Americans are incredibly concerned about Social Security's future, and they think the next presidential candidate needs to do something to fix it, according to a new poll conducted by the Associated Press-NORC Center for Public Affairs Research. That poll found that 85% of Americans think it's extremely or very important for the next president to come up with a solution that guarantees Social Security's future.
A bit of background
There's a growing fear, especially among younger Americans, that Social Security won't be around when they reach retirement. The Social Security program has been around for more than 80 years, and it plays an important role as a safety net for cash-strapped retirees, replacing 40% of the average American worker's pre-retirement income.
Social Security payments made to retirees and the disabled are funded by a 12.4% payroll tax that's applied to income up to $118,500 and that's split equally between employers and employees. However, revenue generated from that tax has come up short of paying for Social Security income to current recipients since 2010.
Currently, the gap between revenue and payments is being filled with money that's been socked away in the Social Security Trust Fund. However, according to number-crunchers at the Congressional Budget Office, the Social Security Trust Fund will be depleted in 2029. If so, then the CBO estimates that the average Social Security income paid to recipients in 2030 will need to be cut by 29% for Social Security to remain solvent.
Stepping into the fray
Worry over falling Social Security income shouldn't be taken lightly.
According to the Social Security Administration, nearly a quarter of all retirees rely on Social Security for 90% or more of their annual income. Therefore, a cut in Social Security income could thrust millions of seniors into poverty.
That's an untenable situation, so presidential candidates are weighing in with ideas on how to fix the program. The candidates' plans differ dramatically between Democrats and Republicans.
For example, Bernie Sanders and Hillary Clinton believe that Social Security payments should be maintained or improved and that the funding gap should be closed by increasing taxes. Specifically, both candidates advocate plans that include applying the payroll tax to higher incomes. Sanders would apply the tax to income above $250,000, and Hillary Clinton has said she'd apply the tax to income above $200,000.
Alternatively, Republican candidates favor Social Security reform that cuts Social Security outlays and leaves tax laws unchanged.
Republican candidates Ted Cruz and Marco Rubio agree that increasing the full retirement age is one way to cut Social Security spending. Currently, retired workers collect 100% of their Social Security income benefit at age 66. Cruz and Rubio haven't said what age they'd prefer to change the full retirement age to, but before dropping out of the presidential race, Jeb Bush had thrown out age 70 as an option.
Cruz also advocates changing the formula that's used to determine how much retirees will receive in benefits. Currently, CPI is used in the calculation, but Cruz would prefer using chained CPI, which takes into account the likelihood of changing consumer spending patterns as prices increase. Because chained CPI has grown more slowly than CPI in the past, this change may lead to smaller payments to retirees and lower Social Security expenditures overall.
Rubio also thinks that the formula for determining benefits should be changed, but he recommends changing it only for high-income earners so that low-income workers aren't penalized.
Tying it together
Overall, 89% of Democrats and 83% of Republicans want the next president to take action to shore up Social Security, but while voters agree that Social Security needs fixing, the policies and plans for doing so vary greatly between the Democratic and Republican presidential candidates. Because this issue is so important, however, Americans can only hope that common ground can be found; however, only time will tell what that common ground will be.
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