Raising False Alarms Over Raising the Retirement Age
Many are sounding alarms over news that the White House fiscal commission is considering changes to Social Security as a part of a possible debt reduction proposal. Progressive members of Congress are demanding that Social Security be taken off the table. At the same time the commission is being similarly pressured from the right to take tax increases off the table. All this goes directly against the president’s charge that nothing be left off the table in considering how to improve the long-term fiscal outlook.
The sirens have been especially loud regarding raising the retirement age. The Economic Policy Institute has put forth the top ten reasons not to raise the retirement age. CRFB board member Gene Steuerle rebutted many of these arguments in a recent commentary. We would like to add to the excellent points Gene made.
The argument that raising the retirement age will be a benefit cut is misleading. As Gene points out, even if the retirement age is increased to 70, projected benefits will still increase substantially for beneficiaries.
The fact is that people are living longer and Social Security must adjust to that reality. While it is true some people can't work longer, many retire way earlier now than they did in the 1950s and 60s—despite a significant decrease in the number of physically demanding jobs. A 2008 study by the Rand Corporation for the AARP Public Policy Institute suggests that less than 20% of 62 year olds are truly believed to be unable to work. That number will likely continue to go down further over time. That said, increases to the retirement age should (as pretty much everyone acknowledges) go hand-in-hand with protections for those who cannot work longer.
As it is with dealing with the larger budget picture, spending cuts and revenue increases must both be considered in shoring up Social Security’s long-term finances. The revenue-only options that EPI proposes to raise the taxable earnings cap and the cap on employer’s taxes would not be adequate. If phased-in completely by 2019, the proposal would close only about 85% of the actuarial shortfall; and about 40% of the gap in the 75th year. The problem grows so large, there are no easy fixes.
Furthermore, there are only so many tax increases the budget can sustain. So the question must be asked: what is the best use of new tax dollars—supporting larger Social Security benefits than what are paid today, other investments that could do more to fuel economic growth, or keeping taxes closer to historical levels? Whatever one’s answer—and there is no “right” answer—it should not be a given that Social Security trumps all other budgetary priorities without considering the nation’s full host of needs.
As with the overall budget picture, some tough choices will have to be made to strengthen Social Security so that future generations can be secure in retirement with adequate annual benefits. We need a constructive dialogue on what can be done to improve the important program’s long-term finances. We agree with Congressman Paul Ryan’s call for a real conversation without partisan attacks. Impractical demands to ignore potential solutions will not get us there.