The Social Security Amendments of 2029

It's time to deliver what the American people have needed for decades

Last week, I was caught off guard by the question, “What should the next administration’s one big thing be?” It was asked by a friend in earnest, but I had to admit I didn’t know what he was talking about.

He explained that each administration really only has the time and political capital to pull off one major legislative victory in their first term: big legislation takes a long time to put together, midterms are often a boon to the party not in the White House. We’ll have a new president elected in 2028. What should that administration’s one big thing be?

Social Security. No question.

Social Security has languished without significant reform for 43 years. It has suffered many ills in that time, not least of which is the wrong question, asked over and over again for almost a half a century. “What do we need to do keep Social Security from running out of money? How do we save it from cuts?”

We don’t need to save Social Security. We need Social Security to save Americans.

Featuring:

1. My Attempt at Politics

2. The Right Question

3. The Right Answer

4. The Social Security Amendments of 2029

5. Can we do this?

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1 My Attempt at Politics

Is there some kind of grand conspiracy to undermine Social Security? Probably not, but there’s certainly an incentive to be dishonest about it.

Social Security:

• collects an absolutely massive amount of taxes

• pays out an absolutely massive amount in benefits

• is the largest social program in the world (I’m pretty sure!)

• is incredibly, indisputably, without doubt very good at its job

• has virtually no waste, fraud, or abuse

• has the lowest administrative costs of any public program in US history

• is wildly popular, across party lines, across races, across genders, across education, across income, across generations

• it’s so popular even its taxes are popular

• it ran a massive surplus for so many years that the federal government (read: Congress) is actually indebted to Social Security and owes it over $2 trillion.

If you’re a small government conservative who hates taxes, what’s to like here? Social Security is the nightmare! Not only does it work like a dream but you owe it money?! Well designed big government can work?

And worst of all, there was a valiant attempt to privatize Social Security in the second term of the W Bush administration—meaning that that absolutely massive amount of taxes could be sent to the stock market via investment banks instead of government coffers—and it failed spectacularly!

How do you dismantle a program that is truly beloved? You make people think that we can’t afford it anymore.

Truly, the biggest conservative coup d’etat of the past half century is to send Social Security to political exile, to fuel the story that it’s the third rail of politics. Never mind that that story implies American voters are violently irrational when it comes to Social Security and that it’s their feelings to blame for the lack of reform. And never mind that Americans are left to languish with the belief that at some point the music will stop and Social Security—benefits they need and rely on—will have to be cut. And really, really, really never mind that every year Social Security is left untouched is a year that Social Security is attacked.

So many Americans will tell you: Social Security is running out because of [insert demographic here aka baby boomers, living longer, fewer babies]. So few Americans realize: Social Security is being run into the ground through inaction. A long-term shortfall was first predicted by the Social Security Trustees in their 1985 report. Back then, the trust fund was projected to last to around 2050. From 1985 to 2010, the program collected more in taxes than it paid in benefits. As of today, it has enough in the trust fund to pay out benefits in full until 2034.

That is nearly 50 years between problem warning and problem occurring, 50 years of being able to say “Social Security is running out of money.”

I had it once explained to me that politicians don’t want to solve problems because then they wouldn’t have issues to run on. An issue can mobilize and motivate a base, an executed solution does not. Inaction forces conversation about Social Security into this never ending doom loop of if we can afford it or how much it costs.

It’s a distraction. To pay for it we raise revenue, which Americans by are large are more than willing to do. They agree on this, in poll after poll. There is no question we can have Social Security.

So what is this a distraction from?

2 The Right Question

What do Americans need from Social Security? From 1935, when the old-age program was created in the original Social Security Act, to 1983, the last time there was a major reform, Congress turned to this question again and again and again.

The first version of Social Security was humble by today’s standards. It was just for workers employed in certain industrial sectors—about 68% of workers at the time—and only provided old-age benefits. Nothing went to children or spouses. The benefit was based on past wages, but it was a fixed amount and wasn’t adjusted after it was first awarded. If you got $100 at age 65, you got $100 until you died. It was basically a government run pension.

