Can these lawmaker proposals save Social Security?
Capitol Hill is talking more about Social Security, which estimates show is on track to becoming insolvent in little more than a decade, as both sides feud over how to address the rising national debt.
A recent report from the Congressional Budget Office (CBO) found that spending for Social Security benefits increased by 10 percent, or $37 billion, in the four-month stretch ending in January, compared to the same period the year before.
The CBO pointed to the recent increase in the average benefit payment to explain the jump, but also the continued rise in the number of beneficiaries — which is often cited as a key component behind the insolvency threat facing Social Security.
Lawmakers have introduced varying proposals over the years aimed at shoring up solvency for the program, but a battle over the nation’s debt limit has shined a fresh light on finances for Social Security, which also accounts for a chunk of federal spending.
Potential fixes to Social Security are often a heavy lift in Congress, and that reality is no different for the currently divided legislature. But that doesn’t mean lawmakers haven’t made some proposals to help shore up solvency for the program.
Here are just some of the ideas that have gotten attention so far.
Raising the payroll tax cap
Sen. Joe Manchin (D-W.Va.), a key centrist, has suggested raising the taxable wage cap as a potential “quick fix” for the program.
“You have enough cash so people can continue to get the benefits that they’ve earned and worked for, the easiest way is to raise the cap,” he told The Hill last month, though he wouldn’t say whether the idea would be able to pass in the divided Congress at the time. “It raises a little bit, but not enough.”
The current cap on maximum earnings that can be taxed by Social Security rests at about $160,000 for 2023, up from $147,000 the prior year.
“I guarantee most West Virginians pay 100 percent, because very few people have average incomes of $150 [thousand] or more, and the wealthier areas, they have a lot more,” Manchin said. “I don’t think anyone would miss it. I think it would help solidify the cash flow problems we have.”
The idea is likely to face difficulty in attracting sufficient support among Republicans. But some Democrats have discussed adjusting the cap by targeting earners making above $400,000, as President Biden has pledged not to raise taxes on those making below that amount.
Raising the retirement age to save Social Security
Some Republicans previously proposed using the debt limit as a leverage to secure significant fiscal reforms as concessions from Democrats, while also eyeing reforms to shore up solvency for Social Security, including raising the retirement age.
The current threshold to be able to receive full retirement benefits is set at 67 years of age for those born in 1960 or later. But some conservatives have pressed to tighten age eligibility requirements, while pointing to data showing more Americans living longer, putting a squeeze on the program’s funds.
However, many Democrats and some Republicans have opposed raising the age amid concerns about fluctuations in the nation’s life expectancy rate and the impact things like more physically demanding labor can have on longevity.
While Gary Burtless, senior fellow in economic studies for the Brookings Institution, said people are living longer, he pointed to research conducted by him and others at the think tank that showed “gains in longevity have been concentrated among people further up in the lifetime earnings distribution.”
“A lot of the longevity improvements have gone to people far up in the income distribution and maybe halfway up the income distribution, but those gains have been slower than those at the top,” he said, adding “there’s a fairness question about raising the retirement age for everybody in the population.”
Republican leaders have since vowed not to use the debt limit to pursue potential changes to Social Security in debt limit, but have pressed for lawmakers on both sides to work on a bipartisan solution.
Creating a sovereign wealth fund to shore up Social Security
Reports emerged last month that Sens. Bill Cassidy (R-La.) and Angus King (I-Maine) are working toward a bipartisan compromise to help shore up Social Security.
Semafor, which broke the news, reported the effort could potentially entail a sovereign wealth fund being set up to help shore up Social Security, but would operate separately from the current funds.
The senators’ offices told The Hill at the time that both Cassidy and King “have been working on a legislative solution,” but said the “plan is not finalized.”
Burtless said on Friday that the idea could potentially help with covering benefits for the program, but doubted it would “pay for the whole gap” if such a legislative effort made it past Congress anytime soon.
“At this stage, the trust fund has got to be so small that earning a few percentage points higher returns every year, on average, is not going to make a material difference,” he argued. “Maybe instead of the trust fund going to zero in 2033 or 2034, it would have made it last to 2037 or 2038.”
Bipartisan panels may tackle Social Security problems
Though GOP leaders have said potential reforms to the program are off the table in debt limit talks, there has been discussion of a Social Security commission fitting into a compromise to raise the debt ceiling.
However, there is some distrust among Democrats of the idea from Republicans, which White House spokesperson Andrew Bates panned as a “death panel for Medicare and Social Security” in recent comments to Bloomberg.
“With the president poised to announce new plans to keep making our economy work from the bottom up and the middle out — not the top down — House Republicans are dead-set on the opposite,” he also said.
The response was met with immediate criticism from Republicans, with House Rules Committee Chairman Tom Cole (R-Okla.), who previously expressed support for the idea, suggesting the White House is “afraid the commission would recommend something the president does not like.”
“If the president is really interested in preserving benefits, as we all are, then he needs to act with Congress to ensure the program’s solvency. Otherwise, the very cuts he fears will happen, and they will be steep,” he argued.
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