Joe Biden’s Social Security quote in 10 words that can change everything
In August, more than 48.1 million older Americans collected a Social Security Check. For the vast majority of these recipients — 89%, according to an April survey by national pollster Gallup — their Social Security income is essential to making ends meet.
This dependence on social security payments should also pass on to future generations. Gallup’s April poll found that 84% of non-retirees plan to rely on their monthly allowance as their “main” or “minor” source of income during their golden years.
Yet despite the importance Social Security plays in the financial well-being of retirees, our nation’s most successful retirement program is in deep trouble.
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Based on the latest report from the Social Security Board of Trustees, the program projects a cash shortfall of $20.4 trillion over the long term, defined as the next 75 years. In addition, the Old Age and Survivors Trust (AVS), which is responsible for paying the above-mentioned more than 48.1 million retirees each month, is expected to exhaust its cash reserves (i.e. excess liquidities accumulated since its creation) in 2034. If and when the liquidities reserves of the AVS are exhausted, a widespread 23% drop in Social Security checks may be necessary to avoid any further reduction in installments until 2096.
Changes need to be made to strengthen Social Security, and the American public is looking to President Joe Biden and lawmakers on Capitol Hill to make it happen.
Democrats and Republicans have approached a Social Security fix from opposite ends
The $64,000 question is: if Congress has known since 1985 that Social Security must have insufficient long-term revenue to cover the current payment schedule, why haven’t lawmakers done anything about it?
The answer, to put it bluntly, is the political hubris of both political parties.
Democrats favor raising payroll taxes on top-earning workers to generate more revenue for Social Security. In 2022, all earned income (salaries and wages, but not investment income) between $0.01 and $147,000 is subject to 12.4% payroll tax. But for the 6% of workers who earn more than $147,000, every dollar beyond that point is exempt from payroll tax. this allows well over $1 trillion in revenue to evade payroll tax each year.
Meanwhile, Republicans prefer to increase the full retirement age — the age at which an eligible worker can receive their full retirement pension. For 82 years that Social Security has paid a monthly benefit, the full retirement age has only increased by two years (65 to 67). By comparison, the average life expectancy in the United States has fallen from about 63 years in 1940 to 77 years in 2020. Raising the full retirement age would force retirees to choose between applying early that would permanently reduce their monthly payment or expectation, which would ultimately reduce the amount of benefits received over their lifetime. In other words, it would reduce Social Security spending over time.
Both fundamental solutions contribute to strengthening social security, which means that neither party has an incentive to find common ground with its opposition. Thus, the stalemate we have today.
This quote from Joe Biden leaves the door open for sweeping Social Security changes
However, it should also be noted that none of the individual solutions solves the long-term financing gap of Social Security.
Raising the payroll tax on high earners gives an immediate boost to revenue collection and has the potential to extend AVS solvency by years or decades, according to the source. to analyse. But simply raising taxes on the wealthy does not provide enough projected revenue to come close to closing the projected $20.4 trillion cash shortfall through 2096.
Likewise, the GOP’s plan to raise the full retirement age has a flaw. While this would help reduce program spending, raising the retirement age would take decades to have an effect. This does nothing to save the AVS from the possible depletion of its asset reserves and a 23% reduction in social security checks by 2034.
But President Biden may have a different solution in mind that could completely change Social Security and solidify its foundations.
In 2007, as then-Senator Biden was running as the presidential candidate for the 2008 ticket, host Tim Russert asked him a simple question about America’s “third rail.” Meet the press. Says Russert: “Senator, we have a deficit, we have Social Security and Medicare looming. Would you consider looking at those programs, age of eligibility, cost of living, put it all on the table?”
Biden’s final 10-word response to Russert was, “You have to put everything on the table.”
What this response implies is a willingness to break with strict party positions and open the discussion to compromise. While neither party’s solution alone solves Social Security’s long-term funding gap, a bipartisan proposal could do just that.
Keep in mind that Joe Biden played a role in the last major overhaul of Social Security, which took place in 1983 under President Ronald Reagan. This bipartisan bill that gradually increased the payroll tax and full retirement age over time, as well as the introduction of taxation of social security benefits above certain thresholds of income, was supported by 88 senators, including Biden.
Is President Biden still open to a bipartisan solution?
Of course, a lot has changed in the 15 years since Biden was ready to “put it all on the table.” Senator Biden is now President Biden, and his views on Social Security have evolved a bit.
While on the campaign trail before winning the 2020 election, Biden released a four-point plan to strengthen Social Security:
- Increase payroll taxes on high earners: As noted, all income earned between $0.01 and $147,000 is subject to payroll tax. Biden’s plan creates a donut hole that exempts income earned between the maximum taxable income cap ($147,000) and $400,000 while reinstating the payroll tax on earned income above $400,000.
- Increased benefits for long-term beneficiaries: The expenses of older beneficiaries tend to increase later in life. Biden has proposed a 1% annual increase in the primary insurance amount (PIA) from 78 to 82 years old. Ultimately, this cumulative 5% AIP increase would increase benefits for elderly beneficiaries.
- Boost the special minimum benefit: In 2022, lifetime low income with 30 years of coverage earns $951 per month, which is well below the federal poverty level. Biden’s proposal would increase the special minimum benefit to 125% of the federal poverty level.
- Switch the Social Security inflationary peg to CPI-E from CPI-W: Finally, Biden’s plan uses the consumer price index for the elderly (CPI-E) as an inflationary measure, rather than the consumer price index for urban wage earners and office workers (CPI- W). CPI-W did a bad job to keep up with the inflation that retirees in the program are facing.
As you will notice, no aspect of Joe Biden’s latest Social Security proposal mentions raising the full retirement age.
Without a supermajority of 60 seats in the Senate, the only way to solve the Social Security funding shortfall is with opposition votes. Although Senator Biden has already been part of significant bipartisan legislation regarding Social Security, it’s unclear whether he’s open to “putting everything on the table” as president.
While Biden’s candor in his 2007 interview gives hope that real change is possible, it seems more likely that Capitol Hill’s stalemate will persist.
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