Photograph Source: FDR Presidential Library & Museum – CC BY 2.0
Social Security is back in the news, as both Donald Trump and Michael Bloomberg, two emblematic one-percenter oligarchs, raise the issue of its future as part of their campaign strategy.
Trump (a faux wannabe billionaire) has put Americans on notice that while he may have promised during his 2016 campaign “not to touch” the New Deal’s most lasting legacy program, on which some 70 million Americans –- the elderly and the disabled as well as dependent children of those dependent upon Social Security rely — during his term of office as president, he is ready to start hacking away in a second term. His first target: benefits for the disabled.
Meanwhile, Michael Bloomberg, America’s eighth-richest man with $62 billion in assets at last count (minus the third of a billion has just spent so far on an ads-only campaign for the Democratic Party’s presidential nomination), is promising to “strengthen” and “improve” Social Security if he becomes the country’s first oligarch/president.
But before we get all excited about improved Social Security, let’s consider what that could mean. First of all, most of the time when US politicians, like Bloomberg, talk about “strengthening” or “improving” social security, they are actually talking about making it harder to get, by for example raising the full-retirement age for receiving benefits, or adopting a cost-of-living metric that further reduces that adjustment made for inflation each year, so that actual benefits decline gradually over time with no actual numerical cut in the dollar amounts received.
As things stand the CPI measure used for adjusting Social Security benefits for inflation is an index designed to reflect the costs experienced by urban service workers, not the elderly. For the current year benefits were raised 1.6%, a ludicrously low amount by any standard, but wholly unlike the inflation that the elderly, whose major expenses are for food, housing and healthcare, have actually been hit with. (According to the Bureau of Labor Statistics, food prices rose 1.9% in that year, housing costs rose 2.9% and health care costs rose 2%.) Many politicians in Congress, especially Republicans (Bloomberg’s party of choice from 2000 until 2018) want to use something called a “chained CPI) which would vastly lower inflation adjustments by substituting a cheaper product whenever one included in the index rises substantially in price, the theory being that low-income consumers will shift to a cheaper product as prices rises — for example switching from beef to chicken as meat prices rise, or from a car to a bus if car prices and/or fuel prices rise.)
So beware of those talking of “strengthening” Social Security without reading all the fine print!
But beyond that, let’s consider how inadequate Social Security really is as things now stand.
So-called think tank “experts” and politicians, Republican and Democratic, are wont to remind us all the time that Social Security “was never intended to be a primary pension” for Americans. We poor schmucks were supposed to have employer-funded pensions and savings. But over the years, as unions have been deliberately crushed by state and federal laws making it easier and easier for companies to break unions and to keep them from winning contracts in the workplace (despite majority support among the American people for a union on their job), those pensions have practically vanished, replaced only by 401(k) plans and private IRA plans. But most employers don’t even contribute to, or contribute very little to the 401(k) tax-deferred plans they offer, and in fact the median size 401(k) for workers in the 60-69 age bracket where most people choose to or need to retire is just $62,000, hardly enough to get one through the next 10-20 years of life!
It’s fine to say that Social Security was “never intended” to be a complete retirement plan, but for a majority of Americans, these days it is their only retirement plan.
Things have only gotten worse over the years. Where once people at least had a paid-off house to live in when they retired, now college costs have gotten so high, even at so-called public universities, that many families have remortgaged their homes to pay for their kids’ college educations… or for needed medical care, which has also soared even as Medicare has covered less and less, especially when it comes to drugs and of course long-term care.
So what should be done?
Well, let’s look at Finland. I visited there a few years ago, and interviewed the Finnish Social Security Program’s chief actuary. He told me that back in the 1990s, the country, which has an older average population than even the US, realized they had a looming problem with the program’s funding. Instead of cutting back on benefits — the preferred US solution to date in Washington — the government conducted a study, first to determine how much of a benefit would be required to allow people to retire without taking a hit to their living standard, and then how to fund a program that could achieve that goal.
The study found that people needed replacement income of about 60% of their final year’s pre-retirement working income to continue with their existing lifestyle. This was based upon the fact that at retirement people in Finland typically expected to own their home free and clear, and of course knew that their healthcare in Finland, as in all the Nordic countries, would continue to be free. They could own their own homes easily, since in Finland, education through college is free, and students also receive a $600 monthly living stipend, so children either leave high school and get a job, or go to college. Either way, they no longer cost their parents much if anything as they progress into independent adulthood.
Of course, here in the US, we don’t have free college, and we don’t have free health care, even in retirement. At present Social Security typically only replaces about 38% of a worker’s pre-retirement income, according to Social Security data, so Social Security benefit checks may be enough to keep a person or a couple from starving on the sidewalk, for more people they are not enough to allow anyone to live as they used to live as a working person. So if we’re talking about improving (as opposed to Bloomberg’s ambiguous strengthening) Social Security, as for example candidate Bernie Sanders is doing, we really have to look at how to make the program more like what they have in Finland or the other Nordic nations.
