“It’s simple math,” is the refrain often uttered by those seeking to explain why cutting, not expanding, Social Security is the choice to make. A variation of that phrase, “arithmetical realities of an aging society,” appeared in Fred Hiatt’s recent opinion piece (“Never-Compromise Wins Again,” Washington Post, 3/23/15). The math is simple, but Mr. Hiatt gets it wrong.
In an effort to show that Social Security will be unaffordable in the future, Mr. Hiatt points out the misleading fact that there used to be a larger number of workers, in comparison to Social Security beneficiaries, than there are now, and there will be an even smaller number in the future. But this “simple math” leaves an important variable out of the equation: productivity. The worker to beneficiary ratio doesn’t prove unaffordability any more than affordability is proven from the equally true observation that the total dependency ratio (workers compared to seniors and children) was much higher in the 1950s and 1960s than it is now or will be through most of the 21st century.
The appropriate measure to assess affordability, one that takes into account productivity, is the percentage of our Gross Domestic Product–the total value of all goods and services–represented by Social Security. Currently, Social Security represents about five percent of GDP. In the future, at its most expensive, it will represent about 6.2 percent. Many other industrialized countries spend a much higher percentage of their GDP on their counterpart programs right now than we will at Social Security’s most expensive. Compared to that 6.2 percent of GDP, for example, Austria today spends 11.9 percent, Germany, 10.7 percent, and Japan, 9.8 percent.
The question of whether Social Security should be expanded, fully funded at its current level of scheduled benefits, or scaled back is not one of math or demographics, but one of values- how we choose to spend our combined wealth. Confusing this question is some other wrong math.
Like one of those fifth grade math word problems involving percentages of pies, advocates of cutting Social Security portray federal expenditures as a pie, and then complain that too much of it is going to seniors. What is missed in this analysis is that there are two pies. One pie is Social Security- disability insurance, life insurance, and joint and survivor annuities financed from its own dedicated revenue paid primarily by insured workers and their employers. That pie cannot borrow or deficit-spend. The other pie is the general operating fund of the United States, financed primarily through the federal income tax.
Past Congresses have tried to make it as clear as possible that there are two pies, going so far as to enact Public Law 101-508, which unambiguously states that Social Security “shall not be counted…for purposes of…the budget of the United States Government.” While the federal budget has a large deficit, Social Security has a large and growing accumulated surplus. Cutting its benefits would shrink the Social Security pie, but not increase the general-fund pie.
Mr. Hiatt and others are missing other important math. Social Security benefits average just $14,600 in 2015. That math is the one that too many Americans are scribbling on the back of envelopes, or neatly entering in Excel spreadsheets. It is the math of hard choices – do I pay for my medications this month, or buy groceries? Forgo heat or pay my phone bill?
These are not questions that people should have to ask themselves when they live in the wealthiest country in the world, at the richest time in our history.
Mr. Hiatt and others imply that cuts would affect only the wealthiest beneficiaries, but that math doesn’t work. There has not been a single serious proposal to cut Social Security that is so limited. The Bowles-Simpson proposal supported by Social Security opponents would cut benefits of workers earning around $40,000 by almost twenty percent, according to Social Security’s Chief Actuary. Those earning more would see their benefits cut by higher percentages; even workers earning just $11,000 would see substantial cuts.
Social Security Works proudly stands by our opposition to cutting even a single penny from our earned Social Security benefits. The American people agree with us;according to the National Academy of Social Insurance, “71% of respondents would prefer a package of changes that increases Social Security revenues, pays for benefit improvements, and eliminates the projected financing gap.”
Now is the time to expand our Social Security system. It is deeply popular, and it is profoundly wise policy. It’s simple math.