Over the next 50 years, Social Security was expanded:

- 1939: Added spouses and kids. Social Security was transformed from a retirement benefit to a broader family security system. Dependents were added in two ways. In the case of old-age benefits, spouses and children under 16 at home would get their own award. If the worker died before old age, spouses and children under 16 at home would get their own award. Not just a retirement program, Social Security was the only life insurance most workers had (or have).

- 1950: The “covered” industries were expanded to include nearly all workers, including agricultural and domestic workers.

- 1956: Disability benefits were added, so that workers, spouses, and dependents were covered if the worker could not continue working to age 65.

- 1972: An automatic cost-of-living adjustment was added to the program so that beneficiaries would be guaranteed to be protected from inflation.

Then in 1983, in the first major benefit cut, the retirement age was increased from 65 to 67. And for the next 43 years (and counting), the program has been frozen in time. But the economy has moved forward, as have the hardships and risks Americans face.

Risk, risk, risk, risk, risk

The official name of Social Security is Old Age Insurance, Survivors Insurance, and Disability Insurance. It’s not a leftover of language we don’t use anymore, it’s an insurance program. As a worker in our economy, you face risk. Through Social Security, you pay premiums in taxes, you get coverage for three instances of risk being realized.

Risk 1: you die before you retire and your dependent family is left without an earner
—> met with Survivors Insurance.

Risk 2: you become disabled before you retire, you cannot earn income, and your dependent family is left without an earner
—>met with Disability Insurance.

Risk 3: your savings are insufficient to keep you and your dependents from destitution when your retire
—>met with Old Age Insurance.

And the benefit’s design covers two overarching risks:

Risk 4: you outlive your savings
—>met with lifetime payments.

Risk 5: inflation erodes your quality of life
—>met with automatic cost-of-living increases.

Why do you need insurance? Because the risk isn’t efficiently saved for. Say you own a $250,000 house but homeowners insurance didn’t exist. That means you have to be prepared for the small chance that, say, a tree falls on it and you’ll need $100,000 in repairs. Either you have to save an extra $100,000 to have on hand after you buy the house or you’d just have to let it ride, not save, and hope that nothing bad happens. In this insurance-less version of the world, people would be less likely to buy a house (if it was seen as too risky), they’d frequently lose their house (if the bad thing happen and they didn’t save) or they’d be sitting on a lot of money that they could be using for other things (if the bad thing didn’t happen and they did save). All three scenarios—not buying, buying and losing, buying and saving—are less efficient than having homeowners insurance.

What do Americans need from Social Security? It’s really asking, in the 43 years since the program has expanded, what risks have emerged that workers need insurance for?

This is such a bigger, and more relevant question than addressing the shortfall. Getting this right, this is the One Big Thing.

3 The Right Answer

What are the biggest risks that workers face that they currently have scant protection for? I think there are two big risks that are not only obvious to everyone in the economy but both well suited for a payroll insurance program.

Risk: A short-term health issue
We aren’t healthy all the time and policy from our employers or our government shouldn’t pretend that we will be. Health happens. Accidents, diseases, injuries, surgeries, births, deaths—at some point, a worker will need to be out of work to recover or to take care of a family member recovering.
—> meet with a new paid family and medical leave benefit

Risk: Unemployment
You need a job and can’t find one.
—> meet with a new short-term and long-term unemployment program

Social Security already meets the risks of long-term disability and permanent exit from work (retirement), this bill adds protection from the risks of short-term disability and short-term exit from work (unemployment).

And if you’re thinking, that’s kind of a stretch to Social Security, I assure you it isn’t. The original 1935 legislation is remembered for the Old Age program, but it also created unemployment insurance.

Those two programs have very different histories. The unemployment insurance program was also set up of a payroll tax insurance benefit, but was left to states to run. In this case, the payroll tax is paid by the employer, not the employee, and the tax and benefit schedule is set by states. The 15 states who have started paid family and medical leave benefits have (mostly) piggy-backed off their state unemployment tax and benefit system, adding another state-level payroll tax, state-level trust fund, and state-level benefit schedule. Kicking those both back up to the federal level is well within the purview of Social Security legislation.

Next, there’s a risk that’s partially met by Social Security now that the program can be better at.

