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Yes, yesterday I wrote an article with the intentionally eye-catching title, “Will Trump’s Payroll Tax Cut End Social Security As We Know It? Let’s Hope So.” — because, as regular readers will know, I never miss a chance to promote my preferred Social Security reforms. In the meantime, I have received more than the usual number of comments (since I invite comments at my personal website), nearly all of which carry the same message: You are cruel, you are heartless, you want the elderly and disabled to live in poverty, unable to pay their rent or buy groceries.
Or, as the group Social Security Works asserted on Twitter earlier today: “’Structural reforms’ is right-wing code for ‘destroy Social Security.’”
Now, again, I have repeatedly — and specifically, in yesterday’s article — called for a change to a “basic retirement income” form of Social Security/Old Age benefit, paired with a funded individual savings system. In prior articles I have outlined what a transition might look like, as people in the middle of their working lifetimes would earn prorated benefits from both systems. (It’s a bit more complicated than in the private sector because Social Security and any replacement account-based system are both designed to be “entire working life” systems but Social Security only uses the top 35 years of earnings for its calculation regardless of how many earning years one has.) What’s more, the objective of such a reform is to implement a benefit which meets retirees’ needs most effectively, not merely to cut costs; whether the system “saves money” depends on how the benefit level is set, and how “costs” are measured in any case. And in yesterday’s article I make it clear that the alternative to a payroll tax is not simply “no money at all” but “funding coming from general tax revenues.” Have my critics simply not read my article?
I am inclined to think that’s not really the explanation.
Instead, it’s a consequence of our politics around Social Security in general.
The reality is that I am one of a very small number of voices calling for a re-think of the general construction of the Social Security system. Even during the Bush years, when the president proposed a partial privatization, it was without particularly much detail but with the suggestion that, in exchange for directing a portion of one’s FICA tax to individual accounts, a level fraction of the benefit would be cut. Now, benefit-cutters generally suggest increasing the retirement age. And benefit-boosters want to increase the minimum benefit (for instance, to 125% of the poverty level, in Biden’s proposal), but while keeping the basic benefit formula as-is.
This has conditioned Americans into believing that there are no alternatives, that somehow Social Security must be structured the way it is now, permanently. And that’s not true at all — after all, the UK moved to its present system, from one much like our own, in 2016. Similarly, Norway significantly changed its system in 2011, Sweden in 1998, Italy in 1995. France was ready to make radical changes to its system earlier this year, despite protests in the streets, until the pandemic put a halt to its plans. Yes, it may appear that our system is so broken that we alone out of all democratic developed nations have a political system so broken we cannot implement major reforms — but we should hardly be so resigned to it.
Now, as it happens, Trump has confirmed that he has not thought out his FICA tax cut, promising on Sunday, according to a New York Post report, that lost revenue would be replenished by general fund revenues, though how that would square with his hope to make the cut permanent is not particularly clear. Which means that this debate is not of immediate relevance — but it’s a conversation we should be having nonetheless.
As always, you’re invited to comment at JaneTheActuary.com!