Happy 91st Birthday, Social Security!

Social security card – Public Domain

It was on August 14, 1935 that President Franklin D. Roosevelt signed into law the Social Security Act. The historic law was the brainchild of Labor Secretary Frances Perkins. Since then, there have been sporadic but constant rumblings about the demise of the program. The constant fearmongering around this most beloved insurance program started even before Ida May Fuller received the first Social Security payout of $24.75 in 1940.

To date, no one due a Social Security check has ever been denied. Let’s keep that in mind, and keep it that way.

Despite the impending 2032 shortfall — which means we could continue to pay 79 percent of benefits — Social Security can be put on firm footing without another increase in the retirement age, without increasing taxes for most who are paying into the system, and without decreasing future benefits.

Among many ideas, here are two. One would go a long way to quickly provide solvency and, depending on particulars, will provide a surplus for some length of time. The second fix is much needed for the future strength of the US economy as it also helps to shore up Social Security.

Raise the Cap. Raising the ‘cap’ is the fairest and least disruptive first step, as earnings above the cap are not subject to Social Security tax. The 2026 cap of $184,500 is simply far too low, especially in light of ever-increasing wage inequality over the last five decades. This move would quickly extend the program’s solvency for some time depending on the particulars, and give us time to implement other policies to strengthen the program.

In CEPR’s recently released Majority Agenda — a collection of policy briefs on important issues where Americans generally have broad agreement across the political landscape — Dean Baker’s piece on Social Security reported that the vast majority (68 percent) favor scrapping the Social Security payroll cap, including 73, 63, and 65 percent of Democrats, Independents, and Republicans, respectively.

Importantly, Social Security is a pay as you go program — meaning current workers pay into the program to provide payout to current retirees. Today, low and falling birth rates in the US are not good news for the future Social Security, as the number of workers supporting retirees has decreased significantly over time.

However, where we are today is only part of the story. We foresaw the impending aging of the US workforce decades ago. The decline in the number of workers supporting retirees when the baby boomers retired was fully anticipated in 1982 when President Reagan reformed the program.

At the time, this impending demographic shift was not a problem because of actual and predicted wage growth–future higher wages meant more money into Social Security. Therefore, if wage growth had kept up with the pace of productivity growth over the last five decades, we would not be in this predicament today. Instead, median wage growth was flat or tepid for decades – shortchanging Social Security. Simultaneously, ever increasing inequality meant that more wages were over the cap.

So today, we need more workers along with strong wage growth. Both would strengthen Social Security , and perhaps more importantly they would facilitate a growing US economy. With unemployment at 4.1 percent, along with a shrinking labor force, myriad future economic woes are certain. Strong, robust labor unions, labor policy, and tight labor markets are necessary to foster robust wage growth. But how do we increase the labor force?

More Immigration. Hard-working immigrants are the key to a dynamic, vibrant and growing US labor force. It has always been the case that immigrants pay into the Social Security system, and those who are undocumented never receive their benefits. So, not only are the vast majority of recent deportations unfair, they undercut economic growth and Social Security. Fair and smart policy puts immigrants on a path to employment in the US, along with a path to citizenship so they can enjoy the benefits of their labor.

To my comrades and the vast majority of Americans that support Social Security, I’ll repeat here what I’ve long said (often in spirited conversations over the last two decades): Please stop saying you won’t receive your Social Security when you retire. Do not listen to the BS, fight for your money, fight your rights, and fight your beliefs.

It may be that more will need to be done to shore up Social Security well into the future, but it is ludicrous to even suggest that we do not have the means to sustain and improve it in the richest country in the world. A New New Deal is what America needs. Policies that expand and build upon the original New Deal.