The solvency of Social Security has been a hot topic lately in the wake of the recent Social Security Trustees report, which found the world’s largest entitlement program can pay out every benefit owed to every eligible beneficiary until the year 2035.
It was a brought up as an issue in a June 13 “Senate Project” debate on Fox Nation between Independent Vermont Senator Bernie Sanders and Republican Senator Lindsey Graham of South Carolina. Of course the two have very different ideas about how to “fix” Social Security.
Sen. Sanders, who recently proposed legislation to expand Social Security payments by $2,400 a Year and extend solvency for 75 years (more on that below), addressed the topic first:
“Lindsey and I disagree on this. I think we should increase benefits for Social Security recipients by lifting the cap which is now at $147,000, so a millionaire pays the same amount as somebody making $147,000. Lift that cap, we can increase Social Security benefits by $200 a month for every beneficiary in America.”
Sen. Graham countered with some comments addressed at Sanders that raised a few eyebrows.
“To get out of this mess, people like me are going to have to take a little less and pay a little more in.”
Sen. Lindsey Graham (R-SC)
“All I can say about your Social Security plan—you want to increase benefits when the program’s going broke, folks,” Graham said.
“In 1955 there were nine workers paying into the system for every retiree. We’re down to three. In 20 years it’ll be two. Let’s do something like Ted Kennedy would do. Get Republicans and Democrats to find a way like the Gang of Six, the Simpson-Bowles plan. Senator Sanders, bring your Social Security plan to the floor. All it does is raise taxes,” Graham continued. “To get out of this mess, people like me are going to have to take a little less and pay a little more in. We’re going to have to adjust the age one more time like Ronald Reagan and Tip O’Neil did. There is a bipartisan way forward, but you describe problems which your answer is always the government. It’s always socialism.”
Further, as Politico points out, the current Senate Budget Ranking Member has pledged that if Republicans regain control of the Senate following the midterms: “Entitlement reform is a must for us to not become Greece.” Graham has said he’s open to tweaking the income cap and eligibility age for programs—and wants to bring in a bipartisan group to study the problems.
Fox News will feature an encore presentation of the Senate Project debate between Sens. Sanders and Graham on Saturday, June 18 at 7 p.m. EDT.
Bill introduced to expand Social Security
On June 9, Sanders and fellow Senate Co-Chair of the Expand Social Security Caucus Elizabeth Warren (D-MA)—joined by Sens. Cory Booker (D-NJ), Kirsten Gillibrand (D-NY), Jeff Merkley (D-OR), Alex Padilla (D-CA), Chris Van Hollen (D-MD), and Sheldon Whitehouse (D-RI), with Rep. Peter DeFazio (D-OR) introducing companion legislation in the House—introduced legislation that would expand Social Security benefits by $2,400 a year and fully fund it for the next 75 years past the year 2096.
In a statement announcing “The Social Security Expansion Act,” the caucus said this could be done without raising taxes by one penny on over 93% of American households.
These estimates reflect an analysis of the legislation conducted by the Social Security Administration on the request of Sen. Sanders and Rep. DeFazio. The analysis was also released June 9 in a letter from Chief Actuary Stephen Goss.
“It is time to scrap the cap, expand benefits, and fully fund Social Security.”
Sen. Bernie Danders (I-VT)
“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,” said Sen. Sanders. “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. It is absurd that a billionaire in America today pays the same amount of Social Security taxes as someone making $147,000 a year. It is time to scrap the cap, expand benefits, and fully fund Social Security. I am very proud that the Social Security Administration has estimated that our legislation to expand Social Security benefits by $2,400 a year will fully fund Social Security for the next 75 years by applying the payroll tax on all income—including capital gains—above $250,000 a year.”
The average Social Security retirement benefit in 2022 is $1,658 a month, according to the Social Security Administration. While this is a $93 increase from the year before thanks to 2022’s 5.9% COLA increase, soaring inflation has sapped the buying power of Social Security payments. According to The Senior Citizens League, beneficiaries have lost 40% of their buying power since 2000.
The Social Security Expansion Act’s $200 per month increase would represent a 12% boost, but the average monthly benefit would have to increase by $539.80 in order for retirees to maintain the same level of purchasing power they had in 2000.
“Social Security is an economic lifeline for millions of Americans, but many seniors are struggling with rising costs,” said Sen. Warren. “As Republicans try to phase out Social Security and raise taxes on more than 70 million hardworking Americans, I’m working with Senator Sanders to expand Social Security and extend its solvency by making the wealthy pay their fair share, so everyone can retire with dignity.”
COLA formula would change
The Social Security Expansion Act has many similarities to the Social Security 2100 Act which has been introduced repeatedly, most recently in November, by John Larson (D-CT). One similarity is the new bill would also alter the cost-of-living adjustment (COLA) formula, switching it from the current Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to the CPI-E, or Consumer Price Index for Elderly Consumers in an effort to better reflect real costs incurred by seniors.
The provision would help seniors who spend a greater portion of their income on health care and other necessities. Improved inflation protection would especially help older retirees and widows who are more likely to rely on Social Security benefits as they age.
If the CPI-E had been used to index the annual COLA for the past 30 years, a an average beneficiary would have received about $14,000 more in benefits than the CPI-W has provided, according to The Senior Citizens League.
Bill faces uphill battle
The Social Security Expansion Act has the support of more than 50 major organizations, including the AFL-CIO, American Federation of State, County, and Municipal Employees (AFSCME), Social Security Works, Alliance for Retired Americans, American Federation of Government Employees (AFGE), National Committee to Preserve Social Security and Medicare (NCPSSM), American Federation of Teachers (AFT), National Education Association, United Electrical, Radio, & Machine Workers of America (UE), and the Economic Policy Institute.
But lacking any bipartisan support, it likely faces an uphill battle on Capitol Hill.
Martha Shedden, president of the National Association of Registered Social Security Analysts, told CBS News that “$200 a month can make a significant difference for many people,” but she’s not sure lawmakers will act on this bill.
“I’m confident changes will be made. I don’t know if this is the bill that will pass, but there is more and more movement on it,” Shedden said.
Read the bill text here.
Read the fact sheet and full list of supporting organizations here.
Read the Social Security Administration’s analysis of the legislation here.
SEE ALSO:
• Social Security Gains Another Year of Solvency: 2022 Trustees Report
• Latest 2023 Social Security COLA Estimate Holds Steady (and Still Huge)
• Social Security Benefits Lose 40% of Buying Power Since 2000
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
