Over the weekend, Democratic presidential candidate Mike Bloomberg released his plan for retirement security, including a commitment to strengthen Social Security’s long-term finances while closing some of the gaps where he believes that the program falls short.
In a statement published on his website, Bloomberg wrote, “Americans who have worked for decades deserve the opportunity to retire without facing constant financial pressure, and, as president, I will strengthen Social Security to allow seniors to do just that.”
The hard truth for voters to understand is that Bloomberg’s plan for Social Security falls short, and offers little more than a promise to think about the problems presented by the system’s long-term financing gaps.
The tough message for any candidate is: think about the problem before you arrive at the White House. Better yet, think about the problem before you announce your intention to run for office because the millions of Americans who depend upon the system deserve nothing less than a vision for the program.
The problems with the program’s finances shouldn’t be news to any candidate. It has been slowly moving towards crisis for decades.
Over that time, the Trustees of the program have repeatedly warned lawmakers to about the urgency of action on the growing actuarial deficits. In response, candidates have been examining, exploring, and considering options without ever finding a single idea on which anyone can agree.
Bloomberg offers a plan for Social Security that isn’t new or innovative. It contains four basic elements.
- Consider options for preserving and strengthening Social Security’s long-term
- Raise Social Security benefits in future years in line with a measure of inflation that reflects the higher costs that seniors have to face.
- Strengthen Social Security by introducing a new minimum benefit to prevent low-income seniors from falling into poverty. (A newly defined minimum benefit will assist recipients whose social security payment falls below the federal poverty line – Mike’s plan will ensure the payment is increased).
- Examine options for addressing other weaknesses in the benefits system.
The candidate’s message is clearly focused on preventing low-income seniors from falling into poverty. The candidate’s plan, however, has one concrete action – changing the way that the COLA adjusts checks to offset inflation. The trouble is this change tends to reward those seniors with the largest checks, most of whom aren’t at risk of poverty.
For example, someone like President Bloomberg might enjoy a bump of $72 per year where as someone on the other end of the economic spectrum would get something closer to $25 extra annually.
Separately, Bloomberg’s plan calls for increasing the minimum benefit to put a more solid buffer between low-income seniors and the poverty line. Unfortunately, his plan lacks the detail necessary to tell supporters what that increase might be or who might qualify.
To illustrate how the details shape the outcome, a lot of policy experts and lawmakers agree with Bloomberg. Yet, proposals that are on the table today have nearly zero consensus on who wins and who loses.
- The Social Security 2100 Act creates roughly a 2 percent jump in benefits for all retirees both existing and future. For someone with a history of low-income jobs, that bump equates to roughly $350 per year. Beyond that change, the proposal would create a significant minimum benefit for those retirees with 30 years of work experience that would add meaningful dollars to the checks but existing retirees are excluded from this benefit. Moreover, only about half of the low income future retirees would qualify for the entire protection.
- The “Social Security Expansion Act” creates substantial benefits for future retirees, but almost nothing for those already retired. For a current low-income senior, the proposal would add about $26 per year for a new low-income retiree. Over time that increase would grow to $450 annually when they reached the age of 85.
I do not mean to suggest that Bloomberg is wrong, or that he doesn’t deserve your vote. This topic of Social Security deserves some attention in the coming election. It hasn’t drawn much because most voters have grown comfortable with the idea that in a worst case Social Security will be able to payout 80% of the benefits owed even if Congress does nothing.
Conventional wisdom tends to accept the Trustee’s forecast as an absolute guarantee rather than a frightening possibility. The consensus view is, of course, a dangerous way to look at these numbers because they are based on not-worst case assumptions.
To illustrate, the trustees expect that the GDP will grow by more than 2 percent in 2035 whether seniors get full checks or not. So, in our worst case scenario, seniors continue to spend with or without the support of a program on which roughly 50 percent of them depend.