Expand Social Security, don't cut it
by David Atkins
Well, glory hallelujah. An op-ed columnist not named Paul Krugman from a major newspaper points out the obvious need to expand Social Security rather than cut it. Michael Hiltzik in the Los Angeles Times makes the case:
What the latest figures show is that Social Security is still the best retirement program we have. It's the safest, the most dependable and by far the most important source of income to the vast majority of retired Americans: Two-thirds of them get more than half their income from Social Security.
The biggest problem is that most retirement funds outside Social Security are at risk in the financial markets. Among workers with any employer-provided retirement plans, the fraction covered solely by a defined-benefit plan — the traditional kind, where your retirement check was based on your longevity and salary history with your company — declined by more than 80% between 1980 and 2003, according to the Center for Retirement Research at Boston College. Even firms that still offer these plans typically exclude new employees.
Over the same period, the percentage of workers covered solely by defined contribution plans tripled. Since the retirement benefits generated by these 401(k)-type plans are based on how much their owners save during their working lives and how well those nest eggs perform in the financial markets, the exposure to financial downturns is severe.
Meanwhile, the proper way to "fix" Social Security (if it needs messing with at all) is simply to raise the cap. Yes, that would involve increased taxes on the ultra-rich. Yes, the corporate shills at Third Way and the like would be very upset:
There's no trick to making Social Security more relevant to more Americans. Benefits should be increased, especially for those whose lifetime annual earnings have averaged $50,000 or so (roughly two-thirds of all beneficiaries). The benefits for women who have spent most of their working-age lives as caregivers by raising a family or tending to aged parents should be augmented through a "caregiver credit" that recognizes their contribution. You know all those politicians who go on the stump or on TV to praise family and motherhood? This is a chance to put their votes where their mouths are.
How to pay for that? No trick to that, either: Raise the payroll tax cap, or even better, scrap it. The most common objection to this solution to Social Security's fiscal issues is that it would raise taxes on the wealthiest Americans to, well, "unsustainable" levels.
That's the case made by Third Way, a self-described moderate think tank that's guided by civic-minded representatives of Wall Street and big business. Eliminating the earnings cap without countervailing benefit cuts is a solution that "will never happen and should never happen," the group said in an "idea brief" last month.
A good way to determine good public policy is just to ask oneself what Third Way would do, then do the opposite. Eliminating or altering the earnings cap can, in fact, happen. It's a popular idea. It just requires the political will to make it happen.
In any case, the last thing we should be doing is advocating cuts:
Experience shows that nothing has worked better to shore up the average American's retirement prospects than Social Security, and nothing has kept the elderly healthy better than Medicare. With the trustees suggesting that the dire projections of the recent past may not be so dire, truly fresh thinking would say that the moment has come to invest more in these programs, not less. Why are we still talking about cuts?
If this were debate class, the progressive side would win easily. The Third Way types and the Paul Ryan crowd have no leg to stand on in a fair fight. The only reason they keep the right thing from happening is the corruption of massive piles of money, combined with the easily manipulable social resentments of certain kinds of people in certain kinds of areas.
But it's nice to see at least one more opinion writer point out that the austerity emperor has no clothes.
.