For reasons I’ll get to in a moment, I was really struck by the title of this excellent, important new paper by my CBPP colleague Kathleen Romig: Increasing Payroll Taxes Would Strengthen Social Security.
It is well understood that Social Security’s financing needs shoring up; we’ve been drawing down the trust funds to meet current obligations and by 2034 the funds will be exhausted. That’s often mistakenly taken to mean that Social Security will no longer pay out benefits, which of course is wrong: 86 percent of its income comes from payroll taxes, which will continue to support the program, allowing it to pay about three-fourths of scheduled benefits in 2035 and beyond. To be clear, that is a totally unacceptable outcome, and one that could be—must be—avoided using Romig’s roadmap. She is absolutely correct when she describes, contrary to the hysteria I often hear on this issue, that Social Security’s shortfall is “significant, though manageable.”
In fact, the shortfall amounts to 1 percent of GDP over the next 75 years. So how can we close that gap? Much of the solution will have to involve increasing the payroll tax revenue that, as noted, is the mainstay of the program’s funding.
Romig’s key argument is that such an increase is justified by recent trends: “Social Security’s tax base has eroded since the last time policymakers addressed solvency in 1983, largely due to increased inequality and the rising cost of non-taxed fringe benefits, such as health insurance.”
But Americans wouldn’t stand for reversing that erosion through paying more into the program, right? In fact, Romig notes that “…the majority of Americans oppose cuts to Social Security and support strengthening the program by contributing more in taxes.” Other than Medicare, there may be no other government program that has this kind of support. So we should tap it.
To do so, she suggests three revenue-enhancing changes:
- Increasing or eliminating Social Security’s cap on taxable wages. The current salary cap on payroll taxes is now $118,500 a year. “Raising the cap would help mitigate the erosion of Social Security’s payroll tax base caused by rising wage inequality. Most workers’ taxes would not change…changes to the tax cap could close roughly a quarter to nearly nine-tenths of Social Security’s solvency gap, depending on how they were structured.”
- Expanding compensation subject to Social Security payroll taxes. This would be a big change, but a worthy and a progressive one. The play is “to include fringe benefits such as employer-sponsored health insurance and flexible spending accounts. Fringe benefits are a growing slice of compensation, and including them in Social Security’s tax base would eliminate the discrepancy between those who receive fringe benefits and those who don’t. Affected workers — who would disproportionately be lower- and middle-income — would pay more in taxes but also receive more in Social Security benefits. Including employer-sponsored health insurance premiums could close over one-third of Social Security’s solvency gap; including other fringe benefits could close [another] one-tenth.”
- Increasing Social Security payroll tax rates. As other aged wonks will remember, this wouldn’t be the first time the rate was increased, as the early 1980s commission headed by that wild-eyed radical Alan Greenspan also recommended various revenue boosters that became law in 1983. “Increasing rates alone could close the entire solvency gap; even a modest change, such as a gradual increase of 0.3 percentage points each for employees and employers (or less than $3 per week for an average earner), could close about one-fifth of the gap.”
The two figures below show the extent to which the compensation base of the program has eroded, due in part to rising earnings inequality pushing a larger share of earnings above the payroll cap. Note first how that total amount of compensation has drifted about the taxable earnings base. The base for the payroll tax used to be three-quarters of total compensation; now it’s about two-thirds.
There are two main reasons for that: higher inequality and the fact that an increasing share of compensation goes to health care and other fringes that are outside the payroll tax base.
The earnings inequality problem is clear in the next figure. The last time we addressed the shortfall, the payroll tax covered 90 percent of earnings. Now it covers only 82 percent.
It is often said that there are three legs to the retirement-security stool: savings, pensions, and Social Security. In benighted DC discussions, Social Security is often derided as the shakiest leg. In fact, it’s the firmest, as decades of wage stagnation and risk shifting (both the shift from defined-benefit to defined-contribution pensions and the simple shedding of pension plans) have undermined the other two legs.
Romig’s big three ideas are great ways to make the strongest leg of the stool even stronger, through broadening the base to correct the factors responsible for its erosion. Yes, that’s a tax increase, which is why I was struck by the boldness of her title. We are in an era where even the Democratic candidate for president will not propose tax increases on any but the top 5 percent; where we are somehow supposed to fund our transportation infrastructure on a gas tax that’s been frozen in nominal terms since 1993.
