Former Sen. Alan Simpson PHOTO: Politico

The beauty of Social Security is its simplicity. Social Security is a self-financing system that workers and employers pay into, and upon retirement (or in the case of disability or death), workers and their families receive benefits commensurate with average wages. Pretty simple, and critical for millions of Americans. So when someone tries to distort the facts about Social Security, it’s pretty easy to see. Here’s one example.

Deficit hawk and former Senator Alan Simpson, co-author of the Bowles-Simpson Deficit Reduction Plan and infamous for calling Social Security “a milk cow with 310 million tits” is making a bold claim: in order to “save” Social Security for the next generation, it must be cut – substantially.

But in a recent post, Ross Eisenbrey at the Economic Policy Institute points out that Alan Simpson’s plan would actually be more harmful to future generations than no changes what-so-ever. “Our children and grandchildren will lose critical benefits under Simpson’s plan, while [current] seniors like him are mostly protected.”

Here’s why: future benefits are already scheduled to fall to a replacement rate of about 36% for middle class earners thanks to an increase in the retirement age, and because of earlier cuts from the 1980s. But Simpson’s plan would make even deeper cuts for a worker retiring at 65, lowering the replacement rate to 28%.

Under the Bowles Simpson’s plan, if a middle class earner retires at age 65 in 2080, Social Security will replace only 28% of their pre-retirement earnings. By contrast, a 65-year old who retired in 1980 had 49% of pre-retirement earnings replaced by Social Security.

Of course, there’s an easy solution not explored by Alan Simpson that would put Social Security on sound financial footing for future generations – Scrap the Cap.

Under the Scrap the Cap plan, Social Security can pay 100% of benefits after 2033, and even modestly expand benefits today, if Congress makes one simple change: eliminate Social Security’s cap on taxable income (now set at $110,100) so high income earners pay the same tax rate as middle class workers.

The additional funding could boost benefits for low-income earners, add credits for individuals (often women) who take time from work to raise their family, and restore benefits for college students that were cut in the 1980’s.

Cutting benefits and increasing the retirement age are not the only options. Scrapping the cap – and asking everyone to pay the same rate for the same guarantee – would put the Social Security system on solid financial footing for the long-term, and allow us to keep our promises to future generations.

Learn more from Keeping Social Security Strong: Four steps we can take to preserve America’s promise for future generations

Thanks to budget cuts, the Social Security Administration (SSA) stopped mailing out statements last year. But they aren’t gone for good. SSA has confirmed that workers 60 and older will continue to receive annual statements in the mail, and a one-time mailing will be sent to workers on their 25th birthday.

Everyone else – including all workers over the age of 18 – will be able to access their statement online.

These benefit statements are an important part of the Social Security program. They give young workers ownership over their contributions, and help older workers to plan for retirement. They also inform people they may be eligible for benefits if they have lost a working parent or spouse.

Click here to sign up for your online statement: http://ssa.gov/mystatement/

Here’s an example of how your Social Security benefit statement might look:

Social Security is one of the great achievements of American democracy. It represents the best of our values – honoring our parents, respecting hard work, and supporting families.

It provides stable income to 56 million people in one in four American households – in both good economic times and bad. For the majority of seniors, Social Security is their largest source of income. Thanks to Social Security, millions of disabled adults and children who have lost a parent also receive income and have access to greater opportunities.

The Great Recession would have been far more devastating without the steady flow of Social Security dollars into every community, supporting families and main street businesses. With traditional pensions in sharp decline, job security evaporating, and savings and home values fluctuating wildly, Social Security in the 21^st century is more important than ever for the American people.

Policy Brief: Keeping Social Security Strong – Four steps we can take to keep America’s promise

As successful as Social Security is, a few tweaks could improve the lives of recipients both today and in the future, and help strengthen economic recovery:

1) Raise benefits for low earners and elderly survivors.[i] Thanks to Social Security, poverty among seniors has fallen from 35% in 1960 to about 9% today – the lowest rate for any age group. Yet far too many live on the financial edge, especially older widows and people of color.[ii] We could better assure all our elders live in dignity by boosting the benefits of those who need them most.

