Capital Commentary is the weekly current-affairs publication of CPJ, written to encourage the pursuit of public justice.


Social Security and the Poor


James Skillen

06-05-2000


June 5, 2000

You may recall the biblical story of the Egyptian Pharaoh, who kept demanding more and more from the Israelite slaves until finally he commanded that they produce the same number of bricks, but with the added burden of gathering their own straw (Exodus 5:5-9).

Our present Social Security system, if not reformed, will increasingly become Pharoah to America's working poor. Yet neither Al Gore nor George W. Bush has cried out, "Let my people go!" Both candidates, thus far, are trying to get Pharaoh's ear on behalf of the Egyptians.

The simple fact is that a growing number of retirees will soon overwhelm a system that will be supported by a relatively smaller number of workers. If the current benefits and retirement age are maintained, the smaller work force will have to pay higher and higher payroll taxes to meet the demands on the system.

Governor Bush's current proposal to introduce private retirement accounts may make it possible (no guarantee!) for some younger workers to retire with adequate benefits 40 years from now. It does nothing, however, to forestall the need to increase Social Security taxes on those who will be working 10-30 years from now to support those who will be retiring during those years. And Vice President Gore's recommendations, focused on maintaining the status quo, would make certain the need for straw gathering by younger workers in the not-to-distant future.

It is time for the presidential candidates and members of Congress to come clean about all of this. The next president and Congress can avoid imposing Pharaoh's crunching command only if they enact some combination of reforms that will: 1) reduce benefits for those retirees who are better off while easing the burden on the poorest workers, and 2) increase the age at which people can begin to draw their Social Security benefits.

Reduced benefits can be achieved in ways that will not be painful for those who retire at higher earnings levels and who have been able to build up other retirement savings accounts. Currently, those who earn more than $76,200 already enjoy the advantage of paying no Social Security tax on their income above that amount. One way to limit the outlay of Social Security payments is to hold down future increases in benefits for those whose retirement income is above a certain level.

As for the working poor, the president and Congress should identify an amount of annual income—perhaps the poverty-line figure—below which one would either owe no Social Security taxes or pay a lower percentage of the tax.

An even more important way to assure the financial security of future retirees is to increase the retirement age. The evidence is clear that Americans are living longer and, on average, staying healthy longer. That in itself means an escalating drain on the Social Security fund, and it would be entirely unfair to have to increase payroll taxes on younger workers, especially on the working poor, in order to support relatively well-to-do 65-year-old retirees who could be working. Consequently, the retirement age ought to be moved up, gradually, starting about 2004, until it reaches 70 or even 72. That will mean more tax income for Social Security and less of a drain on its reserves. All of which should mean less likelihood of having to increase Social Security taxes on the younger working population.

Let's keep making bricks, but let's require that the Egyptians help, perhaps by asking their able-bodied, well-to-do retirees to help gather the straw.

—James W. Skillen, Executive Director
   Center for Public Justice

 

 



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Capital Commentary is a weekly current-affairs publication of the Center for Public Justice. Published since 1996, it is written to encourage the pursuit of justice. Commentaries do not necessarily represent an official position of the Center for Public Justice but are intended to help advance discussion. Articles, with attribution, may be republished according to our publishing guidelines.”