Calls for Congress to Act Now to Save Social Security are Growing
For years, The Seniors Trust has been sounding the alarm on Social Security solvency. We’ve been cautioning folks that if Congress does not take action now, there will be no choice but to slash benefits. As that day of reckoning approaches, it seems others are joining the call to action. A recent post in Reason warns of the funding shortfall that could result in an automatic 23 percent cut to seniors’ Social Security benefits.
What Other Countries are Doing
The article suggests the United States should take notice of what other countries have done to address similar funding challenges within their social security programs.
Citing a report from the CATO Institute, the article points out that “Sweden and Germany implemented automatic stabilizers that slow benefit growth or raise taxes when their systems become unsustainable. New Zealand and Canada have moved toward more modest, poverty-focused pension systems that offer basic support without bankrupting the state. And … Denmark increased the retirement age to 70.”
The article says options exist, suggesting policymakers could gradually raise the retirement age to reflect modern, healthier, longer lives; they could cap retirement benefits at $2,050 monthly; or they could reform the tax treatment of retirement income to encourage private savings. Canada has done with its tax-free savings accounts.
A Better Solution
We here at The Seniors Trust believe the best solution is to enact the Social Security Expansion Act. Not only will this landmark piece of legislation ensure the long-term solvency of Social Security, but it will 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 $176,100 aren’t subject to the Social Security tax.
If enacted, the Social Security Expansion Act could keep Social Security solvent for about 75 years.
