Why the US needs to expand social security

America is on the cusp of a retirement crisis. Millions of Americans are already in danger of not being able to maintain their standard of living in retirement, and the problem is getting worse.

You hear a lot about how corporations are struggling to make good on their pension promises, and how Social Security won’t be there for you in retirement.

Baloney on both counts.

Corporations are awash in money, and they could afford to provide their hourly workers with pensions when they retire. Years ago, they routinely provided “defined benefit” pensions – a fixed amount every month after retirement.

Nowadays most workers are lucky if their company matches what they’re able to put away. The typical firm does no more than offer a 401-K plan that depends entirely on worker savings.

But many workers get such low pay during their working lives that they haven’t been able to save for retirement.

At the same time, the cost of pharmaceuticals keeps rising, taking an ever-bigger bite out of retiree incomes.

That means Social Security is more important than ever. Today, two-thirds of seniors derive over half of their income from Social Security, and one-third of seniors rely on it for at least 90% of their income. Without it, the poverty rate of our seniors would be 45% instead of 10%.

Social Security will be there for you in your retirement. The problem is it won’t pay you enough.

That’s why it’s important to expand Social Security – not cut Social Security benefits.

How?

We can afford to increase Social Security benefits, as well as help ensure the solvency of Social Security, by eliminating the cap on income subject to Social Security taxes.

Unlike the Medicare payroll tax that everyone pays as a small portion of their total incomes, the Social Security payroll tax is capped. Any income over $118,500 this year is exempt from it. Which means a billionaire pays the same Social Security payroll tax as someone earning $118,500.

This isn’t fair and it’s not sensible. Billionaires and millionaires should pay just like everyone else.

Scrap the cap, and not only is Social Security more secure for you and your kids, but it will be able to pay out even more benefits in your retirement.

America’s seniors, who paid in to Social Security over their lifetimes, deserve enough retirement income to live on.

If wealthy Americans pay their fair share, we can make sure tomorrow’s seniors get the Social Security they truly need.

This article is published in collaboration with Robert Reich. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Robert B. Reich is ‘Chancellor’s Professor of Public Policy’ at the University of California at Berkeley. 

Image: A woman holds a cluster of U.S. flags. REUTERS/Robert Galbraith.