RESOLVING THE LEDGER
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0 Share Newsweek is a Trust Project member See more of our trusted coverage when you search. Prefer Newsweek on Google to see more of our trusted coverage when you search. As Congress grapples with Social Security's impending funding shortfall , senators from both parties are advancing competing ideas to shore up the program's finances.
A Senate Finance Committee hearing on Wednesday focused on how Congress should approach reform before the trust fund reaches insolvency.
“Congress has a responsibility to protect and strengthen Social Security for current beneficiaries and future generations. The longer we wait, the more difficult this challenge will become,” U.S. Senate Finance Committee Chairman Mike Crapo, Idaho Republican, said on Wednesday.
According to the latest projections discussed by lawmakers, the Social Security retirement trust fund could be depleted in late 2032, at which point the incoming revenue would be sufficient to pay only about 78 percent of scheduled benefits if Congress does not act.
During the hearing, several possible solutions to address Social Security’s long-term finances were floated, but none have gained enough traction to become law.
More than 70 million Americans receive Social Security benefits , making the program one of the federal government's largest and most politically sensitive programs.
With no congressional action, Social Security beneficiaries will eventually face across-the-board cuts once trust fund reserves are exhausted as early as 2032.
One of the most prominent ideas before Congress is the bipartisan PROMISE Act, introduced by Senators Dick Durbin, Illinois Democrat, and Bill Cassidy, Louisiana Republican, alongside a bipartisan group of colleagues.
Rather than raising taxes or cutting benefits directly, the legislation would establish a formal process aimed at forcing Congress to consider and vote on a long-term Social Security solvency package.
The proposal would direct the bipartisan Social Security Advisory Board to develop recommendations to keep the trust funds solvent for at least 50 years. Congress would then consider those recommendations under expedited procedures.
"Congress has known about this challenge for more than a decade, but it has not taken up these politically challenging issues. And the longer Congress waits, the more difficult it will be to address this issue in the future,” Durbin said.
While the bill could break years of congressional gridlock on Social Security, critics have concerns that commissions or fast-track processes could ultimately be used to advance harmful benefit reductions or tax increases.
“Fast-tracking Social Security reform without a fully transparent commission seems contrary to what is needed,” Kevin Thompson, CEO of 9i Capital Group and host of the 9innings podcast, told Newsweek . “The scope of the program and the challenges it faces are simply too significant to rush through without broad public input and open debate.”
The legislation has bipartisan support from Senators John Cornyn, Tim Kaine, Thom Tillis, Chris Coons, Angus King and Alan Armstrong in addition to Durbin and Cassidy.
Democratic Senator Elizabeth Warren of Massachusetts has also emerged as one of the leading voices against proposals that would reduce future benefits or raise the retirement age.
Instead, Warren has backed proposals that would require higher-income Americans to contribute more toward Social Security by increasing or eliminating the payroll tax cap.
Under current law, earnings above a certain threshold are exempt from Social Security payroll taxes. Lifting the cap could generate substantial new revenue for the program while avoiding benefit reductions.
“Why should a middle-class nurse pay a larger share of her paycheck — than a wealthy corporate lawyer? This is doubly unfair in an economy in which top earners’ wages, over time, have pulled far ahead of those of the average worker,” Warren and Republican Senator Bernie Moreno wrote in a New York Times op-ed.
“This is a no-brainer: The wealthiest Americans, who have benefited the most from America’s opportunities, should contribute the same percentage of their income as a factory worker in Chillicothe, Ohio, or a teacher in Worcester, Mass.”
Independent Senator Bernie Sanders of Vermont has long championed proposals that would both strengthen Social Security's finances and expand benefits. He has argued that higher taxes on wealthy Americans could finance increased benefits while extending the program's solvency.
“At a time when the wealthiest people in America are becoming much wealthier, asking them to pay the same percentage of their income into Social Security as teachers, nurses, firefighters, and construction workers is not a radical idea,” Sanders said this week. “It is common sense. It is what the American people want.”
Under Sanders’ plan, Social Security payroll taxes would be applied to all income above $250,000, including investment income such as capital gains and dividends. The senator said this would not increase taxes for the bottom 91 percent of Americans, who earn less than $250,000 annually.
“Bernie Sanders is adamantly opposed to the privatization of Social Security, so he is wanting to remove the Social Security cap on dividends and income above $250,000 while also making that income subject to payroll taxes,” Thompson said. “Any tax increase would be unpopular, yet it is feasible.”
Lawmakers have floated a variety of other options for improving Social Security's finances, include raising the full retirement age, modifying annual cost-of-living adjustments and even means-testing benefits for higher-income retirees.
Others have pushed for increasing payroll taxes or adopting a combination of spending reductions and new revenue.
“The real concern is that even if you raise the cap, it doesn’t solve the Social Security funding issue entirely,” Thompson said. “It will have to be a multifaceted approach while the cap is jus...
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