2) Recognize modern family structures. People who take time away from work to care for young children or aging parents lose benefits down the road. Women are especially disadvantaged. And while most spouses and dependents receive benefits, Social Security still does not recognize same-sex couples. Family care credits and benefits for same sex partners would make the system more fair.[iii]

3) Restore college benefits.[iv] In earlier generations, children of deceased or disabled workers could continue receiving benefits through college, allowing many young people to pursue dreams that otherwise would have been unattainable. But this benefit was ended in 1981.[v] Today’s young survivors struggle on their own, even as college costs spiral out of reach.

4) Scrap the cap.[vi]Working Americans and their employers each pay 6.2% of wages into Social Security, but only up to the cap of $110,100 in 2012. Taxing all earnings equally would provide the resources for benefit improvements right now, while also guaranteeing the system remains strongly financed for today’s young workers – and for their children and grandchildren.

Increasing Social Security benefits now, financed by new revenues from the highest earners, will make life a little easier for the elderly, disabled people, and children living closest to the edge. Those new benefits will be plowed right back into our still struggling national economy, helping create new jobs – and boosting Social Security’s revenues. In the end, a strong economy and a thriving middle class are the best guarantees of a strong financial future for Social Security.

The news media – and some politicians and pundits – like to throw around words like “insolvency” and “going broke” when speaking of Social Security’s future. Some insist that radical cuts must be made to “save” the program.[vii] However, it is clear that Social Security will have the assets to protect American working families throughout the 21^st century, even if no changes are made.

Social Security is more important now than ever. Half of the workforce has no retirement plan other than Social Security. Traditional pensions have all but disappeared in the private sector. Americans have seen their assets evaporate in 401(k) plans, savings and home equity.

Social Security protects the childcare teacher and university professor, waitress and software designer, truck driver and surgeon, stay-at-home parent and employed parent, the lucky and unlucky, the newborn and 100-year-old. It’s there for us all.

Working Americans and their employers each pay 6.2% on the first $110,100 of earnings into Social Security. Those payments insure 159 million workers and their families from loss of income due to disability, premature death, or retirement. They also fund benefits averaging $1,125 monthly for 56 million Americans, including:[i]

• Retirees age 62+. Age for “full” benefits is gradually rising from 65 to 67.

• Disabled workers with more than 18 months work (depending on age).

• Dependents of retired, disabled, and deceased workers – children, adult disabled children, spouses, and elderly parents

In 1981, Congress adopted a plan to prepare for the retirement of the baby boomers. A key provision was to raise the payroll tax higher than the level needed to cover current benefits in order to build up the trust fund. The interest and principal of the trust fund would supplement payroll taxes during the baby boomer’s peak retirement years. The trust fund has now grown to $2.7 trillion.

Policy Brief: Keeping Social Security Strong – Four steps we can take to keep America’s promise

Every year the Social Security actuaries and Trustees project the program’s income and expenses 75 years into the future. This requires them to make assumptions about birth and death rates, immigration, job and wage growth, and the overall economy. The actuaries conservatively predict that the U.S. economy will grow about 2% annually throughout the 21^st century, rather than the 3% average rate of the 20^th century.

The 2012 forecast predicts that the trust fund will be spent down as planned between 2021 and 2033. At that point payroll taxes will cover about 75% of projected benefits. One year previously, when economists were projecting a slightly faster recovery, the Trustees forecast the trust funds would last until 2036, and at that point payroll taxes would fund 77% of promised benefits. Faster than expected economic growth in future years will push those numbers up again.

Because productivity and wages usually rise faster than inflation over time, both typical workers and retirees will also have higher incomes in future decades. In fact, even under the conservative projections of the actuaries, payroll taxes in 2034 will finance about the same level of benefits as today’s retirees receive.[ii]

Tomorrow I’ll outline four steps America can take to preserve Social Security’s promise for every generation.

