Social Security’s Retirement Age Should Not Be Increased (Again)

In the midst of the seemingly endless series of campaign launches by candidates for the Republican presidential nomination, most media coverage has focused on the horse-race narrative, or on the effect of fundraising on politics, or on other matters that appeal to political junkies. It is sometimes all too easy to forget that there are actual policy issues facing the country.

And there are plenty of important issues that beg for our attention, from climate change to income inequality to racial justice. Some issues, however, are actually not at all important. Unfortunately, even though Social Security is truly a non-problem, some politicians think that it is a sign of seriousness to claim that our retirement system must be fixed. At least one of the Republican hopefuls is advocating a change to Social Security that would do serious harm to Americans young and old.

Last Sunday, former Florida Governor Jeb Bush was asked about his proposal to increase the age for Social Security retirement benefit eligibility. Bush’s answer was revealing, in a way that bodes ill for his candidacy for president. In this column, I will first describe Bush’s blunder, and then I will discuss why it would in fact be a very bad idea to increase Social Security’s retirement age again. It is a bad idea both because it is unnecessary and because it would exacerbate the inequalities in society that have recently (and quite rightly) become a source of concern for enlightened policymakers.

If You Want to Show That You’re Serious, It’s a Good Idea to Know What You’re Talking About

On CBS’s “Face the Nation” this past weekend, the host Bob Schieffer asked Mr. Bush: “Let me ask you about Social Security. You recently said you favor raising the retirement age for Social Security. To what age?” Bush replied:

I think it needs to be phased in over an extended period of time. I have seen ideas that are 68, for example. So people that already have the supplemental retirement system, which is a contract, I don’t think we violate that. For people that are about ready to be beneficiaries of their supplemental retirement, I don’t think we change that. But we need to look over the horizon and begin to phase in over an extended period of time going from 65 to 68 or 70. And that by itself will help sustain the retirement system for anybody under the age of 40.

It is certainly true that one would need to make any changes in a retirement-related program on a phased-in basis. This, of course, means that anyone who thinks that it is possible to change Social Security in a way that harms Baby Boomers is simply dreaming. Even the youngest Boomers are over 50 years old now, and it would be profoundly unwise to try to change the rules of the game when it is too late for such people to adjust their savings in response to a serious cut to their expected benefits. In that sense, Bush’s cautious approach would be sensible – but only if it made sense to increase the retirement age at all. It doesn’t.

The truly odd aspect of Bush’s statement is that he wants to increase the retirement age “from 65” to some older age. The problem is that the retirement age has already been increased, and Bush is apparently ignorant of that fact. For anyone born in 1960 or later (the last five years of the Baby Boom and beyond), the retirement age will be 67. For the older Baby Boomers, born through 1954, the retirement age is already 66. For those born during the years in between, the retirement age gradually increases from 66 to 67, such that (for example) a person born in 1959 has a retirement age of 66 years and 10 months.

One might say that, oh well, Bush’s comment was not really such a blunder. After all, we are only talking about one or two years’ difference, so what is the big deal? The problem is that Bush is talking about possibly increasing the retirement age to “68 or 70,” which raises the question of whether – if he actually knew the current facts about the system that he wants to change – he would possibly only increase the retirement age by one additional year, or whether he is really talking about a three-to-five year increase from the current level, such that he might be describing a retirement age as high as 72.

This is not a “gotcha” moment. Herman Cain’s infamous comment about not knowing the name of “the president of Ubeki-beki-beki-beki-stan-stan” was truly absurd, but there was a core truth to his claim that knowing certain obscure details is not reasonably part of a president’s job. But this is not some obscure detail. Bush decided that – even before he officially announces his candidacy – he wants people to know that he has thought about the future of Social Security, and he thinks it would be a good idea if the retirement age were higher than 65, and maybe it should be 68 (or 70). Well, we are already two-thirds of the way there.

Moreover, what was supposed to make Bush stand out was that he is putatively “the smarter Bush brother,” the serious and well-informed guy whom we all should wish had been the one of the former president’s sons to run in 2000. Jeb Bush is thankfully not mimicking former Texas Governor Rick Perry’s nonsensical claims that Social Security is a Ponzi scheme, in part because Bush is not supposed to be just another Republican candidate filling up space in the clown car. He is supposed to know what he is talking about. Moreover, Bush is the former governor of Florida, after all, so we might have expected him to know something about our key retirement program. Not knowing that we have already increased the Social Security retirement age, even while arguing that we should increase the Social Security retirement age, marks Bush as a non-serious candidate.

