Forget the politics, here are several ways to assure Social Security solvency for at least 75 years

Dealing in facts seems to be out of fashion theses days. When it comes to Social Security what people believe goes from the sublime to the ridicules. It is those myths and misinformation that make it even more difficult to take action.

The simple fact is that funding Social Security has not kept pace with changing demographics, workforce changes, retirement patterns etc. Funding has not been adjusted because one Congress after another has ignored the warnings of the Social Security Trustees and have done nothing to fix the program.

So here we are closing in on a crisis and finding it harsher than should have been necessary to fix the problem. Fixing Social Security generally means assuring adequate funding for at least one generation – 75 years.

I have used the Committee For a Responsible Federal Budget modeling tool to construct several changes in Social Security that will make it solvent for 75 years although not necessarily sustainable beyond that without more changes. Each bullet option is a separate set of changes, only one option is necessary. Yes, these are estimates over many decades, but that is true regardless of the methodology. And yes, over the years other changes may be necessary.

• Raise the payroll tax by 3.5 % – half paid by employers. That is, if current workers paid an additional 1.75% in payroll taxes and no other charges were made, SS stays solvent for the next 75 years.
• Raise payroll tax by 1.5% and tax all wages – with additional benefits based on those taxes
• Increase payroll tax by 1%, apply tax to cafeteria plans – referred to as Section 125 of the IRC – (employee contributions to such plans are not subject to taxes currently) and apply SS payroll tax to all wages above $400,000 – with additional benefits applied
• Raise the full retirement age to 69 and index it to longevity, index future COLAs to chained CPI and means test the COLAs – this would effectively eliminate COLAs for high income retirees
• Raise full retirement age to 69 and index to longevity, apply payroll tax on all wages above $400,000 (with added benefits, but at lower accrual rate) and include all newly hired state and local workers in Social Security. This combination of changes would allow for creation of a higher minimum benefit of 125% of the poverty level.

These are just some of the changes and combination of changes possible to keep Social Security solvent. It’s not all that hard. The real shame is that if Congress had made very modest changes (less than one percent) to the payroll tax for example, over several years and consistently adjusted it as necessary, we would not have a crisis and workers would not even notice the changes.