“Coincidence of interest” is a marvelous thing. Two people or two groups that may never agree, suddenly find themselves at an intersection, and concur that the way ahead lies in the same direction. That is what solutions often boil down to. And we have such a moment right now -- to preserve and strengthen Social Security. There is an instruction in Latin for such moments: Carpe Diem, “Seize the Day!”
What did I say, a chance to strengthen Social Security? Yes, bear with me. Before any of the current and future presidential candidates offer their ideas on preserving Social Security in detail, there may be a solution that has teed itself up in Congress. It is part accident, part fear of sequestration, part mutual understanding of unspoken realities, and part good luck -- and a call for leadership in 2015. Seeing the solution before us is halfway to getting the job done. The other half is working together, and doing it.
Recently, the Republican House and Senate approved a budget that envisions deep cuts in federal spending ahead. Good in theory, the budget looks to be a hard slog. Already, appropriators in both parties are seeking to soften the blow with competing ideas. The tight multi-year budget plan is driven by genuine fiscal conservatism, and also by a latent fear of another “sequester,” or across-the-board Federal cut, that will otherwise kick in next October. Since this would produce another big national fight, complete with possible shutdowns and recriminations, the idea of finding “a better way” is afoot.
Irony of ironies, there seems to be accidental agreement also emerging. Defense hawks feel the defense budget needs to be increased to match current international threats, and propose to do so by cutting parts of vast Federal entitlement programs. At the same time, some Democrats say that any increase in defense spending must be matched by increases in discretionary spending on non-defense programs -- savings that they admit, in part, must come from “offsets” in Federal entitlements. This is a remarkable, but also opportune moment.
Why? Because there may be a way to clean up waste in Federal entitlements, while also stabilizing the Social Security system and not raising taxes. In short, into this void -- or unexpected opportunity -- may slip a solution that is waiting for inclusion in the final appropriations deal of 2015. This solution is a “hybrid” legislative proposal, tied to strengthening the Social Security system with what has been described as a “Social Security Guarantee.”
AMAC, the Association of Mature American Citizens, is the chief advocate for this Guarantee and is one of the outside groups leading the charge to save and strengthen Social Security. We suggest balancing the equities of fiscal hawks and “the every American,” who understands that the “full faith and credit” of the promises we make to our seniors are now and always inviolate. In short, older Americans who need us must not be in doubt that they are always covered.
So, what is this “Social Security Guarantee” plan (SSG)? First and foremost, it’s a plan designed to help working Americans save and invest more of their own money so that they are less dependent on Social Security in the long run. By offering an Early Retirement Account (ERA), the plan gives every American access to a free-market savings account and a way to begin saving for retirement, from the earliest age. All workers would own their ERA, making it portable if an employee changes jobs, and contributions to the account from the worker and employer would be voluntary.
Creation of the ERA is especially critical today because fully half of America’s employees do not have a 401k or a pension plan. Unlike a traditional pension, however, workers would not be able to access their ERA funds until age 62 -- making it a true lockbox for retirement and safety net for all. To preserve both safety and a healthy return, fifty percent of funds may be invested in guaranteed interest accounts or annuities, and the rest in government-approved investments, including the S&P 500 Index. The concept is proven, voluntary, compensatory, popular, and will play a vital role in strengthening Social Security and the confidence of seniors, as we all move into and through “senior-hood.”
In addition to giving workers access to a new retirement account, AMAC’s plan enables Social Security to be there for those who truly need it. At a time when the program is facing serious solvency issues, the SSG offers clear, incontrovertible survival for the guaranteed system, going out for 80 years from 2015, without raising taxes -- full stop. Second, it preserves the basic Social Security compact with every American, including cost of living (COLA) increases.
How? To make COLAs viable, they are calculated in a way that protects survivability, in high and low inflation years, for all incomes. Specifically, COLA amounts are dependent on household income, with beneficiaries with less than $20,000 receiving a COLA with a three percent minimum and four percent maximum, while those over $50,000 managing a COLA range set between one and two percent. The point is that COLAs are preserved, made modestly scalable, and the upshot is preservation of a key element of the system.
Likewise, consider the modest age variant, in part reflecting the reality that people are everywhere working longer and living longer by God’s grace, America’s unrivaled standards of living, and advanced medical care. The reality supports another modest variation, retirement age, to both “grandfather” all now entitled to benefits, and protect those who have a longer lifetime of benefits coming. For example, by placing early retirement at 62 to 64, full from 66 to 69, phasing all shifts in over a multi-year period, we get to sustain the system for our children, and for their children -- rather than blithely racing to spend their money.
We, the country’s seniors, are then both equitable and responsible, fair and good managers -- honest and compassionate fiduciaries -- of the future. And here is a real surprise: In a recent, nationwide poll of AMAC membership, more than a million seniors, results overwhelmingly favored this exact approach.
In short, any workable system for preserving the greatness of our nation’s security guarantee for all Americans has to contain some essential pieces. Imagine that you are baking a loaf of bread. No wheat, butter, salt, milk, and yeast, no bread. The right proportions of each, and you have lasting satisfaction. Missing a key element and the process does not bake.
So now we must ask ourselves, and we ask Congress to ask us: If not we -- who are the real beneficiaries across the generations that we have raised -- then whose word should count more? Who, beyond those who have paid in over the longest time, and who worry for a country we multiple times went to war for, offer a more convincing reason to be responsible? If older Americans are behind strengthening the system, why not all Americans?
So are we finally at the intersection of reality, reason, and solutions when it comes to assuring a Social Security Guarantee for our oldest generation, as well as for all Americans? Or are we going to walk by this intersection, a chance to accommodate a need for strong defense, important support for key discretionary spending programs, and a chance to finally, firmly, and with fairness rein in what we all understand as unsustainable entitlements?
In a moment of unlikely “coincidence of interest,” this is the moment to seriously offer the nation a workable way ahead, with stronger defense, meaningful discretionary additions where needed, and offsets in the form of genuine entitlement restructuring -- with a full “Social Security Guarantee” in the bargain! Let us come together and not raise taxes unnecessarily, not impinge on the “full faith and credit” that so many seniors personally sacrificed to preserve. Let us instead, for once, get down to work, and get it done – right -- and then take pride in the marvel of finding real solutions. If not now, one and all, when?