Fixing Social Security Isn't Hard

By :: June 21st, 2011

Social Security has two obvious problems. While the system is not “broke,” as some insist, it will have only enough money to provide future retirees with about three-quarters of their promised benefits.  At the same time, it is poorly designed for the needs of a country where life expectancy and the nature of work and family have changed dramatically since Social Security was created in 1935. 

As a result, those who most need social insurance—single women, low-wage workers, the disabled, and the very old—get much less than they need. On the other hand, those who need benefits least get the most.

If Washington policymakers could hold the twin goals of solvency and modernization in their heads at the same time, they could take a few relatively modest steps needed to reform Social Security—and enhance a key pillar of the social safety net for the most vulnerable elderly.

The trick will be to get past the dissonant squabbling that passes for debate these days. Conservatives need to recognize that Social Security will remain a defined benefit program for the foreseeable future.  Liberals must overcome their fear that any change at all is the death knell for social insurance. 

While Social Security played a key part in reducing poverty rates among the elderly from more than one-third to less than 10 percent over the past half-century, the system is increasingly leaving some seniors behind. Just a few examples: Divorced and never-married women are three times more likely to be poor in old age than married women, and more than one-third of retired workers and widows get benefits that fall below the poverty level.

In this environment, AARP deserves tremendous credit for declaring its willingness last week to sit down and work out a Social Security deal. By doing so, it recognizes two essential realities:  the seven decade old Social Security system needs to change, and it will.

But how can lawmakers and advocacy groups build a consensus with the dual aims of securing long-term solvency and modernizing the system? I think they can by agreeing to a six common-sense principles:

  1. Create a respectable minimum benefit for low-income workers, increase some widows’ benefits, and create an additional benefit for the very old (say, 85 or older).
  2. Raise the retirement age, including the minimum benefit age of 62. An extra year of work would solve about one-third of the program’s funding problems. More and more of us can work into our 70s and a modern Social Security system should reflect that.  It makes no sense for government to signal that we should stop working at 62 when we are likely to live for two more decades.
  3. Protect those who work physicially demanding jobs. While the percentage of older Americans who do manual labor is shrinking, those who do this work need to be protected. Long overdue reforms in Social Security’s badly broken disability system would help.     
  4. Increase contributions and reduce benefits for high-earners. Everybody would still get some benefit—Social Security is not welfare and must retain its status as social insurance. But there is no reason why it can’t be made more progressive.
  5. Preserve the defined benefit nature of Social Security. Adding an additional savings component is a good idea. But the public is not interested in taking on additional risk with their retirement.
  6. Be absolutely transparent about benefits and structural changes. Whatever Congress does, there should be no surprises. As it is, many young people have no confidence in Social Security. Reforms should restore their faith in this key piece of the old-age safety net. But government should also be clear that in the future Social Security will only supplement—and not replace-- other retirement savings for middle- and upper-income retirees.

By following these principles, Congress and President Obama could fix Social Security in a way that makes it both solvent and relevant to a 21st century world.


  1. denim  ::  5:48 pm on June 21st, 2011:

    Sounds too good to be true…and it is. This is just conservative propaganda in sheep’s clothing. All Social Security needs is a rise in the income cap for withholding and recinding of Obama’s tax holiday on withholding for Social Security.

  2. Ralph H  ::  6:30 pm on June 21st, 2011:

    Pretty good list and analysis. We absolutely need to increase retirement age and also the wage cap. SSI is in great shape compared to Medicare and it is absolutely essential to “fix” it to regain confidence of the younger generation so they willingly contribute. The only quibble I have is in disability. If you watch any daytime TV you will be inundated with lawyers who will represent you for SSI disability. This is much greater since the recession hit and the loss of jobs for lower skilled workers. We need to be certain that those receiving disability are deserving.

    My final comment is that we should not put in means testing, in order to preserve the general willingness to contribute. However, we can well increase the max wage and increase the minimum benefit in order to improve “progressiveness”. I do not support private accounts; IRAs, 401Ks offer ways to do this now.

  3. some guy  ::  6:56 pm on June 21st, 2011:

    Boy, I must be lacking in common sense because #2 and half of #4 strike me as bad ideas.

