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Dear John,
Why is Social Security in danger?
It may not be for the reasons you think!
As currently funded, Social Security will be fully solvent only until 2033. After that, analysts predict the program will only pay about 77 cents on the dollar.
But the problem is not too many Boomer generation retirees. This was accounted for in the 1983 law that gradually increases the age of full retirement from 65 to 67, a change that is helping fund retirements now.
There is another underlying problem with how Social Security is funded that will threaten its full viability within the next decade. Check out this week’s video to find out what the real threat is to Social Security’s solvency -- and what can be done about it!
Here’s a hint as to why Social Security is not receiving all the funds it will need after 2033: it has to do with inequality.
In projecting the future of Social Security, planners underestimated the widening of the income gap.
The wages of American workers have not kept pace with the predictions based on trends from 40 years ago. As these wages have stagnated, the Social Security revenue based on these incomes has also fallen short.
But workers’ wages are only part of the story. The other part of the story is the billions of dollars earned by the top 10% of earners every year, which are not subject to Social Security taxes.
You see, not a dollar earned over $160,200 -- the “taxable maximum” or the “Social Security tax cap” -- is subject to the tax.
So, as the rich have become much richer, more and more of the nation’s total income has been diverted away from Social Security. Combined with the under-performance of workers’ wages over the years, these trends have created a widening inequality gap that has resulted in an estimated shortfall of $1.4 trillion in the Social Security Trust Fund since 1983.
How do we fix this and make sure Social Security stays solvent so workers can retire with dignity?
It’s not rocket science. One plan introduced in Congress would eliminate the cap on earnings over $250,000 and also subject investment income to Social Security taxes. As a result, Social Security would stay solvent for another 75 years while 93% of American households would NOT see an increase in taxes.
Watch this week’s video, and share it with your friends, to help make people aware of the real problem with Social Security, and the solution.
Social Security protects our nation’s future. If we want to continue to keep tens of millions of Americans out of poverty, we must require that the wealthy chip in their fair share.
Thank you as always,
Robert Reich
Inequality Media
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