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Lansing Labor News
Established 1945
 
 
March 25, 2019
Financial Secretary Bob Smith
Updated On: Feb 22, 2019

February 2019


Saving Social Security
The Social Security Act (SSA) of 1935 was our society’s attempt to face the uncertainties brought about by the Great Depression.  The Act provided for unemployment insurance, “old age” insurance and means tested welfare programs among other things.  Most of the provisions of the Act were to provide immediate relief to Americans hit hardest by the depression; the elderly, widows, and their families.  Although there were many who opposed the Act it has become one of the most successful programs in history.  Unfortunately Social Security is having a revenue problem.  It’s not the first time and probably won’t be the last but if we hope to keep the program that helps over 22 million people stay out of poverty we need to do something quickly!
SSA provides a financial baseline for many retirees, the disabled, and the survivors of deceased workers but it is nearing the point where outgoing benefits are overtaking incoming revenue.  Social Security is a “pay as you go” system where today’s SSA taxes are being used to pay today’s retirees and future retirees benefits will be paid by revenue from the workers to come but our demographics are changing.  Today we have lower birth rates, increased life expectancy, and baby boomers reaching retirement age, all contributing to the problem.  If no changes are made the systems cash reserves will be gone by 2034.  Benefits would need to be cut by a minimum of 21% while the deficit would continue to widen each year.  The question is how to fix it.
Both parties have ideas as does President Trump.  He believes that his hallmark Tax Cut and Jobs Act will create enough jobs, generate higher wages, and increase revenue to the extent that no other changes will be needed.  Since the Act has so far NOT performed to those levels it’s unlikely that his strategy will be successful.
The Republican Party is of the opinion that the shortfall can be resolved by gradually raising the full retirement age (the age you become eligible for your full monthly benefit) to age 70, currently set at 67 for those born 1960 or later.  This would force workers to accept a steeper monthly reduction to claim benefits early or try to make do with a pension check and savings with the intent of receiving a larger benefit amount later.  Either way will reduce the amount of revenue required (while also reducing your retirement income).  It will have an even greater effect on workers who do not have a defined benefit pension.  They will depend on personal saving accounts, IRA’s, 401k’s , etc. to supply retirement income and a Social Security benefit will be an important part of their retirement strategy.
Democrats are backing a proposal to increase revenue.  Their plan actually raises the minimum benefit by a small amount (about 3%) to help raise participants above the poverty level.  They would accomplish this by raising and ultimately removing the level of exempt earned income, currently capped at $132,900, and gradually increasing the payroll tax from the current 12.4% (6.2% from employer, 6.2% from employee) to 14.8% (same 50-50 split) on ALL earned income.  Other items include changes in taxable limits on earnings and adjustments to the cost of living calculations used.  While the plan enjoys overwhelming support of House Democrats and should be passed there, it is equally reviled by the Republican led Senate.
As of now no plan has the support needed to become law (except for President Trump’s “stick your head in the sand” plan) but one is needed and needed soon!  I am hoping that the recent spark of bipartisanship on border security and government funding can break the logjam in our politics.  It’s going to take all sides working together to affect the changes needed and we’re running out of time.
 


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