    Means testing is administratively expensive and would either affect an extremely small percentage of beneficiaries or hurt the middle class. After all, the taxable maximum limits the benefits as well as the receipts, so the savings per beneficiary would be small.

    As to the minimum retirement age increase, why? If people are still working at 62, the Annual Earnings Test will offset their benefits until full retirement age. It’s a benefit cut and will necessarily push more seniors into poverty.

    Why not raise the cap to 90% of earnings and phase in an increase in the payroll tax? That strikes /me/ as a common sense solution.

  4. Michael Bindner  ::  11:51 pm on June 21st, 2011:

    I have my own list.

    First, raise or eliminate the income cap.

    Second, credit the employer contribution equally on the front end and end bend points on the back end. If you eliminate the income cap, the average contribution will be a bit higher.

    Third, if you really want to stop CEOs from going after worker wages,enact insured personal accounts – not to give the money to brokers and investment houses – but for ownership of the employing firm if that firm is corporate. A third of these shares would be traded for shares in an insurance fund holding shares in all employee-held firms – both for security and so that 25% of employee held share value can call for an examination of management operations by the insurance fund – which if it finds malfeasance, can remove management with their shares and the dissident shares. Remove for taking too much risk, too little risk and for self aggrandizement (some CEOs deliberately crash their companies and then make them look good to reap bonuses). The threat of the embarrassment of being removed will keep most CEOs in line.

    Note that the insurance funds can be privately managed rather than governmental. Allow retirees to vote shares in retirement, but require spouses (if they aren’t also retirees) to purchase an annuity with the shares or to have them transferred to their own employer/former employer.

    Will item 3 pass? Probably not. But if a serious effort at discussing it is made, people will remember the bargain made in the 50s to have higher personal income tax rates and strong unions in exchange for the unions not trying to buy out management.

    Management has broken its side of the bargain, as is evident over the last 30 years of tax and labor policy. It is time to either remind them or actually use the leverage of social insurance contributions to ruin their day.

    Also note that item 3 essentially gives everyone an insured defined benefit plan through their employers, plus eventual worker control of the workplace. Now that’s progressive.

  5. NoMoreMrNiceGuy  ::  12:41 am on June 22nd, 2011:

    Leave it alone. The reason it is said to be in trouble is because of the smoke, mirrors and tricks the congress did. Where is the promised lock box? How come Congress has it’s own retirement system. Put Congress into the SSI system. They are the crooks/idiots who messed it up. Have an audit take the money out of general funds. Look for them to try to privatize SSI so their crook friends in wall street can steal our tax dollars. LOCK BOX.

  6. albert  ::  1:50 am on June 22nd, 2011:

    Conservatives would like nothing better than to put the entire cost of caring for the poor and disadvantaged on the backs of working people through the payroll tax. They of course don’t want to have to pay anything out of their income taxes or capital gains. These people are shameful.

  7. Val Fitzgerald  ::  5:13 am on June 22nd, 2011:

    The article is wrong. AARP IS NOT about to “put Social Security on the table.” This is just another vicious rightwing lie, meant to demoralize the progressive base. If you want to know the truth about Social Security’s being “on the table” then just go to their website, where you’ll see Social Security’s chief, Barry Bonds, completely denying this lie.

    More and more, the Radical Right has shown its enmity to ordinary Americans. People say “it’s just politics”. But if your SS benefits really WERE to be cut, as a result of the Radical Right’s neverending lie stream, where would that leave you? And more to the point–the Radical Right would have won yet again. The last time they won they gave us the disastrous Bush administration. That was bad enough–don’t let them steal our old age too!

    There NEVER IS and NEVER WAS a “threat to Social Security.” President Roosevelt foresaw today’s gang-up by the Radical Right–after all, their forebears brought about the last Great Depression, and to the extent that we allowed the Right Wing to scream “DEREGULATION!!! Rules are BAD!!!” we let them into our system once again. Remember–Social Security BY ITS VERY NATURE is sound. But it is a huge plum hanging in front of the Radical Right, and they will NEVER EVER stop trying to get us to give it up. Articles like this is their main tool for doing that. Now, for those who may not realize how it works, here’s why Social Security IS SOUND and NEEDS NOTHING BUT BEING LEFT ALONE:

    When Roosevelt set SS up, he set it up on a GENERATIONAL basis. Rather than the lie that our children are paying for our Social Security, those of us who still believe this can rest easy–it’s THE OTHER WAY AROUND. WE pay for OUR CHILDREN’S Social Security.

