Social Security is the foundation of our social safety net. It puts our highest ideals into action. Unfortunately, the safety net is in trouble.
Social Security became law in 1935. Less than half of all employees were covered. The Social Security tax rate was 2%. The tax applied to the first $3,000 earned. Life expectancy for people born in 1935 was less than 62 years. Retirement age was 65.
Today, Social Security covers almost everyone that has a job. The Social Security tax rate is 15%. Earnings over $117,000 are exempt from the tax. Life expectancy for people born in 2010 is almost 79 years. Retirement age is 66.
Social Security is facing three crises. First, it is becoming too expensive to sustain. Second, Americans least able to pay bear almost all the burden of paying for Social Security. Third, Social Security payments are too small.
I propose three reforms.
First: Social Security tax should apply to all income.
Second: Social Security should be expanded to cover all Americans that reach retirement age. Retirement age should be indexed to life expectancy at time of birth.
Third: Social Security payments should provide enough income that the retiree’s income is not below the poverty line. Social Security payments should be offset against all other forms of income.