Raising the retirement age won’t help anyone

Matthew Yglesias, Tribune News Service

It’s budget season in Washington, which means the politicians are delivering their annual warnings about the looming Social Security crisis. How big of a crisis — and how close it looms — is largely within their control, and there are basically three proposals to address it: one from House Republicans, one from President Joe Biden, and one from former President Donald Trump. Trump’s plan is so bad that Republicans decided to attribute it to Biden instead. The budget proposal from the House’s Republican Study Committee, released last week, points out that if no changes are made, the Social Security trust fund will be exhausted by 2032. “Ignoring this fact, as the Biden Administration and Congressional Democrats have, will lead to the largest across-the-board cuts to current Social Security retirement beneficiaries in history,” its report reads. This is a valid point. But “do nothing and let massive automatic benefit cuts occur” is in fact Trump’s position on Social Security, not Biden’s. The Biden administration released a Social Security plan earlier this month that would restore solvency to the trust fund by raising taxes on people who earn more than $400,000 a year.

As for House Republicans? Their plan calls for raising the retirement age “to account for increases in life expectancy.” They realize this is risky — the Biden administration has already pounced on it — which may explain their attempt to sow confusion by pretending their nominee’s plan is actually the other guy’s. Nonetheless, the plan from the Republican Study Committee, which represents almost 80% of the party’s House membership, is worth taking seriously. And in the universe of possible benefit cuts, the GOP preference for a higher retirement age is one of the worst possible options. It’s essentially a benefit cut that targets people with below-average life expectancy. Social Security needs painful changes, but it’s a strangely regressive choice to make them at such a cost to a group that’s poorer than average. Progress on life expectancy has been very uneven across US society. Educated Americans are living much longer than we used to, but those without bachelor’s degrees are not. Contemporary Republicans like to cast themselves as champions of the working class, but they haven’t updated their policy playbook on major issues accordingly.

Beyond the specific class skew, meanwhile, there’s just something peculiar and cruel about singling out people in poor health for benefit cuts. On average, the rich are in better shape than the poor. But there are exceptions. And almost everyone would trade money for better health and longer life if they had the opportunity. Increasing the retirement age essentially singles out the very worse-off class of elderly people — and makes them worse off. Then there is the already-regressive nature of Social Security: The richer you are, the larger your monthly benefit check. Liberals generally admire Social Security for being a “universal” program rather than a means-tested one, providing a guarantee of dignified retirement to all Americans without a lot of elaborate administrative rigamarole. But most people’s understanding of a universal program is something like a public library or a bus — a service available on equal terms to everyone. Social Security is not like that. It pays larger benefit checks to higher-income people who paid more taxes during their working life.

The theoretical rationale here is that Social Security is supposed to be a kind of mandatory insurance program with a pension-like structure of payments and payouts. In reality, though, Social Security is redistributive — those who pay higher taxes receive higher benefits, but not in proportion to what they pay. The point of the Democrats’ tax-raising plan is to make the program more redistributive. But precisely because the existing benefit structure is skewed to the rich, you can achieve the Democratic goal of making the program more redistributive — and the Republican goal of cutting spending — by simply making the program flatter. Take the current 80th percentile of benefits (or 60th or 40th or whatever number you want to compromise on), and make it the maximum benefit. That creates a spending cut that targets not exactly rich people, but at least non-poor people. And because more affluent people live longer, reducing an affluent person’s monthly check does more for the Treasury than cutting spending on the poor.

All this said, the idea of raising the retirement age is not completely without merit. In fact, the research shows that retirement itself is something of a mixed blessing. There are clearly people who, due to their physical condition or the nature of their work, benefit from the opportunity to retire earlier rather than later. On average, however, retiring seems to lead to worse physical and mental health due to a reduction in activity and social connectedness. Beyond the narrow budgetary questions of retirement programs, there is clearly a large economic benefit to having able-bodied people work rather than not even if they are in their 60s or 70s. Rather than cut benefits for those who want to retire, America might consider cutting taxes on people who choose to continue working past retirement age. At the very least, the government shouldn’t actively discourage the elderly from participating in the labor market.

The main health benefits of continued work seem to accrue with part-time hours — it’s avoiding total inactivity, in other words — and for many people that may be the ideal situation. Part-time work gives the able-bodied elderly a continued connection to coworkers and a role in the national economy, while also generating additional free time to spend with grandchildren or on hobbies. The US should consider creating an active labor market program oriented toward connecting sixty-and seventy-something people with part-time job opportunities. It may be boring to say that Republicans want to cut benefits and Democrats want to raise taxes, and that the best solution is some kind of bipartisan compromise that does a mix of the two. But realistically, the optimal policy probably involves tax increases smaller than Biden proposes paired with spending cuts more careful than Republicans suggest. At least both parties agree — one explicitly, one implicitly — that there is no place in this debate for Trump’s reckless indifference.