An increase in the retirement age and other proposed changes to Social Security that would reduce benefits are both unnecessary and unpopular across a broad demographic spectrum, research and polling data shows.
On January 19, EPI, Demos, and The Century Foundation hosted a discussion on the future of Social Security, where a group of researchers presented data showing the system is fundamentally sound under its current structure and that the projected 75-year shortfall is modest and could be fixed without reducing benefits. They also presented polling data showing that a large majority of Americans regard Social Security as a core benefit that should not be on the table as policymakers consider ways to reduce the deficit.
“Social Security is not spiraling out of control,” said EPI Vice President Ross Eisenbrey, who presented data showing a relatively modest increase in costs over the next few decades. Social Security benefits equal 4.8% of gross domestic product today. When those costs are projected to peak in about 20 years, after all the baby boomers have retired, benefits will equal only 6.2% of GDP. “Drastic solutions are not called for,” said Eisenbrey.
Eisenbrey and others also showed that current Social Security benefits are quite modest. Greg Anrig of The Century Foundation said that with the average Social Security beneficiary receiving about $14,000 per year, the United States ranks 26th among 30 developed nations in terms of replacing pre-retirement income for seniors. Yet that amount makes a critical difference to millions of seniors. “Without Social Security, half of the elderly population would be living in poverty,” Anrig said.
Other key details discussed in the meeting – many which are covered at more length in EPI’s new paper, Beyond “Normal” — include:
–Life expectancy has risen more in working-age years than retirement years, which means that to the extent that Americans are living longer, they are also contributing more to Social Security.
–Although overall life expectancy is rising, lower-income groups have seen very little increase in post-65 life expectancy in recent years, and some research suggests that lower-income women may be losing ground.
–Slow wage growth and rising inequality are bigger problems for Social Security than increased life expectancy. Longevity gains for younger generations account for only one-fifth of Social Security’s projected 75-year shortfall, while slow wage growth and rising economic inequality account for more than half the projected shortfall.
While slow wage growth in recent decades has limited funding through payroll tax contributions, increasing wage inequality has meant that payroll taxes are capturing a smaller portion of incomes at the top. The current cap above which incomes are not subject to the Social Security payroll tax is $106,800, meaning that individuals and families with high six- or seven-figure incomes are only taxed on a very small portion of their earnings. In 1984, the payroll tax captured 90% of all income, but that rate had fallen to 84% by 2008.
Polls show that most Americans do not even know there is a cap on the Social Security payroll tax, although lifting the cap could fill a large portion of the projected shortfall, said Heather McGhee of Demos.
Other polling data presented at the meeting reveal a broad disconnect in how many policymakers and the average American view Social Security. While policymakers often include Social Security in budget discussions, and stress that everything must be “on the table,” Celinda Lake of Lake Research Partners said Americans view Social Security as a “core value” rather than a “policy debate.” As most of the public sees it, benefit cuts should be off the table.
Lake equated Social Security to other foundations of the modern economy, such as the minimum wage, and stressed that Social Security has its own source of funding complete with a built-in trust fund designed to cover the increased cost of the baby boom generation. “Everything is not on the table,” she said of deficit reduction proposals. She also stressed that making Social Security part of the deficit discussion took the focus off the much more crucial issue of jobs. “If jobs are created, more money will go into Social Security.”
“For the public, cutting benefits is the problem, not the solution,” said Guy Molyneux of Hart Research Associates. One survey by Hart Research showed that 61% of respondents supported strengthening the Social Security system with increased taxes, while only 36% supported cutting benefits. Other polls showed a strong opposition to increasing the retirement age or otherwise reducing benefits among most age and demographic groups and political affiliations. This included younger age groups, who, Lake said, are “wildly opposed” to cuts in the program.