As Republicans in the U.S. House of Representatives hem and haw over when and how to make a second attempt at repealing and replacing the Affordable Care Act, President Trump has an opportunity to work with Democrats to keep one of his campaign promises and claim a major victory: protecting Social Security.
Trump, in his promise, meant that he wouldn’t seek cuts to Social Security benefits, and his recent “skinny” budget stayed true to that pledge, instead making significant cuts to federal government agencies such as the State Department and Environmental Protection Agency to pay for significant increases for the military.
But actual protection of Social Security will require reforms that sustain the more-than-80-year-old program and keep its trust funds solvent into the 22nd century.
It’s overreach to claim Social Security will soon go broke; however, it does need to correct for the recent stagnation of middle class wages and the bubble of retiring baby boomers. Combined, the trust funds for Old-Age and Survivors and Disability Insurance beneficiaries total about $2.85 trillion. That’s enough to continue paying full benefits to all who are eligible until about 2035. After that, however, the benefits would have to be cut by about 21 percent.
A number of reforms have been proposed in the past, including raising the retirement age, now 66 (or 67 if you were born in 1960 or late); adopting the “Chained” Consumer Price Index, which could have the effect of smaller cost-of-living adjustments to benefits; increasing the payroll taxes paid by workers and employers; and lifting the cap on salaries. Currently, the payroll tax is applied only to the first $127,200 of annual wages, meaning income above that is not taxed.
Adjusting the cap is seen as one of the more effective reforms, and it’s the centerpiece of two recent pieces of legislation proposed in the House and Senate.
Joined by four Washington state Democrats, including 1st District Rep. Suzan DelBene and more than 150 other House Democrats, Rep. John Larson, D-Connecticut, introduced The Social Security 2100 Act on Wednesday, which seeks to preserve the program but also expand benefits to many.
Larson’s proposal would keep the current cap, which does increase based on average wage increases, but would lift the cap for incomes over $400,000. The proposal also seeks a gradual increase in the payroll tax paid by workers and employers, now 6.2 percent for each, increasing it to 7.4 percent by 2042. Larson’s bill also would combine the two separate trust funds into one Social Security Trust Fund.
Larson’s reforms to the payroll tax would keep the system solvent for the rest of the century and would expand benefits, including an immediate 2 percent increase for monthly Social Security payments.
It would also set a new minimum benefit, which is now below the federal poverty line, to 25 percent above the poverty level; use a Consumer Price Index formula, CPI-E, that recognizes the additional costs for health care and other needs paid by seniors; and would raise the threshold at which seniors’ benefits are taxed, from the current $25,000 for individuals and $32,000 for couples to $50,000 and $100,000 respectively.
DelBene said Larson’s “commonsense steps” would “boost seniors’ benefits and ensure their cost-of-living adjustments reflect rising housing and prescription drug prices.”
Sen. Bernie Sanders, I-Vermont, introduced similar legislation in February, but it seeks to reimpose the payroll tax for incomes over $250,000, and would also apply the tax to unearned income, including capital gains and dividends. It, too, includes expansion of some benefits.
Neither proposal has Republican support, but either could find support from one key Republican: President Trump, himself.
Trump would have to buck the advice of many of his economic advisers, including his budget director, Mick Mulvaney, who during his Senate confirmation hearing declined to disavow an earlier claim that Social Security was a “Ponzi scheme.” Mulvaney also has pressured Trump to make cuts to Social Security and Medicare.
But the president knows he rode a populist wave into office. That wave is now an ebb tide.
With approval ratings near 40 percent, Trump could use the positive news that working with Democrats to preserve and expand Social Security would deliver.
And we could use a Social Security system that remains healthy for ourselves, our children and our grandchildren.