Economy  
comments_image Comments

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.

Continued from previous page

 
 
Share
 
 
 

“People really don’t understand,” he said. “We only tax wages for Social Security. We do not tax capital gains or dividends. We only tax wages up to a cap of about $110,000. In the past, we’ve taxed in real dollar terms up to close to $200,000, in 2013 dollars. So we have allowed the wage base to decline, and we have exempted income to capital, just at the time when there’s been a wholesale shift from wage income to capital income in terms of the composition of income in our society.”

Restoring that fiscal balance—by asking the wealthy to pay a fairer share—is what the politics is all about, Silver said. Until now, the discussion has been about using Social Security to pay off other federal debt, created by recent wars and other tax breaks. It hasn’t been about tax fairness and the real-life impact on the elderly and vulnerable.  

“The real politics of the attack on Social Security are all about the people who are getting away with not contributing to Social Security fear that they might have to pay a little more taxes—and are willing to spend a lot of money to buy people in the media and in policy institutions to keep the taxman away from their door. And their willingness to sacrifice the weakest among us to that agenda,” Silver said.

The second part of the solution framework is how to expand Social Security so retirees—and others facing family emergencies—can get an income that they can live on and not fall into poverty. The experts all discussed a better and more accurate inflation index for the elderly, called the CPI-E (E stands for elderly). It would track the inflation in expenses that primarily affect older people (such as medical, utilities and food), so the benefit increases tracking inflation would be tied to a better metric.

The other big part of expanding Social Security is creating minimum benefit levels, set to 125 percent or more of the federal poverty line, and a maximum payout so richer people don’t receive billions that they don’t need. There were other improvements mentioned, such as expanding payments for students whose parents die or become disabled, as well as expanding family leave options in real emergencies, or for birth or adoption.

“Where does the money come from? We have about a 2.72 percent of taxable payroll shortfall and we add about 2.5 percent of additional expenses,” said Kingson, speaking of Social Security Works’ plan. “We get it from gradually eliminating the [income tax] cap. And we give full credit to people who pay above it, up to $6,000 [a month] of average benefits. So there would be a maximum benefit, just as we have a minimum benefit.”    

Harkin's and Honda’s bills would lift the tax cap, use a CPI-E and increase benefits by $70 a month. It does not go further and create a minimum benefit based on the federal poverty level or a benefit ceiling. Many progressives are now trying to make the funding and expanding of Social Security an issue as federal budget talks continue. They also are talking about campaigning on it in the 2014 federal elections. A petition to save and expand the program already has a half a million signatures.

But all this progress—from reframing the political discussion to the very stark and pragmatic reasons to expand the program—comes in an indifferent if not hostile political environment, Rep. Dan Maffei, D-NY, told those at the daylong Capitol Hill conference.

“We are in a rear-guard action,” Maffei said. “We have a Democratic president who is supporting one of the worst policies for Social Security and many Democrats have supported that. It’s bad policy in a way that’s insidious and would continue year after year afer year… Chain CPI is so dangerous because it’s put together to be politically palatable. It’s too complicated. Nobody can figure it out."