On Thursday, U.S. Representative Cynthia Lummis (R-Wyo) re-introduced her Social Security-saving legislation, H.R. 1160 Alex's Law. The bill increases the Social Security retirement age to 70 for today's six-year-olds, closing one-fourth of the program's long-term funding gap. The bill comes a day after the House Budget Committee approved a budget resolution calling on Congress and the President to put forward Social Security Reform plans. Alex's Law seizes upon the bipartisan support for a retirement age increase in the recommendations of the President's own deficit commission, led by former Wyoming Senator Alan Simpson and former Clinton White House Chief of Staff Erskine Bowles.
"Fortunately, people live much longer on average than when Social Security was created. Unfortunately, that and other factors mean our Social Security program is going broke as the baby boomers are starting to retire," Rep. Lummis said. "We owe it to today's workers to save this program and guarantee their benefit, because under the status quo that guarantee is imperiled in just a few short decades. The modest change I've proposed is not extreme--it reflects the natural changes in our workforce over the years and doesn't affect anyone in or close to retirement. The scare tactics need to stop, the adult conversation needs to start, and common sense demands looking at the retirement age."
Social Security is a cash-in, cash-out program, with benefits funded by payroll taxes on workers. The program currently has a sizable surplus, but sheer demographics will evaporate this surplus over the next two decades. The reasons for this are simple:
- In 1950, there were 16 working-age Americans for each retiree. Now there are about 3 workers per retiree.
- In 1950, the average man could expect to live an additional 11.9 years after turning 65--for women it was 13.4. Now it's 17.7 years for men and 20 years for women.
- Moreover, the program offers more generous benefits and demands higher and higher taxes to pay for them--what was initially a 1 percent tax is now a 6.2 percent tax.
The fact about Social Security that opponents of reform don't want to admit is that the status quo means severe benefit cuts. By 2033, the Social Security trust fund will be broke. If Congress does nothing in the meantime, this will trigger a 25 percent across-the-board cut in benefits. Alex's Law by itself won't fix the program, but it will close one-fourth of the 75 year funding gap without affecting anyone 52-years-old or older.
Under Alex's Law, the retirement age increase would phase-in slowly over time, and these changes are more than justified given changes in life expectancy.