At the beginning of 2019, Representative John Larson (D-CT) introduced the Social Security 2100 Act to the House of Representatives. This bill is designed to keep Social Security from going broke, which it is expected to do by 2034. However, the bill faces several hurdles that could kill it before it becomes a law.
How the bill proposes fixing Social Security
The Social Security 2100 Act proposes fixing the program’s cash shortfall in several ways:
- Adjust the taxable earnings cap. The current cap for taxable earnings is $132,900. This bill would remove the cap and reintroduce a 12.4% payroll tax on income earned over $400,000. This tax would only affect 1 percent of Americans. In 2016, $1.2 trillion escaped taxation due to this income cap.
- Gradually increase the payroll tax. This tax would affect all workers, but not by much. The current payroll tax for Social Security is 12.4%. This provision would increase the tax by 0.1% every year until it reaches 14.8% in 2043. However, most workers have half of their payroll tax liability covered by their employers, so the increase would likely be 0.05% per year.
- Switch the COLA system. The current system that determines the cost-of-living adjustment (COLA) every year is flawed and inaccurate. This bill would switch from the CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers) system to the CPI-E system, or the Consumer Price Index for the Elderly, which takes seniors’ expenses and lifestyles into account more accurately.
Why the bill could fail
Although it narrowly missed passing in the House with 210 out of the 218 votes it needed, the bill still faces an uphill battle.
- It won’t pass in the Senate. The current Senate will not pass the bill. No Republicans have voiced support for the bill, which is a problem as it would require 60 votes to pass. In fact, the current Senate is actively trying to cut Social Security benefits in order to reduce the national debt despite the fact that Social Security by law cannot influence the national debt.
- The president opposes direct action to save Social Security. Even if the Senate were to pass the bill, President Trump would not sign it into law. He believes any direct changes to the program would be met with public outrage against Republicans during the next elections. One of his indirect measures was the Tax Cuts and Jobs Act of 2017, which was intended to boost workers’ wages and, therefore, taxable income. This benefit of the bill has yet to be seen.
- It does not account for declining birth rates. Birth rates have plummeted in the United States over the past decade. In fact, the Centers for Disease Control and Prevention (CDC) determined that 2018 saw the lowest fertility rates ever for women between ages 15 to 44. Social Security is built on the idea that the working generation will pay into the system to support the retired generation. However, if birth rates continue to decline, there will not be enough people in the workforce to support aging populations later.
If the Social Security funding problem is not fixed soon, benefits could be cut by 23% across the board within 16 years. One-third of retirees depend on Social Security to provide 90% of their income, and 60% rely on benefits for half of their income. If these people see a quarter of their income disappear, it could be a problem for millions of seniors.
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