It is only in magical lands that we can get what we want and need without paying for it. In the real world, this is the way forward, and kudos to Romig (and CBPP) for saying so.
Excellent posting. A gradual increase in the wage cap plus a gradual increase in the FICA rate could make Social Security entirely solvent for generations (given demographic projections). Small gradual annual increases for both should commence as soon as possible, and they should stop when Trustees are confident that the Trust Fund won’t need more.
The idea of including some fringe benefits–not just wages/salaries–under FICA is intriguing as an approach to increasing benefits. It’s a good idea now that we’ve seen how other insurance and retirement vehicles don’t function well for the average person. And a question: since the Earned Income Tax Credit subsidizes low wages, shouldn’t it also be subject to FICA?
a one tenth of one percent increase in the FICA “tax” for each the employee and the employer, each year that the Trustees project short term actuarial insolvency would close the SS deficit completely and forever. that amounts to a one dollar per week increase in the tax for each year for the next ten years and and decreasing intervals after that… while payrolls are projected to increase ten dollars per week each year. this means that even though the tax increases as a (tiny) percent of wages, the worker is getting an absolute pay increase about ten times as large so that by the time the tax increases are no longer needed (at about 2% of wages) the worker will have about twice as much after the tax dollars in his pocket to spend each year PLUS having saved through SS enough to insure that he will be able to retire at the current retirement age.
the other suggestions here may make sense in terms of cosmic justice, but they are not good ideas politically. the “rich” already pay more for SS than THEY think is fair. there is no need to tax them more than SS is worth to them as insurance. that way workers can continue to say “i paid for it myself.” and that is important to them. FDR thought it was a critical part of the program. taxing fringe benefits is a good idea. about 1% of the actuarial imbalance comes from a shift in compensation away from taxable wages to “benefits.” benefits created intentionally to avoid taxes. that should be stopped, but i hate to introduce complications that are not needed. the workers should be… and i think are… smart enough to know that the benefit they receive from SS is worth what they pay for it. and will continue to be worth it even with an increase in the tax.
I’m hoping that your message can get through eventually so that the president after this next one can do something about it. I have absolutely zero hope that Hillary will accomplish anything but the status quo. Zero.
http://www.zerohedge.com/news/2016-09-30/hacked-recording-hillary-mocks-bernie-supporters-living-their-parents’-basement
Sorry people, we ain’t voting for this person. Try again, rich Democrats.
1) “changes to the tax cap could close roughly a quarter to nearly nine-tenths of Social Security’s solvency gap”
Ok, why not go with the nine-tenths version? Why make taxes more regressive instead of more progressive? (admittedly ‘progressive’ is just the term used to describe increasing rates with higher income and does not by itself connote the idea of ‘progress’ per se, but taxes and especially social security taxes are very much regressive as presently structured. The impact of the tax is also larger than the era of more progressive taxation, especially before 1960. It rose from 5% in 1959 to 15.3% in 2015 (including medicare). That’s a flat tax except for those earning over the cap of $118,000 who are taxed at a lower rate because of the cap. That’s in addition to lower income tax rates, as before 1960 income above $1 million was taxed at 90% vs today at 41%. There is no justification for avoiding a heavy reliance on raising the cap. Bernie Sanders inserted a gap in the cap to protect upper middle class too.
2) Before you apply social security to benefits, you would need to apply income tax to benefits so they are taxed with progressive rates. Otherwise you are making the tax system worse (less progressive). This process would need to be phased in gradually to avoid economic disruptions and avoid sudden impacts to people’s personal finances. That’s the only fair way to treat taxing benefits.
3) It’s less than honest to use the term “employer share” of social security when every economist includes that tax as a tax on employees’ income. There is no employer share in reality, it’s a way for Republicans and Democrats to tax for retirement (including medicare) by fooling the public as to the true cost.
4) There should be no consideration of a broad based increased payroll tax while unemployment is elevated and wages stagnant. Table that notion at least a year or two except for the nine/tenths problem-solving raising-the- cap.
