2032 is a date that Washington keeps in the back of his mind. It’s not that it’s far away; rather, it’s not at all. According to the Social Security trustees’ projections, the program’s primary trust fund will run out in just six years. If Congress does nothing before then, about 70 million Americans may see a $500 monthly check reduction. That figure isn’t theoretical. For many retirees, that means rent, groceries, or prescription drugs.
During a recent conference call, Social Security Administration chief actuary Karen Glenn stated bluntly, “We need to either raise scheduled revenue, reduce scheduled benefits or some combination of the two.” It’s a basic math problem, she said. She omitted to mention that it’s a politically complex issue, even though she didn’t have to.
Congressman Tom Suozzi and Republican Representative Tom Cole of Oklahoma introduced the Bipartisan Social Security Commission Act earlier this year. With the specific objective of generating reform recommendations within a year, the legislation would establish a 13-member commission that would be modeled after the Social Security Commission that last pulled the program back from the brink in 1983. The fact that both sides appear to agree on the urgency, if not the solution, is noteworthy.
For a politician in Washington, Cole’s framing was remarkably straightforward. He publicly stated that doing nothing is just not an option and that many of his colleagues refuse to accept the reality regarding Social Security’s solvency. People tend to notice that kind of candor. Both representatives may perceive a limited window of opportunity that past Congresses have allowed to close without taking any action.
There are already a variety of proposals on the table, from blunt to structural. The Social Security payroll tax cap, which is currently $184,500, is one of the most talked about. The program is funded by a 6.2% payroll tax, but any income above that threshold is exempt. The program’s runway could be greatly extended without affecting benefits at all by removing or reorganizing that cap, possibly through a so-called “donut hole” strategy in which earnings between $184,500 and $400,000 remain exempt but income above that level is taxed once more. Naturally, the question of whether Congress has the courage to impose higher taxes on higher earners is quite different.
This is a common misconception that needs to be addressed. If Social Security were to become insolvent, the program wouldn’t instantly vanish. Benefits would continue to be distributed. However, the average monthly payment, which is currently about $2,071, would be automatically reduced; this automatic feature is what makes inaction so risky. Voting is not necessary. No argument. The cut simply occurs.
As you watch this debate play out, you’ll notice how many reputable policy organizations have endorsed the commission idea, ranging from the Progressive Policy Institute on the left to the American Enterprise Institute on the right. Such cross-ideological consensus is uncommon enough to merit consideration. The stakes are straightforward, according to Maya MacGuineas of the Committee for a Responsible Federal Budget: 70 million Americans depend on this program, a 24 percent benefit cut is already imminent, and a commission would be the first significant step toward long-term solutions.
Whether the legislation will proceed swiftly enough to be significant is still up in the air. Everyone is aware that commissions can quickly turn into exercises in delay. However, the precedent from 1983 indicates that they are not required to be. For many years, Social Security remained solvent thanks to the reforms that this commission produced. The real question that hangs over all of this is whether the Congress of today has the same resolve or something similar.
As Glenn stated, the math isn’t the difficult part. In fact, the math makes sense. To determine who pays, political will is required. If this decision is made before 2032, everyone will benefit.
