Gordon L. Weil

Gordon L. Weil

“The Good Life for Less.” That’s the title of an article in the latest issue of the AARP magazine.

Its focus is finding places to live where a couple can get by on their Social Security payments. Bangor is one of the five featured places from across the country.

Living on Social Security and not much else has become common. Two-thirds of retirees receive more than half their income from the federal retirement program. About 35 percent get virtually all their income from it.

Social Security is the biggest single source of retirement income, well ahead of the combination of private sector and government pensions.

In effect, Social Security has gradually become this country’s universal pension program. In light of the opposition to having single payer health care insurance, it may be surprising that the U.S. has a single payer retirement plan.

It didn’t start out that way. President Franklin D. Roosevelt led the effort for Social Security, because the Depression had driven more than half the people over 65 into poverty.

In the 1930s, older people were expected to live only a couple of years after they reached 65. So the plan would provide end-of-life support, when added to savings and pensions, rescuing older people from a poverty they could not otherwise escape.

Just like the Affordable Care Act, Social Security was attacked from by conservatives, who claimed it was big-government socialism. So they challenged it before the U.S. Supreme Court.

The Court ruled that it was within the power of the federal government to create the program, because it was based on the government’s taxing power, which is almost absolute.

That’s exactly the same reasoning that the Court used to rule that the Affordable Care Act — Obamacare — is legal.

Perhaps someday the Affordable Care Act will become embedded in the American way of life and be considered just as essential as Social Security. But, unlike its predecessor, the ACA is a hybrid public-private program and is far more complex.

At the outset of Social Security, nobody suggested the country was getting itself into a national retirement plan with the government as its source of finance and management.

Social Security has been financed out of the revenues from payroll taxes of current workers and their employers. Except at the start, they have always exceeded outlays.

But that will not continue as there are more retirees and fewer contributors. Because so many depend on Social Security, it is inconceivable that the program can be sharply reduced, meaning that at some point, general tax revenues would have to supplement the payroll tax.

Some believe that if Social Security funds were invested in the stock market, gains there would keep payments up without resorting to general funds. They also would like to reduce the role of the federal government.

The problem with that proposal is that the stock market is not reliable enough to make it possible to count on the steady income flow needed to support fixed retirement payments.

But something needs to be done to make sure Social Security costs are manageable.

The retirement age used for full payments is already increasing, and it may have to go up even more as life expectancy grows.

It seems likely that Washington will change the method of calculating the inflation adjustment, which will mean lower annual increases and lower federal costs.

The payroll tax as a share of income has not been increasing as fast as have the incomes themselves. The cap on the amount of employment income subject to the Social Security tax would have to be increased.

One way to do that would be simply to remove the cap. The wealthiest people might never receive payments equal to what they had contributed, but it’s unlikely they would suffer a seriously adverse effect.

Or the payroll tax could be gradually eliminated and the income tax increased accordingly. Lower income, employed people, who might not otherwise pay taxes, could be required to pay a minimum income tax.

And Congress should not add on new programs to be financed through the Social Security tax without ensuring they pay for themselves.

Today, both disability and Medicare operate at a loss and are eating into their reserves.

What’s clear is that the country has become dependent on Social Security. That makes it imperative for Washington to deal with it before revenues become inadequate.

Social Security shows how single payer health insurance might work. But it also shows that any federal program needs constant effort to keep it financially viable.

GORDON L. WEIL, of Harpswell, is an author, publisher, consultant and former public official.

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