Last summer we looked at upcoming problems in the Social Security System, with an eye toward its pending insolvency. Today we look at what “solutions” have been proposed in Congress during this year. Remember that this problem has been staring our elected officials in the face for years. We fear that 2021 proposals constitute, at best, too little, too late. As usual.
The need for reform has been well documented throughout recent history. Originally overfunded by design, the System built up a sizable Trust Fund for future benefit payments. Congress spent the actual money in the Trust Fund, replacing it with a huge I.O.U. They “own” the problem.
Changing demographics have now rendered promised benefits unsustainable. Without changes, present and future Social Security beneficiaries will soon face a sharp reduction in benefits. Politicians understand that senior citizens vote in consistently high numbers. Keeping seniors happy is paramount for their re-election. So, how did Congress fare in the quest for restoring sustainability? Simple answer—poorly, again.
Summarizing 2021’s proposals introduced into both Houses of Congress these past 12 months, we found the following:
- Two proposals would restart the payroll deduction for Social Security above either $250,000 or $400,000 income levels, as the current payroll deduction stops for incomes above $142,800
- Proposed benefit increases for low earners, older retirees, students, and workers in general
- Expanded eligibility for Supplemental Security Income (SSI) benefits (note that the SSI portion of Social Security is actually a welfare program, and is funded by General Revenues, rather than payroll taxes)
- Requiring paper statements for many more participants and beneficiaries (unless waived by the participant)
- Ensuring that Social Security offices are fully staffed for phone calls
- Improving benefits for surviving disabled spouses
Implementation of all these proposals would bring a small increase in overall revenue to the System, but with more than offsetting costs. Reviewing the list of proposals leaves us wondering if Congress understands that the System is going broke. Americans understand, and they are demanding action.
Historically, voters tend to punish politicians who offer realistic fixes. Perhaps we are our own worst enemies. That is not a welcome thought.
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