Vermont Sen. Bernie Sanders likely will not be the Democratic Party’s nominee, but he already has performed a great service in the 2016 presidential campaign by calling for an expansion of the Social Security tax and an increase in benefits.
Sanders says increased benefits will be necessary in the face of a looming crisis of workers who haven’t saved enough – if anything – for retirement. Paying for the increase wouldn’t affect most workers. He would simply have Social Security taxes adjusted to reflect the sharp increase in economic inequality.
The tax now applies only to income up to $118,500 and doesn’t apply to unearned income from capital gains. Sanders’ plan would apply the tax to the current limit plus all income – earned and unearned – over $250,000.
Calling for increased benefits is heretical in a political environment in which even most Democrats concede that Social Security will not be able to sustain current benefit levels by 2033 unless changes are made. That dim outlook has prompted some Republican presidential candidates to call for cutting benefits, increasing the age for eligibility and replacing much of the retirement program with 401(k)-type savings plans that workers would manage themselves.
Cutting, freezing or replacing Social Security has been a Republican quest since Franklin D. Roosevelt signed the Social Security bill into law 80 years ago. Republicans at the time warned that the program would kill jobs and cripple business. It didn’t. Social Security has spared millions of older people from falling into poverty and stabilized both society and the economy.
Social Security “reform” should not bring a reversion to the very state of elderly poverty that Roosevelt sought to prevent. That almost certainly would be the effect of leaving more of the responsibility for retirement savings to individuals.
Meanwhile, raising the eligibility age would impose the heaviest burden on low-income manual laborers who may not be able to do demanding work – or even find it – beyond their mid-60s. Cutting benefits for well-off retirees would push the program from being an earned benefit toward an entitlement and narrow its political support.
The fairest and most effective way to bolster Social Security is to extend the tax to high incomes. Private pensions are disappearing. Wages for the great majority of Americans are stagnant and that leads to stagnant Social Security tax revenue. Meanwhile, the top 1 percent of earners have seen their after-tax income grow by 275 percent since 1979. The three-fifths of earners in the middle saw an increase of just under 40 percent.
Tying Social Security’s solvency to the nation’s overall earnings would reduce income inequality and preserve a program that has given millions of older Americans protection from poverty after a life of work.