Biology can solve the Social Security debate.

Science, technology, and life.
Feb. 22 2005 6:50 PM

The New 65

Biology can solve the Social Security debate.

(Continued from Page 1)

Twenty years ago, Congress made a move in this direction, programming the retirement age to rise from 65 to 67. But the change didn't begin taking effect until 2003 and is being phased in so gradually it will take 24 years  to complete. That's slower than the rate of increase in active-life expectancy. The "rising" retirement age isn't catching up with our biology; it's falling behind. Meanwhile, over the last four decades, Congress scaled back and eventually abolished the Retirement Earnings Test, which Roosevelt had proposed in order to confine  Social Security to people who couldn't work. The RET rollback was supposed to encourage work. Instead, despite improvements in health and ease of work during those decades, the percentage of people aged 65 or older who earned income apart from assets or pensions fell from 36 percent to 22 percent. More old people can work without giving up any Social Security benefits, but fewer are doing so. Thanks to pensions and Social Security, they don't have to.

What about the minority of people whose strenuous jobs or poor health make work after 65 too difficult? The Greenspan Commission, which proposed the original age hike to 67, solved that problem in 1983. Social Security already has a separate benefits program  for people with disabilities. "The disability benefits program can be improved to provide cash benefits and Medicare to those between age 62 and the higher normal retirement age who, for reasons of health, are unable to continue working," said the commission.

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How much money would a higher retirement age save? According to the Congressional Budget Office, if the ascent to age 67 were accelerated and completed by 2016, and if the retirement age kept rising two months a year until it hit age 70 in 2037, and if the rate of increase then slowed to one month every two years, Social Security outlays in 2050 would decline by 12 percent. A fully adjusted retirement age--one that kept pace with biology instead of lagging 40 years behind it, as the CBO's scenario does--would generate an even bigger surplus. By one rule of thumb, every year of recipient eligibility consumes about 7 percent of Social Security's financial commitments. Compared to the currently assumed retirement age of 67, an increase to age 73 could cut the government's obligations by as much as 40 percent. Either way, the projected Social Security deficit would disappear--and with it, the Democratic objection to personal retirement accounts, which could be funded out of the new payroll tax surplus.

Seldom does justice so perfectly suit convenience. Raising the retirement age would honor the principles of productivity and self-sufficiency that originally defined the age group deserving of benefits. It would also collect a fair return on what Manton calls "human capital." As a share of GNP, American spending on health care has doubled  since 1975. A third  of the increase over much of that period has gone to fighting heart disease, lung disease, mental illness, cancer, and hypertension. Medicare  has done wonders for old people's health, but the government's budget for health care is far outpacing revenue. The financial reward for that investment is that people can work later in life, paying taxes instead of collecting benefits. And they should.

Human Nature thanks Jesse Henry Stanchak and Rachel Sugar for extensive research assistance.

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