When I was driving down the main road that goes past Reader Copies this morning, an elderly person was holding up a cardboard sign that had a big bold misspelling:
Hungry – Plese Help
I lived in Wheaton and worked in downtown Chicago for a little over a year, and very quickly got used to seeing panhandlers on street corners. It became clear that they weren’t necessarily just down on their luck since the same people were on the same corners every day as long as I walked the downtown streets.
This was different. It was cold this Christmas Eve morning, and the person with the sign was bundled up. They had on gloves, boots, and a coat with a hood that was pulled so tightly around their face that it was difficult to tell if it was a man or a woman. What was clear was the wrinkles on their face that evidenced their age. There was a large coffee on the ground behind them as they moved back and forth to keep warm and attract attention.
It’s not like I don’t have sympathy for those struggling with food insecurity; we routinely send money to Second Harvest when we have more than we need and last month the store even ran a food drive and collected over 400 cans of food for one of the local food banks. At times I’ve even handed some people five dollar bills and told them to go get a meal, even when I didn’t have a steady income myself. It’s probably not enough, but it’s likely more than most people do to help. There should be help readily available to them, but I’m pretty sure they needed money because their resources had run dry, and I can’t really help with that very much anymore.
Like all the cars ahead of me and behind me I simply drove on without stopping to help. But I couldn’t help but worry about the future we all face in this country.
The Social Security trust fund was not intended to be the way funds were accumulated to pay benefits – Social Security is a pay-as-you-go plan where taxes paid now are immediately paid out to those people receiving benefits. The trust fund was intended to hold about one month’s benefits, not a huge sum. In the early seventies, actuaries (the math wizards who worry about such things) projected that as the Baby Boomers started to retire the taxes collected would not cover the cost of the benefits that had to be paid, and as a result, laws were passed to increase the level of taxes. The extra taxes for the next few decades were to be invested and used to pay the extra benefits required starting well, starting now when taxes are not enough to cover benefits. Of course, the federal government managed to “borrow” those funds to use to add to general revenues, and the money didn’t really accumulate as much as they should have, so now income taxes have to repay the money that was borrowed to cover benefits. In fact, the shortage is so bad that it is estimated that by 2034 (at the latest) the trust fund will be depleted and (at best) benefits will have to be reduced by 20%. And that’s what I was worried about this morning.
Not so much for myself (I do have a small pension and an annuity as well as Social Security) but for the typical Baby Boomer. The average Boomer has less than $100,000 saved up for retirement, and most of them probably are not debt free. When Social Security is their only source of income, what will happen if their monthly checks are reduced by 20%? How many people living paycheck to paycheck could survive a 20% pay cut?
How many of the elderly will be in the situation where standing in the cold with a cardboard sign seems like a good idea?
There are three simple ways we can fix Social Security so no reductions in benefits are required:
- Raise the retirement age. Right now the age is slowly moving upwards from 65 to 67, and the age should probably be moved even higher – people are living longer, and Social Security cannot easily cover all those extra years of benefits. Phasing in a higher full retirement age of 68 or 69 or even 70 would solve our problem. This is the solution offered by the Republicans and despised by Democrats.
- Raise the amount of income that gets taxed by Social Security. Right now you pay 12.4% of income up to $132,900 to Social Security (your employer probably pays half of that), but nothing beyond that is taxed. If we raise or eliminate the limit (without adjusting retirement benefits) Social Security is solvent for a long, long time. This is the solution offered by Democrats and despised by Republicans.
- Increase the tax rate. Instead of paying 12.4%, require people to pay 13% or 14% or whatever it takes. This is the solution proposed by nobody who wants to run for office ever again and is despised by everybody.
- Decrease future benefit calculations. This is a non-starter, so there’s no need to even suggest it.
- Finally, we can increase payrolls by increasing population and productivity, but AI and computerization and robots are making that look less and less likely.
Perhaps the only possible solution is one that uses little pieces of all these possible solutions, but it still generates pain and lower benefits to people so politicians will continue to kick the can down the road.
Since our divided Congress is unlikely to grapple with this problem any time soon (What, Me Compromise?), the date we face disaster and the amount of the reduction in benefits will continue to creep in our direction – you cannot affect reality by wishing it away.
But we really do need to do something before there are lines of people with cardboard signs seeking more help than we can provide.