    What happens is when WE start working, OUR EMPLOYER pays half of our Social Security. WE pay the other half. The money is put into the Social Security Fund, which then grows with inflation so that our children will get the result. When it’s their turn, THEIR children will get THEIR MONEY. As long as there are working people left in this country, Social Security will be sound. Roosevelt set it up the way that he did, because he wanted to “…keep the politicians’ hands off it.” And any FIX is for one reason and one reason ONLY–those same politicians–the ones who brought on the First and Second Great Depressions–are now trying to steal all that we have left, our Social Security.

    “Private accounts”? IRAs? 401Ks? Imagine if THAT was all we had. Many seniors in the past decade have been wiped out by the tanking stock market. Their Social Security is all that they had–suppose this Radical gang of crooks had had their way and sold Social Security down the river??? Picture how bad it REALLY could have been. Right now Seniors who spent a bit unwisely and got into the Credit Card crunch, have to keep working. Seniors like myself, who still have pensions AND Social Security, are lucky enough to be able to live very well on that alone. We travel all the time, we live and eat very well, all right we don’t own our own home but we have a big beautiful apartment in the heart of town. With?

    Just Social Security and a pension. Back to the article–I’m really surprised that a respected name such as the Christian Science Monitor, didn’t double-check their facts and just blindly repeated the Radical RightWing lie that “Social Security Is On The Table”. It isn’t. And if it were there would be rioting in the streets, because as we all know, that would mean that the theft of our old age security was imminent.

    Medicare however is another story. Enacted under the auspices of the Bush administration (they who first tried to make us give up our Social Security) it’s a giveaway to the Pharmaceutical Industry. Prices of meds keep rising because that was part of the “package”. This needs to come to an end. Nobody anymore is afraid of the Radical Right’s bugaboo words like “Communists”! and “Socialists!” To that, the rest of the country now rightly says: “Thieves! Don’t DARE touch our Social Security! And while you’re at it–make Medicare as sound as Social Security–OR ELSE!!!”

  8. Tomato Queen  ::  7:21 am on June 22nd, 2011:

    Writing as an SSA employee, I find the article well-thought out if a bit too general t fit all aspects of the program. SSA has never had the resources it needs to perform efficiently, and has too many responsibilities to exceed expectations. Nonetheless, the agency is changing over from a paper system to electronic, and has begun to be able to respond more quickly in disasters. The latest waste, fraud and abuse (can we shorten this to WFA, or waffle?) numbers sound so awful, but compared to other programs they really aren’t (where are all the bundles of cash lost in Iraq?), and for those of you who whine about spending, remember that if a budget cut is made, a service is not done. Two examples: we have a small office of inspector general and we don’t have a police force, and our data systems are antiquated. So if we’re looking at possible fraud because of underreported wages, keep in mind that our data is almost a year old by the time it’s actually delivered to field officers, and there may be only one or two field officers for an entire region. It really is a matter, administratively, of you get what you pay for. And still, people get their benefit payments on time, month after month, year after year, because the eligible beneficiary (a disabled child, a retiree, a heart patient) is our first priority.

