Analysis: Many Americans think they'll never receive Social Security benefits — that's wrong

When you write about personal finance, as I do, people will talk to you about finances. It goes with the territory. And over time, you'll notice certain subjects tend to come up again and again.

One is the impending demise of Social Security. Within the past few weeks, this happened when I spoke on a panel at a conference, over dinner with a friend and when I ran into a neighbor while walking my poodle. It is, I should add, almost always my Generation X peers or, increasingly, millennials who ask about this. That's not a surprise. In 2015, Gallup found that more than 6 out of 10 people between the ages of 18 and 49 did not believe they would receive checks from Social Security when they retired.

Why would they think this? As it turns out, you can blame well-meaning attempts to address financial woes in the Social Security system. These attempts, when combined with political agendas, greed and less-than-math-savvy Americans, leave many convinced they won't get a benefit at all. What my questioners believe is true about Social Security is, rather, partly the result of coming of political age in the world made by the conservative turn the United States took following the election of Ronald Reagan.

This week, the annual report from the trustees for Social Security and Medicare projected the Social Security Trust Fund will likely run out by 2034. This is not different from their finding last year. Nonetheless, alarmist articles followed immediately, many predicting a good chance of significant future benefit cuts. “You've spent a lifetime paying into Social Security, but there's no guarantee that you'll get out of it what you've put in,” a columnist for MarketWatch opined. “The odds aren't looking too good.”

Benefit cuts are a far cry from not receiving any Social Security check at all, but my suspicion is that's what many people hear when they hear words such as “bankruptcy” tossed around. So let's be clear. Running out of reserve funds does not mean Social Security won't continue issuing checks. It simply means that in a worse-case scenario, the system will no longer be able to rely on money previously set aside to fund promised benefits. Instead, it will be forced to rely solely on incoming payroll taxes. If that happens, it's estimated that the system will be able to pay only about three-fourths of what people expect to receive.

Would that really happen? It doesn't have to.

There are ways to buttress the system. The Social Security payroll tax cap — that is, the cutoff after which income is not taxed by Social Security — is currently $128,400. Both Bernie Sanders and Hillary Clinton campaigned in 2016 on eliminating it for employment earnings in excess of $250,000. That would make a good dent in that upcoming shortfall.

We could also just continue paying recipients the money they were promised. If the current administration can pass a deficit-exploding tax package that uses dubious economic growth estimates to give the wealthy a massive break, why not at least acknowledge that Social Security can be paid out of general revenue? I should note that no less an estimable force than The Washington Post's editorial board said this week they thought that was a possible (if not ideal) outcome. There's a reason political consultants call Social Security the third rail of American politics — vote for changes and your career could end.

But you rarely hear these options mentioned in the many less-than-responsible “sky is falling” articles, blog posts and television appearances. Instead, there is all-but-nonstop harping on the need to raise revenue to prevent benefit cuts, as well as suggestions to cut — oops, I mean change the formula for — the annual cost-of-living increase. There are also appeals to raise the retirement age with (correct!) reminders that the falling birthrate, combined with longer life spans, will result in fewer workers paying in for each beneficiary receiving a check. But when the prospect of raising the current Social Security tax rate — currently 12.4 percent and paid by the employer and employee — is mentioned, it's rarely accompanied by any acknowledgment of the payroll tax cap issue.

More than a few discussing the programs's financial issues would like to keep the range of options narrow. Some don't want to pay more in taxes. Others are politically motivated — Social Security, after all, is a popular progressive social welfare program. Early in the 1980s, David Stockman, Reagan's budget director, gave the game away about how this works when he told a journalist that talking up the program's financial shortfalls would give ax-wielding politicians cover. They will, he said,” look like they're doing something for the beneficiary population when they're doing something to it.”

Fast-forward 20 years, and George W. Bush and his administration seized on the idea the Social Security system was going bankrupt to promote the otherwise unpopular privatization effort. The talk was constant, too, during the 2016 Republican primaries — you can count me as someone who believes Donald Trump won the Republican primaries because he forthrightly (and quite possibly falsely) claimed he would not attempt to cut the program, while almost everyone else on debate stages with him seemingly competed for who could throw future beneficiaries under the bus the fastest and hardest.

Over the years, all this trashing worked — if by “worked” one means it undercut public faith in the long-term prospects of the program. The effort, it appears, was especially successful with the cohort who came of age after Reagan's election, and the subsequent sea change in political discourse. By the 1990s, a poll claimed to discover more GenXers believed in UFOs than the almost certain fact they will one day receive a Social Security check.

As a result, they seem all but passive on the issue. They shouldn't be. Future generations will likely be more, not less, dependent on Social Security to get by after retirement. Replacing corporate pensions with 401(k)s is leaving Americans' retirement savings in much more precarious positions.

A paper published last year by the Center for Retirement Research at Boston College calculated that about 40 percent of those born between 1976 and 1985 would be unable to replace at least 75 percent of their pre-retirement income by age 70. Millennials — who came of age during the Great Recession, have significant amounts of student debt and are not purchasing homes at the same rate as earlier generations — have less wealth at their ages than did the typical Gen Xer, something that doesn't leave retirement experts exactly sanguine about their late-life finances. People routinely proclaim they will retire later — or not retire at all.

Finally, something I need to point out in the age of #MeToo: Social Security is a feminist issue. Women make up a majority of recipients and rely more than men on the program to avoid poverty in old age. Any future cuts will likely hit them harder as a result.

We should be enraged by all this, not resigned to our fate. As Stockman pointed out, conservatives gambled that the worse you can make Social Security's situation sound, the more you can acclimate people to accept changes they otherwise would refuse to tolerate. A future cut in benefits doesn't sound so bad when you think you might not get anything at all. Don't fall for this trick.