The above represents a truly progressive and workable proposal, notwithstanding the congress. You won’t change congress by pledging to raise taxes. But you can change congress by pledging to only raise taxes on the rich.
I wouldn’t advise the nine tenths solution which removes the cap but doesn’t increase benefits of those affected. The paper says lifting the cap and limiting increased benefits to 3% or 5% vs. current 15% would close three quarters of the gap.
One could see how cutting the 15% to 7% as the cap is doubled, and then reducing to 5% for over double the cap would still close half the gap, and present the upper 10% affected by increase with a more palatable choice (important because they run the country). Then they wouldn’t cry as much about their 401Ks were decimated by the latest stock gyrations and they were forced to sell and so couldn’t make it back up when the market returned to normal.
https://www.ssa.gov/policy/docs/issuepapers/ip2009-02.html
The 1% and .1% would still get whacked with a big tax increase and only 3% vs. 15% proportionate return, and deservedly so, they still be undertaxed, it would still be a relatively flat 15% tax for ordinary workers.
The other half could be raised by an across the board hike, gradually and only when the economy is in better shape.
Good comment, except for one small detail. FICA doesn’t fund Social Security. See: https://mythfighter.com/2014/11/09/a-brief-reference-what-you-need-to-know-when-discussing-economics/
Wages are down, a slight recent uptick notwithstanding. So is employment in middle income wealth creating occupations. The trends are to produce overseas in low wage countries or back home with robots. These trends seem to be accelerating.
This are long term problems for the Social Security system because foreigners and robots don’t pay into the system. Neither do the wealthy, except for piddling contributions before they crash through the annual wage ceiling. Current workers will probably amass spotty lifetime employment records that will greatly reduce their benefits from the system to below subsistence when they retire. Private retirement programs do not begin to fill the gap except for professionals and executives.
I think now is the perfect time to start morphing Social Security into a guaranteed national lifetime income system.
Smith
try not to make an idol of the phrase “progressive tax.” Social Security is highly progressive. and the payroll tax is not really a “tax.” it’s a mandatory savings and insurance contribution. you don’t charge a person more for fire insurance just because he is “rich.” turning SS into just another “progressive tax” would turn it into welfare, and FDR, who was smarter than you, thought this would be a very very bad idea.
raising the “tax” one dollar a week per year for an average earner (50k per year) would not be a burden, would not be felt, or even noticed by 99% of workers. seems a really really bad bet to bet their Social Security against a dollar a week.
if you want to “tax the rich” to pay for welfare or government in general, fine. have at it. but don’t destroy Social Security because you don’t understand how it works.
Allow me to clarify a few things that are obviously being overlooked.
Progressivity is defined as an increasing rate associated with increasing income. Social Security may be redistributive because the eventual rate of return decreases at higher incomes, even for those under the cap who are thus fully taxed, but the tax is certainly a flat tax and a regressive one at that for income above the cap.
It’s just very weird to make a crack about adherence to progressive taxation, when I directly commented on the technical nature of the term.
I am for universal benefits, and my follow up comment (which may not have been posted before your targeted note, though the time shows it was written hours before) further emphasizes cutting a deal that offers most wage earners above the current cap a better deal than even the one proposed in the CBPP paper.
Nothing in the proposal to raise the cap (except the extreme Sanders no increase 9/10ths solution which I don’t support) changes anything about the existing nature of the system, except for the idea of raising or eliminating the cap. We already have reduced returns at higher income levels (15%).
Instead of being cute about raising taxes .1% for ten years, employer and employee, it’s more honest to say you’re raising taxes 2% (though phased in over ten years). For median personal income of $30,000, that’s $600. Ouch. Let’s not go there. Half can come from raising the cap, and the other $300 we can think about some years from now when presumably the economy is better, maybe when income equals 2007 levels again (almost there now).
