We can ensure the future solvency of our Social Security program without having to apologize to our children and grandchildren.
You may say, “Well, if you don’t feel the need to tell them that you’re sorry about cutting their benefits, you must have no heart."
I do have a heart. I’m also a strong supporter of progressive public policy, having campaigned mightily for a “Medicare-for-All” solution to the health care issues in our country. But I don’t feel the need to apologize for a cut to currently promised Social Security benefits to my kids.
I am not a big supporter of Alan Greenspan but I certainly agree with a remark that he made at a Congressional hearing while serving as Chairman of the Federal Reserve. When questioned about Social Security, Greenspan said that we had set expectations for future generations that were too high.
The issue in question is the formula used to calculate the initial benefits that a future retiree receives, based on his or her wage history. The formula calculates the Average Indexed Monthly Earnings (AIME) using the highest 35 years of earnings. The AIME is expressed in the current year’s dollars. In order to obtain the AIME in current dollars, the calculation uses the average wage growth in the economy for each of the past work years of the retiree.
Once the initial benefits are established for a recipient of Social Security, benefits to that recipient in future years are increased by the rate of inflation, the increase in the cost of living. If the cost of living decreases, benefits are not reduced but stay the same.
Wage growth has historically outpaced the rate of inflation by a significant amount. As the current formula for future benefits is based on wage growth versus cost of living increases, if my children have the same wage history when they retire as I did when I retired, their initial benefits will greatly exceed mine. Is this necessary?
One of many Social Security policy options evaluated by the Social Security Administration changes the formula for the calculation of initial benefits so that they are based on growth in the cost of living over the work years, rather than wage growth.
This approach, last analyzed in 2009, would prevent our Social Security program from becoming insolvent, ever. The effect of implementing this option would be that our children and grandchildren, with similar wage histories to our own, would receive benefits that provide the same purchasing power in future dollars as we have today.
What’s wrong with that? Nothing. Why hasn’t Congress jumped all over this option? The short but correct answer is that it represents a cut. Very few Congressmen from either party are willing to tell their constituents that future benefits will be cut. I was not a great admirer of former President George W. Bush, but this very proposal was one of two recommendations that he made to fix our Social Security problem. He dropped this one because he received no support from Congress. The other part, dealing with private accounts, he kept in his program although he later admitted that it didn’t solve the problem at all.
This approach to solving our Social Security issue is so simple and effective, it begs to be adopted. May our Congress have the courage to say the word ‘CUT’ and then position the policy so that Americans can understand its benefits and consequences. I firmly believe that 9 out of 10 would be quite willing to ensure that their kids received in the future what they are receiving today.
For much more on this topic, refer to: