We’ve all heard the Social Security Trust Fund will no longer be able to finance Social Security payments in full after 20xx. We say xx because the date keeps changing.

When folks think about Social Security, what mostly comes to mind is the Old Age Insurance aspect of the program. But there’s also a vital role played by Survivors’ Insurance for spouses and children and important Disability Insurance for those unable to work.

Why is this safety net, this Trust Fund, running out of money? For several reasons:

We are living longer than expected.

People are retiring too early.

Congress gave an increase in benefits that was too generous.

Too many people are claiming disability benefits for which they do not qualify.

There are more disabled people than we ever anticipated.

It goes on. What are we to do? There is a partial solution, known for decades, which Congress does not yet support:

Eliminate the cap on eligible earnings. Yes, there is a limit on how much wages and salaries can be taxed for Social Security, but not for Medicare. We don’t have much data for 2019 yet, but we can look at 2017 for detail.

In 2017, the cap stood at $127,200, up from $51,300 in 1990. That put the cap $76,900 higher than the average wage in ’17, well more than double the difference of $30,300 in ’90.

I said the average wage. And this is the reason folks hate statistics. The average wage is not the wage of the average worker. The average worker is more likely the median one who stands in the middle of the pack, with half of the wage earners to one side and the other half on the other side. The average wage is strongly influenced by the few, but very high wages paid to the most favored employees.

Average Anne can be very different from Median Mike.

In 1990, Average Anne earned more than 63 percent of all workers. By 2017, Average Anne’s income was higher than 67 percent of all workers.

At the same time, Median Mike’s wages, which were 72 percent of Anne’s wages, had fallen to 65 percent of hers.

These two little-known, related statistics have persistently reflected the widening income gap.

Meanwhile, the maximum eligible income taxed for Social Security has advanced at an average annual rate of 3.4 percent, almost tied to the average wage which grown by 3.3 percent annually. But the median wage, a much more meaningful number, has risen only 2.9 annually.

How much money will be raised annually if the cap is removed? Roughly, it would exceed $75 billion, a relatively small amount of the one trillion dollars estimated Social Security revenues for 2018.

Why hasn’t the cap been removed? Ask that Congressional representative you keep reelecting.

Morton J. Marcus is an economist formerly with the Kelley School of Business at Indiana University. His column appears in Indiana newspapers, and his views can be followed his podcast.

© 2020 Morton J. Marcus