For anyone who thinks we don’t need to go back to the pre 1960 marginal tax rate of 90% on income above $1 million, they shouldn’t then wonder why the economy doesn’t work the same as it did in the high growth 1950s and 1960s. You may say it was a unique time, but how could that difference in taxes not have a huge effect? It was 70% up until 1980 too. And 50% up until 1986. It was in the 1990s that inequality really took off, and the 1% captured an additional 10% of national income. Piketty argues for nearly exactly those rates.
http://www.merriam-webster.com/dictionary/progressivity
http://www.merriam-webster.com/dictionary/progressive
4 a : increasing in extent or severity
b : increasing in rate as the base increases
When the work week moves to fewer hours and wage/salary earnings shrink more in terms of their proportion of income, would we then, finally, recognize that we need to think differently here?
We want more domestic employment and lowering the tax burdens on its incidence would make some common sense. Perhaps people disagree on that point, though I think most would like us to care about the level of employment here in the US, and this point should be considered.
We could have many good discussions about employment, proportionate shares of income flow, contributions to public finance, retirement and safety net economics if the sophistry about ‘welfare’ and the strangling connection to work hours as paid in the past and in the aggregate currently, well, was openly duscussed as just one way to think about some of these things. The welfare memes, however, these are misleading, used as Propaganda for those who want to continue burdening payrolls fir the bulk if society so wealth and concentrating incomes are less and less burdened by wiser taxation policies. This election is in large part about stopping the propaganda and stopping thus shift from continuing.
Net wealth and the magnitude of annual income flows continue to increase, and these are nice metrics until you recognize how the nice parts are concentrating in fewer and fewer people, even as these few people lobby to increase public finance burdens on work (which is what, surprisingly this article has as a basic premise).
This is about wealth and income and the income tax – can we not commit to lowering payroll taxes for the bulk of workers and salary earners and carefully watch the proportion of income flow to make sure this is sensible even as real progress leads to shorter and shorter definitions of full time employment in the US?
The social security program is the accepted way to arbitrate this transition but it requires good people to stop talking about a strict coupling to labor hours and paid amounts for these hours. Just look at net wealth and overall income flow, we can as a society afford to treat ourselves more thoughtfully. Ok to keep some payroll taxes, but let us address the disproportionate income share trends and the obvious progress that will continue to influence fair labor standards balancing the desire for almost all people to work and contribute. Absolutely sorry to see this article and commentary from the author and from others.
Can I ask for some to talk about lowering payroll tax burdens for the bulk of people touched by these taxes while we substitute other general ways and means to finance even an expansion in the earnings that are to be paid (even remediating perhaps for the rents obtained over the decades from distortions or unfairnesses in labor markets). Please discuss this too, not just the connection to labor hours as a defining boundary to any thoughtful economic policies.
I think FDR would like that, he could in my view see the past and the future, and do something, actually a number of things, about it. Can we do this now??
No way. There is no need to lower the payroll tax. Just raise the cap. The way to address income distribution is to do what worked before, restore the rates, 90% on income above a million. The effective rate at $10 million was therefore close to 90%. At a million it was 66%. Having the government redistribute, or worse, regulate salaries more than we do now, is a mistake. Higher minimums, and restoring the 40 hour work week for everyone, or cutting it to 35 hours or less, mandating paid vacation, universal healthcare, these are already existing policies in many countries. Benefits like free public education, healthcare, minimum wages, vacation, limited hours, child care, retirement pensions, are, should and must be universal and not means tested. Tax progressively to eliminate the insanely skewed income distribution. It worked before. It was 90% from 1940s to 1960 and 70% up to 1980.
In 1960 when the payroll tax was 5%, the effective income tax rate on median income was much higher than today so the total tax burden on lower incomes was at least equal if not greater than today’s.
Well JB and CBPP here is the discussion area that you should be writing about.
Smith is highlighting my point about the shift in contribution burdens to payroll. I don’t think we need to go to a 5 percent FICA but we have to recognize that as there became more global labor competition the US raised payroll taxes and we have subsequently seen jobs more easily go elsewhere. This shift in contribution burden was rapid and done at the wrong time. We can remediate by shifting back.
But we must decouple the earnings calculation side (that is, how to calculate the retirement earnings checks) from the strict labor hour and retrospective paid compensation straightjacket and look to the wealth and size of the economy instead. The economy now was built and is still being maintained by the 40 to 50 plus year efforts of the retirees, in other words better earnings checks have indeed been earned.