Risk: A non-employee job
What happens when you aren’t an employee but an independent contractor? Some workers arrive in that situation by choice, they want to run their own business or have more control over their work and schedule. Others arrive by force, because their employer doesn’t want to pay the taxes or have them subject to labor laws that employees are granted. Social Security accounts for this by incorporating all these workers into the program via a double tax—contractors/self-employed pay both the employee and employer side of Social Security taxes, for a total of 12.4%.
—>start taxing contracting employers

Especially if Social Security is expanded, the incentive to downgrade employees to contractors will grow. Regulation can help prevent that, but Social Security can help minimize that incentive by taxing contracting employers for their contractors in addition to their W2 employees.

Finally, by almost any comparison you can think of, the US spends scant amount on children relative to the elderly. Social Security is large, well funded, generous, and out of reach of regular Congressional spending. Programs for kids are the opposite: small, fighting with other programs (including defense) for regular money, making their modest benefits that are subject to cuts or reductions in every Congress. You’ll certainly hear some people say this is why Social Security should be cut, so that we can spend more on children instead. But really, this is why Social Security should be expanded, so that it benefits children as well.
—> dedicate that revenue from the estate tax into a children’s trust fund that is used to pay for federal investments in children.

Again, you might be thinking that redistributing money for children is far afield from Social Security and again, it’s not. The Social Security Act of 1935 also created welfare. Welfare, which was originally Aid to Dependent Children, then Aid to Families with Dependent Children, then ended in 1996, was a cash benefit for poor children that went overwhelmingly to single mothers and was excoriated for encouraging or enabling single mothers to not work.

Unemployment, paid leave, money for children—it’s all fair game.

4 The Social Security Amendments of 2029

The Amendments have five major components.

I. Create a new paid family and medical leave program

Establish a new payroll tax split by employee and employer and a new trust fund to pay for a universal paid family and medical leave program. All workers in the US, regardless of employer size or tenure at a specific employer, are eligible for up to 13 weeks of leave paid at 100%.

II. Create a new unemployment system

The system has both a short- and long-term benefit, paid via payroll taxes, that gets workers cash in the near term and access to moving assistance, education, business help, and employment in the long-term. (I’ve written about what this could look like.)

III. Bring independent contractors/self-employed into coverage

End the double employer/employee tax on “non-employee” workers, so that they only pay the workers’ side, and add the payroll tax for paid leave and unemployment. Start a new tax on the employers of independent contractors that is a per cap rate based on the number of contractors used and split between the three trust funds.

IV. Create a new children’s trust fund

Amend the estate tax threshold and rate so that inherited wealth above $5 million is subject to a progressive estate tax and deposit all proceeds into a children’s trust fund, used exclusively to pay for the health and care of children.

V. Raise revenue for the trust funds

Eliminate the current tax cap and increase the payroll tax rate to cover the current 75-year shortfall in the old age program. Direct 1% of corporate income tax revenue into Social Security to serve as a rainy day fund to forestall shortfalls in any of the existing trust funds (old age and survivors, disability, unemployment, and paid leave).

5 Can we do this?

Y’all. Y’all. This ain’t exactly a leap into the dark—Social Security is 91 years old. It’s been through World War II, 14 recessions (1937, 1945, 1953, 1957, 1960, 1969, 1973, 1980, 1981, 1990, 2001, 2007, 2020), the dot com bubble and collapse, the housing bubble and collapse, the savings and loan crisis, the financial crisis, the foreclosure crisis, a pandemic, the decline of agricultural employment, the decline of manufacturing employment, the invention of the computer, the internet, cell phones, and email, it existed before we had a federal highway system, and it has never missed a benefit. We have a resilient, high-functioning program that is the bedrock for economic security in our country and it has been road tested.

Americans deserve Social Security and they want it. Let’s effing go.

Once again, it’s the wrong question. Not “can we do this?” but “what else do we need to do?” This is the start. Savvy readers will notice I didn’t say anything about Medicare and Medicaid, both part of the Social Security Act as well. Or how we should spend the Children’s Trust Fund. More to come.

If you want sources or more information or just have questions, check out my companion post to this piece: