The New York Times recently delivered a full-page reminder that we are coming up on crucial policy decisions about Social Security that may show the world what kind of a country the United States really is. In 1983, President Reagan signed off on a set of fundamental reforms to the Social Security system: raising payroll taxes on the wealthy, taxing the Social Security payments themselves, raising the age for eligibility, and a host of minor fixes that brought the system into rough balance over a seventy-five-year actuarial period.
As of today, the trust funds have some $2.9 trillion of cash reserves funded by payroll taxes and interest on the system’s reserves. Coincidentally, 2019 is the last year that taxes will fully cover the cost of the system. From here on out, the system will have to dip into its reserves, which should last until about 2035. After that, to keep the system solvent, monthly payments would have to be cut by about a quarter.
That is a big deal. Elizabeth Warren (D-Mass.) points out that a third of Americans on the verge of retirement have no savings at all, while another third have total savings that are less than their annual income. Once upon a time, companies furnished loyal employees with pension plans. No longer. Now the more enlightened companies make available a sum of money that their employees may match, putting the onus of financial planning on the employees. And only a third of American employers do even that much: 44 million workers have no fallback at all—except, that is, for Social Security. Congressional Republicans say they want to reform the system, but not in order to strengthen it. They want to cut Social Security benefits, presumably to protect the $1.5 trillion tax cut they passed in 2017.