TM: Social Security is based on two competing concepts—the adequacy of benefits and the fairness of the benefits in light of the contributions made. Those who have earned lower incomes get a higher portion of their pre-retirement income and a higher portion of their contributions (what they paid into the system). Those at the top of the income distribution get a higher benefit in absolute dollars. But their benefits are a lower proportion of their previous wages and salaries than is the case for lower income pensioners.

Raising the wage base will produce additional revenues, of course, but the net effect on Social Security’s finances will depend on whether benefits are proportionately raised. To the extent they are not raised, this would redistribute income from higher wage and salary earners to lower wage and salary earners while reducing Social Security’s projected gap between revenues and benefits. A few decades ago, Social Security’s wage base covered about 90 percent of Americans’ wage and salary income. Today it covers 84 percent. To return to that proportionate coverage of wage income would be another step we could take.

TL: What’s the rationale for this redistribution?

TM: In any insurance, private or social, there’s always redistribution from those who don’t suffer a risk to those who do. It’s pooling on the financing of insurance and paying out when the risk is experienced. In a private pension plan, someone who paid in twice as much would get twice the benefit. But that is not so with Social Security.

Simply put, paying more in Social Security taxes than someone else means generally you will receive a higher pension. But it does not mean your higher pension will be proportionately increased by the percentage difference in contributions. Social Security pensions, as noted above, are more generous to the less wealthy, and in that sense redistribute income in the name of more generous pensions for the less lucky. Since we don’t know how our incomes will turn out at the end of our careers, Social Security compensates at the end for those whose incomes have been in the lower half of the distribution. The idea behind Social Security is to insure a more adequate insurance benefit to those at the lower part of the income scale, but at the same time not to reverse the rank order of the income of pensioners.

TL: Doesn’t everyone get Social Security disability and survivors’ benefits? How does the redistribution work here?

TM: Every family with a worker who has worked at least ten quarters is eligible for benefits if the worker becomes permanently disabled or dies.

TL: Would means testing be one way to address the projected gap after 2039?

TM: The short answer is no. If those with incomes over $250,000 were denied benefits, you could not find that effect in the accounts of Social Security. It would make no difference in the program’s future fiscal circumstances, because such a small proportion of American families enjoy incomes that high.

TL: What would means testing ultimately do to the program?

TM: It would reduce the interest of upper income Americans in the fate of Social Security, and in that respect reduce its political support.

TL: Is means testing a way to privatize the system through the back door?

TM: I don’t think this is a useful way of evaluating means testing. Means testing is the opposite of Social Security’s principles. Tests of means suggest that one receives benefits if and only if one is in trouble. Benefit promises of pensions—with public support so strong—are much more like a secure guarantee, one closer to a platform than a safety net. Safety nets have holes, large or small, and their level can be lower or higher from the ground. Social insurance, when widely supported, is much closer to an assurance rather than a charitable gift.

TL: Are there groups who do not believe in social insurance?