Even though tinkering with the Social Security hasn’t been one of President-elect Donald Trump’s big initiatives it isn’t stopping a powerful Republican senator from proposing drastic changes to the currently underfunded entitlement program.
Ways and Means Social Security Subcommittee Chairman Sam Johnson, R-Texas, introduced legislation last week that he said will permanently save Social Security, “ensuring this vital program continues to work for today’s workers and beneficiaries and future generations.”
In order to close Social Security’s long-term funding gap, Johnson would make Social Security’s benefit formula less generous for all but the lowest earners, rapidly raise the retirement age for younger people decades away from retiring and reduce the annual cost-of-living adjustment, among other changes designed to save money.
Johnson also proposes changes that would cost the program money, like an increased minimum benefit for the poorest retiree’s ― provided they have a long history of covered employment ― and the elimination of income taxes on Social Security.
Trump repeatedly promised in his campaign to leave Social Security alone, to make sure that the program would remain untouched for seniors and future retirees.
Under Johnson’s plan, a middle-class 65-year-old claiming benefits in 2030 ― one with average annual earnings of about $49,000 over 30 years of covered employment ― would experience a 17 percent benefit cut relative to what the program currently promises them, according to the Social Security Administration’s chief actuary.
A 65-year-old with the same earnings history claiming benefits in 2050 would experience a 28 percent benefit cut compared to current law.
Due to the retirement of the Baby Boomer generation, Social Security faces financial strain in the coming years. If Congress fails to act to either reduce the program’s obligations or increase its revenue by 2034, a 21 percent across-the-board benefit cut will automatically take effect.
Conservatives like Johnson favor closing this funding gap by reducing benefits.
Many Democrats and moderate Republicans would rather address it entirely through revenue increases, such as lifting the cap on earnings subject to Social Security taxes.
Upon introducing the legislation, Johnson said: “For years I’ve talked about the need to fix Social Security so that our children and grandchildren can count on it to be there for them just like it’s there for today’s seniors and individuals with disabilities.”
“My commonsense plan is the start of a fact-based conversation about how we do just that. I urge my colleagues to also put pen to paper and offer their ideas about how they would save Social Security for generations to come,” Johnson added. “Americans want, need, and deserve for us to finally come up with a solution to saving this important program.”
Johnson’s fellow senator, Connecticut’s Chris Murphy, a Democrat, isn’t a fan of the bill.
“It’s pretty wild that when people are panicking about not having enough money for retirement, Republicans in Congress would propose to privatize and cut Social Security,” Murphy said.
“As a young parent, I realize that Social Security, left unchanged, may not be there for my kids the same way it was for my grandparents. There are a number of proposals to shore up the trust fund that Republicans and Democrats should be able to come together on, like raising the cap on income that is taxable for Social Security,” Murphy said.
“Unfortunately, the current Republican plan of privatization, raising the retirement age, and not allowing some retirees to collect the Social Security benefits they’ve earned leaves beneficiaries picking up the tab. We need to give seniors a raise that reflects the reality of their rising costs, not take those same hard-earned benefits away,” said Murphy.
One who studies, and teaches the political ways of Washington believe Johnson’s bill will be a tough sell.
“By moving to a more means-tested approach, the proposal undermines broad political support for Social Security,” Fred V. Carstensen, professor of Finance and Economics at the University of Connecticut, said.
“If it becomes a welfare program – which is the direction this proposal takes it – there will be progressively less support for the program,” added Carstensen, who is also the director of the Connecticut Center for Economic Analysis at UConn’s School of Business.
“One of the truly great virtues of Social Security is that nearly every American (and non-American) who contributes for the 40 quarters gets Social Security,” Carstensen said. “When you begin to exclude or minimize payments to higher income households, those households have progressively less personal stake in the health of the system.”
Additionally, Carstensen said, increasing the retirement age is very much to the benefit of higher-income, white collar workers.
“Those earning lower incomes typically have more physically demanding jobs and are less able to continue working into their 60s and 70s. They also tend to have more health problems, partially related to their work environment, partly related to diet, etc.
“Mortality statistics reveal an increasing divide among Americans based on socio-economic status. So raising the retirement age while claiming to help those most in need is contradictory,” Carstensen said.