Social Security will need to borrow an extra $22.4 trillion over the next few decades to cover its costs. This is because the population is getting older. In particular, since the baby boom after World War II, birth rates have gone down and life expectancies have gone up. Now, the number of retirees is growing faster than the number of workers.
The Social Security Administration says that the number of workers to benefits has gone down from 8.6 in 1955 to 2.7 in 2024. That’s a problem because Social Security is mostly paid for by a designated payroll tax.
Spending is going up faster than income because fewer workers are paying into the program and more seniors are getting benefits. This trend can’t go on forever, and if Congress doesn’t step in, it will lead to benefit cuts.
The exact date is not known, but the Board of Trustees thinks that the Old Age and Survivors Insurance (OASI) Trust Fund will run out of money by 2033. People who have retired lost a spouse or died will get payments from that trust fund. Once they were gone, payroll taxes would cover about 77% of planned payments. This means that benefits could be cut by 23% for everyone.
Note: Rep. Suzan DelBene a Twiiter user share a tweet at 9:50 PM · Apr 5, 2024, with the caption
“For generations, Social Security has ensured Americans can age & retire with dignity. But House Republicans’ new proposal would raise the retirement age & slash benefits for every American aged 59 or younger. I will continue working to protect & strengthen Social Security.”
For generations, Social Security has ensured Americans can age & retire with dignity.
But House Republicans' new proposal would raise the retirement age & slash benefits for every American aged 59 or younger.
I will continue working to protect & strengthen Social Security. pic.twitter.com/QyoT7IP7NO
— Rep. Suzan DelBene (@RepDelBene) April 5, 2024
There are three straightforward options to solve the problem.
- Tax increases could boost revenue for the Social Security program.
- Benefit cuts could reduce spending for the Social Security program.
- A combination of the first two solutions could resolve the issue.
It’s now a big deal to argue about which approach is best. As the election for president gets closer, that trend is likely to get stronger.
The Republican Study Committee (RSC), which is made up of about 80% of Republicans in the House, just released its budget for fiscal year 2025, Shared by@TheDemcoalition on Twitter at 11:12 PMÂ on Mar 26, 2024.
The Republican Study Committee, which comprises about 80% of House Republicans, called for the Social Security eligibility age to be increased in its fiscal 2025 budget proposal.
The proposal sets the stage for an election-year fight with Biden, who accused Republicans of going… pic.twitter.com/5mPSWTDxkL
— Democratic Coalition (@TheDemCoalition) March 26, 2024
The Republican budget proposal lacks specific facts and figures
The RSC’s budget indeed says that spending on Social Security will rise very quickly over the next ten years. According to the Congressional Budget Office, spending on programs will rise by 60% by 2034. But the RSC budget would cut that number to 42% by cutting spending on Social Security by $1.5 trillion over that time.Â
This Statement is also shared on Twitter by @SSworks at 3: 19 A.M on March 21, 2024.Â
Today, the Republican Study Committee (RSC), which counts nearly 80 percent of House Republicans as members, released its 2025 budget proposal — and it includes $1.5 TRILLION in cuts to Social Security!
🧵 with more details below.
— Social Security Works (@SSWorks) March 20, 2024
Republicans on the Study Committee say that the changes they want to make would not only stop the 23% cut to benefits in the short term, but they would also make the Social Security trust fund stable in the long term. The report also makes it clear that the budget will not cut or delay payments for seniors who are retired or getting close to retirement. But there’s a catch: Republicans in the House didn’t back up their claims with facts and numbers.
Instead, the RSC budget talks about a few changes in general terms that can be interpreted in different ways. The following quote is taken from the 180-page report:
The RSC budget would make modest changes to the primary insurance amount (PIA) benefit formula for individuals who are not near retirement and earn more than the wealthiest PIA benefit factor. It would also make modest adjustments to the retirement age for future retirees to account for increases in life expectancy. Finally, for these individuals, it would limit and phase out auxiliary benefits for high income earners.
Unfortunately, the report doesn’t explain what modifications might be made to the benefit formula, nor does it comment on how much full retirement age would increase. The report also fails to define “high income earners.”
Recent Updates:
- Social Security Update: April Payments Issued, Up to $4,873 for High-Income Retirees
- April Social Security Update: Extra $80 for Retirees Aged 65
The Republican budget relies entirely on benefit cuts
The Republican Study Committee’s budget didn’t give enough information to say for sure if it would fix the problem of not having enough money for Social Security.
But most Republicans in the House would rather cut benefits than raise taxes. I say that because the plan calls for changing the PIA formula and raising the age of full retirement, both of which would mean less money for benefits.
Republicans in the House have talked about raising the full retirement age from 67 to 69 in the past, but that wouldn’t fix the problem with Social Security’s funds by itself.
Even if the full retirement age went up by two months a year starting in 2024 and kept going up until it hit 69 for workers who turn 62 in 2035, only 37% of the funding gap would be filled. It was made by the Office of the Chief Actuary at the Social Security Administration.
That means Republicans in the House must think that changing the PIA formula will save a lot of money since their plan doesn’t include tax hikes. In light of this, the RSC budget has a major flaw: As a whole, it depends on cutting payments.
This is a problem because Democrats have been very clear that they don’t want benefit cuts, and Congress is not likely to agree to a plan that only helps one side. In the same way, Democrats have erred by relying too heavily on tax hikes to protect Social Security.
In the end, a long-term solution will need backing from both parties, which means that benefits will have to be cut and taxes will have to go up. That belief is backed up by history. In 1983, Congress changed two things about the Social Security program: (1) the full retirement age was raised from 65 to 67, which cut payments; and (2) the Social Security payroll tax rate was raised from 5.4% to 6.2%, which raised taxes.
Those changes won Congressional approval with widespread support on both sides of the political aisle, including Joe Biden, a senator from Delaware at the time. I would expect a similar outcome this time around.
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