is detrimental.

    An enigma wrapped in a paradox and shrouded in a conundrum.

    Or a sh*tfire in a dumpster.

    Call me naive, but I believe there are a lot of legislators and governors, etc., trying to do the “right thing” who run up against the hard realities.


  2. I’m not worried about the shortfall. If Washington can cook up a 1.2 trillion “infrastructure” bill then they can cook up the 20-25% shortfall starting in 2033 or whenever.

    No politician wants to hang a tax increase on all the wage earners and risk making a significant number of them mad enough to vote him/her out.

    Any scheme to fix finances for Social Security in the long run is not going to hold. There are too many moving parts and unknowns in the long run for a nation as big with an economy as big as the United States.


  3. “And yet nothing significant has been done to solve the problem.”

    How you gonna solve? If you come up with an ideal bi-partisan solution that 70 percent of the population wants, and the minority party blocks it because it gives a “win” to “the other side”?

    It’s infrastructure week!

    Social Security is next week. Or not.


  4. Seems to me that it all comes down to salesmanship. You have proposed a practical solution which would likely be employed or adapted by a business oriented group. Our elected leaders believe they must first “sell” any such plan to the voters. And, they are more concerned with gaining or losing votes, than they are with whether the plan is best for the nation. And I can see why, given that they have conditioned many of those voters to focus on their rights but not their responsibilities. Those voters are constantly being told by their elected leaders that they are exploited victims of an unjust society, and are therefore entitled to compensation in the form of more generous benefits, paid for entirely by the rich. Never mind that their definition of “rich” is elusive. An honest person, more concerned with telling the truth than selling an idea, saying that we can all enjoy enhanced benefits provided everyone is willing to pay through the nose, just doesn’t have the same ring to it. It won’t sell.

    On Wed, Nov 10, 2021 at 4:42 AM QUINNSCOMMENTARY wrote:

    > rdquinn posted: “Under Construction Richard Quinn | Oct 3, 2018 TO MY > WAY of thinking, it is inexcusable that we’ve reached the point where > there’s even the possibility that Social Security may not be able to pay > full benefits 16 years from now. Ame” >


  5. All good options. But, Why should you or me or Congress get to decide how to fill the gap that resulted from past, deliberate, inadequate funding? We should demand a variant of annual enrollment that is intergenerationally equitable, leaves the relative burdens unchanged, where each option is priced and repriced annually for anti selection, and let each taxpayer and beneficiary decide what “poison” they want – and all can change their minds if they want each subsequent year.


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