Issue Position: Social Security

Issue Position

It is critical that major Social Security reform be undertaken. If nothing is done benefits will have to be cut. But that is not as bad as it sounds. Even with scheduled cuts to Social Security, benefits will continue to improve -- just not as much as they are currently scheduled to.

For example, under the current system, a typical married couple born in 1940 that retired at age 65 receives Social Security benefits of roughly $15,000 a year. A typical couple born in 2000 and retiring in the year 2065 is currently scheduled to receive annual Social Security benefits with the purchasing power of $26,400 today. However, if no changes are made to the program, the Trust Fund will be able to pay that retiree and his or her spouse benefits with the purchasing power of about $20,000 a year. In other words, even if Social Security benefits are cut to balance future outlays with payroll tax revenues, Social Security benefits several decades from now would still be higher in inflation-adjusted terms than they are today.

What needs to be done

While the program faces some long-term financing problems down the pike, these problems are manageable. Congress needs to act responsibly by taking a long-term view of the issue; however, Congress should also act quickly.

If we fail to find a solution soon, Americans will face reduced Social Security benefits.

Down the road, we're going to have to pick up some new revenues for the program -- probably by raising the cap on how much of an individual's salary and wages are subject to the payroll tax.

Currently, only the first $102,000 in earnings are subject to the Social Security payroll tax. That means that the highest-paid people in America pay a smaller percentage of their earnings into Social Security than people who make minimum wage. That's unfair.

Moreover, by subjecting all earnings to the Social Security payroll tax, we could eliminate fully half of the long-term shortfall between Social Security receipts and benefit spending. If we also raised the payroll tax slightly, we could ensure Social Security's solvency and soundness indefinitely.

There are other options for closing the gap between Social Security revenues and benefits -- all more or less controversial, but all capable of maintaining Social Security as the safety net for our nation's elderly, dependents, and disabled for decades to come. The only questions are when we decide to fix it -- and which options we choose.

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