So Smith and I agree. Use nonpayroll ways and means to pay the earnings along with payroll taxes. Social security as a systemic arbiter can then connect people to the success of the economy and this is not just a payroll tax revenue matter at all, just a shift in thinking about what was indeed earned as a return for years of work.
Smith might even agree with me that the shift of burden to payroll incidence was over done and could be adjusted now. I am just saying that there are employment policy benefits to be obtained by shifting back to a lower payroll tax rate (ok with me to recover the tax base itself with a modern update to the definitions so the shift away from the income tax-like effects of this payroll regime is brought back to what it was for those in the higher compensation brackets).
No, I don’t agree, which is what I tried to convey in an earlier post writing “There is no need to lower the payroll tax. Just raise the cap.”
Just because I complain about low marginal income tax rates doesn’t mean I think general revenues should be used for Social Security.
I’m in favor of raising the payroll tax but also raising the cap. Krugman, and I agree with him on this, has pointed out there is no need to address the issue now, because the economy is weak, because there is still enough lead time to postpone any tax hike.
Global labor competition doesn’t rely on payroll tax contributions to pay differentials. It’s more about corporate greed, weakened labor, corrupt unions, government collusion, and economists who fail to look what other countries do protect their workers and also rip us off.
No progressive oughta oppose blowing off the cap
But increasing the job holding “citizen burden ” of our health system
By taxation ?
Look we need a social security program part B
Funded out of a shrewdly prudent blend of general revenue and borrowings
Pay out ?
A life time of Orkney based
earned dividend
Sorry vicious pro corporate capitalist typo
Orkney
Is “lord of the rings ” speak
For
Job work based
This part B program could operate as part of the auto stabilization system
Ie bigger payments in hard times
Smith
there is nothing “cute” about gradually raising the tax. a 2% hit all at once would be noticed. possibly even a mild (very mild) hardship for some. a one tenth of one percent increase each year while wages are growing at a rate over one full percent would be no hit at all. your take-home would be rising ten times as much as the tax, and you would be getting the tax back, with interest, when you will need it more than you do today.
i have put a good deal of thought into this and have a hard time being patient with people who haven’t. sorry about that. it’s a character defect, i know.
i cannot understand the zeal to protect workers from having to pay an extra dollar a week to preserve their social security benefit level and age of retirement. is the need to “tax the rich” so strong in your hearts that you abandon common sense? is the need (greed) to pay nothing for your own retirement so strong that you are willing to sell Social Security to the rich? once they pay for it, they own it. they will turn it into welfare as we knew it. FDR understood this. don’t fight with me. i am not a nice person. think about what you are actually proposing, what its unintended consequences will be.
and, sorry, most of the “ad hominem” (that’s not what it is, but it’s what it’s called these days of universal higher education) in this comment is not directed at Smith particularly, but at all the “progressives” who will destroy the best deal workers ever had by blind greed… though of course they can’t believe that “progressives” would be greedy. that’s what rich people are.
Maybe you shouldn’t call it cute, maybe a better word would be deceptive. You say “a 2% hit all at once would be noticed” which can only mean a .1% hit wouldn’t be noticed. So now all I’m claiming is something done that is not noticeable is deceptive.
There is however a serious problem with your data, you’ve overlooked the fact real income (income adjusting for inflation) for the average worker doesn’t rise 1% per year. For the last 30 years, the cumulative rise for median income was less than 2% (.06% per year). Your 2% increase would wipe out even those laughable gains. Even for household income, the cumulative gain for median income is 16% over 30 years thanks to more average wage earners per household (increasing two income earner families through the 1980s and 1990s). That is no longer the case and average households are struggling to get back to the 1999 peak income or 2007 pre recession high.
http://www.bls.gov/news.release/wkyeng.t01.htm
http://www.pewresearch.org/fact-tank/2014/10/09/for-most-workers-real-wages-have-barely-budged-for-decades/
Looking at the bls charts, current dollars mean the nominal amounts for the year in question without adjusting for inflation. The dollar amounts pegged to some particular year are needed to compare one year to another (though easier to see when adjusted to current year rather than 1984)
Also, there are large segments of the population that have experiences declining wages instead of mere stagnation.
