PhillyDeals: The continuing standoff for Social Security

Behind the Social Security card is the debate: Cut aid or raise the tax?
Behind the Social Security card is the debate: Cut aid or raise the tax?
Posted: January 14, 2013

It happens every spring: The annual report of the Social Security trustees hits Washington, where it becomes a hammer that tax-boosters and benefit-cutters use to beat each other.

Like last year, this April's report will show Social Security has raised enough money, from worker paychecks and bosses' matching fees - plus IOUs for money Congress "borrowed" from Social Security to fund "cotton subsidies, student loans and aircraft carriers," as President Reagan's budget director once put it - so it can pay every promised penny to retirees and other dependents, adjusted for inflation, for about the next 20 years.

After that, the system will need to collect more money, or trim benefits.

That safety margin will have gone down since 2012, since we have more people retiring, compared with the number working, than in the past.

The trustees will warn, as they do every year, that, if Congress and the president plan now - rejiggering payroll deductions and employer contributions and the $113,700 taxable-income cap and future benefits and eligibility dates - the system will pay for itself.

But most years, nothing happens.

This year, Republican leaders, and some Democrats, including President Obama, have said they may actually agree to trim future Social Security payments - by reducing the yearly inflation adjustment, under the assumption retirees should start buying cheaper stuff.

That's right, Grandma: Taco Bell, not Applebee's, for your monthly spree. Goodwill instead of Target, for those sensible shoes.

Two years ago, other Democrats and Republicans in Congress suggested we ought to raise the Social Security full-retirement age - currently 67, for people born since 1960 - to 70 or more.

But not everyone agrees the best solution is to trim benefits below the future equivalent of today's typical $15,000 a year.

Who pays?

"Social Security transformed the nation," argues Nancy Altman, a former Harvard pension expert who was former Federal Reserve boss Alan Greenspan's assistant on a 1980s Social Security reform commission, and who now co-heads Social Security Works, a Washington group that advocates expanding the program.

Old people who couldn't work used to live with their kids, or in public poorhouses. Social Security helped keep millions of seniors independent, boosting consumption.

There are still senators - mostly liberal Democrats - who say we should do what insurance programs usually do when payouts rise: boost the price.

Instead of just boosting the 6.2 percent Social Security payroll tax and matching employer "contribution" for all, advocates like Altman want to see higher-income people and their employers pay Social Security on more of their income: The rich, they say, have more to share, in an increasingly unequal America.

Most of our politicians, who depend on higher-income people for campaign funds, are reluctant to go there. But they're also afraid to offend voters - who like Social Security. Thus the standoff.

Signing up

The late Sunoco president J. Howard Pew criticized Social Security on moral grounds, contending that its "benefits are no longer determined by the contributions made by the recipient, but rather by government considerations of fairness and adequacy," Mary Sennholz recounted in her Pew biography, Faith and Freedom.

He asked the faculty of Pew-backed Grove City College to decline Social Security. "[But] in spite of his pleading," wrote Sennholz, "all the members of the administration and faculty" voted to join the system. Except the three economists.


Contact Joseph N. DiStefano at 215-854-5194, JoeD@phillynews.com, @PhillyJoeD.

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