The Board of Trustees for the Social Security and Medicare Trust Funds released their annual reports this week once again reminding Congress that time is running out on maintaining Social Security as we know it. Without action, the trust funds will deplete forcing a 21 percent across the board cut to beneficiaries in 2034.
Social Security’s chief actuary, Stephen Goss delivered the news to the House Ways and Means Social Security Subcommittee on Thursday where its top Republican and Democrat agree that Congress can — and should — fix the problem. They just don’t agree on how.
“We often hear that government should run more like a business and in this case it should run like an insurance business and be actuarially sound.” said Congressman John Larson. “Yet, the last time we actually addressed this issue actuarially was in 1983.
The fix then, orchestrated by President Ronald Reagan and House Speaker Tip O’Neill, fell short by failing to “index” the program. Without such adjustments, Larson said it is no wonder that the trust funds aren’t holding up for the 10,000 new enrollees each day.
Texas Republican Sam Johnson, who chairs the panel, explained that for the first time since 1982 Social Security is paying out more in benefits than it collects from payroll withholdings — requiring them to tap into the trust funds’ principal to pay benefits. Colleagues, this is a big deal and is an important signal that time is not on our side,” Johnson said.
“So, how do we address them?” Larson asked. “We can either tell those 10,000 people they’ve got to face cuts or we can say to them — You know what we have to do? We have to make a premium adjustment.”
Larson favors a premium adjustment and has introduced legislation that would raise FICA withholdings to keep Social Security solvent. He says it would amount to 50 cents extra a week for individual earning $50,000 annually.
Johnson has a different view. He has proposed legislation that would avoid a fee increase and instead increase the retirement age from 67 to 60 for those born in 1960 or later and change how benefits are calculated to eliminate cost-of-living adjustments for high-income earners.
“Previously, I introduced my plan to fix Social Security permanently. My good friend from Connecticut, Mr. Larson, also has a plan that would fix Social Security permanently. Our plans are very different, but we both agree that we need to act to fix Social Security for good. Workers and their families deserve the certainty that we’ve gotten Social Security on the right track,” Johnson said.