Washington Post accuses Obama and Democrats of pandering on Social Security
The Washington Post’s editorial board has been arguing for Social Security benefit cuts for years, so their negative reaction to the president’s call to expand the program should come as no surprise. Still, readers might wonder about some of the claims made in the editorial: first, that the wealthy would benefit most from across-the-board expansion plans and we should instead help the “very poorest,” second, that American seniors are better off than working-age adults and have higher incomes than their counterparts in other advanced economies, and finally, that we have better things to do with the limited tax revenues we might be able to wring from the wealthy.
Social Security is a through-the-looking-glass policy world, where progressives are constantly pushing back against conservatives who claim to want to focus on the poor. But the claim by conservatives that we should narrowly tailor Social Security to provide help to the poorest seniors sets up a destructive false choice. Social Security became the most effective antipoverty program precisely because it is social insurance and not simply a safety net program. We already have a means-tested old-age program—SSI—and it is woefully inadequate. You’ll get no argument from progressives on the need to increase SSI benefits, so ask yourself why conservatives want to make Social Security more like SSI.
Is it wasteful to expand a universal program that’s unambiguously progressive but not narrowly targeted on the poor? No. First, it’s important to understand that almost everyone, not just low earners, would better off if we expanded Social Security. Since the decline in traditional defined benefit pensions even many high earners—though maybe not those in Mitt Romney’s income class—could use more secure retirement and disability benefits. But for most people, Social Security only replaces less than half of pre-retirement earnings. It’s an efficient program with very low administrative costs. Instead of expanding it, however, we cut Social Security benefits in 1983, just as disastrous 401(k) plans came on the scene.
As a universal program that is only modestly redistributive (and which has become less redistributive over time because of the widening gap in life expectancy), it’s true that any across-the-board expansion would provide high earners with more benefits than low earners, simply because they earn more and would contribute a lot more under these plans. Because expansion plans raise much more money from the wealthy than they receive in benefits, however, it is misleading to suggest that they are lopsided in favor of the wealthy. If they were, we’d have more billionaires than the stalwart Warren Buffet clamoring to contribute more to the program.
What about the argument that we have better things to do with any tax revenue we can raise? As Social Security Works co-director Nancy Altman points out, we have to get the revenues in the first place. Social Security is a popular program that even Republican voters are happy to pay for—just not most Republican big-money donors. Americans across the political spectrum support both contributing more themselves and making the wealthy pay taxes on all their income (not just earnings up to $118,500). This is important because “scrapping the cap” no longer raises enough money to close the projected shortfall and pay for across-the-board benefit increases, assuming at least some of the money goes to higher benefits for people currently earning above the cap. So even if you think it’s pie-in-the-sky to think we can address all our nation’s overdue needs by soaking the rich, Social Security is a good vehicle for broader revenue increases.
Last but not least, we get to the claim that seniors are relatively well off. It is true that households with young children have higher official poverty rates than seniors, though the difference is much smaller using an alternative poverty measure that takes into account government transfers and out-of-pocket health costs. This still might rule out any immediate transfer from working-age families to seniors, but it does not follow that working-age households wouldn’t benefit from contributing more to Social Security today and receiving higher benefits in the future, since future generations are expected to fare much worse in retirement than current retirees. In any case, it is ridiculous to suggest that lavish Social Security payments make American seniors privileged compared to those in other high-income countries. Higher incomes among seniors in America are due not to the relative generosity of our public retirement system relative to those of other countries, but rather the fact that American seniors are much more likely to be working. Moreover, seniors in Western Europe and Canada have much lower out-of-pocket health costs, so they can retire with fewer worries than American seniors.