On the Merits, We Should Not Harm Younger People By Increasing the Retirement Age, Because Social Security Is Not Broken

Even if Jeb Bush’s reputation for being a serious candidate continues to take a beating, however, we should still ask whether there is a sound argument to increase the retirement age for Social Security. Although Bush lacks credibility as a messenger, after all, we owe it to ourselves to confront the substance of the policy proposal.

Again, note that Bush sensibly talked about phasing in any retirement age increase over a number of years, so that we can “sustain the retirement system for anybody under the age of 40.” Bush appears to be referring to the idea that the Social Security system is “going broke,” so we need to figure out ways to make it more financially viable, so that the system will still be there when the Boomers’ children and grandchildren are ready to retire.

This is a laudable goal, and the good news is that we have already secured that goal for future generations. As I have explained many times (most recently in a Verdict column last summer), even the supposedly scary financial projections that Social Security’s critics use to scare people in fact point to a perfectly viable long-term system.

The worst that could happen, according to forecasts that change only mildly when they are updated every year, is that the system could require a one-time, permanent decrease in benefits in the range of 20-25 percent, starting about twenty years from now. During the next twenty years, Social Security’s benefits will rise in inflation-adjusted terms by roughly twenty percent, so that the most one can say is that future retirees might have to live on benefits that are equal to the benefits on which current retirees live.

If people such as Jeb Bush, who claim that Social Security is busting the federal budget, were right that benefits are already too generous, however, that would refute the idea that benefit cuts in the mid-2030s will be deeply painful. Besides, there would be many ways to make any such cuts either unnecessary or to phase them in, but only after it became certain that it really will be necessary to reduce benefits.

Again, there is no reason even to go down this road unless it becomes clear that the system will need to be adjusted. Yet the message from those who would “fix” Social Security is that, because the future might work out such that currently-young people will see reduced benefits, we must guarantee today that those currently-young people will see reduced benefits when they retire.

Social Security, Longevity, and Inequality

Moreover, of all the ways that we might want to change the Social Security system (should that ever become necessary), proposals like Bush’s are actually the worst possible way to do so. To increase the retirement age is to cut future retirees’ total lifetime benefits. As it stands, a person retiring with full benefits today at age 66 has about 18 or 19 years left to live. If that is still the case when currently-young people retire, increasing the retirement age to, say, 70 would reduce their lifetime benefits by more than twenty percent.

The story is even worse when we look at income inequality. The much-discussed increase in U.S. life expectancies has been notable in how it has been concentrated among society’s already better-off groups. Indeed, researchers at the Social Security Administration recently concluded that the life expectancy for people in the upper half of the income distribution is now five years higher than for those in the lower half. The life expectancy for those in the lower half has barely increased at all.

This means that, for those who are most in need of Social Security benefits to support them in retirement, the net decline in their lifetime benefits (benefits that are already lower than other people’s benefits, because benefits are tied to how much we earn while we are working) will be the greatest. After a lifetime of working, often in the most grinding and lowest-paying jobs in society, they will be forced to work still longer, and thus to receive less from Social Security. That is, in fact, the whole point of increasing the retirement age.

Moreover, it is not merely a matter of losing twenty percent of one’s lifetime retirement benefits. It is also a matter of losing benefits, and thus being forced to continue to work, during the healthiest remaining years in one’s life. Neither method of cutting benefits (directly reducing monthly payouts, or increasing the retirement age) are likely to be necessary, but in any case, we should not thoughtlessly take away the best years of people’s retirement.

For people like Jeb Bush, and frankly for people like me as well, who make our living doing something that is physically undemanding and intellectually fulfilling, talking about increasing the retirement age sounds like a painless plan. I cannot imagine wanting to retire at all, much less at age 67, or even age 70. But other people hold jobs that take a physical toll, and retirement for them is a blessing.

In fact, because of those physical demands, increasing the retirement age is unlikely to save as much money as politicians would like to think. In addition to its retirement program, the Social Security Administration also runs a disability insurance system. As it currently stands, a person who can continue to perform his job for the last few years before retirement can count on automatically qualifying for retirement benefits. Those who cannot last that long are forced to apply for disability benefits.

The problem is that disability benefits are not automatic, and the Social Security disability adjudication system is expensive to navigate. Increasing the retirement age would inevitably put more people into the disability system, increasing both the payouts to disabled near-retirees and the administrative costs of processing and policing those applications.

There might, or might not, come a time when the Social Security system needs some adjustments. If that time comes, the best approach would be to find additional revenue sources; but if that is not politically possible, reducing benefits to all retirees would be the best way to proceed. We have already increased the retirement age from 65 to 67, even if some politicians have not received that memo. Increasing it again would needlessly harm everyone, and it would most harm the people who deserve a dignified and restful retirement.