Trays of printed Social Security checks wait to be mailed from the U.S. Treasury's… (Bradley C. Bower / Associated…)
Advocates for strengthening Social Security have come to dread the release of the annual report of the program's trustees.
That's because the event has become the basis for more hand-wringing about Social Security's fiscal condition and calls to cut benefits for current and future retirees. This week's release of the 2012 report is no exception.
If you concentrate on what is sure to be the headline figure, you're led to believe that the program has seldom been in lousier shape. Largely because of disappointing economic growth, high unemployment and an unexpectedly large cost-of-living increase for beneficiaries, the date of exhaustion of the program's trust fund has been moved forward three years to 2033 since last year's report.
What won't be adequately explained is that the program isn't "insolvent" or "bankrupt." Even if you accept the dire forecast, it's still two decades off. Economic recovery alone will improve the program's fiscal condition, and the trustees say that even if Congress does absolutely nothing, in 2033 there still will be money to pay about 75% of currently scheduled benefits.
And by the way, despite facing the worst economic conditions in its history, the program ran a surplus of $69 billion last year, increasing the trust fund to nearly $2.7 trillion.
The greater danger in all the panicky talk that will come from politicians and pundits, not to mention Wall Street grandees, about this manifestly conjectural projection is that it will keep people from focusing on the most important figure in the trustees' report. It appears on Page 2, and what it says is that right now Social Security is providing benefits to 55 million people.
That testifies to the reach of a program that keeps 20 million Americans out of poverty and helps stabilize the economy by putting money into the hands of people who will spend it on goods and services. And it points to the best way to improve Social Security's value for all Americans: by increasing benefits to better serve the neediest workers, and expanding its reach to cover workers and dependents who have been cheated by or excluded from the system for far too long.
Yes, you heard me right. It's time to shut down the talk of cutting benefits, which serves nobody, and pump up the volume on making them better.
The idea has been around for years, but its supporters have been hunkered down against a conservative campaign to cut, cut, cut. It's emerging from its foxhole now because the long recession and two stock market crashes have put the final bullets into the hopes of millions of Americans for a secure retirement.
Of the customary three legs of the retirement stool, two — personal savings and employer-paid pensions — have been shattered into smithereens by the markets, high unemployment and changes in workplace benefits. Social Security is the third leg.
"What we really should be doing is beefing up the third leg of the stool, and not breaking it too," says Kelly Ross, a retirement expert at the AFL-CIO. The union is calling for increasing benefits across the board, changing the cost-of-living formula to an index geared to the real costs faced by seniors, and scrapping the cap on wage income subject to payroll taxes, which has been set for this year at $110,100.
Similar provisions are found in the most comprehensive congressional proposal to upgrade Social Security, introduced by Sen. Tom Harkin (D-Iowa) in his Rebuild America Act. Social Security's actuaries calculate that the tax increase in Harkin's measure, to be phased in over a decade, would virtually eliminate any Social Security deficit until mid-century while paying for an across-the-board monthly benefit raise of $65 after 10 years.
Harkin would also base retiree cost-of-living raises on the CPI-E, an inflation index that overweights goods and services that consume a lot of elderly people's budgets, such as medical care. The CPI-E rises at about 0.2 percentage points a year faster than the regular CPI, which makes a big difference over time.
Other proposals to shore up the income and retirement security of historically overlooked segments of society deserve serious consideration. One is to create a "caregiver credit" to counteract Social Security's consistent shortchanging of women. Although retirement benefits are based on the best-paid 35 years of one's working life, women on average spend only 27 years in the workforce. Why? Because they tend to spend years raising children or caring for elderly or disabled family members. Social Security counts those years as big zeros, wage-wise, which translates into lower benefits.
"Instead of having zeros, she should have something," says Terry O'Neill, president of the National Organization for Women. One common proposal backed by NOW and other women's groups would be to assign caregiver years a value equivalent to half the median wage for full-time work, which is about $41,000.