[i] Social Security Trustees, “The 2012 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds,” Overview, http://ssa.gov/OACT/TR/2012/index.html.

[ii] Social Security Administration, Monthly Statistical Snapshot, March 2012, http://ssa.gov/policy/docs/quickfacts/stat_snapshot/index.html?qs.

But I think Hiltzik saves his best lines for last:

Isn’t it curious that the same people who insist that America is the greatest, richest country in the world, ever, are those who insist that there’s no way we can afford to provide for our elderly, our disabled and the survivors of our deceased workers to the same degree as the rest of the industrialized world?

The received wisdom among political insiders is that today’s hyper-partisan atmosphere in Washington makes any talk of raising Social Security benefits a non-starter. But maybe this is exactly the moment to turn the conversation around. Every member of Congress will be out on the stump, along with the leaders of their parties, facing the voters.

“This is an important thing for constituents to be talking to their candidates about,” NOW’s O’Neill says. “Are you with us, or are you against us — that’s the question.”

Read the whole thing here ».

The 2012 Social Security Trustees’ Report shows the nation’s most important and popular social insurance system is on sound financial footing for at least another generation. With $2.7 trillion in its trust fund, Social Security can pay full benefits through 2033.

After 2033, the program can still pay 75% of benefits, even with no action by Congress. And because of how Social Security calculates benefits, that “75%” of benefits in 2033 will be about the same (in inflation-adjusted dollars) as benefits today.

But America can do better than that. Under the “Scrap the Cap” plan, Social Security can pay 100% of benefits after 2033, and even modestly expand benefits today, if Congress makes one simple change: eliminate Social Security’s cap on taxable income (now set at $110,100) so high income earners pay the same tax rate as middle class workers.

Eliminating Social Security’s cap on taxable income (now set at $110,100) means
high income earners would pay the same tax rate as middle class workers

The additional funding could boost benefits for low-income earners, add credits for individuals (often women) who take time from work to raise their family, and restore benefits for college students that were cut in the 1980’s.

“These improvements immediately boost the American economy, build economic security for women, and safeguard educational opportunities for young people who have suffered the loss of a parent,” according to Marilyn Watkins, policy director for the Economic Opportunity Institute.

Social Security benefits are more critical to American economic security than ever. According to estimates, nearly one-half of Americans will be unable to maintain their standard of living in old age. About 1 in 4 Washington households – more than 1 million Washingtonians, including 73,000 children – received old age, survivor, or disability benefits from Social Security in December 2010.

From the article:

For nearly three years CJR has observed that much of the press has reported only one side of this story using “facts” that are misleading or flat-out wrong while ignoring others. Whatever the reason—ideology, poor understanding of how the program works, gullibility, or plain old reportorial laziness—news outlets have given the public a skewed picture of the financial health of this hugely important program, which is the sole source of retirement funds for millions of Americans and will continue to be for decades to come.

That’s pretty harsh criticism – and not undeserved, in this case. CJR isn’t known for making unsupported statements, and this is no exception. They cite case after case to back up their claim that by and large, journalists aren’t exactly doing a yeoman’s job reporting on Social Security:

To be sure, Social Security is not in perfect financial health. But the fact is, the program can pay full benefits until 2036, and three-quarters of the benefits after that without new revenues. Many experts believe small fixes like lifting the cap on income subject to payroll taxes—$110,100 for 2012—will make Social Security solvent for decades. But that option is not on Washington’s table, nor has it been discussed much in the press. Why not? Because it doesn’t fit into the doom-and-gloom narrative that has proved politically expedient to tell?

Reading CJR’s detailed analysis makes this much clear: it’s no accident younger generations are so pessimistic about Social Security given the quality of reporting around it: “Bad journalism begets bad information begets bad decisions.”

