This year, Social Security paid out more money than it took in for the first time since 1983. If the economy rebounds, Social Security is expected to be in the black by 2012 and will stay that way until 2015. But starting in 2016 Social Security will be in the red for as long as the Social Security Trustees can see. Under current law, Social Security is scheduled to pay out $7.7 trillion more in benefits over the next 75 years than it can afford to pay from its payroll taxes.
Heritage Foundation retirement and economic policy expert David John has a new paper out making the case that one way to keep Social Security solvent is by raising the retirement age, which, as John ably details has been a moving target ever since Social Security was first created:
Although “mid-sixties” is typically the age range defined as the beginning of retirement, history shows that until fairly recently, it was common for men to be employed after they reached 65. In 1880, 76 percent of men were employed at age 65, a proportion that declined to 43 percent in 1940, and 18 percent in 1990. Although the current recession has caused more workers to postpone retirement, a 2009 survey of retirees found that 84 percent had entered retirement at age 65 or earlier.
When Social Security was established in 1935, state pension systems were split equally between those that determined 65 as the retirement age and those that determined 70 as the retirement age. The Commission on Economic Security, which designed the system under FDR, was swayed to adopt age 65, partly because the federal Railroad Retirement System, which was established in 1934, used 65, and partly because analyses at the time showed that 65 was actuarially feasible at low levels of taxation.
Since the program’s inception, the retirement age has undergone only two modifications. The first was the addition of the early eligibility age (EEA) (under which recipients receive partial benefits), which was created for women in 1956 and for men in 1961. The modification for women was motivated by politeness rather than policy considerations: Wives were generally three years younger than their husbands, and a gracious Congress wanted to allow couples to retire at the same time. Men were later offered early retirement as a mechanism to cope with high unemployment by encouraging workers to leave the labor force.
The second modification was the increase in the normal retirement age (NRA) from 65 to 67, which was implemented in the early 1980s because Social Security was nearing a point where it did not have the funds to print benefits checks. In 1982, Chairman of the House Ways and Means Subcommittee on Social Security Congressman J. J. Pickle (D–TX) first proposed phasing in an increase to age 68 over a period of 10 years beginning in 1990. Pickle’s proposal was panned at first by Speaker Tip O’Neill in what Time magazine then dubbed “one of the more egregious examples of partisanship.” The Reagan Administration had landed itself in hot water over reform proposals it introduced in 1981, and O’Neill was not inclined to let Democrats absorb any of the heat with a proposal that would reduce benefits. In 1983, when a reform package was signed into law, it was clear that some increase in the retirement age would have to be part of the compromise. The Senate initially passed an increase to age 66, but Pickle was able to push through an increase to 67 in conference committee. Even then, the increase was not scheduled to take effect until 2000, when an increase to 66 was phased in year by year in two-month increments. A further increase to 67 using the same phase-in will begin in 2017.
