Issue: Social Security

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Nationally, almost 50 million beneficiaries receive money from Social Security—and 86,760 in Onondaga County. The beneficiaries are at the heart of Social Security’s political dilemma. The program, born out of the Great Depression, now faces a serious financial crunch.

Consider these statistics:

• About 70 percent of Social Security’s beneficiaries are retired workers and their families. About 30 percent of the beneficiaries are family members of deceased workers. Half of all beneficiaries are women over 65 years old.
• For about 60 percent of beneficiaries, Social Security is their main source of income. For 20 percent, it is their sole source of income.
• Nationally, the average benefit check is for $987. In Onondaga County, that’s $1,047.
• Right now, Social Security has a surplus, but in 2017 the program starts paying out more in benefits than it is earning by taxes.
• In 2041 the surplus runs out and Social Security will only be able to pay 78 percent of the promised benefits.

The reasons: a smaller workforce paying into Social Security and the expanding pool of Baby Boomers drawing benefits from it.

Social Security works like this: The system is based on the idea that today’s workers pay for today’s retirees. In 2008, American workers pay a 6.2 percent tax on income up to $102,000. Their employers pay another 6.2 percent into Social Security. At age 65, most Americans are entitled to a monthly pension from Social Security.

The program is one of the nation’s most popular public policies. It’s often called “the third rail of American politics,” for its potential to be politically deadly — like the electrified third-rail of subway systems — to those who try to tinker with it. With its guaranteed income for the elderly, it is widely credited as a factor in Americans living longer and healthier lives.

The stock market crash of 1929 and the wide-spread poverty that followed in the Great Depression spurred the creation of Social Security. It became law in 1935 in the administration of President Franklin Roosevelt.

Now, it is in financial trouble because of a decreasing birth rate, increasing life spans and the imminent retirement of the Baby Boomers. Experts agree that several components are necessary to change Social Security. Potential solutions include: raising the tax cap, lowering benefits, raising the retirement age, and adding personal retirement accounts invested in the stock market. The longer it takes to implement a solution, experts say, the more drastic the changes to the program will have to be.

In 2005, President George W. Bush proposed changing Social Security to allow workers to set aside a portion of their Social Security payroll taxes into personal accounts. But the president eventually dropped the proposal because of widespread opposition to personal retirement accounts. This was the most recent effort to overhaul Social Security.

In September, President-elect Barack Obama, then still on the campaign trail, gave a speech at the AARP National Expo about Social Security. “For millions of Americans, it’s the very difference between a comfortable retirement and falling into poverty. More than half of seniors depend on it for more than half of their income. And as the first Baby Boomers become eligible for benefits this year, there are steps we can take to secure its future for generations to come,” he said.

Obama’s proposed solutions:

• Obama adamantly opposes personal retirement accounts, which allow workers to set aside a portion of the Social Security payroll taxes into personal accounts invested in the stock market.
• He wants to remove the cap on income taxed for Social Security for those making more than $250,000. Those who make more than $250,000 would be taxed from 2 to 4 percent more in total.
• He wants to eliminate income taxes for seniors making less than $50,000.

Few Onondaga County recipients would be hurt by Obama’s plan to raise the amount of income that’s taxed for Social Security, says Janet Wilmoth, a sociology professor at SU. Only 1.7 percent of the households in Onondaga County have incomes that exceed $200,000, she said.

But getting rid of income taxes for seniors making less than $50,000 would help many, she said. The median household income for Onondaga County is $40,847, which means half of the county makes less than this amount, she said.

But raising the cap on the amount of income taxed for Social Security won’t solve the program’s money crunch, says John Palmer, the former Social Security trustee and former dean of SU’s Maxwell School. Palmer calculates the change this way:

Nationally, he said, 15 percent of the population earn more than the tax cap, at $102,000. And only 5 percent of the population earn more than $250,000. A small surcharge on this money will only cover 10 percent of what is needed to bring Social Security benefits up from the estimated 78 percent to 100 percent after the program’s surplus runs out, he said.

“We’re talking about a modest surcharge on a very small percentage of the population. You can do a back-of-the envelope estimate. Mine tells me we’ve still got a deficit,” Palmer said.

Obama’s proposed plan will probably not be passed without some tweaking, Palmer said. Typically, liberals are in favor of raising taxes to make up the deficit and conservatives are in favor of lowering benefits, according to Palmer.

“What’s happened in the past is that a little bit of each is used,” he said. “That’s the most likely outcome for the future.”

(Susanna McElligott is a senior with dual majors in newspaper journalism and art history.)

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