President Joe Biden has been abundantly clear that he doesn’t want any cuts to Social Security. In his State of the Union address in February, the president stated, “If anyone tries to cut Social Security, I will stop them.”
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But that doesn’t mean Biden isn’t open to revising the popular federal program in ways that don’t reduce benefit payments. It’s quite possible that the president could soon push for a huge Social Security change.
On board with Bernie?
The Washington Post reported on Feb. 23 that President Biden met privately with Sen. Bernie Sanders (I-Vt.). The main topic discussed was Social Security.
Sanders, along with Sen. Elizabeth Warren (D-Mass.) and other Democrats, want to raise the cap on the payroll tax that helps fund Social Security. Currently, annual income above $160,200 isn’t subject to this payroll tax. Sanders has proposed also taxing all income above $250,000.
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It appears that Biden could be on board with this increase to the payroll tax cap. In his 2020 presidential campaign, he proposed something similar. However, instead of applying a threshold of $250,000, Biden’s plan was to subject income above $400,000 to the payroll tax.
The president hinted that he’s agreeable with some level of higher taxes in his State of the Union address with a reference to “making the wealthy pay their fair share.” However, Biden has also committed on multiple occasions to not increasing taxes on Americans with household income below $400,000. If he went along with Sanders’ Social Security plan, he would have to renege on that pledge.
A 75-year solution
Sen. Sanders doesn’t just want to increase the payroll tax cap. He also has proposed raising Social Security benefits by $2,400 per year. Even with the added benefits, the plan would fully fund the program for the next 75 years.
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You don’t have to take the senator’s word on that projection. Social Security’s chief actuary, Stephen Goss, confirmed that the proposed changes would allow all scheduled benefits to be paid out fully over a 75-year period.
By comparison, Biden’s campaign proposal to increase the payroll tax cap to $400,000 would only delay Social Security’s insolvency until 2044. After that point, Social Security recipients would face the prospect of an 11% benefit reduction.
There are other potential ways to avoid steep benefits cuts. For example, raising the full retirement age from 67 to 69, then indexing it based on longevity, would, in combination with Biden’s plan to increase the payroll tax cap to $400,000, fully fund Social Security through 2059. Other possible alternatives include raising the payroll tax percentage.
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A change is gonna come
Will President Biden throw his support behind Sen. Sanders’ huge change to Social Security? That remains to be seen. But the president recognizes that something needs to be done.
Last year, Social Security’s trustees projected that the combined trust funds for the program would be depleted by 2035. But the Congressional Budget Office now estimates that the trust funds could run out of money sooner than expected, as early as 2033.
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Significant changes will be needed to avoid insolvency. If no changes are made, Social Security recipients will see their benefits cut by at least 20%. One way or another, major changes to the federal program are on the way.
