It’s high time for the U.S. Congress to step into the void and offer some concrete solutions to Social Security’s funding failures, as the clock is ticking.
Data from the Social Security Administration’s
OASI trust fund and from the
Committee for a Responsible Budget (CFRB)on dates and cash amounts attached to future program payments. The trust fund report noted the fund will run out of funds in 2032, a timeline that would trigger a 78 percent cut in program benefits unless Congress intervenes. The CFRB study pegs the average Social Security cut at about $500 for recipients in 2032.
It takes political will to tackle an issue like the shortfall in Social Security funding, but that formula has been slow in arriving.
“Unfortunately, political will seems to be lacking in Washington, DC today,” said Robert Johnson, professor of finance, Heider College of Business, at Creighton University. “Proposing cuts to Social Security used to be political suicide, but since politicians aren’t tackling the issue, they are, in effect, proposing Social Security cuts. For years, lawmakers have been kicking the can down the road on Social Security reform. Unfortunately, the road appears to be ending.”
There are some Social Security funding ideas emerging from Congress, academia, and economic analysts recently that bear noting with five years left on the OASI deadline. Here are some intriguing, bolder ideas that could bear fruit.
Balance the budget
Both the OASI numbers and the CFRB report seem to have landed in the halls of Congress, and that’s a healthy start.“It’s clear now that Congress shouldn’t delay any longer. Several of us have been coming together to talk about how we can strengthen Social Security for current and future generations of retirees. We say to our colleagues: join us in doing what we were elected to do — legislate on hard issues and protect this lifeline program for our kids and grandkids,” Sens. Dick Durbin (D-Ill.), Bill Cassidy (R-La.), Tim Kaine (D-Va.) and Thom Tillis (R-N.C.) said in a
joint statement issued June 10.
One of the more intriguing but acrimonious ideas on Social Security comes from Congressional Republicans, who call for a balanced budget that doesn’t cut Social Security or Medicare payouts.
“I have prioritized a return to pre-pandemic spending levels and a balanced federal budget as soon as possible – which our budget will do in ten years,” said Republican Study Committee
Budget and Spending Task Force Chair Rep. Beth Van Duyne (R-Texas) in a
recent statement. “We are following a precedent set by my friend, Budget Chairman Jodey Arrington. Since January, our Task Force has been working with RSC Members, the House Budget Committee, the White House, and many stakeholders to gather proposals that were aimed at addressing our nation’s fiscal challenges. We developed this budget around a simple principle: Washington must live within its means.”
"For too long, Washington has ignored the basic math that every American family understands," added RSC Chairman Rep. August Pfluger (R-Texas). “Families balance their budgets and make tough choices every day. They expect their government to do the same. The RSC Budget is a reality check for Washington and proof that we can balance the budget, protect seniors, and restore fiscal sanity without punishing hardworking Americans."
Yet proposals that start with raising the retirement age are unlikely to pass in Congress.
“In practice, raising the retirement age by two years would reduce the median retiree’s monthly benefits by $345 to $741 — or by between 17 and 35 percent — effectively cutting tens of millions of Americans,” noted Senator Elizabeth Warren (D-Mass.) in a June 14
letter to the White House. “Social Security benefits are disproportionately falling on seniors at the lower end of the income distribution who rely on Social Security as one of their main sources of income.”
Means test America’s wealth class
Another proposed fix centers on protecting benefits for ordinary retirees, with no negotiations, by removing the taxable wage cap to shift more of the funding burden toward households with the greatest capacity to absorb program cuts.
“I’d reduce the net benefit for ultra-wealthy retirees via very lenient means testing and adjustments to the alternative minimum tax calculations. Social Security is a "floor" program for keeping people out of poverty in their old age,” Jordan Taylor, a financial adviser at Brooklyn, N.Y.-based Core Planning, told NTD. “If you have enough wealth that you're on a Forbes list, collateralizing assets to create income, etc., you can afford to pay taxes on the portions of your wealth you access to help keep the rest of your community in respectable living situations.”
Raise the wage cap
Private-sector analysts say that preserving Social Security benefit levels as they are now requires raising or eliminating the Social Security Wage Cap.“Right now, wages above a specific amount are excluded from being taxed for Social Security,” Evan Farr, founder at Farr Law Firm, PC, told NTD News. “If we require the higher-earning individuals to be taxed on their Social Security earnings based on all of their income, it will go a great deal towards closing a good part of the long-term financial deficit of Social Security, while at the same time allowing for continued Social Security benefits for low-to-middle income retirees.”
Farr advises bundling wage caps in with other program-saving elements to keep Social Security rolling.
“Possibly the best solution would be a combination of a raised wage cap, slightly increased full retirement ages for future younger generations, and reduction in Social Security Benefits for extremely wealthy retirees who have substantial amounts of income and/or retirement savings,” he notes. “There is no single solution to this problem.”
Boost younger workers in the employment market
Farr also advocates increasing legal immigration of younger working-age individuals. “This is very politically controversial given today's climate, but Social Security's finances rely upon younger working-age individuals helping to provide for retirees,” he said.Increasing the number of young working-age individuals (especially those in the home healthcare and long-term care industries, which are tragically suffering), “contributing to Social Security's finances could enhance the ratio of contributors to beneficiaries, without having to reduce benefits or significantly increase tax rates,” Farr added.
A Balanced Approach
According to Farr, each serious proposal eventually boils down to one of three alternatives: collecting more money, paying out less money, or increasing the number of workers who contribute to Social Security. That balance makes sense, but only if implemented incrementally and not at the expense of younger workers.“Instead of placing all of the burden of saving Social Security on one generation, spreading the burden over several generations and doing it slowly is likely to be the simplest solution,” Farr noted.
Washington D.C. pols will have to step up, too, and develop a backbone before it’s too late. “Congress doesn't have a Social Security problem,” Farr said. ”It has a political courage problem.”
The views and opinions expressed are those of the interviewees. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. NTD does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. NTD holds no liability for the accuracy or timeliness of the information provided.
