Sep
14

Social Security: They Won’t Stop Picking At It

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At Naked Capitalism, Yves Smith exposes a stealth attack on Social Security in the Bowles-Simpson approach. Raising the age limit to 69 reduces monthly benefits by 13 percent:

Nothing could sound more reasonable than one of the “reforms,” meaning attacks, on Social Security: raise the retirement age from 67 (the level for those born after 1960) to 69. People are living longer, right? That means they can work longer, right? Well, aside from a few inconvenient facts (the life expectancy of low income black women is actually falling, and middle aged people who lose their jobs often find it difficult to get any kind of paid work), on the surface, this seems not too bad.

But this plan is actually a sneaky way to cut monthly benefits across the board, and for an age cohort where retirement is so far away that they won’t focus on details and subject this scheme to the criticism it deserves.

Representative Jan Schakowsky (D-Illinois) calls the Bowles-Simpson “less than meets the eye.” Taken together, she writes, all policy changes would reduce benefits for middle income workers by up to 35 percent. Her brief explains other deficiencies in the Bowles-Simpson “plan,” one she believes gets more credit that it is due.

But that is not how the press is selling it, as Trudy Lieberman at the Columbia Journalism Review explains (emphasis mine):

Explaining how raising the retirement age equates to a benefit cut is tricky, as The Associated Press discovered a few weeks ago when it reported on its own survey about preferences in dealing with the financial problems of Social Security, under, at one outlet, the headline, “Narrow majority supports raising taxes, retirement age, to save Social Security.” Most Americans, according to the AP survey, said raising taxes and raising the retirement age were preferable to “cutting monthly benefits.” The AP made that point in its lede, giving readers a clear impression that increasing the retirement age was not a cut. But it is.

The AP gave the same false impression in one of its survey questions. In our CJR Dart to the AP the other day, we reported that raising the age and cutting benefits across the board are mathematically indistinguishable from one another.

Yves Smith reproduces a chart from Social Security Works the shows how raising the retirement age results in a benefit cut. The chart has been reviewed by the Chief Actuary, Social Security Administration.


Comments

  1. Andrew Dahm says:

    I think the place to start would be to “blow the lid.” If FICA were deducted from earned income all the way up to $250K, the system’s solvent as benefits are currently structured, and the payroll tax is a little less regressive than it currently is. Right now, somebody working for minimum wage pays a much greater portion of their income in FICA than somebody drawing a $250K/yr salary, and the insurance/annuity component of coverage is a good deal more expensive because they’re only eligible for the minimum benefit.

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