With only a matter of months remaining in his final term, President Obama likely isn’t expecting quick success in expanding Social Security, as he proposed last week.
But he does have an agenda-setting opportunity to make Social Security a leading election issue, not just for the presidential race, but for congressional races, too.
Obama, speaking in Elkhart, Indiana, called for an expansion of Social Security. Obama earlier offered to consider benefit cuts to begin a discussion with Republicans. The GOP didn’t bite. Now Obama now wants to see the program expanded to increase the benefits paid to the 54 million Americans who receive benefits either as retirees 65 and older, those who are disabled or those who are the survivors of deceased workers.
Expansion is necessary, Obama said, because fewer workers receive pension benefits from employers, and middle- and low-income workers aren’t able to contribute to Individual Retirement Accounts and 401(k)s as easily as higher-income workers. Along with strengthening Social Security and ensuring its long-term health, Obama said, the benefits paid by Social Security need to be more generous to ensure a dignified retirement for Americans.
Obama’s suggestion for paying for an expansion was general; the wealthiest Americans can afford to contribute more.
He’s not the first to make the suggestion. Others have noted that the current annual cap on the 12.4 percent payroll tax is $118,500, meaning that those who make more than that pay a smaller percentage of their income to support Social Security than those who earn less. Raising the cap to $250,000 has been suggested as a starting point.
The conventional wisdom that Social Security is in danger of going broke is a myth, as was explained by Washington Post Plum Line writer Paul Waldman in March. Social Security still takes in more than it pays out. For 2014, the program took in $769 billion and paid out $714 billion, leaving a surplus of $55 billion that went into Social Security’s trust fund, which now stands at $2.729 trillion. That trust fund is being drained with every baby boomer who retires; there are fewer and fewer workers paying into the fund and more and more retirees who are receiving benefits from it.
Under the most conservative estimates, the trust fund will be exhausted by 2035, and revenues will cover only 77 percent of what will be needed to pay retirees and others. That’s not “broke,” but it’s on its way to “broken” if we can’t provide full benefits to those who have contributed to the system for their entire working lives.
And that makes it a campaign issue.
Raising the cap is a good start, but it isn’t the only option. Other suggestions have included incrementally raising the retirement age and slowly increasing the payroll tax rate by 2 percentage points over several years.
The presumptive presidential nominees for the Republican and Democratic parties haven’t been any more specific than Obama. Donald Trump, breaking with Republican talking points, has pledged not to make cuts to Social Security, but neither has he suggested any way to address the potential shortfall in the next 20 years. Clinton has said she’s against increasing the retirement age but does want to raise the cap in order to increase benefit payments.
Both should be pressed for greater detail on what they would do to restore long-term solvency to Social Security, increase its benefits or both. And the same question should be asked of those running for Senate and the House of Representatives.