Social Security is in trouble. The popular federal program is on track to become insolvent by 2034 if nothing is done. Everyone in Washington D.C. knows it, including President Joe Biden.
The president spoke last week about Social Security, vowing to protect it, as well as make it stronger. But he didn't announce any details on how he'll make that happen. How does Biden plan to save Social Security?
Biden's 2020 vision
We know more about what President Biden won't do than what he will do about Social Security, based on what he's said and done in office thus far. It's clear that the president opposes a proposal by Sen. Ron Johnson (R.-Wisc.) for Congress to re-evaluate the program on an annual basis. Biden said this idea would put Social Security "on the chopping block."
However, Biden included several changes to Social Security in his 2020 presidential campaign. His vision, as a candidate, for the federal program is likely the template for any proposals the president might make going forward.
The first item in Biden's plan two years ago was to prevent Social Security from going insolvent by requiring high earners to pay additional taxes to fund the program. Specifically, he proposed subjecting all income above $400,000 to Social Security payroll taxes. Currently, the maximum amount of income taxed is $147,000.
Biden also proposed increasing Social Security benefits in several ways. His 2020 plan called for higher benefits for individuals who have received retirement benefits for at least 20 years. He promoted a special minimum benefit of at least 125% of the federal poverty level for anyone who worked for 30 years.
In addition, then-candidate Biden wanted surviving spouses to receive a higher share of benefits. He advocated the elimination of penalties that prevent public-sector workers with pensions from receiving full Social Security benefits. Biden also proposed replacing the inflation metric used to calculate Social Security cost-of-living adjustments (COLAs) with one targeted toward seniors.
How the proposals would help (and hurt)
Only one component of Biden's 2020 Social Security plan would actually help prevent the program from becoming insolvent by 2034. Raising the payroll tax cap to $400,000 would generate more money for Social Security.
An analysis by the University of Maryland's Program for Public Consultation (PPC) found that this change would eliminate 61% of the projected funding shortfall for Social Security. The proposal would likely lead to all income becoming subject to payroll taxes for the program since the annual taxable maximum level for taxation rises as average wages increase.
The other ideas proposed in the president's plan would help many Social Security recipients. However, they would weaken the federal program from a financial standpoint and partially offset the positive impact of the payroll-tax cap increase.
For example, Social Security would become insolvent one year earlier than projected if public workers with pensions were to receive full Social Security benefits. Increasing the minimum benefits for older retirees would worsen the estimated funding shortfall by 5%, according to the PPC analysis. Implementing a special minimum benefit for anyone working 30 or more years would increase the shortfall by 6%.
Some members of Congress have introduced legislation that would enact some of Biden's campaign proposals. None of them, however, have been brought to a vote before either chamber.
The outcome of the November congressional elections will likely greatly impact the president's next steps with respect to Social Security. Some of his proposed changes, especially the increase to the payroll-tax cap, enjoy significant bipartisan support among Americans.
Hopefully, Democrat and Republican politicians can work together to forge a solution that will preserve Social Security benefits for decades to come. In the meantime, it's pragmatic for Americans to do everything they can to boost their retirement income, just in case their elected officials in Washington don't come to Social Security's rescue.