On Tuesday, Sen. Marco Rubio (R-Fla.) outlined a number of reforms for Social Security at the National Press Club in Washington.
His speech dealt with public policy on retirement in the 21st century, including a 4-point change to Social Security.
- Eliminate the payroll tax for anyone over age 65 who continues to work.
- Remove the retirement earnings test for seniors 62 and over
- Raise the Social Security retirement age for those under the age of 55.
- Increase benefits for low-income seniors and reduce scheduled initial benefit levels for wealthy retirees.
His words were strong. Rubio warned the audience, “(By 2038), Social Security will have been bankrupt for years. This is not a scare tactic. It is a mathematical certainty. The longer we wait to address this the harder it will be to fix, and the more disruptive those fixes will be.” These words contrasts sharply with the 2012 election in which we heard “Social Security is – you know – structurally sound.”
It is refreshing to see a politician speak candidly about Social Security for all Americans. At the same time, his comments paint a clear picture that the even the most courageous politicians remain distrait from a system on which they do not depend.
Oddly enough, a considerable portion of his proposal will make Social Security less solvent. Reducing payroll taxes will not help Social Security, particularly for seniors who, as Rubio notes, may get very little in return for their contribution. Removing the retirement earnings test will only encourage more people to start drawing benefits at 62, which creates near term pressure on the system. Likewise, increasing Social Security benefits for anyone makes Social Security less solvent.
There are two parts of his policy that will improve Social Security’s finances. One increases the age of retirement for those who are 54 and younger. The other targets wealthy retirees for lower benefit levels. So would these adjustments rescue Social Security for those under the age of 54?
The Social Security Administration has scored similar concepts, and the results generate little confidence that Rubio’s changes will add “years” as he claims. The research from the Social Security Administration suggests that it is closer to months. It isn’t even possible to say that these adjustments will offset the negative impacts of his other proposals.
These are scores of comparable ideas. None of these ideas increase the exhaustion point of the Trust Fund past 2033. The Social Security Administration:
- Scored a proposal to increase the retirement age for people 54 and younger. This change addresses about 12% of the financing gap.
- Projected that slowing the initial benefits of senior retiring in 2026 addresses 2% of the shortfall financing.
- Scored the changed to Chain-CPI would address 14% of the projected shortfall. That assumes of course that we change the system in 2016 rather than 2026, and apply the cost controls on all seniors rather than just those who reach normal retirement age after 2026.
There are some problems with Senator Rubio’s proposals. Specifically, Social Security does not have insight into a retiree’s wealth. His proposals use past income which may be connected to wealth, but it isn’t possible to say that his changes will even target wealthy retirees.
It is difficult to criticize someone who has the courage to step forward when no one else will. It is, however, a tiny step, one that does almost nothing. In the words of Senator Rubio, “anyone who is in favor of doing nothing about Social Security is in favor of bankrupting Social Security.” He is effectively doing nothing.