Opinion articles that are light on the facts, inflammatory statements from elected leaders who should know better, ideological screeds from corporate-backed thinktanks, and yes, poor media coverage have all contributed to popular misconceptions about Social Security.

But through all the smoke and mirrors one thing remains certain: Social Security is critical to the economic security of more than 50 million Americans – and extremely popular.

CJR makes a strong case. Many people of my generation (the Millennials) can’t tell you much about Social Security – except they think it’s going broke. Many don’t know “the cap” exists, or that millionaires pay into Social Security at a much lower rate than middle class workers. And few realize Social Security benefits could be increased – and any projected shortfall eliminated – just by scrapping the cap.

An open and honest discussion with all the facts is a hallmark of our American democracy. But at the moment the Fourth Estate is failing the public, by failing to balance powerful political and economic forces with an unbiased search for the truth. Reporters: the public needs the full story, because the facts won’t report themselves.

Robert Samuelson

Mustache aficionado Robert Samuelson pushed some voodoo economics about Social Security in his latest column for the Washington Post – and now he (along with the Washington Post) is receiving some well-deserved ridicule for it.

At least four different experts - including Nobel Prize winning economist Paul Krugman - have stepped up to refute his claims and remind us why it’s nothing but a scare tactic.

From Krugman’s critique:

Robert Samuelson, who pulls out, for the 7 millionth time, the old Social Security bait and switch. Here’s how it works: to make the quite mild financial shortfall of Social Security seem apocalyptic, the writer starts out by talking about Social Security, then starts using numbers that combine SS with the health care programs — programs that are very different in conception, financing, and solutions.

And then the writer ends by demanding that we cut Social Security, as opposed to addressing health care costs.

Krugman is spot on – and the graph below shows why. Social Security costs are projected to remain relatively flat as a percentage of GDP through 2082, rising by ~ 1% and then leveling off.

Paul Krugman’s column is worth a read, find it here. Read more about Social Security’s long-term financing here.

The event will run from 6:30 – 8:30 PM in the Student Union Building (Building 8),  and also feature Pramila Jayapal, Executive Director, One America; Marilyn Watkins, Policy Director, Economic Opportunity Institute; and Magdaleno Rose-Avila, Executive Director, The Latino Equality Initiative.

The forum is free and open to the public – please mark your calendars.

This event is sponsored by Social Security Works – Washington

Senator Tom Harkin

Today’s introduction of  the “Rebuild America Act” by Iowa Senator Tom Harkin would do more to help the American economy and revitalize the middle class than any bill currently before Congress.

This sweeping legislation would boost employment by investing in infrastructure upgrades, promote U.S. manufacturing, and end tax breaks that encourage U.S. firms to move production offshore. It would also have immediate and positive impacts for the middle class by increasing access to affordable, quality child care; establishing a fair national minimum wage; allowing all Americans to earn paid sick leave; and strengthening and protecting Social Security, among other things.

It’s clear this legislation would provide considerable help to the American middle class, but its provision to strengthen and protect Social Security is particularly noteworthy.

For Social Security beneficiaries, the “Rebuild America Act” would increase benefits by about $60/month for the average beneficiary – a boon for seniors, disabled workers and survivors living on fixed incomes. It would also change the way the Social Security Administration calculates benefits from the current CPI-W calculation to the CPI-E, which more accurately reflects inflationary cost increases faced by seniors.

To pay for these changes, and to ensure Social Security is solvent and soundly-financed well into the future, Senator Harkin proposes scrapping the cap – ensuring all Americans pay into Social Security at the same tax rate. That means high earners – who currently pay a much lower tax rate into Social Security than middle class earners – would pay the same rate of 6.2%.

Senator Harkin’s bill also creates a new bend point of 5% for income over the current wage cap, maintaining Social Security’s historic benefit-contribution link.

The “Rebuild America Act” is sweeping legislation that would address some of the most critical issues affecting middle class families today, and should be celebrated as such, but its provision to strengthen and protect Social Security should not go unnoticed.