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Published: Sunday, November 25, 2012, 12:01 a.m.

Why rich want to raise retirement age and why it's a bad idea

WASHINGTON -- If you're the CEO of Goldman Sachs -- if you have a job that you love, a job that makes you so much money you could build a Scrooge McDuck room where you could swim through a pile of gold coins wearing only a topcoat -- then you should perhaps think twice before saying this:
"You can look at the history of these things, and Social Security wasn't devised to be a system that supported you for a 30-year retirement after a 25-year career. . . . So there will be things that, you know, 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. But in general, entitlements have to be slowed down and contained."
That's Lloyd Blankfein, chief executive of Goldman Sachs, talking to CBS. And he's not saying anything that people, particularly wealthier people with desk jobs, don't say all the time in Washington and New York. So I don't want to just pick on him. But the cavalier endorsement of raising the retirement age by people who really love their jobs, who make so much money they barely pay Social Security taxes, and who are, actuarially speaking, ensured a long and healthy life, drives me nuts.
If you want to talk about cutting Social Security, talk about cutting it. It's a reasonable point of view. You're allowed to hold it.
But cutting Social Security is unpopular, and people don't like to talk about it. So folks who want to cut the program have instead settled on an elliptical argument about life expectancy. Social Security, they say, was designed at a time when Americans didn't live quite so long. And so raising the retirement age isn't a "cut." It's a restoration of the program's original purpose. It doesn't hurt anything or anyone.
The first point worth making here is that the country's economy has grown 15-fold since Social Security was passed into law. One of the things the richest society the world has ever known can buy is a decent retirement for people who don't have jobs they love and who don't want to work forever.
The second point worth making is that Social Security was overhauled in the 1980s. So the promises the program is carrying out today were made then. And, since the '80s, the idea that we've all gained so many years of life simply isn't true.
Some of us have gained in life expectancy, of course. Since 1977, the life expectancy of male workers retiring at age 65 has risen six years in the top half of the income distribution. But if you are in the bottom half of the income distribution, you've gained 1.3 years.
If you're wealthy, you have many more years to enjoy Social Security. But if you're not, you don't. And so making it so people who aren't wealthy have to wait longer to use Social Security is a particularly cruel and regressive way to cut the program.
It's also a cut that's particularly tough on people who spend their lives in jobs they don't enjoy.
Do you know at what age most people actually begin taking Social Security? Sixty-five is what most people think. That's the law's standard retirement age. But that's wrong. Most people begin taking Social Security benefits at 62, which is as early as the law allows.
When they do that, it means they get smaller benefits over their lifetime. We penalize them for taking it early, but they do it anyway. They do it because they don't want to spend their whole lives at that job. Unlike many folks in finance or in the U.S. Senate or writing for the nation's op-ed pages, they don't want to work till they drop.
As Peter Diamond, the Nobel laureate economist and Social Security expert, told Dylan Matthews:
"What do we know about the people who retire at 62? On average, shorter life expectancy and lower earnings than people retiring at later ages. If anyone stood up and said, 'Instead of doing uniform across-the-board cuts, let's make them a little worse for people who have shorter life expectancies and lower earnings,' they'd be laughed at. Anything that reduces benefits is going to hurt everybody. It's going to hit people with short life expectancies, it's going to hit people with high life expectancies. But we should not make it worse for those retiring earliest."
That's what's galling about this easy argument. The people who make it, the pundits and the senators and the CEOs, they'll never feel it. They don't want to retire at age 65, and they don't have short life expectancies, and they're not mainly relying on Social Security for their retirement income. They are bravely advocating a cut they'll never feel.
Do you know what they would feel? Social Security taxes don't apply to income over $110,000. In 2011, Blankfein's total compensation was $16.1 million. That means he paid Social Security taxes on less than 1 percent of his compensation.
If we lifted that cap, if we made all income subject to payroll taxes, the Congressional Budget Office estimates that it would do three times as much to solve Social Security's shortfall as raising the retirement age to 70. In fact, it would, in one fell swoop, close Social Security's solvency gap for 75 years. That may or may not be the right way to close Social Security's shortfall, but somehow it rarely gets mentioned by the folks who think they're being courageous when they talk about raising a retirement age they'll never notice.
Again, I don't mean to pick on Blankfein. He's not saying anything unusual, and he's one of the CEOs who are pretty straightforward about the fact that their taxes need to go up. But he and all these folks who like to talk about raising the Social Security retirement age as if it's a no-brainer need to think harder about why they've settled on the cut to Social Security that will concentrate its pain on people who haven't fully shared in the remarkable increase in life expectancy, who don't make much money and who don't love going to their jobs every day.
Ezra Klein is a Washington Post columnist. His email address is kleine@washpost.com

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Jon Bauer, Opinion Editor: jbauer@heraldnet.com

Carol MacPherson, Editorial Writer: cmacpherson@heraldnet.com

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