“Congress hasn’t increased Social Security benefits in nearly fifty years.” ~ Senator Elizabeth Warren
Senator Elizabeth Warren (D-MA) has a lengthy post at Medium detailing her plan to expand Social Security. What she doesn’t say in her plan is that Social Security benefits have been increased almost every year for nearly fifty years.
Says Sen. Warren:
Social Security has become the main source of retirement income for most seniors. About half of married seniors and 70% of unmarried seniors rely on Social Security for at least half of their income. More than 20% of married seniors and 45% of unmarried seniors rely on Social Security for 90% or more of their income.
Yet typical Social Security benefits today are quite small. Social Security is an earned benefit — you contribute a portion of your wages to the program over your working career and then you and your family get benefits out of the program when you retire or leave the workforce because of a disability — so decades of stagnant wages have led to smaller benefits in retirement too. In 2019, the average Social Security beneficiary received $1,354 a month, or $16,248 a year. For someone who worked their entire adult life at an average wage and retired this year at the age of 66, Social Security will replace just 41% of what they used to make. That’s well short of the 70% many financial advisers recommend for a decent retirement — one that allows you to keep living in your home, go to a doctor when you’re sick, and get the prescription drugs you need.
And here’s the even scarier part: unless we act now, future retirees are going to be in even worse shape than the current ones.
Despite the data staring us in the face, Congress hasn’t increased Social Security benefits in nearly fifty years.
What a lie. But like many lies, it has an element of truth in it.
One must pay Social Security taxes for a minimum of 40 quarters to be eligible for benefits. The current tax rate is 12.4 percent (split equally between employers and employees) on the first $132,900 of an employee’s income. Social Security benefits are figured on the basis of one’s “primary insurance amount,” the average of a worker’s 35 highest years of earnings (up to a particular year’s wage base), adjusted for inflation.
According to the Social Security Administration (SSA):
The “primary insurance amount” (PIA) is the benefit (before rounding down to next lower whole dollar) a person would receive if he/she elects to begin receiving retirement benefits at his/her normal retirement age.
The PIA is the sum of three separate percentages of portions of average indexed monthly earnings. The portions depend on the year in which a worker attains age 62, becomes disabled before age 62, or dies before attaining age 62.
When we compute an insured worker’s benefit, we first adjust or “index” his or her earnings to reflect the change in general wage levels that occurred during the worker’s years of employment.
The steps leading from the PIA to the benefit amount are:
- A factor is applied to the PIA to account for early or delayed retirement, with the result truncated to the next lower dime.
- Any offset to the benefit, such as payment of the Medicare Supplementary Medical Insurance (SMI) premium, is subtracted
- Finally, the resulting amount is truncated to the next lower dollar.
Social Security benefits were first paid in 1940. Congress increased Social Security benefits by 77 percent in 1950. Additional increases were authorized by Congress in 1952, 1954, 1959, 1965, 1968, 1970, 1971, 1972, and 1974.
Beginning in 1975, and continuing to the present day, Social Security recipients have received an annual cost of living increase (a COLA), based on the annual increase in consumer prices. This has ranged from a low of 1.3 percent (1986, 1998) to a high of 14.3 percent (1980). No COLAs were issued in 2010, 2011, and 2016. The increase for 2019 is 2.8 percent. According to the SSA, due to rounding, possible offsets, and final truncation in the steps leading from the PIA to the benefit amount, “A COLA increases a person’s Social Security retirement benefit by approximately the product of the COLA and the benefit amount.”
Clearly, Social Security benefits have increased substantially since the beginning of the program. They have increased almost every year for nearly fifty years, but via COLAs, not congressional legislation.
Sen. Warren doesn’t want to wait for Congress to increase Social Security benefits. She is proposing “the biggest and most progressive increase in Social Security benefits in nearly half a century.” She wants to increase benefits immediately by $200 a month and further increase benefits for women, minorities, and the disabled. She proposes to pay for all of this in the usual Democratic manner—by increasing Social Security taxes on the wages and investment income of “the rich.”
But after calling for increased COLAs to supplement her “across-the-board benefit increase,” Warren contradicts her earlier lie: “The government currently increases Social Security benefits annually to keep pace with the price of goods typical working families buy.”
So which is it, Sen. Warren? Has Congress not increased Social Security benefits in nearly fifty years or does the government currently increase Social Security benefits annually?
The government spent $1 trillion on Social Security benefits last year. But regardless of whether benefits have increased in the past, Sen. Warren wants the government to spend even more.