Many Republicans think we cannot afford to maintain current Social Security benefits. In fact, it is more likely that we cannot afford to cut benefits.
This program played an important role in reducing poverty among older households from about 36 percent in 1960 to the current level of about 10 percent. However, it was always intended to supplement individual saving and private pension funds, that in the context of the growing American economy in the post-World War II era combined for an impressive assault on poverty among older Americans.
Economic realities now undermine the conditions that made Social Security successful. Since the mid-1980s, income inequality has intensified, as the bottom 40 percent of households has not shared in economic growth. Department of Labor projections show that the fastest growing occupations pay less than $30,000 and there is almost no growth in occupations paying between $30,000 and $40,000.
The implications are obvious. Households with relatively low income will not be able to save enough to supplement lower Social Security benefits. Meanwhile the third leg of the retirement security stool, defined benefit pensions plans, are being phased out in favor of defined contribution plans.
Labor market trends and the demise of traditional pensions make clear that just sustaining current benefits will result in increased economic insecurity among future cohorts entering the ranks of the 65 and older age group. If we want to avoid an increase in poverty among these households, Social Security will need to expand, not contract. This is what it means to “fix” Social Security.
Those who argue that we cannot afford our entitlements like Social Security may have it wrong. It is entirely possible that we cannot afford to not resuscitate our efforts to fight poverty among older households. Older households whose “golden years” turn to dust can be a formidable voting block that can undermine the benefits of relatively free markets that are valued by those who argue we cannot afford Social Security. And the older households may well be joined by their children and grandchildren who are required to help impoverished parents.
Fixing Social Security is not rocket science. There is money available to fix it.
Since the mid-1980s, income has stagnated for 40 percent of the population while the top 20 percent has seen their real incomes double, a phenomenon known as “labor market polarization.”About two thirds of Americans believe that our economic system favors the rich. Over half the rich agree with them. Yet congressional leaders who think we need to cut entitlement programs supported a tax reduction plan that favored high income people and corporations.
Expansion of low wage jobs in the long-run means that future cohorts over age 65 will need Social Security more than ever. Growth of high-income occupations can provide the resources needed to fix the system.
- Tallahassee Democrat