We aren’t that far apart in case you didn’t notice, I’m for half of your proposed increase, and I’m in favor of phasing it in gradually. The difference is that it should be backloaded or delayed since the economy is weak. There is no need for even a .1% increase to start now unless perhaps the horse trading necessary for lifting the cap makes it imperative to close the deal. But there isn’t even a good case closing the gap needs to be addressed now when unemployment, underemployment, wage stagnation, inequality, and low workforce participation loom so large.
The other half should come from lifting the cap. It would still keep Social Security as a universal benefit, not means tested. Limiting benefits for an additional threshold similar to the presently reduced 15% to an appropriate workable amount (I proposed a mid tier 7% instead of CBPP’s 5%) hardly upends social contract inherent in the Social Security benefit structure. It already is redistributive. If the rich think they’ve been so unfairly treated compared to middle wage worker, then maybe they wouldn’t mind trading places with them. And if they really don’t like it, they can move.
http://www.merriam-webster.com/dictionary/deceptive
“something that would not be noticed is deceptive”
tell that to your dentist.
or try to think through it carefully one step at a time. a one dollar per week increase in the tax would not be noticed. a twenty dollar per week increase would be noticed.
now, it that twenty dollar per week increase is phased in over twenty years (it turns out to be longer, because while you are phasing it in the drawdown from the trust fund is slowed accordingly) to that the full twenty only comes into play when the income has increased in real terms about 200 dollars per week, it is no longer a “burden,” unless of course you are convinced that people making 200 dollars more than they are making today are being unjustly crushed by the burden of paying an extra 20 dollars toward their retirement.
the only way i can understand this is by concluding that you have a set in concrete concept that the “poor” should never have to pay anything for their own needs. i wonder if you understand that by shifting that 20 dollars to “the rich”, because there are only, about, one rich person for each ten “poor” persons, you are going to have to tax that rich person about two hundred dollars per week… and you think they won’t find ways to pass that tax on to their employees and customers? and still scream about their horrible tax burden and the lazy welfare bums not working after the age of 65 or older? and find a way to limit the benefits to only the “needy” who will face a yearly, at least, “means test” while the rich find a way to conceal their means and collect benefits to sweeten their retirement?
the trustees project a 1.2% increase in real income per year. i can only go by the official projections. meanwhile if wages do NOT go up, the workers are going to need their SS even more. even if the full 2% comes out of no wage increase whatsoever. I know i got by with a good deal more (less) than 2% less than the average wage…. even less than the “poverty wage,” so I am betting that in the possible future even the poorest will find a way to pay that 2% without really noticing it. and that the remedy for no wage increase is NOT to turn SS into a welfare program. it’s to find ways to raise wages, and to keep Wells Fargo from stealing the life savings of ordinary people.
but we can let the future take care of itself. if worse comes to worst, a proposal like yours might be the best we could hope for. but start by raising the tax one tenth of one percent per year. try to make the people understand that this is for their OWN retirement… and if it does become a true burden, that would be the time to consider a “welfare” solution.
i do not argue the “justice” of raising the cap. i argue the politics. but meanwhile SS makes sense as insurance even for those at or over the cap. much beyond that it looks like what it is (would be): a welfare program. FDR thought making SS a welfare program was such a bad idea he went in and changed the proposal of his own SS commission…. well meaning people like you who could only think in terms of welfare…. in order to make SS worker paid… “so no damn politician can take it away from them.”
i don’t have time to answer the rest of your comment here, but i sincerely thank you for offering it. if you want to continue…. and it may not be worth either of our times… coberly@peak.org
Here’s the numbers we’re talking about. Salary is your average annual salary (personal income, not household) used to figure out your social security benefits. Percentage is the amount of money you get back per year of that salary. Please notice how redistributive it is already. $30,000 is median personal income. $57,372 is 75% make less, 25% more. At $118,000 94% make less, and at $237,000 contrats, you’ve reached the 1%. Before you complain about the 1% absorbing a large reduction in percent of benefits awarded (goes from 28% to 14%), why should they complain when those making less are giving up pretty hefty percentages to subsidize those earning less, except they have much less to spare than the 1%.