  9. Vivian Darkbloom  ::  8:32 am on June 22nd, 2011:

    Re: #1 : Good idea. The original concept of SS was to ensure that people don’t run out of retirement savings. The system should protect those most in need, and this is primarily those who live longer than actuarial averages;

    Re: #2: Also a good idea. “Some Guy” does have a small point about the AET. Unless that test is also modified in step with the retirement ages, raising the age limits does not do much directly to social security solvency. For example, the implicit assumption here seems to be that if, say, the minimum retirement age were to be raised to 64, those retiring at the age would receive the same benefits of current retirees at age 62. Even if it is not, though, the argument is that the change would keep people in the workforce longer, with the associated expected benefits to overall GDP;

    Re: #3: I’m not sure about this one. Those with “physically demanding jobs” are already demanding extra compensation, not only with respect to wages, but also retirement benefits. This argument is made each time a fireman or policeman (or more likely his or her union) enter into discussions over pay and benefits. Whether one has a “physically demanding job” is also a pretty subjective concept. Mentally demanding jobs take their toll, too. I assume the “reform” of the disability program would involve reducing the amount of fraud and abuse currently inherent in that system;

    Re: #4: Social security is already extremely progressive–much more so than the original framework envisioned by FDR. Columnists here seem to assume that (additional) progressivity is automatically an appropriate desirable thing—that is an ideological viewpoint and not one related, per se, to the solvency question. Nevertheless, the simplest method to make SS *even more progressive* than it is now, would be to increase the taxation of SS payments (I avoid the use of the term “benefits” since those caught by this provision typically pay more in than they receive in SS payments after tax) to 100 percent of the payments rather than 85 percent. Apropos increasing progressivity, this would, of course, follow the previous increases from zero to 50 percent to 85 percent;

    Re: #5: The fact that “the public” is “not interested” should not automatically negate a “good idea”. In fact “the public” do not favor any changes at all to social security. So, perhaps we should begin with convincing the public as to the merits of that “good idea”, just like the other “good ideas” presented in this post;

    Re: #6: Transparency, of course. This idea cuts both ways. On the one hand, the public might have more confidence in social security if they think it is fiscally sound. On the other hand, reneging on implicit promises has the opposite effect of eroding public confidence. Why should they believe this time will be different? Each year, most workers get a statement from the SSA that lists their contributionns and their projected benefits. While the SSA in recent years has been carefull to footnote that implicit promise with a disclaimer, I think most SS recipients, or future recipients, would view such a change as a breach of implicit contract in the same sense as they would if a private insurer did the same. While such a breach is likely inevitable and necessary, it does serve to increase public cynicism.

    In addition to the above, here’s another suggested change.

    Currently, in order to qualify for SS and Medicare benefits, one needs only to acquire 10 years of coverage (40 quarters). The bar is set very, very low for these minimum benefits and it is those “minimum benefits” that cost the system the most (because the amount paid in on lifetime earnings earns a far greater return). It is time to re-visit that as well. Once qualification for minimum benefits is acheived, the additional returns for working longer diminish considerably.

    Some argue that increased immigration is an answer to the SS solvency problem. But, these people fall to realize that over the longer-term immigration likely costs the system more than it saves. That is because immigrants have typically a much shorter work history than others. Some countries calculate benefits based on the number of years of residency rather than the number of years of employment history (benefits are earned ratably over years of residency regardless of the level of one’s wages). This system makes sense to me. Either we could convert to such a system going forward or we could raise modestly raise the minimum threshold for benefits to say 60 quarters (or more).

  10. SSAdogsoldier  ::  9:39 am on June 22nd, 2011:

    Repeal the Windfall Elimination Provision…I personally had a Social Security Supervisior tell me there was never a windfall..It was created by Greenspam and Ragean….It is discrimination against the police, firefights, state and federal workers.

  11. Michael Bindner  ::  10:15 am on June 22nd, 2011:

    Many people with physically demanding jobs are undocumented workers with no bargaining strength – although Disability Insurance won’t help them anyway.

  12. Michael Bindner  ::  10:19 am on June 22nd, 2011:

    Immigration only works while the contributing economies are bad. They won’t always be so. We need an expansion in home grown workers for when the immigrants stop coming (and doing dirty jobs for slave wages – often without documentation).

    The real answer has to include upping the tax incentives for families with children by a factor of 6 or 10 (depending on your baseline) with matching amounts at the state level. Ending the mortgage interest and property tax deductions make that possible on the federal level.

  13. Frustrated  ::  11:01 am on June 22nd, 2011:

    All I want is the ability to OPT OUT of SS altogether.

    The rest of you can lumber along however you want.

    Just let me put another (employer split) 13% into an IRA or 401k.

