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Friday, August 10, 2018

Future Leaders Discuss Solutions to the Social Security Financing Gap

Bethany Cole, 2018 Rashi Fein Intern in Health Policy and Griffin Murphy, 2018 Merton C. Bernstein Intern on Social Insurance

 

On Wednesday, August 1, dozens of summer interns and young professionals gathered at the 2018 Summer Social Security Academy in Washington, DC to engage in thoughtful discussion about the features and future of Social Security. Guided by actuaries from the Social Security Administration (SSA), participants explored policy options to address the adequacy of benefits and achieve long-term financial balance. For attendees, it was a brief glimpse into the frequent discussions that take place on Capitol Hill and in policy circles around the country.

Kathleen Romig, TJ Sutcliffe, and Lisa Ekman participate in the day's first panel.

Participants were introduced to concepts in Social Security policy by a series of expert panels and speakers. The first panel, “Why is Social Security Important and How Does It Work?,” discussed who receives Social Security benefits and the importance of these benefits for recipients. Kathleen Romig, Senior Policy Analyst for the Center on Budget and Policy Priorities, kicked off the panel with her presentation, “Why Social Security Matters to You.” She emphasized Social Security’s role in poverty reduction, stating that the program lifted 1.5 million children out of poverty in 2016. Acknowledging her audience, Romig noted that younger workers are currently contributing to Social Security’s funds, and that many have already received benefits. TJ Sutcliffe of The Arc and Lisa Ekman of the National Organization of Social Security Claimants’ Representatives (NOSSCR) echoed these points in their discussions of Social Security Disability Insurance (DI). Like Romig, Sutcliffe remarked on the program’s role in decreasing poverty among people with disabilities, who are especially vulnerable to financial hardship. According to Sutcliffe, without DI, the poverty rate for people with disabilities would increase over thirty percentage points, from 19.7 percent to 50.5 percent. Ekman also highlighted the issue of chronic underfunding of the SSA, in addition to the increasingly difficult appeals process faced by DI applicants.

Chief Actuary Stephen Goss and Deputy Chief Actuary Karen Glenn of SSA presented in the second panel, “Social Security's Financing and Policy Options.” Their presentations broke down how Social Security is funded, the current financial status of the trust funds, and the ramifications of the projected financing gap. The panel ended on an optimistic note, as Goss introduced policy options to address the adequacy of benefits and the financing gap.

After the panels concluded, participants discussed the pros and cons of various policy reform options in small groups. Each group was aided by one of the Social Security actuaries in attendance. Four policy areas received special attention: the retirement age, the taxable maximum, benefit changes for certain populations, and cost-of-living adjustments.

Supervisory Actuary Tiffany Bosley introduced the first discussion, on the retirement age, with a presentation on the implications of raising the full retirement age. In group discussions about this topic, participants weighed the impacts of raising the age on beneficiaries against the need to close the financing gap. Moving on to the next topic, Executive Officer and Supervisory Actuary Jason Schultz detailed the program’s contribution structure, which then informed small-group discussions about altering the cap on taxable income subject to Social Security contributions. Actuary Daniel Nickerson then presented on options to modify benefits—both broadly and for specific subgroups of beneficiaries. Of the options proposed, many groups found the arguments for establishing a caregiver credit and for extending children’s benefits through college to be most persuasive. The final policy area, changing the cost-of-living adjustment, was presented by Actuary Kyle Burkhalter. Groups weighed the pros and cons of adopting different cost-of-living adjustments, one of which may more accurately reflect the inflation experienced by the elderly, and another of which could more accurately reflect consumers’ ability to substitute different classes of goods for one another.

The day-long seminar culminated in a series of small group discussions, where participants made tradeoffs between different policy options to come up with a preferred set of changes to Social Security. Lively debate ensued over changes to the retirement age, the Social Security tax rate and base, benefits, and other elements of the program’s structure. While policy preferences were the primary topic, the political feasibility of various options was not forgotten. For example, although a few groups embraced the idea of raising the retirement age, most groups were skeptical of such proposals due to the anticipation of strong political opposition. In spite of disagreements, each group was able to compromise on a set of policy changes that came within five percent of closing the financing gap, and many groups ended with a budgetary surplus.

For a final word on Social Security, the Academy invited The Honorable Earl Pomeroy, a former Member of the House of Representatives, to the stage to discuss current developments in Social Security policy. Pomeroy began by describing the program’s role in reducing poverty and giving dignity to the elderly. In a tender moment, Pomeroy recalled his experiences conversing with constituents who relied on Social Security to meet their most basic needs. He proceeded to commend the day’s activities, expressing optimistic feelings about Social Security’s future based on the interest and passion shown during the group discussions.

Former U.S. Representative of North Dakota's at-large district (1993 - 2011) wraps up the day's events.

In light of the event, we want to continue the important discussion around Social Security’s financial future. What means to restoring solvency do you find most compelling and why? Are current Social Security benefit levels inadequate, adequate, or excessive? How would you change benefits going forward, and why?

We’d love to hear your thoughts in the comment section.

Posted on August 10, 2018  |  Add your comment
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I would first like to thank the National Academy of Social Insurance for putting on this illuminating event. Before attending, my knowledge of Social Security and social insurance policy in general was much more limited. With the rapid decline of pensions, rise of consolidated corporate power, and generally weaker power vested in workers and the American people, now seems as important a time as any to fully understand and continue Social Security as a foundation for our country and economy.

Though many ideas exist to restore solvency to the Social Security trust fund, my group during the event arrived at a few key policy solutions:

1. raise the payroll tax rate on businesses from the current rate at 6.2%. Business in general benefits from countless services and infrastructure funded by American taxpayers, which ensure that their businesses can operate effectively. As wages continue to stagnate and consumer prices on medical care, medical products, and housing continue to grow faster than inflation, corporations (especially those with higher profit margins) should pay a higher share toward Social Security to ensure that our national systems continue.

2. raise the retirement age by 1-3 years, while adjusting for job type and socioeconomic status (SES). With advances in public health and medicine, average life expectancy in the U.S. has increased by 8 years since 1965--when Social Security began. However, the retirement age has only increased by 1 year--from 65 to 66--and should raise further to account for what the designers of this policy intended. However, life expectancy is not the same across job types and SES. A coal miner in West Virginia still will not live as long on average as an IT specialist in San Francisco (let alone their relative risks for pre-retirement disability); a truck driver earning 200% of the federal poverty line will not live as long on average as a banking executive in New York. These realities demand consideration, and thus by developing a progressive scale of retirement ages, dependent on job type and SES, we can best support all Americans fairly.

On the point of benefits, our group decided that benefits should only rise modestly amid the current projections of Trust Fund depletion by 2034. We elected to improve benefits for students of a disabled worker, to assist with attending college, and to assist with family medical leave in the case of new parents. Both of these benefits would encourage better workforce and childhood development--processes that have both been shown to enhance local economies and strengthen communities.

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