Sat Nov 24, 2012, 12:50 PM
FourScore (8,181 posts)
Ezra Klein: Why rich guys want to raise the retirement age [View all]
Sat Nov 24, 2012 at 04:12 AM PST
Ezra Klein: Why rich guys want to raise the retirement age
is a must-read piece which somehow I had missed before this morning's email from Reader Supported News.
Ezra takes words Lloyd Blankfein, CEO of Goldman Sachs, made to CBS, about raising the retirement age for Social Security. This is a common argument, usually offered by people who really do not themselves need Social Security, that since we now live longer than when the program was established, the age should be raised. People are now getting so many years more to get benefits from the program.
Ezra totally takes that apart. For example, he offers a chart on life expectancy for people retiring at age 65. Since 1977 those in the upper half of income have seen their life expectancy expand by six years, while those in the bottom half have gained only 1.3 years.
Ezra then writes
If you’re wealthy, you do have many more years to enjoy Social Security. But if you’re not, you don’t. And so making it so people who aren’t wealthy have to wait longer to use Social Security is a particularly cruel and regressive way to cut the program.
But there is so much more.
Many people do not do work they enjoy. They do jobs to support themselves and their families, they take what is available and provides an income (and perhaps some benefits). Klein writes
You know what age most people actually begin taking Social Security? Sixty-five is what most people think. That’s the law’s standard retirement age. But that’s wrong. Most people begin taking Social Security benefits at 62, which is as early as the law allows you to take them.
When they do that, it means they get smaller benefits over their lifetime. We penalize for taking it early. But they do it anyway. They do it because they don’t want to spend their whole lives at that job. Unlike many folks in finance or in the U.S. Senate or writing for the nation’s op-ed pages, they don’t want to work till they drop.
First, Ezra is a bit out of date. For my age cohort, full benefits were not available until one is 66, and that age is continuing to creep up under the "fix" to Social Security made in the 1980s.
But there is more. Klein quotes from Nobel economist Peter Diamond, who is a Social Security expert, and who pointed out to Dylan Matthews that those retiring at 62 lived shorter lives and drew less income than those who retired later, and that proposals like those of Blankfein and far too many in the chattering class and in politics are effectively cutting benefits for those who need them most.
Klein then writes
That’s what’s galling about this easy argument. The people who make it, the pundits and the senators and the CEOs, they’ll never feel it. They don’t want to retire at age 65, and they don’t have short life expectancies, and they’re not mainly relying on Social Security for their retirement income. They’re bravely advocating a cut they’ll never feel.
He got that right. He points out that Blankfein, whose 2011 compensation was over $16 million, paid Social Security tax on less than 1% of his income because the taxes are capped at salaries over 110,000 - and I would add are not applied on things like stock options which represent a major part of the compensation of people like Blankfein.
We then get this observation from Klein:
If we lifted that cap, if we made all income subject to payroll taxes, the Congressional Budget Office estimates that it would do three times as much to solve Social Security’s shortfall as raising the retirement age to 70. In fact, it would, in one fell swoop, close Social Security’s solvency gap for the next 75 years. That may or may not be the right way to close Social Security’s shortfall, but somehow, it rarely gets mentioned by the folks who think they’re being courageous when they talk about raising a retirement age they’ll never notice.
When I was younger, the cap was so much lower. As you can see by this chart, when I began working in the mid 1960's, the cap on wages from which the tax was deducted was only $6,600. For my work career before I left to get trained as a teacher in mid-1994, I had the experience of hitting the ceiling sometime in Autumn, after which it was like receiving a temporary pay raise when the taxes were not deducted from the remaining pay checks that year. Now as a teacher I pay those taxes on all my wages.
Someone like Blankfein and other captains of industry almost do not notice the few times the tax is deducted from them. Rank and file members of the House and Senate currently make $174,000, which means they stop paying the tax in the summer. And if the voters decide to keep them in office, they may drawing a salary from use into their 90s (Robert Byrd) or even when they hit the century mark (the late Strom Thurmond), even while they can simultaneously draw Social Security.
There is no consideration in proposals to raise the retirement age of the toll of the kind of work some people do. It is one thing to be a lawyer or a politician or a banker. It is something far different to be a coal miner, work on a loading dock, stock shelves in a supermarket. Heck, some jobs even force you out after a certain age. The FBI requires agents to retire at 57, 5 years before they are eligible for early Social Security. It is hard to imagine an ordinary fireman running into burning buildings at 66 or older.
Far too often our policies are made by people with insufficient knowledge or regard for the lives of people not like them. Thus in education policy we had in No Child Left Behind the option to transfer from a failing school to a more successful school. But how does that work in the rural part of western Nebraska where some communities still have one-room schools? Raising the age for Social Security - and before the Affordable Care Act Medicare - is an action that ignores the reality of the lives of too many people.
I am retired and on Social Security. I have gone back into a classroom in a setting that most people could not handle because I wanted to. Many of us if we do work we enjoy will continue working, conceivable even as we draw Social Security.
We should not be balancing our finances on the backs of those who have already labored enough, and who should have earned the right to some time away from jobs that were necessary but not enjoyable.
Ezra Klein has written an important piece.
I hope the policy makers pay attention.
"Politics is like driving. To go backward put it in R. To go forward put it in D."
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Ezra Klein: Why rich guys want to raise the retirement age [View all]
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