The trustees are being very deceptive in projecting increases of real income of 1.2%, the historical record says that’s not happening the past 30 years unless you include income above the cap. This blog has repeatedly showed productivity rising with no wage reward (except the 1%).
Salary % of salary received in benefits
9,492 90%
30,000 50%
57,372 42%
118,500 28%
New proposal
237,000 14%
237,000 <14%
Tax increases hidden, bad deception
Cavities unseen, bad deception
Restorative dental work, good deception
It's still all deceptive.
oh, re the deceptiveness of gradual increases. i’m not sure if you tell your financial adviser that when he suggests you save 100 dollars a month now so you don’t have to save 500 dollars a month when you are fifty. probably you can think of other examples where “gradual” is “deceptive” or just the normal way people do things.
as for the gradual increase in the payroll tax: in 2018 the Trustees will report “short term actuarial insolvency” and everyone will shout and scream, “social security is broke. flat bust. we are all going to die.” and the compromise you will eventually get won’t look like the compromise you were dreaming about in your comment. instead of a gradual tax increase, you will see a “gradual” benefit cut, which the “young” will like because they are too dumb to realize they are cutting their own future benefits, and living on less than the current SS benefit is going to be no joke. in fact it will teach them the difference between “just enough” and “not enough.” you may see a small cap increase… just enough to get the honest rich to hate Social Security and sign on to the dishonest rich program to kill SS entirely… turn it into “personal accounts” and “means tested” welfare.
but paying for SS one tenth of one percent per year keeps it out of “actuarial insolvency” forever. and you, the worker, really are paying for your own future benefits. contrary to the … stupid… people who think that with SS you pay for “the old” and “the young” pay for you… the fact is you are paying for your own, but we won’t expect anyone to understand that. they think when they put money in the bank it goes into a drawer and breeds compound interest by “the miracle”. but, as with, the tax increase that helped pay for the boomer retirement… the tax you pay (the tax they paid) pays ultimately for your (their) own retirement. if by no other means then by adjusting the amount you pay in to be a reasonable amount (with interest) to pay for the benefits you (they) will receive. i hardly expect people to understand this stuff, especially with the Big Liars making it easy for them to feel sorry for themselves. But i’d like to think that better politicians than I am (nicer people) could explain this to the masses in a way they would at least get the point: if you are going to want to retire, and you will, you will have to pay for it yourself, one way or another. SS, as constructed now, is the safest way to do that.
Actually, you don’t pay for you. Although state taxes pay for state spending, and local taxes pay for local spending, FEDERAL TAXES DO NOT PAY FOR FEDERAL SPENDING.
Even if FICA collections fell to $0, the government could pay SS benefits, forever — double or triple them, even.
The reason: The federal government is Monetarily Sovereign. See: https://mythfighter.com/2010/08/13/monetarily-sovereign-the-key-to-understanding-economics/
It creates dollars, ad hoc, by paying bills
Social Security does not need to be “strengthened.” It is an agency of the U.S. federal government,
The U.S. government, unlike state and local governments, is Monetarily Sovereign (https://mythfighter.com/2010/08/13/monetarily-sovereign-the-key-to-understanding-economics/) Even if all federal tax collections fell to $0, the federal government could continue spending, forever.
Being Monetarily Sovereign, the federal government never can run short of its own sovereign currency, the dollar, nor can any federal agency, unless Congress wills it.
The White House is a federal agency. There is no “White House Trust Fund,” yet the White House cannot run short of money.
Similarly, the Supreme Court and Congress are federal agencies. They have no “Trust Funds,” yet they cannot run short of dollars.
Because the federal government is Monetarily Sovereign, FEDERAL TAXES DO NOT FUND FEDERAL SPENDING. Even if all federal tax collections, including FICA, fell to $0, the federal government could continue spending forever.
Thus, raising FICA is unnecessary. Cutting benefits is unnecessary. The federal government could, and should, provide Social Security benefits (and Medicare benefits) to every man, woman, and child in America.
This fact is described at: https://mythfighter.com/2014/11/09/a-brief-reference-what-you-need-to-know-when-discussing-economics/