The Social Security 2100 Act: Dead on Arrival?

The Democratic proposal for Social Security reform is a symbolic gesture for now, but it could be the foundation of reform down the road.

Dan Caplinger
Dan Caplinger
Feb 25, 2017 at 7:20AM
Investment Planning

Social Security has been a political third rail for a long time, but over the past couple of years, politicians have increasingly been willing to propose sometimes aggressive measures to reform the social program. In the wake of the 2016 election and the Republican assumption of control of Congress and the White House, Democratic proposals last year to broaden Social Security look like they're going nowhere. But that didn't stop one representative from reintroducing the Social Security 2100 Act, a Democratic proposal introduced in 2014 that would make major changes to Social Security on both the revenue and benefits side. Even if the bill in its entirety might be dead on arrival, the Social Security 2100 Act has some ideas that might set the stage for a bipartisan compromise at some point in the future.

White House with Washington Monument in background.

Even if Congress let this bill pass, the White House wouldn't let it through. Image source: Getty Images.

What the Social Security 2100 Act says

The original Social Security 2100 Act was the product of Rep. John Larson (D-Ct.), who announced the bill two-and-a-half years ago. At the time, the Act included four primary changes to Social Security:

  • An increase in benefits for current and new Social Security participants, set to take effect in the year following passage of the bill.
  • A change in the way cost-of-living adjustments are made. Whereas COLAs are currently tied to an inflation measurement known as the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), the Act would tie them to the experimental Consumer Price Index for the Elderly (CPI-E), which is designed to reflect the living expenses of retirees specifically. A switch to the CPI-E would likely lead to larger increases in monthly retirement benefits.
  • An increase in the income threshold above which Social Security benefits are subject to income taxation from $25,000 to $50,000 for single filers and from $32,000 to $100,000 for joint filers.
  • A new minimum benefit for low-income workers that guarantees monthly income of 25% above the poverty line.

At the time, Larson argued that the changes would not only preserve the financial sustainability of the program but also produce a more sustained positive impact on the nation. In Larson's words, "Social Security lifts Americans, including children, out of poverty and boosts our economy as a whole." With these "common-sense, gradual steps," Larson argued that Social Security could continue through 2100 and beyond (hence the name of the Act).

In order to pay for the additional benefits, the Social Security 2100 Act imposed the payroll tax of 7.65% for employees and 15.3% for self-employed individuals on all wage income above $400,000. That would have left a hole in the payroll tax system, with wages between the existing wage limit (currently $127,200 in 2017) and $400,000 escaping tax.

The return of the Social Security 2100 Act

In early February, Rep. Brian Higgins (D-N.Y.) agreed to cosponsor the Social Security 2100 Act's latest incarnation. In the release making the announcement, Higgins noted that the Trump administration had named key personnel who would take measures to weaken Social Security's support of older Americans, through measures such as raising the retirement age or switching to inflation measures that would slow the rate of growth from cost-of-living increases.

Given that Republicans control Congress, the current version of the Social Security 2100 Act is virtually dead on arrival. However, Higgins is a member of the Social Security Subcommittee of the House Ways and Means Committee, and that will put him in a position to participate in debate on whatever reforms to Social Security might emerge from the House of Representatives. If lawmakers in the majority decide that having some sort of cooperative approach to Social Security reform is warranted, then the Social Security 2100 Act might prove to be a starting point for more extensive discussions and negotiations to come.

Still, there are certain aspects of the Act that are complete nonstarters from the Republican side of the aisle. Republican leaders have long opposed the concept of increasing the payroll tax on high-income individuals, especially given that the boost wouldn't bring any significant increase in benefits for those paying the tax. Republicans have been more willing to consider measures like means-testing for high-income retirees than to consider higher taxes on working-age Americans.

Social Security is a complicated and contentious topic, and there are no easy answers. The Social Security 2100 Act might not go anywhere in this session of Congress, but it's impossible to predict whether the future the notions put forth in the bill could gain more support in the future.