Editor's note: Christopher Howard is Pamela C. Harriman professor of government and public policy at the College of William & Mary. He is also a member of both the Scholars Strategy Network and the National Academy of Social Insurance. His latest book, "Who Cares? The Social Safety Net in America", is published by HarperCollins. This commentary is written by the author. CNN has more opinions.
Social Security and Medicare will need to undergo reforms in the coming decade. Some of these changes will be challenging. Social Security and Medicare will not go bankrupt as many people fear. However, officials need to find ways to increase revenues or reduce spending to maintain a sound fiscal position. They have to find a way to distribute the pain.
The retirement age is being raised as a possible option. Recent proposals by Republicans like Nikki Haley, the presidential candidate and Nikki Kennedy of Louisiana have been made to raise retirement age. A group of House Republicans proposed last year to increase the retirement age for Social Security, Medicare and index it to life expectancy. According to Semaphor a bipartisan senator group is also working on a Social Security reform package, which includes a higher retirement.
On the surface, raising the retirement age makes economic sense. The increase in revenue would come from payroll taxes collected over a longer time period, while the benefits would decrease. This option was used in the past. The Social Security Amendments of 1984 made many changes to the program. One of the most significant was the gradual increase of the retirement age.
Most often, the increase in retirement age is justified by the fact that Americans live longer than their grandparents and parents. It seems rational to raise the retirement age from 68 or 70 years old.
This option, however, has a major flaw. In this country, life expectancies vary widely by race and social class. Raising retirement age will disproportionately affect Black Americans and those with lower incomes, because their life expectancy is shorter. Morally, a higher retirement age discriminates against those who are already disadvantaged.
According to the Centers for Disease Control and Prevention, Americans born in 2019 should expect to live on average 78.8 more years. Averages can be misleading. According to the CDC, non-Hispanic Blacks have a four-year shorter life expectancy than non-Hispanic Whites. For men, the Black-White Gap is five years.
The gaps between the races widened after the Covid-19 epidemic. According to the National Center for Health Statistics (NCHS), between 2019 and 2021 life expectancy for non Hispanic Whites decreased by 2.4 and for non Hispanic Blacks, it declined by 4.0. A Black child will live 70.8 years in 2021; a White baby's life expectancy is 5.5 years more.
Raising the retirement age is racist if you look at its effects and not their intentions.
Other inequalities are equally disturbing. According to the Congressional Research Service, a man aged 50 in 1990 would have lived on average until the age of 88, as long as he had a high income. If he had an income at the bottom decile, it is likely that he would have died 12 years earlier.
The life expectancy of Americans varies greatly by their educational level. College graduates enjoy a greater advantage today than they did in the past. The Economist stated that 'a 25 year-old American with an undergraduate degree can expect to survive a decade more than a comparable American who dropped out of school'.
Racially minorities and those with lower incomes rely the most on Social Security. Many of them lack alternative retirement income sources, such as pensions based on their jobs. Blacks are twice as likely to be poor as Whites among the elderly.
There are better options for reform.
When Social Security reform was last done in 1983, officials did not raise the limit on the income that is subject to payroll tax even though they increased the retirement age. This meant that Black Americans, and those with lower incomes, were forced to shoulder more burden than people of higher income.
Workers earning $50,000 per year pay more in taxes than millionaires because the federal government does not collect Social Security taxes on incomes above $160,000. The cap is usually increased each year but hasn't kept up with the increasing share of income that the wealthiest Americans have.
According to the Congressional Budget Office (CBO), 83% of all earnings earned by employees in 2020 will be subject to Social Security tax. We could generate $670 billion in additional revenue over the next decade by increasing the cap to tax 90% of all earnings, the same as it was in 1983. If we increased the cap to 90% of total earnings, the same percentage as in 1983, Social Security could collect $670 billion more over the next decade.
It's not radical to increase the cap. Since the 1970s, Medicare payroll taxes have been applied to all income from wages and salaries. Lifting the cap won't help Medicare, because it doesn't exist anymore. The Biden administration recently proposed several changes to improve Medicare finances, which do not involve raising the retirement age. It is not necessary to increase the retirement age for Social Security and Medicare. We have other options.