On August 14, 1935, President Franklin Roosevelt signed into law the Social Security Act, saying, “We can never insure one-hundred percent of the population against one-hundred percent of the hazards and vicissitudes of life. But we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age.” Some measure of protection to the average citizen and to his family. Nothing more extraordinary than that. Indeed, a modest goal.
Yesterday, January 18, 2013, the news was that that CEO of Goldman Sachs had a 75% raise in 2012 from his compensation rate in 2011. The CEO made $21 million in 2012, with a $2 million dollar salary and a $19 million dollar bonus. This same CEO said on November 19, 2012, “Social Security wasn’t devised to be a system that supported you for a 30-year retirement after a 25-year career…the retirement age has to be changed. Maybe some of the benefits have to be affected. Maybe some of the inflation adjustments have to be revised.” Who is this creature with the soul of Ebenezer Scrooge; are there no prisons? And the union workhouses, are they still in operation?: Lloyd Blankfein.
The callousness is matched only by the inaccuracy in those statements. The minimum retirement age for Social Security is 62 years old. In order to have a “25 year career” and retire at “early” retirement age, the worker would not have started working until age 37. What did they all do for the years before they starting working? And, that 30 year retirement? The life expectancy of a 62 year old male is 19 years, or 81 and the life expectancy of a 62 year old female is 22 years or 84. So, what are the real facts? The real facts are that the worker will work for about 40 years and collect Social Security if he/she opts for early retirement for about 20 years, at a reduced rate because of the “early” retirement. The person who waits to full retirement age, ranging from 65 to 67, depending on one’s date of birth, will work 45 years and collect social security for 16-19 years.
Now, Blankfein could be talking about someone else when he refers to lazy moochers who work for 25 years and then retire to collect off the public dole for 30 years. Who would that be? Well, that would be Congress. The United States Congressional pension vests fully after 25 years of work, and there is no minimum retirement age or age at which one starts to collect the pension. As the minimum age to hold Congressional office is 25, then it is entirely possible for a Congressman to work to age 50 and retire to live off the public dole for the next 30-40 years.
There is so much wrong (as well as so much offensive) in what Blankfein said. The maximum earnings subject to Social Security Tax (OASDI) were $110,100 in 2012. In 2013, it will be $113,700. If one makes under that amount, say $100,000/year, 100% of one’s income is subject to the OASDI tax. In Lloyd’s case, only .05% of his income is subject to OASDI taxation. The rest is exempt from the OASDI tax. The effect of removing that cap on earnings subject to OASDI tax would be to make the Social Security system solvent for the next 75 years and produce a 115% elimination of the projected shortfall. You can see the entire breakdown here.
What about those “inflation adjustments” that need to be revised? Blankfein’s revision was a 75% increase. What was the “inflation adjustment” for retired workers in 2013? A mere 1.7% increase. See my COLA post.
Not all people can earn $21 million dollars a year. Yet, these minimum wage workers and modest earners contribute to the economy in a way that the rapacious money movers at Goldman Sachs, etc., never will. They manufacture automobiles, they transcribe medical reports, they sweep streets, and they wait on customers in grocery stores. In short, they are the ones who, with the sweat of their brow and the bend of their back, manufacture, move and deliver goods throughout the nation and abroad. Oh, and yes, they contribute to the Social Security system with 100% of their earnings base.