Monday, February 25, 2019

Democrats Push Legislation to Improve Social Security: The Social Security 2100 Act


The recovery of the control of the House after years out of power, and the disgust with the Republicans under Trump, seem to have invigorated the Democrats and encouraged them to pursue some of their fondest social goals.  At the top of their list has to be shoring up the healthcare system which Trump has been trying to weaken over the past two years.  Regenerating a healthier version of Obamacare is a priority, but if Medicare is ever going to be put on a sound financial basis it must capture revenue and the associated savings from providing a Medicare-for-all type program.  Next on the list is to recognize that the current Social Security System plus private retirement savings is just not cutting it when it comes to providing financial security in retirement.  As private retirement pensions disappear, and reliance on personnel savings plans has been demonstrated to be inadequate, some sort of enhanced federal system is required.  The Democrats seem to be taking a baby step in that direction with what is being called the Social Security 2100 Act.

The purpose of this legislation is both to upgrade the coverage of the current Social Security system and to place it on a sound financial footing.  Young people today should no longer have to listen to the lies coming from the right claiming that Social Security will not be there for them when they come to retirement age.  Robert Pear produced an article for the New York Times, Democrats Push Plan to Increase Social Security Benefits and Solvency, that describes the legislation.  The Democrats have actually come up with a bold plan that dismisses the notion that benefits must be decreased to save money and replaces that with an expansion of benefits paid for with a modest increase in taxes for all wage earners, and a significant increase for those with wage incomes over $400,000 per year. 

“The bill would provide an across-the-board benefit increase equivalent to about 2 percent of the average Social Security benefit. It would raise the annual cost-of-living adjustment to reflect the fact that older Americans tend to use more of some services like health care. And it would increase the minimum benefit to ensure that workers with many years of low earnings do not retire into poverty.”

Those with the lowest pre-retirement earnings, who depend the most on Social Security for their retirement income, receive the biggest benefit gains.  A provision would raise the income level above which Social Security benefits are taxable providing tax relief to lower income retirees.  All earners and employers will experience a gradually increasing payroll tax.  The most significant feature is imposing payroll taxes on those earning $400,000 or more annually.  They would face the tax on earnings up to a current value of $132,900, then no payroll tax until reaching the $400,000 number at which point one-half the payroll tax, currently valued at 6.2% but increasing to 7.4% in 2043, would be applied.  Employers would also pay that amount.  This is a significant tax on the wealthy, but rather than a straight income tax, the wealthy would regain much of their contributions in retirement income just like everyone else.

 “’Our bill, supported by more than 200 members of the House, would enhance and expand the nation’s most successful insurance program, which touches the lives of every American,’ said Representative John B. Larson, Democrat of Connecticut and the principal author of the legislation.”

“Mr. Larson, the chairman of the Ways and Means Subcommittee on Social Security, said he would hold hearings and forums around the country on the legislation.”

Action, as proposed in this bill, is clearly needed.

“Nonpartisan actuaries at the Social Security Administration say that the program will soon be spending more than it takes in and that the trust funds for retirement and disability benefits will be depleted by 2034 if Congress makes no changes.”

“By contrast, under Mr. Larson’s bill, Social Security would be solvent — ‘able to pay all scheduled benefits in full on a timely basis’ — for 75 years, and after that its financial condition would be improving, according to projections by Stephen C. Goss, the chief actuary of Social Security.”

“Of all the money raised by the bill, about one-fourth would be used to increase benefits, and the rest would cover projected deficits in the Social Security trust over the next 75 years.”

Of all the possible tax-raising proposals, this one should be the least noxious to the general public.  With Democrats in the majority in the House, it would stand a good chance of passing there.  With Republicans in charge of the Senate, its prospect there would be less sanguine, but if the public gets behind it, opposition could become difficult with another election in the offing, one where many Republican seats are on the ballot.

“The Congressional Budget Office injected a note of fiscal reality into the debates this past week. Assuming no change in existing law, it estimated that the budget deficit, $779 billion last year, would exceed $1 trillion every year from 2022 to 2029.”

“It forecast remarkable growth in federal spending dedicated to people 65 or older. By 2029, it said, such spending, which includes Social Security, Medicare and Medicaid, will account for 50 percent of all federal spending aside from interest payments on federal debt. That represent a substantial increase from 35 percent in 2005 and 40 percent last year.”

Fixing Social Security is only one part of the problem, the easier part.  Still to be done would be reining in medical expenditures, about one half of which are paid by the government.  The best way to do this is by incorporating Medicare and Medicaid into a single payer plan that couples their cost savings with a majority of younger, healthier people who will pay into it but require less medical care.  Medicare-for-all plans fit that prescription.  Let’s start the conversation on both initiatives and find a way to make them work.


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