With 13 years until Social Security’s funds are projected to run out, Washington Democrats have some proposals to strengthen the program
- With 13 years until Social Security’s funds are projected to run out, several plans have emerged to shore up the program.
- The Democratic plans all aim to make benefits more generous while increasing taxes on the wealthy.
- While any plan will need support from both sides of the aisle to become law, it is encouraging that more proposals are happening, one expert says.
Two Washington Democrats — Sen. Mazie Hirono of Hawaii and Rep. Ted Deutch of Florida — teamed up last week to reintroduce legislation to strengthen Social Security.
Their bill, the Protecting and Preserving Social Security Act, aims to extend the program's ability to pay benefits.
The Social Security Administration projects the program's combined funds will run out in 2035, at which point 80% of benefits will be payable.
Hirono and Deutch's proposal would extend that by bringing the depletion date to 2052, according to an analysis of the plan by the Social Security Administration's Office of the Chief Actuary. In addition, by the end of the projected 75-year period, it would reduce the federal deficit by about $12.3 trillion.
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"Every day, I hear stories from seniors in my district about the importance of their Social Security checks to their quality of life and to their day-to-day survival," Deutch said, in a statement. "This bill will not only continue these lifesaving benefits but strengthen them for decades to come."
With just 13 years until Social Security's funds are projected to run out, other Democrats have also put forward plans to extend that timeline while also making benefits more generous.
That includes the Social Security Expansion Act put forward in June by Sens. Bernie Sanders, I-Vt., and Elizabeth Warren, D-Mass., with companion House legislation introduced by Rep. Peter DeFazio, D-Ore.
Meanwhile, another bill, Social Security 2100: A Sacred Trust. led by Rep. John Larson, D-Conn., was reintroduced in October.
While the specifics of the plans vary, they have similar goals.
Raising taxes on the wealthy
Currently, Social Security is funded through payroll taxes of 6.2% paid by both workers and their employers. But those taxes only apply to income up to $147,000 as of 2022.
Hirono and Deutch's bill calls for phasing out the cap over the next seven years. For contributions above the cap, it would provide additional benefits.
Sanders and Warren's proposal would apply the payroll tax on all income above $250,000 a year, including capital gains, while also raising taxes on net investment income and certain business income.
Larson's bill calls for reapplying the payroll taxes for wages above $400,000. The difference between the current cap and the $400,000 threshold — a so-called donut hole — would eventually close as the cap goes up every year.
Making benefits more generous
Each Democratic bill touts different ways of getting more money into Social Security beneficiaries' pockets.
The bill from Hirono and Deutch makes it so a deceased beneficiary's family no longer has to return their last benefit check.
The Sanders and Warren bill calls for giving beneficiaries an extra $2,400 per year, or $200 per month. The proposal also includes a higher minimum benefit indexed to 125% of the poverty line. It would also restore student benefits up to age 22 for children of disabled or deceased workers.
Larson's proposal also would also give all beneficiaries an increase of about 2% of the average benefit. The minimum benefit would also be set above the poverty line. It also includes provisions to improve benefits for widows and widowers, while repealing rules that reduce benefits for public servants known as the Windfall Elimination Provision and Government Pension Offset.
Changing how annual adjustments are calculated
All three Democratic plans call for the changing the way Social Security annual cost-of-living adjustments are measured to the Consumer Price Index for the Elderly, or CPI-E.
While experimental, the CPI-E would be a better measure, they argue, of the costs seniors pay than the current subset of the Consumer Price Index used to calculate annual benefit changes, called the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W.
Which plan could come out ahead
One key difference among the plans is how far they extend Social Security's solvency.
The Hirono and Deutch bill is expected to expand solvency to 2052. Sanders and Warren's bill is expected to fully fund the program for the next 75 years, or past 2096.
Larson's bill, however, has the shortest time frame, by extending the depletion date to 2038.
Because of that, the latest version of the Social Security 2100 Act has drawn some criticism. A previous version of the bill sought to extend the program's solvency into the next century.
Notably, Larson's plan would reduce the program's 75-year shortfall by about half, a recent Center on Budget and Policy Priorities analysis noted. Yet many of the benefit enhancements would sunset after five years.
"By 2039, Congress would have to act to avoid reserve depletion and automatic cuts to benefits," the Center on Budget and Policy Priorities noted.
With 202 co-sponsors in the House, the latest Social Security 2100 proposal has the most support.
When movement could happen
The National Committee to Preserve Social Security and Medicare has endorsed all of the plans.
"Our underlying priorities are to respond to the growing number of Americans who are going to depend on Social Security for all or most of their income in retirement, plus extending the solvency of the program," said Dan Adcock, director of government relations and policy at the National Committee to Preserve Social Security and Medicare.
However, Larson, who serves as chairman of the House Ways and Means Subcommittee on Social Security, is uniquely positioned to persuade leadership to have the bill marked up in committee and voted on by the House, he said.
Currently, the hope is that can happen before this November's election, according to Adcock.
However, a House floor vote will likely not include the Republican support necessary to get the legislation passed into law.
"By definition, any solution to the Social Security problem is going to need to have bipartisan support," said Shai Akabas, director of economic policy at the Bipartisan Policy Center.
Some conversations are starting to happen across party lines, he said. To be sure, compromises will be needed to get both Democrats and Republicans to agree on changes. However, there is a window between the November election and the 2024 campaign season where real activity on the issue could happen, Akabas said.
"The encouraging thing is that people are putting forward solutions and that trend has been increasing recently," Akabas said. "Policy makers are recognizing that the insolvency date is getting closer and closer and we need to have a solution far in advance of that point to have it be a sustainable one."