Reforms to Social Security Might Energise the Post-midterms Political Landscape| Latest News!

If Republicans control one or both chambers in November, expect bipartisan attention on Social Security’s finances.

Such declarations have been made before, only to go away with the next election.

But the spirit of compromise that fueled last year’s bipartisan infrastructure agreement appears to be creeping into early discussions about preventing Social Security insolvency.

The outlook is improving in the Senate, where former members of bipartisan “gangs” are calling for reforms.

That includes Utah Republicans Mitt Romney and Bill Cassidy, as well as Illinois Democrats Richard J. Durbin and Joe Manchin III,

as well as Maine’s Angus King, an independent who caucuses with the Democrats.

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King and Romney are leading sponsors of legislation to create “rescue committees” to address Social Security and other troubled trust funds.

King said the notion would be similar to the Social Security panel chaired by former Federal Reserve Chairman Alan Greenspan that led to legislative reforms in 1983.

King said the change helped extend the program’s solvency to the 2030s, which is “not far away now.”

The latest Social Security trustees report estimates that starting in 2033, only 76% of scheduled benefits would be paid.

“The numbers are true,” King remarked. “We must solve this issue as soon as possible.”

Social Security

Reforms to Social Security Might Energise the Post-midterms Political Landscape

Romney said Cassidy has been privately talking to senators from both parties about some Social Security proposals he hasn’t yet discussed publicly.

Cassidy, like King and Romney, is a veteran of the infrastructure bill negotiations and sits on the Senate Finance Committee, which oversees Social Security.

Cassidy, along with GOP Finance members Todd Young of Indiana and John Cornyn of Texas, co-sponsored the Romney-King trust fund overhaul bill.

The bill also includes Virginia’s Mark Warner, a Finance Democrat, as well as Manchin and Arizona’s Kyrsten Sinema.

“I’m willing to cooperate with you to save Social Security,” Romney said Durbin recently informed him.

Durbin’s staff couldn’t confirm the interaction, which isn’t unusual considering how frequently senators casually connect.

Bipartisan discussions regarding possible “grand bargains” to decrease debt and deficits have been held previously.

In 2010, he was one of 11 members of the Simpson-Bowles fiscal panel that approved a broad range of suggestions, including raising taxes, cutting benefits, and raising the retirement age.

These included gradually increasing the share of wages paid by Social Security payroll taxes, which is indexed for inflation each year and is currently set at $147,000 for 2022.

Up until that point, both the employee and the employer pay 6.2 percent tax.

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A growing retiree population means the tax can’t keep up with benefit payouts. The $2.8 trillion trust fund reserve means beneficiaries will have to take a big haircut in around 11 years.

‘Uncap’

Simpson-Bowles would have gradually increased the Social Security tax level until it reached 90% of all “covered earnings,” or US wages and salaries.

With rising income disparity and incomes at the top of the income scale outpacing inflationary increases in the Social Security tax threshold,

that figure was set in 1977 and reached in 1982 before slowly declining to roughly 83 percent today.

Social Security benefits are linked to earnings and contributions to the trust fund throughout working years, ensuring bipartisan support.

This is a controversial measure, as it seeks to limit benefits for higher earnings.

The alternative is significantly greater benefits for wealthy retirees, which is also unpopular.

Even with their severe medicine, boosting the taxable part of earnings would only cover only 19% of the program’s long-term gap.

Some on the left complained that Simpson-Bowles would have left seniors hungry, dubbed the “cat food commission.”

Some Democrats, like Manchin, argue Social Security taxes can be raised more.

Others, like him, favor raising the payroll tax cap, as lawmakers did with Medicare in the 1993 budget reconciliation statute.

“Take the cap off,” Manchin said on Feb. 10 on Talkline with Hoppy Kercheval.

According to Chief Actuary Stephen C. Goss, raising the taxable ceiling to 90 percent of currently covered earnings would raise the cap from $147,000 to $337,500.

Manchin said he would raise it to $400,000 “overnight.”
That would violate President Joe Biden’s pledge not to raise taxes on anyone earning under $400,000.

Manchin supports more taxes on the wealthy, but not the $400,000 threshold.

Social Security

Reforms to Social Security Might Energise the Post-midterms Political Landscape

‘If you make less than $400,000, we won’t raise anything,’ Manchin added. “The bottom line is, we should remove the cap and expand it to ensure financial stability.”

Top Democrats want to keep the present threshold but reintroduce the payroll tax after wages reach $400,000.

In addition, many reforms would increase benefits, notably for low-income and elderly recipients.

A bill sponsored by Ways and Means Social Security Subcommittee Chair John B. Larson, D-Conn., has 200 cosponsors.

Larson’s plan would only extend trust fund solvency by five years, according to Social Security actuaries.

Because budget reconciliation rules prohibit changing Social Security taxes or benefits, supporters of Larson’s plan would need 60 Senate votes.

Theoretically easy

These are the two biggest long-term financial drains on the US government. Medicare is likely to be more costly in the long run, and its trust fund will run out in 2026.

But fixing it requires complicated calculations to “bend the curve” of medical inflation.

Former Rep. Mick Mulvaney, R-S.C., former President Donald Trump’s budget director and acting chief of staff, told a House Budget Committee hearing this week that Congress should use next year’s debt ceiling deadline to force action.

Mulvaney said fixing Social Security is “mathematically easy.”

“I’ve said previously Social Security is easy math; Medicare is sophisticated calculus,” he sounded like Durbin in 2013. We can work around Social Security.”

In 2005, President George W. Bush and a Republican-led Congress made reforming Social Security a high priority,

only to have that effort fail and be used against them in the 2006 midterm elections.

A divided government allows both parties to share the blame — or the credit. But with the left and right ready to attack, no Social Security reform is a sure thing.

Rep. Glenn Grothman, R-Wis., said in a budget hearing that 2011’s tight discretionary spending caps were “maybe the best piece of public policy we’ve seen in 20 years.”

Grothman would prefer to reduce a few federal programs, but not Social Security.

Social Security should never be cut, Grothman says. “People paid into that, and we shouldn’t cut it.”

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