    I just want to be free from the stupidity in WA DC.

  14. Vivian Darkbloom  ::  11:31 am on June 22nd, 2011:

    So, is the point here that the undocumented workers with no bargaining power should be allowed to retire early with full social security benefits? I do not see the connection here with the social security solvency issue.

  15. Michael Bindner  ::  12:15 pm on June 24th, 2011:

    No, it just means that whether they are documented is still an issue. I would end documentation requirements so that they could collect if working hear diabled them. It is unconscionable that they can’t.

  16. Confused  ::  4:10 pm on June 24th, 2011:

    If I am understanding these “reform” proposals, they basically consist of keeping the system as it is, or increasing payments to, the older generation and shifting all of the costs of that system to younger people in the form of reduced benefits, increased contributions, and increased retirement age. As far as I am concerned, it would be best to do nothing, let the system run low on funds and reduce payments across the board.

  17. Nancy Irving  ::  8:08 am on June 27th, 2011:

    And when you’re 80 and you’ve lost all your retirement funds to a scammer, I will be happy to pay taxes to keep you off the street. (Not.)

  18. Claims That Fixing Social Security Is Hard: For the Virtual Green Room  ::  11:27 pm on June 30th, 2011:

    […] Rebutted by Howard Gleckman: […]

  19. Greg  ::  3:49 am on July 1st, 2011:

    As another person said, raising the retirement age is another way of saying reduce benefits. Moreover, it keeps people in the workforce longer instead of allowing them to step out so that a younger person can have a job. A better alternative would be to actually lower the retirement age, allowing a million or so older workers to retire and opening up the labor market by a million new positions for younger workers — i.e. reducing unemployment.

  20. Bill Dietrich  ::  10:30 am on July 8th, 2011:

    If we means-tested SS benefits (no benefits for millionaire retirees) and removed the cap on SS-taxable income (tax high earners on all income, not just first $107K or so), that would fix SS’s problems. No need to change retirement age or other things.

  21. Bill Dietrich  ::  10:33 am on July 8th, 2011:

    SS supports lots of types of people: disabled, those who never earned enough to retire on, those who never saved enough to retire on, those who worked and saved and then lost it all to Enron or Madoff or some other scam. Being part of a society means supporting other people when needed.

  22. Molly  ::  11:19 pm on September 8th, 2011:

    These suggestions are thoughtless and disrespectful to workers.

    The outrageous benefits for married people need to be reformed before anything else is done.

    The 50 percent bonus for non-working spouses has to go. Replace it with a certain number of work credits per child raised. But no more payouts based purely on marriage.

    They encourage under-the-table work by spouses (why report and get taxed when you’ll be given benefits even if you don’t pay the tax?)

    “High earners” should not see their benefits cut and younger workers should not see their work lives lengthened while we continue to give handouts to married people.

    The “high earner” (defined as over $60,000 by some so-called reformers) might have incurred huge medical bills and not been able to save much. Or been unable to buy real estate because he or she needed to move often to hold decent employment.

    The non-working spouse, meanwhile, might have received an inheritance (not taxed for Social Security) or made money in personal real estate (not taxed at all). Yet, under your foolish plan, that wealth won’t be taken into consideration when weighing needs. The heavily taxed “high earner” will be presumed not needy; the untaxed spouse who never deigned to work for a living will be presumed needy.

    This is an assault on single people and dual-income couples. Above all, it is an insult to hard work. To get a workers’ benefit and be ineligible for a spousal one, a married person would work less than 20 years at a job that pays 50 percent of his/her partner’s salary. Working 15 years at 75 percent would do it, too. Think of what that says about the ones getting the handout. They had the luxury of choosing not to work for a living for most of tjeir adult lives. Why should others be forced to subsidize that privilege?

  23. Jeff Chapman  ::  12:05 pm on September 9th, 2011:

    It is perfectly acceptable public policy to increase the retirement age as long as it is recognized that the health adjusted life expectancy for American men (for example) is 68 (as calculated by the WHO.) Raising the age implicitly means that you work until you crumble.

    Also, you don’t believe that taking the cap off of income is a legitimate part of the solution?