Each and every month, some 62 million eligible beneficiaries, almost 7 out of 10 of which are retired workers, receive a Social Security check. This is a figure that's expected to grow over time as Americans live longer, and as baby boomers exit the workforce and enter retirement.
For many retirees, Social Security isn't just some check they receive each month. It's much more than that. Data from the Social Security Administration finds that 62% of current retirees lean on their monthly benefit for at least half of their income, with 34% pretty much wholly reliant on Social Security for 90% to 100% of their monthly income. At the end of the day, Social Security keeps millions of retirees above the federal poverty line.
America's most important social program is on thin ice
But this crucial program is in some pretty big trouble. Last year's Social Security Board of Trustees report estimates that it'll begin paying out more in benefits than it collects in revenue beginning in 2022. Despite having grown its asset reserves to a projected $3 trillion since 1983, it's only going to take 12 years to completely exhaust the program's cash reserves.
Before panic sets in, understand that the depletion of this excess cash doesn't mean Social Security is bankrupt. It merely means that the current payout schedule isn't sustainable. Thankfully, Social Security's 12.4% payroll tax on earned income between $0.01 and $128,400 (as of 2018) provided more than 87% of the $957.5 billion collected in 2016, and it'll continue doing the heavy lifting for Social Security moving forward. As long as Americans keep working, payroll taxes will be collected, providing the SSA with funds that it can disburse to eligible beneficiaries.
But in order to deal with the unsustainability of the current payout schedule, the Trustees report opines that an across-the-board cut to current and future benefits of up to 23% may be needed. Slashing benefits by 23% would, presumably, allow benefits to continue without any further adjustment through the year 2091. But it would also push the average monthly payout of $1,409.91 ($16,919 a year), as of March 2018, dangerously close to the federal poverty level of $12,140 a year.
In other words, seniors need the help of lawmakers in Washington in order to avoid a sudden cut to their future benefits.
What might happen to Social Security if Democrats flip the Senate and/or House in November?
However, one of the biggest issues with Social Security reform has been in getting lawmakers to agree on anything. With the exception of Democrats and Republicans recognizing that there's a long-term funding shortfall, and neither party particularly caring for the program's inflationary tether, the Consumer Price Index for Urban Wage Earners and Clerical Workers, these two parties agree on almost nothing when it comes to Social Security.
Might the midterm elections change that? My inclination is that it's extremely unlikely.
Even if Democrats are able to flip the current GOP majority in the Senate and House, President Trump would almost assuredly refuse to sign off on Social Security reform legislation presented by the opposing party. After all, the president's primary solution for Social Security's woes was to pass the Tax Cuts and Jobs Act. The idea being that an uptick in economic growth derived from a reduction in corporate and individual tax rates would lead to higher household income, which, in turn, would boost revenue via the 12.4% payroll tax on earned income. Of course, it's going to take years before we'll know if economic growth does pick up sustainably, and if that increases payroll tax collection in a meaningful way.
Meanwhile, if the GOP manages to hang onto its majority in the Senate and House, Social Security reforms also appear unlikely. Speaker of the House Paul Ryan (R-Wisc) had been leading the call for Social Security reforms among the Republican Party. However, with Ryan retiring from politics after his current term is up, and President Trump essentially suggesting that targeting Social Security reforms during an election year is political suicide, without using that exact phrase, it would seem that the GOP's hands are tied until after the 2020 elections.
How the heck do we fix Social Security?
So, what's it actually going to take for there to be meaningful Social Security reforms? Ideally, one of two things would need to happen.
One possible solution is a Senate supermajority. In plainer terms, one party would be required to control at least 60 of the 100 seats in the Senate. Assuming lawmakers voted along party lines, the supermajority would allow an overhaul of the Social Security program to be made. The problem is that we have to go all the way back to the 95th Congress (1977-1979) to find the last time that a supermajority existed for either party. In that particular Congress, Democrats controlled 61 seats. It's pretty rare for any party to near a supermajority in the Senate, which makes it veritably impossible to streamline legislation through Congress.
The other possibility would be (and I hope you're sitting down for this) cooperation. If Democrats and the GOP could find a middle ground between their core solutions, Social Security would almost assuredly be in better shape over the long term.
For Democrats, this would mean raising or eliminating the maximum taxable earnings cap and exposing more of the wealthy's earned income to Social Security's payroll tax. For Republicans, it would call for raising the full retirement age -- the age at which you're eligible to receive 100% of your retirement benefit -- to somewhere between ages 68 and 70 to reflect increased longevity over time.
To be clear, both individual proposals to fix Social Security work to eliminate its long-term (75-year) cash shortfall. The Democrats' plan would add new revenue, while the GOP proposal would reduce program expenditures over time. The fact that both proposals work has given neither party the incentive to back down and compromise with the other party -- and that's the real issue here.
Until a supermajority exists in the Senate, or lawmakers can learn to put their party differences, including hubris, aside, reforming Social Security probably isn't possible.