How the Banking Crisis Could Impact Social Security
With Social Security facing an impending budget shortfall in about 10 years, Congress has been scrambling to try to come up with solutions to protect its solvency. According to an article by The Motley Fool, one proposal could fail as a victim of the banking crisis.
Sovereign Wealth Fund
A bipartisan group of U.S. Senators suggested the creation of a sovereign wealth fund. It would allow the federal government to invest money in stocks to fund Social Security retirement benefits. The thought is that the stock market can generate higher returns over the long term than investing in Treasury bonds, which is where Social Security trust funds are currently invested. Other countries, such as Norway, use this system to fund their retirement programs.
Banking Crisis Impact
While creating a sovereign wealth fund sounds like a great idea when the stock market is doing well, it’s much riskier in a volatile environment such as during the current banking crisis the world is experiencing.
Norway was holding bonds issued by the Silicon Valley Bank, which failed last month. Although Norway expects to get some money back, it’s unclear how much. Things could have been much worse, as it was revealed that Norway significantly reduced its investment in Credit Suisse before the bank’s financial woes.
A Better Option
The Seniors Trust believes there is a better option to shore up Social Security. We stand behind the Social Security Expansion Act. Not only will this ensure the long-term solvency of Social Security, but it would also provide seniors with bigger benefits.
Under this bill, seniors would receive an extra $2,400 in benefits each year. In addition, it would recalculate the way the Social Security cost-of-living-adjustment (COLA) is calculated, using the Consumer Price Index for the Elderly (CPI-E) instead of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-E more accurately reflects the actual spending of seniors, which tends to be on expenses such as healthcare and housing.
To fund the proposed benefits boost and maintain solvency far into the future, the Social Security Expansion Act calls for applying the Social Security payroll tax on all income above $250,000. Currently, earnings above $160,200 aren’t subject to the Social Security tax.
Join Our Efforts to Ensure Solvency and Enhance Benefits
The Seniors Trust believes the Social Security Expansion Act seeks to reform Social Security the right way: by expanding and strengthening benefits proven to reduce senior poverty and improve retirement security as well as extending the solvency of this crucial program.
Please, sign our petition to Congress and join us as we strive to improve the lives of senior citizens.
