Social Security failing, falling behind the times

January 31, 2023

Mark Maisoneuve, a CFA, promotes Social Security as a safety net, citing that as its primary purpose.

Social Security’s Return Is Good Enough for Retirees - WSJ.pdf

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Maisonneuve writes:

the program’s steady payments, which help keep them from starving in the cold and dark—Social Security’s original reason for existing.

Two pages earlier, in the same edition, Andrew G. Biggs writes:

Social Security is expensive because it’s more than a safety net: The average new retiree in 2021 received an annual benefit of nearly $21,000, 1.5 times the poverty threshold without counting their own savings. And the highest-earning Americans receive even more than that, with the maximum benefit at the normal retirement age of 67 coming in at $42,238 in 2023.

One Small Step for Social Security - WSJ.pdf

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Read the rest of Biggs' analysis to see just how far from the "original reason for existing" Social Security has come.

This blows through any reasonable idea of a safety net: It’s more than three times the federal poverty threshold and about 5% higher than the median employee’s salary in the U.S. It’s also two to three times higher than the maximum benefit paid in the United Kingdom,

Social security’s maximum benefit increases every year. In 2000 it was about $28,300 in inflation-adjusted dollars, about a third less than today. By 2035 the maximum Social Security benefit will reach$49,825 and by 2050 it will rise to $59,234.

For a single, high-income retiree $42,238 should be more than enough to get by in most parts of the country. That’s why, in future years, the maximum Social Security retirement benefit should be capped at the 2023 value, adjusted for inflation. Retirees entitled to less would receive their benefit as promised, but those entitled to more would be limited to that amount.

To receive the top benefit, a person must have worked 35 years or more at the maximum salary taxable by Social Security, which would have averaged to about $117,000 a year for someone retiring today. It’s likely that these Americans are already saving for retirement on their own, with total national retirement savings having more than doubled in the past two decades.

And from an earlier letter to a friend, on how I'd start to fix things:

In my platform, I'd start by repudiating public sector unions (especially teachers), the Department of Education, college loan forgiveness, and all government-funded college aid. [Government could provide college support with portable merit scholarships.] I'd push for complete school and medical choice with serious vouchers that create true public health and education, without having to rely on ineffective and outdated public schools and insane single-payer systems. No need for Medicare or Medicaid. Vouchers for every CITIZEN (I'd also eliminate anchor babies, retroactively but come up with some way to identify, track, tax and legitimize current non-citizens) means universal health insurance. And then a federal flat income tax rate (with $7500 deductible per person, including kids) to replace almost all of the IRS jargon, staff and auditors and roll Social Security into that flat tax, eliminating the separate FICA. Capital gains would be treated as ordinary income, which it really is, as everybody's income and job entails risk. And I'd gradually raise the age for any retirement benefits from Social Security (I don't think eliminating Soc Sec is possible) to no earlier than 68 (it's 62 now), and even consider both means testing the amount someone receives and not taxing what is received.