Ageing Americans pose growing threat to Social Security system
The US population is ageing, leading to its government pension system – Social Security – running so low that, according to projections, it will be out of funds by 2035. One proposed solution is to increase taxes on the rich.
Disagreement over government spending is a constant in US politics, with Social Security getting the most attention this year. Republicans are touting smaller payments and Democrats are saying it’s time to tax the rich. This follows recent drama with the nation’s debt ceiling where House Speaker Kevin McCarthy told the media that President Joe Biden had “walled off” Social Security and Medicare in negotiating the debt limit.
McCarthy and Republicans generally make no bones about the fact that they oppose increasing taxes for the rich. When they look at programmes like Social Security and Medicare, they look at cutting, not growing.
Since its inception in 1935 during the Great Depression, and to this day, the national Social Security pension plan is worker-funded. In 2021, the US population was about 332 million, with the fastest-growing segment being people over the age of 85.
The US Social Security system is a government-run trust fund that taxes every working citizen and legal resident 12.4% of their earnings and then pays retirees back some of this money. The system also manages disability support and food support (SNAP).
While taxing the rich might solve the pension issue, the growing ageing population could still outgrow even this cash injection.
Every US citizen is eligible for Social Security after the age of 62 – Biden and the first lady both collect Social Security, and because they also have an income outside of Social Security and brought in $579,514 in total joint income last year, they were taxed on their total income at 35%.
In 2022, the tax cap for how much of an annual salary was taxed towards Social Security was $147,000 and in 2023 it went up to $160,200. So if, for example, an American earns $200,000 they only have to pay 12.4% on $160,200.
There is growing support for solving the problem of running out of funds by removing the tax cap. A persistent Senator Bernie Sanders, as part of the “Expand Social Security Caucus”, introduced legislation last year that would ensure Social Security funding for at least another 75 years “by demanding that the wealthiest people in America finally pay their fair share of taxes”.
Sanders reintroduced the legislation in February this year, despite Republican pushback. While taxing the rich might solve the pension issue, the growing ageing population could still outgrow even this cash injection.
According to the National Council on Aging: “There were 55.7 million adults age 65+ living in the US in 2020. This included 30.8 million women and 24.8 million men.”
Taken as a number, against the backdrop of the size of the US population, this may not seem alarming, but consider also that this group is growing faster than the birth rate. In 2021, US birth rates showed an increase for the first time since 2014, with the US Centers for Disease Control reporting that an estimated 3.66 million babies were born in 2021. This is a 1% increase from 2020, which some experts are calling “a blip” and saying that it does not mean the numbers will continue to go up. According to Forbes, the “US population is flatlining”.
Republicans want to ‘save’ it by cutting it and Democrats want to save it by adding to it via a combination of government funding and taxation of the rich.
Consider also that 55.7 million adults aged 65+ means the retirement-age population in the US is basically five million short of the entire population of South Africa, where life expectancy at birth is 62,8 years. About 70 million US citizens received Social Security benefits in 2019, including disability benefits and supplemental income.
Up until a month ago, projections were that by 2035 the Social Security trust will be out of cash – the median age in the US is 38, and the workforce is shrinking alongside the declining birth rates.
A 2005 article published by the Social Security Office of Policy, “Coping with the Demographic Challenge: Fewer Children and Living Longer”, states: “Due to demographic challenges, the US Social Security system will face financial challenges in the near future. Declining fertility rates and increasing life expectancies are causing the US population to age. Today 12% of the total population is aged 65 or older… the Social Security system is experiencing a declining worker-to-beneficiary ratio.”
The article cites 2040 as “the year in which the Social Security trust fund is projected to be exhausted” and recommends that the minimum eligibility age for Social Security benefits be changed to 65 rather than 62.
Read more in Daily Maverick: Protests across France after Macron doubles down on pensions
Addressing the nation from the White House in 2005, US President George W Bush said: “Instead of 16 workers paying in for every beneficiary, right now it’s only about three workers… With each passing year, fewer workers are paying ever-higher benefits to an ever-larger number of retirees.”
Almost 20 years later, US birth rates are still down, but concern about running out of Social Security funds is up, because of the ageing population and their increased lifespan. Social Security has become “as American as apple pie”, an earned support system which is not going to go down easily.
Whether Social Security money will run out in 2033, 2035 or even 2079 depends on which report one reads. What is clear is that Republicans want to “save” it by cutting it and Democrats want to save it by adding to it via a combination of government funding and taxation of the rich.
The bottom line is that the US population is not getting any younger and without Social Security and Medicare a significant number of older Americans would starve and have inadequate access to a range of healthcare services. In April, Feeding America reported that one in 14 Americans aged 60 and up “was food insecure in 2021”.
Read more in Daily Maverick: Washington clash over debt ceiling bears critical consequences for US security and global interests
Consider that in 2021 the population included 89,739 centenarians and Chief Citizen Biden himself is 80 years old. The president, in his 2023 budget, also proposed a $1.8-billion increase to the Social Security Administration budget and is fighting to maintain and grow Medicare and Social Security.
Biden is part of one of the fastest-growing age groups in the US: 16.5 million people aged 75 to 84. The US is ranked number three in the world for countries with the largest numbers of older populations, with India at number two and China at number one (by percentage of population, Japan leads, followed by Italy and Finland). DM