As we heard from the Public Trustees at our June 3rd hearing, Social Security revenues will cover only 77 percent of benefits by 2036.  Congress must act and the sooner we do so, the sooner we can protect those who are most vulnerable, along with current retirees and those nearing retirement.  And for younger workers and families, we have a responsibility to provide certainty about the future of their Social Security.

To that end, I was heartened to learn of the deliberations of AARP’s volunteer board and   welcome their acknowledgment that Social Security will be unable to pay benefits promised in the future and how the program must be strengthened for generations to come.
 
Today we will learn more about Social Security’s current revenue sources, proposed changes to those sources and their impact on Social Security, workers, beneficiaries and economic growth.  Since its beginning, Social Security has been a program primarily financed by workers for workers.  Workers hard earned payroll taxes fund the majority of the benefits Social Security pays each year.    

It’s important to point out as well that the number of workers paying into Social Security has been steadily declining over the years.  In 1950 for instance there were 16.5 workers for each beneficiary.  Today there are just 2.9 workers and in 14 years there will only be 2.3 workers per beneficiary.  

In 1935, the tax rate for employers and employees each was just 1 percent on earnings up to $3,000 a year.  Congress has raised the payroll tax rate 14 times since then.  Today, the tax rate is 6.2 percent for employees and employers for a combined rate of 12.4 percent.  

The amount of earnings subject to payroll taxes, known as the taxable wage base, has also grown over time.  In 1935, the taxable wage base was $3,000.  Over the lifetime of the program, the taxable wage base has been statutorily increased by Congress 10 times.  In 1972, Congress passed legislation that increased the base automatically to reflect the growth in average wages.  However, soon afterwards Congress increased the wage base even further over a number of years.  
 
Annual tax increases have generally been on autopilot since 1982.  Since then the wage base has increased 26 times, from $32,400 to its current level of $106,800.  But despite these tax increases, Social Security is still in trouble.  Not enough young workers will pay this tax to sustain the Baby Boomer wave of retirees leaving the workforce and drawing benefits at the rate of 10,000 a day for the next 19 years.  Clearly, we cannot tax our way to sustainable solvency.  

And as we consider the program’s financial state we cannot lose sight of the fact that throughout the history of the program Congress has also increased benefits beyond the ability of the program to pay them over the long run.  The challenge Congress now faces goes beyond just re-balancing Social Security’s finances.  With chronic unemployment, falling incomes and so many young workers unable to start their careers, nothing we do should make it harder for Americans to find good paying jobs.            

I am sure that if you asked any ordinary citizen what is vitally important to them, you will likely hear “good-paying jobs.”  They worry America is falling behind and that their children’s futures will be dictated by foreign creditors.

Americans want and expect a balance between creating a new and better economy for their children and caring for their elders.  That is why as we look ahead Social Security must be what its’ founders intended: a program that lives within its means.   Americans want, need and deserve nothing less.  We must do this for the American people and I’m confident that by working together we will.