For years, lawmakers have acknowledged the future financial challenges that Social Security faces in meeting its obligations to retirees. Yet more than three decades after the most recent major reform of the program, Social Security continues to elude any long-term solutions from those charged with ensuring its financial stability. Now, however, representatives in Congress have presented a bill for consideration by the House. The bill, dubbed the Save Our Social Security Act, features bipartisan support and could finally mark a step forward in policymaking on retirement benefits, and its balancing act between raising revenue and reducing costs could mark a turning point in the logjam that has prevented meaningful reform to Social Security in the past.
What the Save Our Social Security Act would do
The legislation, introduced by Rep. Reid Ribble of Wisconsin and cosponsored by representatives of both parties, calls for the implementation of several changes to Social Security. Policymakers have suggested many of these changes as potential solutions to Social Security's anticipated future shortfall, but the intent of the Save Our Social Security Act is to balance revenue increases, benefit adjustments, and increases to the full retirement age. By doing so, lawmakers acknowledge that the polarizing rhetoric that both parties have used in the past only serves to prevent any reasonable compromise.
In particular, the legislation would make several major changes:
- The wage base on which Social Security payroll taxes are charged would rise from its current level of $118,500 to more than $300,000 over the next five years. The intent of the provision would be to tax 90% of all earnings throughout the U.S. economy.
- The formula for calculating benefits would reduce the benefit addition for earnings above the top bend point from 15% to 5% over a five-year period. The impact would therefore be to give high-income earners less credit for their earnings for purposes of determining their monthly benefit amount.
- Starting in 2022, the full retirement age would begin rising from 67 to 69 in two-month increments, with future increases of one month every two years.
- Benefits would be based on average earnings over a 38-year career rather than the current 35-year assumption.
- Cost of living adjustments would be based on the chained CPI figure, which most economists argue will lead to slower benefit increases over time.
- New benefits for those at or below 125% of the poverty level would provide a safety net. In addition, benefit increases for those retirees who've received benefits for 20 years or longer would also offset some of the cost savings from other provisions of the law.
None of these changes would be sufficient by itself to solve Social Security's problems, but in combination, they would be able to address the program's long-term financial situation. According to the legislation, raising payroll taxes would provide about 34% of the measures funding, with benefit-formula modifications providing 10%, retirement age increases helping with 35%, and cost of living adjustments amounting to 19%. The reduced cost in considering 38 years of career earnings would offset the added expense of minimum benefits and higher payouts for older beneficiaries of the program.
Early reaction from those with influence in the Social Security debate has been more positive than prior proposals have received. By combining elements of both Republican and Democratic platforms, the legislation has a balanced feel that can appeal to all lawmakers if they so choose.
Of course, it's also possible that partisan politics will cause legislators on both sides of the aisle to focus their criticism on the portions of the bill with which they disagree. Some Democrats see raising the retirement age as a nonstarter, while Republicans oppose the hefty payroll tax increases that will hit high-income earners.
Unfortunately, in a Presidential election year, few expect the legislation to make any progress even within Congress, let alone becoming law. What proponents of the measure hope is that the framework of the Save Our Social Security Act will serve as a useful starting point for future legislation, acknowledging the need for rational give and take in what has become one of most contentious issues among policymakers.
For a debate that has been gridlocked for decades, the Save Our Social Security Act could become an important step forward in the path toward meaningful reform. Even if the political process doesn't gain momentum this year, lawmakers should still remember this legislation when it comes time to take the Social Security crisis more seriously than they have in the past.