What’s at stake for Social Security beneficiaries this election
Social Security is one of the most pressing concerns for voters this November. The trust fund is projected to dry up in about 10 years, yet efforts to reform it have stalled, and neither presidential candidate seems inclined to weigh in. This Washington Examiner series, Social Security Stakes, will examine how we got here, what could be done, and if anybody has the stomach to tackle it.
Social Security is a pivotal program for millions of retired and disabled citizens, giving them monthly payments, but it is spiraling toward insolvency and the threat of delayed or reduced benefits for citizens.
Both Vice President Kamala Harris and former President Donald Trump claim to have a fix to the looming issue, but the clock is ticking for solutions to prevent problems for older citizens in the coming decade.
The program’s Old-Age and Survivors Insurance trust fund is projected to be exhausted in 2033, the program trustee’s 2024 report found, at which point benefits would be cut and possibly delayed for those receiving Social Security. With the program needing significant reform to avert insolvency, here is what is at stake in the presidential election for the widely used government program.
What happens if looming insolvency is not addressed
If Social Security is not addressed by Congress and the president before projected insolvency, the program would not go bankrupt or be unable to pay benefits, but those benefits would be cut and delayed.
As soon as the program hits insolvency, beneficiaries would immediately see 21% of their projected benefits cut, according to the 2024 report. The cut would come from the program only being able to pay 79% of scheduled benefits for those in the program due to the insolvency of the retirement trust fund.
The projected insolvency comes as the program pays out more retirement checks than wager earners are contributing. The disparity in payments versus contributions is due to the baby boomer generation reaching retirement age, in addition to gradual increases in life expectancy.
“The OASI cost rate rises rapidly from 2023 to about 2040. During this period, the aging of the baby-boom generation will increase the number of beneficiaries much faster than the number of workers increases, as subsequent lower-birth-rate generations continue to replace the baby-boom generation at working ages,” the trustee’s 2024 report said.
“During the 2040s, the cost rate continues to increase, but at a relatively slower pace, because the aging baby-boom generation is gradually replaced at retired worker benefit eligibility ages by the lower birth-rate generations that followed,” the report continued.
While there has been significant discussion about cuts to monthly benefits, which would likely happen once the program has exhausted its trust fund, the full impact of the reduction is not clear, according to Merrill. The monetary amount of benefits would be reduced depending on various factors for the individual beneficiary.
The Committee for a Responsible Budget found that beneficiaries of all income levels would see a significant cut to their benefits in the first year.
Low-income retirees would see a $7,500 total reduction in benefits in 2034 for single-income couples, while dual-income couples would see a $10,000 reduction in benefits. Middle-income retirees would see their benefits cut by $12,400 for single-income couples and $16,500 for dual-income couples in the first year of insolvency for the trust fund. High-income retirees would see the highest reduction of benefits, with single-income couples seeing $16,300 less paid out in the first year, and dual-income couples would see $21,800 less in benefits in 2034.
A 2017 study from the Social Security Administration found that roughly 19.6% of those 65 years old and older relied on payments from the program for at least 90% of their income.
The U.S. Census Bureau has also found that 8% of those 65 years old and older lived in poverty, with 69.7% of those households in poverty receiving regular social security benefits. Of the older households not in poverty, 91.5% receive regular payments from the program. Cuts to the program’s benefits through insolvency could increase poverty figures.
As lawmakers contend in the future with extending the Tax Cuts and Jobs Act of 2017, also known as the Trump tax cuts, and other actions that could increase the budget deficit, raising additional funds to make up for the looming insolvency of Social Security will increasingly become part of the policy discussion.
Harris’s plan
The plan outlined by Harris’s campaign has called for increased taxes on high-income citizens to help strengthen the finances of the program.
“She will strengthen Social Security and Medicare for the long haul by making millionaires and billionaires pay their fair share in taxes. She will always fight to ensure that Americans can count on getting the benefits they earned,” Harris’s campaign touts on her issues website.
The 2024 Democratic Party platform calls for a rejection of efforts to “privatize” the program, something not endorsed currently by the GOP, and calls on “asking the wealthiest Americans to pay their fair share” toward Social Security.
Harris’s plans have mirrored Biden’s on Social Security, which has called for the reinstatement of a payroll tax on those making more than $400,000 annually. Biden has called for that measure, but in each of his federal budget proposals while in office, he has not included the provision.
Currently, employers and employees are taxed up to 6.2% of wages toward Social Security, with a maximum taxable amount of $168,600 for 2024.
Trump’s plan
Trump has made Social Security a campaign issue since the primaries, vowing to protect the program from cuts.
Trump’s platform has claimed he will “fight for and protect Social Security and Medicare with no cuts, including no changes to the retirement age.”
“Social Security is a lifeline for millions of Retirees, yet corrupt politicians have robbed Social Security to fund their pet projects. Republicans will restore Economic Stability to ensure the long-term sustainability of Social Security,” the 2024 Republican Party platform said.
The Trump campaign has said that cutting waste in other parts of the government would help raise money to help Social Security.
A Trump proposal that could have adverse effects on the fiscal health of Social Security is eliminating the income tax on benefits from the program. Of the roughly 65 million people who receive Social Security, this proposal would benefit the roughly 40% of recipients who must file taxes on their benefits each year.
An analysis from the Tax Foundation found that it would increase the federal government’s budget deficit by roughly $1.6 trillion over the next 10 years and would send Social Security and Medicare trust funds to insolvency faster than current projections.
“Exempting all Social Security benefits would likely accelerate the insolvency of the trust funds. For Social Security (including the disability portion of the program), it may move insolvency up two years, from 2035 to 2033, and for Medicare, it may move it up six years, from 2036 to 2030,” Garrett Watson, a senior policy analyst and modeling manager for the Tax Foundation, said in the report.
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With both campaigns lacking details on how they plan to address Social Security’s looming financial woes, the program may be headed for projected insolvency without a solution.
If projections remain roughly the same for Social Security’s insolvency, neither Trump nor a two-term Harris administration, beginning in January, would be in power when the time comes.