Social Security and Shared Sacrifice

February 08, 1993

If President Clinton doesn't do something this year about the financial time bomb and regressive structure built into the Social Security system, chances are he never will. Almost anything he proposes will trigger a fire storm of protests and phone calls from the well-organized gray-power lobbies. But this is something he must attack, not just as part of his deficit-reduction package but to protect his own generation of Baby Boomers.

One thing that should be high on the Clinton agenda is a quick rise to 67 years from 65 years in the retirement age required for full Social Security benefits. The sacrosanct, out-moded 65-year figure goes all the way back to the shorter life-expectancy days of the mid-Thirties. Actually -- and actuarially -- the retirement age today should be 73. Therefore, the phase-in for full retirement benefits at age 67 should take place by the year 2000, not by 2027 as called for in existing law.

Such a change would not only save $60 billion over the next two decades and protect the integrity of the Social Security fund; it would encourage older citizens to keep working (and paying Social Security taxes). In the late 1940s, 13 workers supported each Social Security recipient. Today there are three and in the next century only two.

For more immediate impact, President Clinton should increase the taxes on the Social Security benefits now being paid to affluent older Americans. The present system stands fairness on its head. It provides the largest benefits to those whose incomes during working years were the highest. And it provides the smallest benefits to the elderly poor who need it most.

At the very least, Social Security benefits should be taxed as regular income. The elderly poor would not be hurt and the elderly affluent would be asked to make the "shared sacrifice" Mr. Clinton called for in his inaugural address. At present, 50 percent of benefits are taxable for single persons with incomes over $25,000 and for couples with incomes over $32,000. To raise the taxable ceiling to 85 percent would add $2.8 billion in 1994 and $31.5 billion over the next five years.

Republican Senate leader Robert Dole would prefer reducing benefits marginally on a sliding scale that would leave the poor unscathed and affect only higher income beneficiaries. We consider this more equitable than calls for an across-the-board one-year freeze or a reduction in annual cost-of-living adjustments in Social Security payments. True, immediate and out-year savings would be considerable, but persons almost totally dependent on Social Security benefits (average payment: $650 a month) would suffer. The Democratic White House and some Republican lawmakers are giving lip service to this idea, but our guess it is a political live wire that won't be touched.

President Clinton's challenge is to come up with a Social Security proposal in his economic package that can be enacted this year. He may not have another opportunity.

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