Social Security at 78

Jared Bernstein is a senior fellow at the Center on Budget and Policy Priorities in Washington and a former chief economist to Vice President Joseph R. Biden Jr.

Leave it to my estimable colleague at the Center on Budget and Policy Priorities, Kathy Ruffing, to remind everyone that today is Social Security’s 78th birthday.  As she points out, and as can be seen in the chart below:

“This highly successful program pays benefits to 57 million Americans.  It’s the single most important source of income for its elderly beneficiaries, contributing on average two-thirds of income for recipients over age 65.  For more than one-third of them, Social Security constitutes 90 percent or more of income.”

As the chart shows, Social Security is especially important to the minority elderly.

Center on Budget and Policy Priorities Source: Social Security Administration, 2010 data.

Moreover, absent Social Security benefits, 44 percent of the elderly would be poor.  But when you factor in the program, their poverty rate falls to 9 percent. 

Speaking of milestones, next year will mark the 50th anniversary of the war on poverty, a set of anti-poverty initiatives including expanded Social Security benefits aimed at the poor elderly.  So when you hear people like Representative Paul Ryan going on about how we’ve lost that war, please remember these numbers (and many others I’ll be writing about in weeks to come).

Clearly, this 78-year-old is playing a critically important role in maintaining some degree of retirement security for our economically vulnerable elderly. Social Security’s finances are not nearly the basket case that opponents claim. 

As Ms. Ruffing notes:

“Social Security faces a long-term shortfall that’s predictable and manageable.  Those who fear that Social Security won’t be around when today’s young workers retire misunderstand the trustees’ projections.  Even if policy makers did nothing, the program could still pay three-quarters of scheduled benefits after the trust funds run out in 2033.”

The menu of measures that would achieve solvency for the program are well known.  I’ve gone through them myself.  They involve increasing the revenues that flow to the program, by, for example, raising the salary cap on taxable benefits to offset the fact that the growth of earnings inequality has lifted a larger share of national earnings (about 6 percent) above the current taxable cap of about $114,000.  Other fixes could involve reducing the benefits of high-income beneficiaries.

But what we must avoid is fixing Social Security by breaking it, i.e., by reducing the retirement security it provides to those who need it most, and as Ms. Ruffing’s numbers above reveal, that’s not some fringe group of poor elderly.  That’s a majority of its recipients.

If anything, I agree with the economist Brad DeLong, who wrote recently that in the face of increasingly insufficient private pensions and savings, along with the wage and income trends that have left large swaths of aging people less economically prepared for retirement, we should be considering expanding the program, not shrinking it.

Far too often, when I hear politicians and conservative advocates talking about Social Security in particular and social insurance in general, they inevitably talk about making “the hard choices” â€" by which they generally mean privatizing, voucherizing, or otherwise removing the critical insurance component of Social Security or Medicare.  Such proposals, as in the House Republicans’ budget, are usually coupled with large tax cuts favoring the wealthiest among us.

But that is anything but a “hard choice” for the beneficiaries of those tax cuts and the politicians they support.  For them, these are shamefully easy choices.

That doesn’t mean we can have all the social insurance we want without paying for it.  But the “hard” message is not the one that purports to cut taxes and social benefits.  It’s the one that says, “Here’s what we need to achieve retirement security for the vulnerable elderly, and here’s what it will cost us.”  It’s the one saying that based on both demography and inequality, we’re going to need to strengthen these programs.

So happy birthday, Social Security.  We don’t just wish you many more happy returns.  We’re going to keep fighting to ensure that outcome.