Social Security is the biggest program of the federal government, bigger than Medicare, Medicaid or the Pentagon. Social Security's 12.4 percent payroll tax is also the biggest tax paid by most American households, more than federal income taxes. And Social Security is the biggest source of income for most retirees, providing about 40 percent of total income for a typical household.

Yet Social Security is well short of the funds it needs to keep its promises to American retirees. According to Social Security's Trustees, the program will run a deficit of 2.7 percent of wages over the next 75 years. That means that to keep the program solvent over that period would require an immediate and permanent 2.7 percentage point increase in the existing 12.4 percent payroll tax, which is already the biggest tax most American workers pay. Alternately, benefits could be cut by about 16 percent, across the board and beginning immediately.

And things could easily turn out to be worse: A recent government-appointed expert Technical Panel recently concluded that Social Security Trustees' projections are actually optimistic. The panel estimated that a more realistic figure for Social Security's long-term shortfall is 3.5 percent of payroll. The Congressional Budget Office, which makes its own projections, projects a long-term deficit of 4.4 percent of payroll.

So why do we not hear more about Social Security reform from the presidential candidates?



Several Republican candidates have in fact issued detailed plans to make Social Security solvent. Gov. Chris Christie and former Gov. Jeb Bush would both increase the retirement age, reduce cost of living adjustments and lower benefits for higher-earning households. But even Christie and Bush don't tout the details of these plans much on the stump, and most other GOP candidates haven't put forward plans at all. Most likely the candidates are still stung from then-President George W. Bush's failure to push similar plans through a GOP-controlled Congress in 2005. Americans find the details of these plans confusing, and when they're confused, they're often frightened. And that's not where a presidential candidate wants voters to be.

The Democratic candidates for president, by contrast, are happy to talk about Social Security – but most of what they say is simply happy talk. Most progressive activists these days want to expand Social Security benefits across the board to address what they see as a "crisis" in households' retirement savings. In searching for progressive primary voters' support, Sen. Bernie Sanders and former Gov. Martin O'Malley have put forward plans to increase benefits across the board, while former Secretary of State Hillary Clinton talks of more targeted benefit increases. None mention the possibility of benefit cuts.



Sander's plan is the most detailed. His proposal would raise taxes by $2.3 trillion over 10 years. Sanders plan would eliminate the current $118,500 "cap" on payroll taxes, which effectively raises the top federal tax rate by 12.4 percentage points, and add an additional 6 percent tax on investment earnings for high-income households. Sanders' plan raises more than enough money to fix Social Security, at least under the trustees' lower estimates of the shortfall, but spends so much of those new taxes on expanding benefits for both rich and poor retirees that large funding shortfalls remain. Even if Sanders' plan were passed in full, an American entering the workforce today could not expect to receive his full promised Social Security benefit or anything even close to it. And given the scale of Sanders' tax increases on high-income households, the only alternative left would be to hike taxes on low- and middle-income Americans – precisely what most candidates rule out.

But the solutions aren't nearly as complex as people think. First, we must recognize that while Social Security is a progressive program and does help reduce poverty in old age, most benefits don't go to poor households. In fact, the highest-earning fifth of the population receives about one-third of total Social Security benefits, and the next fifth receives almost another third. Social Security doesn't pay benefits to middle- and high-earning households because those households can't save on their own. It pays those benefits based on a political calculation, dating from the time of Social Security's founding, that middle- and higher-earning Americans wouldn't support a program that benefits the poor unless they themselves received a benefit from it. But paying generous benefits to middle- and high-earning households gets very expensive as the population ages and the workforce paying into Social Security shrinks.

And second, there is plenty of evidence that middle- and high-earning households treat Social Security and personal saving as substitutes. That is, if you increase Social Security benefits, these households will save less on their own. If Social Security benefits are lower, middle- and high-earning households tend to save more to make up the difference. Research from the U.S., United Kingdom, Canada and Poland finds similar results: If future Social Security benefits are lowered, middle- and upper-income workers save more. But if future benefits are made more generous, working-age households will save less. The result of the Democratic candidates' plans to expand Social Security benefits would very likely be less individual retirement saving by middle- and upper-income Americans.



Doubtless a presidential candidate would phrase things more delicately than I, but saving for retirement is something that middle- and high-income Americans can, should and would do on their own if the government scaled back their future benefits. The federal government should work to expand access to retirement saving plans such as 401(k)s and help people sign up. But if ever there were a case for letting households rather than government do a job, this is it.

But that doesn't mean scaling back the safety net. In fact, Social Security protections for low-earning households should and can be improved. Many low earners fail to even qualify for benefits, and almost one third of retirees who do qualify receive a benefit that's below the poverty line. Ten percent of American seniors live in poverty, despite enough Social Security outlays to pay every retiree a benefit above the poverty line.