New public opinion poll supports Social Security reform

Changes including raising full retirement age, making more income subject to payroll tax gain support

Feb 7, 2014 @ 12:01 am

By Mary Beth Franklin

Although members of Congress may not agree on how to reform Social Security —or on much of anything else for that matter — it seems the American public is ready to make tough choices about how to bolster the finances of the nation's popular retirement income program.

The results of an innovative poll released Friday show a representative majority of Americans support reducing Social Security benefits for the top 25% of earners; eventually raising the full retirement age to 68 or more; increasing the annual cap on income subject to the payroll tax to $215,000 or higher; and boosting the payroll tax rate from 6.2% to 6.6% or higher.

Rather than following the typical polling procedure of asking individuals whether they favor isolated proposals, such as cutting benefits or increasing taxes, participants in this survey were asked to approach the issue holistically, simulating the interactive process that policymakers go through.

The participants received a briefing on the issues, read and evaluated arguments for and against various policy options, and finally formulated an integrated proposal involving trade-offs among the various options.

A model Citizen Cabinet was created by selecting a nationally representative sample of 738 members — large enough to provide a meaningful sample for the nation as a whole, according to the survey's sponsor, Voice of the People. The new nonpartisan organization seeks to give citizens a greater role in government. Ultimately, the goal is to create a Citizen Cabinet of more than 100,000 members that would be large enough to provide every congressional district with a representative sample of his or her constituents.

A wide range of options have been proposed to mitigate Social Security's shortfalls, primarily by reducing benefits or by increasing revenue. Nonetheless, there has been no significant congressional action since the system was last reformed in 1983.

If no steps are taken by Congress to reform Social Security, its trust fund will be exhausted by 2033, according to the latest Social Security Trustees' Report. At that point, the program would only be able to deliver benefits based on current payroll tax receipts — resulting in a 23% cut in benefits.

A major reason that Social Security has not been addressed is a widespread assumption that the American public is not willing or able to face the issue. Social Security has long been dubbed the “third rail of politics,” implying that it is political suicide to address the controversial reform issues.

But the results of the new survey suggest that average Americans are willing to make tough decisions to save the program — even if their congressional leaders aren't.

When asked to evaluate the various reform options for addressing Social Security's shortfall, substantial majorities of both Democratic and Republican respondents said they could tolerate a variety of proposals, a departure from traditional polling questions that ask respondents which single option they favor.

Two-thirds found it at least tolerable to reduce benefits for the top 25% of earners, while just under half found it tolerable to reduce benefits for the top 40% of earners.

Six in 10 found it at least tolerable to raise the full retirement age to 68 while half found it tolerable raise it to 69.

Seven in 10 found it at least tolerable to raise the cap on income subject to the payroll tax from the $113,000 maximum in effect in July 2013, when the survey was conducted, to $215,000 over a period of 10 years. Eliminating the cap altogether received approximately the same response.

Seven in 10 also found it at least tolerable to raise the payroll tax rate from 6.2% to 6.6% over several years. Two-thirds found it at least tolerable to raise the rate to 6.9% and six in 10 found it tolerable to raise it to 7.2%.

Currently, employers and employees each pay 6.2% of payroll up to $117,000 and self-employed individuals pay a combined 12.4% on the first $117,000 of net income to fund Social Security. In addition, employers and employees pay 1.45% on all income and self-employed individuals pay a combined 2.9% of net income to fund Medicare.

Ideas for recalculating the cost-of-living adjustment formula were found tolerable by a majority. Two-thirds of participants supported using a “chained CPI” formula that would reduce the average growth of benefits. Six in 10 participants supported basing COLAs on what the elderly actually buy, rather than a generic consumer price index, which would increase the average growth of benefits.

You can try the policymaking simulator for yourself at www.VOP.org. Once you figure out how you would reform Social Security, next you can figure out how to get your congressional representative to do something about it.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Upcoming Event

Apr 26

Webcast

Cracking the Code: Making Sense of Alternative Investments

InvestmentNews Research estimates that $150 billion in alternative assets could be added to client portfolios among independent advisers over the next three years. Roughly 85% of all clients are now expressing interest in learning more... Learn more

Accepted for 1 CE Credit by the CFP Board. Pending by Investments & Wealth Institute for 1 credit towards the CIMA® and CPWA® certifications.

Featured video

INTV

Why broker-dealers are on a roll

Deputy editor Bob Hordt and senior columnist Bruce Kelly discuss last year's bounce-back for IBDs.

Latest news & opinion

Things are looking up: IBDs soared in 2017

With revenue up, interest rates rising and regulation easing, IBDs are soaring.

SEC advice rule may give RIAs leg up over broker-dealers

Experts say advisers will be able to point to their role as fiduciaries as a differentiator in the advice market.

Brokers accept proposed SEC rule on who can call themselves an adviser

Some say the rule will clear up investor confusion, but others say the SEC didn't go far enough.

SEC advice rule: Here's what you need to know

We sifted through the nearly 1,000-page proposal and picked out some of the most important points.

Cadaret Grant acquired by private-equity-backed Atria

75-year-old owner Arthur Grant positions the IBD for the 'next 33 years.'

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print