Social Security has now been in place for more than 80 years, and has likely helped billions of people supplant their income, especially later on in life when they retire.
But despite its success, it is no secret that the Social Security program is in a dangerous place when you consider that it may not be able to cover every eligible person who qualifies by 2035. Additionally, many say the benefits are no longer enough to keep up with the cost of living.
Something is likely going to need to happen at some point to continue the program in its full capacity. Now, a Congressional bill is not only aiming to fund the program well past 2035, but also increase Social Security benefits.
The Social Security Expansion Act
The Social Security trust currently has $2.85 trillion in assets, which will be enough to cover every qualified American in the program until 2035. After that, the Social Security Administration projects that it will be able to pay out about 80% of benefits to those who qualify.
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Sponsored by a slate of Democratic politicians, including Sen. Bernie Sanders (I-Vt.), Sen. Elizabeth Warren (D-Mass.), and Rep. Peter DeFazio (D-Ore.), the Social Security Expansion Act (SSEA) would increase the solvency of the Social Security trust funds by 75 years. The bill plans to do this by increasing the tax limits in the program. Currently, Americans only pay Social Security taxes on the first $147,000 of their earnings. SSEA would significantly increase this limit and tax all earnings above $250,000.
With this additional tax revenue, the bill would increase monthly benefits by $200 across the board, which means an additional $2,400 per year for program participants. That equates to a nearly 13% hike for those receiving the average Social Security check is $1,540 per month.
There are several other provisions in the bill that are also significant. Another big one has to do with the annual cost-of-living adjustment (COLA) increase to Social Security benefits, which is done each year to account for inflation.
Currently, the calculation is based on the increase in the Consumer Price Index for Urban Wage Earners. But SSEA would base the COLA adjustment on the Consumer Price Index for the Elderly, The authors of the bill believe this index more accurately reflects what older Americans spend their income on -- it's more heavily weighted to healthcare and prescription drugs. This would likely mean higher annual COLA adjustments.
Can the bill get passed into law?
The bill was only introduced in June, and it doesn't look like much legislative action has happened since, although 52 groups have endorsed the bill. Congress also hasn't passed major Social Security legislation since the early 1980s, so the passage of this bill in its current form is probably more unlikely right now.
Democrats and Republicans have long been at odds over Social Security because extending the solvency of the trust funds would likely require tax increases one way or the other, which has long been a hot-button issue.
That said, as 2035 gets closer, there will be more pressure on Congress to do something, so expect more bills and proposals to get introduced and the issue to become a bigger debate in the coming years.
