“We fumbled the rollout of this health care law,” President Obama admitted last week. He added, “I am not a perfect man and I will not be a perfect president.” As critics on the right and on the left attack the Affordable Care Act, it’s important to examine our more successful entitlement programs: Social Security, Medicare and Medicaid.
Enacted in 1935 and implemented in 1937, the Social Security Act came at a time of hardship for elderly Americans. Far more than 50 percent of people over the age of 65 were in poverty during the 1930s. When the benefits began being distributed after five years of legislative rollout, life expectancy at 65 was about 12 years for men and about 13 for women. That’s if you made it to 65.
The first checked was issued on Jan. 31, 1940, to Ida May Fuller in the amount of $22.54, or about $375 in today’s currency. However, Ida was a rarity; when Social Security was launched, barely half of the labor force participated. Only $35 million ($583 million in 2013) was paid out in 1940. That’s chump change for today’s budget of $1.3 trillion. Some said the rollout was “fumbled.”
Today, we can boast that 14 million Americans aged 65 or older are raised above the federal poverty line by Social Security. And for 24 percent of elderly citizens, Social Security checks serve as their only source of income.
Between Social Security and Medicare, we spent $1.34 trillion, or about 38 percent of federal expenditures, in 2012.
Yet, 12 percent of people over 65 are still in poverty. And nearly 20 percent of the country at large earns less than the poverty line. If that doesn’t make you uncomfortable, consider that 27 percent of children are in poverty.
We can do better and we should do better: We’re no longer in 1935 or 1965; Social Security and Medicare need to be updated.
Our entitlement programs should fit the times we live in. Life expectancy at 65 now is 17 years for men and more than 19 for women. Those figures are expected to rise to 19 and 21 by 2035. Thirty-eight percent of men and 28.1 percent of women aged 62-74 are employed, as of 2009. Those figures were 27.3 percent and 16.9 percent just 20 years ago.
That’s why our first action should be to raise the retirement age. The Congressional Budget Office lays out a number of policy options to improve the longevity of the Social Security trust, including options for raising the full retirement age (FRA). Setting the FRA to 70 could proceed over 18 years, finishing in 2040. Not only would an FRA of 70 in 2040 correspond to the change in life expectancy since 1940, it would also decrease projected Social Security spending by 6 percent, saving $58 billion over the next 10 years alone.
Our largely service economy does not take the same physical toll that manufacturing and agriculture did when these programs were designed. Yet, 39 percent of workers ages 50 to 61 are in physically demanding jobs. That’s why I propose a tiered Social Security program. Workers in blue-collar jobs can apply for benefits at an earlier age, such as at 60. White-collar employees, who don’t bear the same physical hardship, can work until the FRA at 70.
Another much-needed update is to add a means-tested aspect, making the program progressive. Unlike in 1935, many people can now afford to plan for retirement. We should not be obligated to support them when they can support themselves. Under the CBO’s plan, lowering benefits for the top 50 percent of income earners would extend the life of the trust by four years.
Lastly, Social Security benefits should fulfill the roll they were designed for. Currently, benefits are tied to wages, which have increased faster than prices. Social Security was not intended to account for promotions and bonuses one would receive in the workforce; it was designed to make sure seniors could buy food and shelter. Linking benefits to price inflation would still allow them to do that, but would also save, over the next 10 years, $57.5 billion if done progressively and $93.4 billion if implemented “purely.”
Perhaps ironically, Ida May Fuller lived to be 100 and collected $22,888.92 from the Social Security Administration, despite contributing only $24.75. As more and more people like Ida retire, the need to take concrete steps becomes more urgent.
As we take these steps, however, let us pay homage to the great good they’ve done for seniors and for the country. Let us also note that it took decades to recognize them as successes. Obamacare is no different; all large programs need time to grow.
Contact Nick Ahamed at [email protected]