There is bipartisan support among Democrats and Republicans for reforms to the Social Security program in the United States. In 2023, Social Security recipients will receive a cost-of-living adjustment (COLA) of 8.7%, the largest increase since 1981 and the fourth largest COLA in the program’s history.
The Social Security Administration (SSA) reports that in 2022, approximately 66 million Americans received a monthly Social Security benefit, totaling over $1 trillion in benefits paid for the year.
However, the trustees for Social Security have announced that they will be unable to pay all required benefits in 2035.
Social Security Funds Would Run Out
The Trustees Report estimates that the program has a cash deficiency of $20.4 trillion through 2096, at which point the combined trust funds, which support payouts for the elderly, survivors, and disabled, are projected to be exhausted.
Medicare, which covers nearly 64 million senior citizens and Americans with disabilities, is in worse shape. The medical insurance trust fund, known as Medicare Part A, will only be able to pay scheduled benefits until 2028.
This situation is due to a combination of Americans living longer, having fewer children, and an increase in retirees in the coming years. President Joe Biden proposed several reforms to Social Security during his 2020 campaign, including increasing the payroll tax cap, raising the minimum benefit, and changing how COLAs are calculated.
These proposals received bipartisan support in Congress, and the new Congress is expected to consider the future of Social Security.
Despite the widespread support for reform, it remains a contentious issue. Some argue that increasing the payroll tax cap or changing the calculation method for COLAs would unfairly burden businesses and higher-income earners.
Others argue that not addressing the projected shortfall in the program could lead to significant cuts in benefits for future retirees.
It is likely that any reforms will involve a combination of measures, including potentially increasing revenue through higher payroll taxes and finding cost savings through changes to the program’s structure.
Possible Reform Would Increase Retirement Age
One potential reform that has received some support is the idea of gradually increasing the retirement age to reflect increased life expectancy. This would involve a slower phase-in of the age increase, so as not to disproportionately affect those who are already close to retirement.
Another idea that has been proposed is to reduce benefits for higher-income earners while increasing benefits for those who have lower incomes and are more reliant on Social Security for their retirement security.
It is clear that the program, which has been a cornerstone of the American retirement system for over 85 years, is facing significant challenges.
It will be important for lawmakers to find a way to address these challenges and ensure the long-term stability of the program, while also ensuring that it remains fair and provides adequate support for those who rely on it
