[ad_1]
Social security provides crucial income support to tens of millions of people every year, including retirees, surviving spouses, dependents and people with disabilities. But it is largely a pay-as-you-go system; the taxes that workers pay today mainly cover the benefits of retirees today. As a result, the upcoming increase in the number of retirees per worker will wreak havoc on the system.
If Congress does not, the social security reserves will be exhausted by 2035 and workers will receive only about 75% to 80% of the benefits to which they are entitled. Either the payroll taxes will have to increase, the benefits will have to go down or another resource will have to be exploited.
A reform plan should restore the long-term solvency of the program and sustain it. This will prove rather difficult, but to be truly effective and sustainable, the plan must meet several additional criteria.
First, it should fund changes through social security reforms itself, so that the program can function autonomously, as it has done throughout its history. We should not, for example, transfer income tax revenues to social security; this would make the program solvent, but only to the detriment of a larger deficit from the rest of the budget. Second, any change should protect vulnerable Americans and preserve and enhance the features of social insurance and poverty alleviation that make social security successful. Third, the reforms should reflect changes in the economy since the last reforms of 1983 – including a longer lifespan for high-income households and a worsening of income inequality.
Fourth, any change should treat different generations fairly. The first generation of social security beneficiaries received benefits but paid little tax as the program started in the middle or at the end of their career. But this generous treatment of first generation beneficiaries imposes the costs of their retirement on future generations. In the future, every generation of workers should pay the retiree benefits of his time, as well as part of the inherited deficit, and these workers should then receive their own retirement benefits from the next generation of workers.
Moreover, the reforms will only last if they respect the public opinion. While any reasonable plan includes both tax increases and spending cuts, the public seems to be in favor of maintaining the benefits of social security rather than keeping social charges low. Finally, for social security to remain the cornerstone of Americans' retirement security, citizens need to know what benefits they will receive and what taxes they will have to pay in order to plan for their future. Statements that people can get from Social Security indicate the benefits that a worker has earned; they do not adapt to a possible financing gap.
To solve these problems, policymakers should adopt a set of 2016 measures developed by a bipartisan policy center commission (of which I was a member). The plan would significantly increase the payroll tax ceiling, increase the payroll tax rate by 1% over 10 years for employees and employers, and increase the income tax on benefits. Social Security for high income households. This would change the way social security calculates inflation to better reflect price changes. To entice people to work longer, the age of 100% retirement would increase by one month every two years from 2022 until age 69 in 2070.
Taken together, the proposed amendments would reform social security in a sound and equitable manner, meeting all the criteria set out above. The proposal would restore the solvency of 75 years of social security as a whole and maintain this solvency in the future. The overall benefit structure would be made more progressive by increasing annual benefits for low-income households and reducing them for high-income households.
Securing social security would preserve and strengthen a social pact that would connect the generations and give the necessary impetus to other reforms: if we could put in place a program as fundamental as social security, we could surely solve other economic problems. .
[ad_2]
Source link
