Conservatives Want to Raise the Retirement Age -- Doing That Now Would Be Stupid and Cruel
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Many argue that this spike in older unemployment is another reason for rolling back the age at which people can collect Social Security benefits with no penalties, a move in the opposite direction from the retirement age increases pushed by Boehner and other conservatives.
Being able to collect full Social Security benefits earlier would be a lifeline for Syracuse resident Cindy Paoletti, 58, who was laid off from her corporate accounting job at JPMorgan Chase in 2007 and hasn’t found work since. Her husband’s life insurance payout is now gone, and she is paying a penalty to withdraw “what’s left of my IRA early,” after it lost thousands of dollars in the recession. She’s nearly given up looking for work, since jobs in her former specialty have largely been outsourced, and when applying for other jobs she’s been told countless times she’s overqualified. Sometimes employers tell her the jobs have already been filled when they discover her age.
In 1983 the retirement age was increased from 65 to 67 (for those born after 1959, with those born after 1938 on a sliding scale) at the urging of Federal Reserve Chairman Alan Greenspan. At the time Social Security was facing a dire funding crisis. It has since stabilized, for years creating a surplus paid into a trust fund that lent to the federal government. Hence some economists and pundits have called for reverting back to a full retirement age of 65. Now as baby boomers retire, Social Security payroll taxes are decreasing and payouts are increasing, with the Congressional Budget Office predicting the program would be paying out more in benefits than it is receiving in payroll tax revenues this year due to the economic downturn -- hence Boehner’s call for raising the retirement age to 70. Morrissey and others say the risk is being exaggerated for political reasons, since Social Security is still running a surplus if interest on the trust fund is included.
“The slight imbalance that exists has been framed as a crisis even though there is no crisis,” said Morrissey. “It’s being used as an excuse to shrink the system even though there’s no real reason we shouldn’t be expanding the system.”
National progressive radio host and author Thom Hartmann is calling for an even earlier normal retirement age, like 62. Hartmann bases his argument not on humanitarian grounds but rather the idea that taking older workers out of the labor force will reduce the available supply of workers, driving up wages and thus increasing Social Security payroll taxes. In his recent book Rebooting the American Dream: 11 Ways to Rebuild Our Country, Hartmann says historically laws and policies prohibiting child labor, limiting immigration and giving unions control of skilled trades effectively limited the supply of workers and hence caused wages to increase.
“If we have a lot of unemployed people desperate for work, wages will be low and tax collection is low,” he said. “If you dropped Social Security and Medicare eligibility to 55, you’d be pulling a large cohort of the labor market out and demand for labor would go up dramatically, increasing wages. That would also mean increased payments to Social Security. Everybody wins.”
Morrissey invokes the traditional image of a three-legged stool for financing one’s retirement, with a pension or 401k earned from one’s job, Social Security benefits from the fund one has paid into throughout one’s career, and personal savings (including the value of a home). But she notes that personal savings have always been negligible for most people, and pensions and 401ks have shrunk so much in recent years that it is really a one-legged stool of Social Security that keeps most people upright in their golden years.