That’s why we need, as part of any reform, to have Medicare for All. Retiring parents cannot be expected to live decently if they have to subsidize private medical insurance premiums for their own care (Medicare Part B and D for example) or for their uninsured or typically underinsured kids and grandkids, as many find themselves having to do. We need to take those costs off the budget for retirees.
And we need to eliminate the burden of paying for higher education for current workers and for their children. Free public college, as they well understand in far more enlightened Finland, besides being good social and economic policy for a nation, is also a key part of making retirement affordable.
Put those two things in place, and we too, in the US, could look at making Social Security a true public retirement program for all. Instead of people (most of whom we know live from paycheck to paycheck) needing to have the sufficient income over expenses and the discipline to sock away millions of dollars in an IRA or 402(k) plan on their own, we need a Social Security program that will provide benefits of roughly 60% of what workers are earning right before they retire, at least up to a level of a decent middle-class living standard of say $70,000 for a married couple (roughly the median income for a couple in 2020). That would mean a Social Security benefit for two of about $42,000. Since the median Social Security benefit amount for an individual who retires at age 67 is currently $15,000, assuming a couple with two workers, that would max out at $30,000 a year — about $1000 a month short. Obviously for people who were higher earners, living on $120,000 a year, the needed retirement benefit would need to be closer to $70,000 a year, but their Social Security benefit if they retired at 67 currently would be closer to $48,000 combined, or almost $2000 a month short or maintaining their standard of living in retirement.
We’re obviously talking about having to make a major adjustment of assets paid into the Social Security system to make it a genuine public retirement program, even after initiating a Medicare-for-All health system and free public higher education, but it can be done. What’s required is what was done in Finland and the other Nordic nations: an increase in the retirement fund payroll tax, known as FICA, in this country, from its current 6.2% rate for employee and for employer, to perhaps 8 percent or more, and an end to the 50/50 split in that tax, so that employers, who would no longer need to voluntarily pay into 401(k) plans to attract workers, would instead be required to pay a higher share of the FICA tax for the people on their payroll. This is uneven split in taxation to fund retirement plans is common in Finland and other European countries that have such public retirement plans. (It’s odd that we find it quite logical for employers to voluntarily pay into 401(k) plans, but extortionate to make them do so through FICA, but that’s America for you.)
All of this can, and should be done as part of any genuine reform to make the US a decent place for all of us to live. It should no longer be a survival-of-the-fittest jungle in the US, as it has been increasingly becoming over recent decades of alternating conservative and neoliberal governments.
Of course, there’s one more issue that has to be dealt with if we’re going to accomplish all these critically important things, and that is ending the death grip of the Military Industrial Complex on the US economy and on our political system. No progressive change is really possible in this country if we continue to spend upwards of $1.3 trillion a year on wars and preparing for wars, occupation and intervention in the affairs of other nations. We need to bring the half million or more troops stationed abroad or at sea home to the US and cashier them out into civilian life, to slash the US military payroll overall by perhaps 75-90 percent (especially the top-heavy officer corps), cancel the $1.3-trillion “modernization” program for the US nuclear arsenal, and eliminate the US standing army, against the existence of which the Founding Fathers rightly warned. If Russia can get by on a $66-billion annual military budget, and China, with its internal domestic occupation army alone of almost a million men, can get by on $200 billion a year, surely the US can get by on a military budget a tenth the size of what it is now. That would free up some $1 trillion a year for social spending.
So do you want to know what social democracy is? It’s a socio-political system and economy that has as its premise improving the lives of all, with a focus on those at the bottom economic rungs of the ladder. It’s not about how we organize the ownership of the means of production (that would be true socialism – – or even communism with a small “c”). Rather, social democracy, as practiced by many of the nations of Europe, all of them still staunchly capitalist at their core, and in many ways more democratic and socially mobile than our own, which is where Bernie Sanders says he wants this country to go, fundamentally means a system where the people of a country do not need to struggle to survive. Most Americans are clueless about this but they are countries where people have time for their children, six weeks or more per year of paid vacation, often higher standards of living than the US, maternity/paternity leaves of as much as a year per child, and even, in Finland, sabbatical leaves every 10 years for all workers, not just academics! We in the US can get there from here if we want to.
Truly remaking Social Security, and as part of achieving that worthy goal, establishing Medicare for All and free public college for all who want it, while slashing military spending, is something that all Americans — the elderly, the disabled, and the younger folks who care for those who need the program, and who want it for themselves when they get older or become disabled — should be fighting for in this critical election year and beyond.
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Photograph Source: FDR Presidential Library & Museum – CC BY 2.0