The Social Security trustees announced last week that the program’s trust fund will be depleted in 2035, at which point benefits would be cut by 20%, assuming Congress does nothing to alter its current fiscal trajectory. A group of Democratic lawmakers led by Sens. Bernie Sanders (I-VT) and Elizabeth Warren (D-MA) introduced legislation Thursday that would do just that, with a plan they say would fully fund Social Security for 75 years while boosting benefits by $2,400 annually for most participants.
The Social Security Expansion Act would pay for that increase in benefits by applying the current payroll tax of 12.4% to incomes over $250,000 — a big change from the current system, in which the payroll tax is capped at the first $147,000 in income. The proposed change would affect about 7% of taxpayers. The plan also calls for improving the way inflation is measured for the annual cost of living adjustments.
“At a time when half of older Americans have no retirement savings and millions of senior citizens are living in poverty, our job is not to cut Social Security,” Sanders said. “Our job must be to expand Social Security so that every senior citizen in America can retire with the dignity they deserve and every person with a disability can live with the security they need. And we will do that by demanding that the wealthiest people in America finally pay their fair share of taxes.”
Sanders for years has called for raising the payroll tax cap, and some version of that approach is supported by dozens of Democratic lawmakers, including key centrist Sen. Joe Manchin (D-WV). But whatever the merits of the plan, it has no chance of becoming law since it is opposed by virtually all Republicans, who typically want to include benefit cuts in any plan that fixes the program’s finances.
“Senator Sanders makes a wonderful plea, which many, many people agree with — the need for helping our seniors and providing better benefits for them and so forth,” Sen. Mitt Romney (R-UT) said Thursday. “But recognize this bill has no chance whatsoever of receiving a single Republican vote in either house.”
Hearing from the experts: Sanders led a hearing of the Senate Budget Committee Thursday that took up the issue of Social Security and its long-term solvency. The hearing included testimony from experts on the topic, with representatives from Social Security Works, the Alliance for Retired Americans, the Bipartisan Policy Center and the Committee for a Responsible Federal Budget.
Stephen C. Goss, the chief actuary at Social Security Administration, provided a basic summary of the current challenge. “Legislation will be needed before 2035 in order to sustain the ability to pay all Social Security benefits in full and on time,” he said in prepared remarks. “The retirement of the baby-boom generation is increasing the number of beneficiaries much faster than the increase in the number of covered workers, as subsequent lower birth-rate generations replace the baby-boom generation at working ages. … This fundamental change in the age distribution of the population will require the Congress to modify scheduled benefit levels, scheduled payroll tax levels, or add additional sources of revenue for the Social Security program.”
In her prepared remarks, Nancy J. Altman of Social Security Works expressed support for Sanders’ plan, citing polling data that shows that a majority of Americans are opposed to cutting Social Security and instead want to see the program expanded. She also made the argument that Social Security in its current state is “unquestionably affordable,” costing less than 6% of GDP by the end of the century. “That is a lower percentage of GDP than many other industrialized countries spend on their counterpart programs today,” she said.
Robert Roach Jr. of the Alliance for Retired Americans made a plea for boosting benefits. “Social Security benefits are not keeping up with inflation,” he said, noting that the average benefit for a retired worker was just $1,666 per month. “The Social Security cost-of-living adjustment is inadequate and not representative of the true measure of inflation that seniors face in what they buy.”
Shai Akabas of the Bipartisan Policy Center called on lawmakers from both parties to act quickly to address Social Security’s finances. “Delaying necessary reforms will only serve to make them more politically difficult and cause added uncertainty for workers and retirees,” he said, adding that the situation calls for comprehensive reform that could include benefit increases. “Enhancing Social Security benefits—particularly for those who most rely on them in retirement—and putting the program on a fiscally sustainable path are not mutually exclusive,” he said.
After running through the basic facts of Social Security’s financial challenges and chiding lawmakers for failing to act sooner, CRFB’s Maya MacGuineas called for a mix of revenue increases and benefit cuts, especially for wealthier retirees. “We should … look to progressive revenue increases, but it is hard to understand those who advocate for more taxes on the rich while ruling out slowing the growth of their benefits,” she said. “So that’s where I would start: reducing benefits for the well-off who don’t need them. It won’t get you close to all the way there to fixing the program but can get you a lot.”