By: Sid Salter
Stop the presses: Democrats and Republicans disagree over the future of what used to be called “the third rail” of American politics – the Social Security program. Water is also wet…
But in assessing Social Security, there is a very short-term fiscal cliff approaching that does not allow the usual partisan wrangling to continue to manifest itself in gridlock and inaction,
In 2020, Social Security provided retirement, disability and survivor benefits to some 416,500 Mississippians with monthly benefits averaging $1,420 per month or $17,161 annually. That means that Social Security injects $7.147 billion into Mississippi’s economy — more than the state-funded portion of the state budget.
The Social Security Trustees Report projects that the 86-year-old program can only meet its obligations to retirees until 2035 — after which Congress must either shore up the program’s finances or see benefit reductions of between 21% to 27%.
Those dire numbers were posted before $5-per-gallon gas prices became a national reality and inflation soared to north of 8.6% – impacting the price of everything including food, fuel, and health care. Prescription drug prices are up 35% since 2014 and up 2.5% since the beginning of the Covid-19 pandemic.
One simple set of facts bodes ominously for Social Security and Medicare and government officials seeking to solve these challenges. Doing nothing is neither a strategy nor an option.
First, Social Security and Medicare constitute north of 41% of all federal expenditures. Second, the senior demographic of those eligible for the programs are growing and science is helping them live longer. Third, in 1950 there were 120 workers paying into the program for every one retired worker drawing a pension. By 2035, it is projected that there will be only 2.3 workers paying into the program for each retiree drawing a pension.
So, what are the current alternatives on the table? Vermont Independent U.S. Sen. Bernie Sanders, along with more than 15 Democratic co-sponsors that include Massachusetts Democratic U.S. Sen. Elizabeth Warren, recently introduced the Social Security Expansion Act which claims it would extend program solvency for 75 years and increase benefits by $2,400 a year by removing the present income “cap” on current program funding rules.
SmartAsset.com financial analyst Christine Williams points out: “Taxable Social Security earnings are currently capped at $147,000 for the year, but this new legislation could tap individuals earning more than $250,000 and subject them to a further 6.2% in payroll taxes. The bill additionally proposes increased taxes on investors and businesses.
Sanders offered this assessment to financial journalist Brian Anderson on June 17: “Our job must be to expand Social Security so that every senior citizen in America can retire with the dignity they deserve and every person with a disability can live with the security they need. And we will do that by demanding that the wealthiest people in America finally pay their fair share of taxes.
“It is absurd that a billionaire in America today pays the same amount of Social Security taxes as someone making $147,000 a year. It is time to scrap the cap, expand benefits, and fully fund Social Security. I am very proud that the Social Security Administration has estimated that our legislation to expand Social Security benefits by $2,400 a year will fully fund Social Security for the next 75 years by applying the payroll tax on all income—including capital gains—above $250,000 a year,” Sander said.
Republican U.S. Sen Mitt Romney, R-Utah, responded by saying the proposal had “no chance whatsoever of receiving a single Republican vote in either House.
GOP U.S. Sen. Lindsey Graham, R- South Carolina, was more pointed in his reaction to Sanders: “To get out of this mess, people like me are going to have to take a little less and pay a little more in. We’re going to have to adjust the age one more time like Ronald Reagan and Tip O’Neil did. There is a bipartisan way forward, but you describe problems which your answer is always the government. It’s always socialism.”
Will Congress scrap the income cap to raise money while raising the retirement age to save money – or will it be a more Draconian plan? What’s sure is that change is coming sooner than later.