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Unless Social Security Is Expanded with Increased Funding, We Face An Unprecedented Crisis of Millions of Baby Boomers In Poverty

Trillions needed to maintain lifestyle could come from closing one tax loophole.

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But there is another number that’s almost as large as the $17 trillion debt that Americans haven’t heard about, Oakley said, and which most Washington politicians—except for a handful of progressives—don’t cite. It’s the “retirement deficit”—or what Americans have not saved but will need to maintain their standard of living. In 2010, it was a $14 trillion shortfall, Oakley said. When pension payouts are subtracted—and many plans are now under attack for being too generous—the retirement deficit falls to $11.8 trillion.

Costs this large—trillions—are abstract and hard to understand. Even so, congressional Republicans and President Obama have been focusing on the $17 trillion debt while ignoring the $12-plus trillion retirement savings deficit, even though progressive activists have been analyzing these trends for years. That misplaced focus, driving an unbalanced and incomplete public discussion overlt focused on the federal debt, is what has to change, the retirement experts said, citing to the ongoing federal budget negotiations.   

“Why are we talking about cutting Social Security? Why are we not talking instead about increasing Social Security and finding a way to close some of these gaps and provide real retirement security to everybody?” said Ross Eisenbrey, pension expert and vice president of the Economic Policy Institute.

“We have to understand who is going to be disproportionately affected by any proposed cuts,” said Maya Rockeymoore, chairwoman of the National Committee to Protect Social Security and Medicare. “I have said before—and some people might consider me incendiary for saying it—and that is this can also be interpreted through the lens of fiscal racism if you look at who’s talking about the cuts, and which populations it will fall on.”  

Solution Is Simple, But Not On Political Table

What was especially striking about last Tuesday’s Social Seurity briefing is that the solutions are well known by anyone who’s taken a fair-minded look at the problem. Every advocacy group present passed out reports with variations on these same remedies, a mix of progressive tax increases implemented over time, and a focused and compassionate expansion of benefits based on specific age-group and income-based needs.

“We’re just going to have to do it,” said Rep. Mike Honda, R-CA, who began his remarks by saying he was preaching to the choir in the Capitol Hill conference room. Honda was a co-sponsor of HR-3118, a bill mirroring Harkin’s S-567 which would shore up Social Security funding through 2049 by making income taxes more progressive, using a more accurate inflation metric and slightly increasing future benefits.   

The revenue to secure and expand Social Security for decades into the future comes from closing a big tax loophole for wealthy Americans, the experts said, and from asking workers and employers to pay a little more, such as 50 cents a week. Americans now pay a combined 12.4 percent Social Security tax (split between employers and employees) on their first $113,700 of annual income. People making more than that don’t pay more, just as income from capital gains is not taxed for Social Security.

Eliminating the $113,700 income cap would provide most of the funds needed to shore up and expand the program, the experts said. Pollster Celinda Lake said people across the political spectrum supported eliminating that cap, but ironically, many people don’t know it’s there.

“This is the biggest tax loophole that people didn’t know about,” she said. “Only 2 percent of the women in America make over $106,000, so of course, nobody knows there is a cap.”   

AFL-CIO policy director Damon Silver made the same point—the public does not know how Social Security is financed and why that foundation has not grown over time.