BEYOND THE NUMBERS
House Ways and Means Social Security Subcommittee Chairman Sam Johnson has introduced a bill that he claims would “save” Social Security — but its savings would come entirely from cutting vital benefits. Although policymakers must address Social Security’s long-term financing gap, they don’t need to rush to enact such an ill-advised plan.
The Johnson plan:
- Cuts Social Security’s annual cost-of-living adjustments for all beneficiaries (and eliminates them completely for some), which would erode the value of Social Security benefits as people age into their most vulnerable years;
- Slashes benefits for most retirees by flattening Social Security’s progressive benefit formula, weakening the link between earnings and benefits; and
- Raises Social Security’s full retirement age — currently rising from age 66 to 67, to 69 — which would cut benefits across the board for all new retirees.
Under the plan, the vast majority of retirees would get less than they’ve been promised — and the cuts would only deepen as they age and cuts to cost-of-living adjustments compound. For example, a worker who earns an average of $49,000 over 44 years would take a 17 percent cut in the first year of retirement, growing to a nearly 24 percent cut over his or her retirement, according to Social Security’s actuaries.
That approach is out of step with Americans’ views. The public overwhelmingly opposes cutting Social Security. When pressed to develop their own solvency plan, Americans of both parties lean strongly toward paying more — not getting less. President-elect Donald Trump promised during the campaign that he wouldn’t cut Social Security benefits, a promise that he extended to raising the retirement age.
Policymakers should limit any Social Security benefit cuts and carefully target them to avoid causing significant hardship. Social Security benefits are already modest, and they’re especially important for women and minorities. Moreover, the risk of retiring without enough savings is growing for today’s workers.
Social Security’s tax base has eroded since the last time policymakers addressed solvency, in 1983, and policymakers have many options to shore it up, such as lifting the cap on Social Security payroll taxes — options that the Johnson bill ignores. In fact, the bill would actually reduce Social Security’s funding by eliminating a tax that only higher-income seniors pay — requiring even bigger cuts to achieve solvency.
Policymakers should carefully craft a solvency package that strengthens public confidence in the program, spreads sacrifices fairly across generations, and gives workers plenty of notice so that they can plan their work, saving, and retirement. Social Security’s long-term financing gap is driven by demographics, particularly population aging, which leaves fewer workers per retiree. Waiting a few more years to address the financing gap won’t change the structural, but manageable, mismatch between costs and revenues. Social Security faces no imminent crisis, so policymakers have time to do the job right.