In November, almost 50 million retired workers received their Social Security checks. It might not seem like much, but for most retirees, it's a necessary source of income to help cover their expenses. More than 16 million seniors were lifted out of poverty in 2020.
Lawmakers are aware of the program's flaws. Social Security is facing a $20 trillion funding shortfall over the next 75 years and many members of Congress have offered solutions. You might be surprised to learn that Biden's top economic advisor doesn't always agree with the president.
President Biden is giving a speech. The official White House photo was taken by Adam Shultz.
Biden released a plan to improve Social Security's finances before he was elected president. The proposal would raise additional revenue in order to offset the long-term deficit.
Increasing payroll taxation on high-earning workers was one of the most important changes that Joe Biden proposed.
All earned income between $0.01 and $160,200 is subject to the payroll tax. The tax that provides most of Social Security's revenue is called the tax. The payroll tax can't be applied to earned income over $170,200. Over a trillion dollars in earnings are not subject to Social Security's payroll tax.
If Biden's proposal is adopted, the payroll tax on earned income above $400,000 would be reintroduced and there would be a hole between the maximum taxable earnings cap and $400,000. The doughnut hole will eventually close because of the maximum taxable earnings cap.
Revenue for Social Security would be boosted if a larger scope of earned income were taxed.
Raising additional revenue for Social Security is something that current Treasury Secretary Janet Yellen can get behind. Biden's economic advisor doesn't agree with the idea that Social Security's issues can be solved by taxing the rich.
The Washington Post published an opinion piece in which Yellen was one of five co- authors. Don't blame entitlements The authors wrote about it.
There is room for additional spending reductions in these [entitlement] programs, but not to an extent large enough to solve the long-run debt problem. The Social Security program needs only modest reforms to restore its 75-year solvency, and these should include adjustments in both spending and revenue.
Biden wants to raise revenue. Spending reductions for Social Security would also be involved in the approach taken by the lady.
The image came from the same source as the one above.
What are Social Security benefits like?
The full retirement age is currently 67 for people who were born in 1960 or later. Retirees can receive 100% of their monthly benefit at the age of the FRA. Future beneficiaries would have to decide if they want to accept a reduction or wait longer to get their full benefit if the FRA were increased. There would be a reduction in lifetime benefits.
The second way to reduce Social Security expenditures is to use the Chained Consumer Price index as the program's measure of inflation. Consumers will trade down to a less expensive good or service if one becomes expensive. Lower cost-of-living adjustments would be caused by the ChainedCPI.
Reducing benefits is one of the ways Social Security spending could be cut. The OASI is expected to exhaust its cash reserves by 2034. If this were to happen, benefit cuts of up to 23% may be necessary to keep benefit checks going.
A dual approach that aims to raise revenue and manage future outlays is the best way to strengthen America's top retirement program.
Social Security's solvency time line is likely to be increased by decades if the payroll tax is expanded. Raising the payroll tax alone wouldn't be enough to solve the Social Security shortfall.
Raising the full retirement age won't provide an immediate benefit. It would take decades to provide any meaningful cost savings, which is of no help to the OASI, which is expected to run out of assets in 12 years.
It would make sense to combine the two ideas. Biden's proposal to raise the payroll tax would add immediate revenue and cost-cutting measures would help to reduce outlays decades down the road. As the OASI's asset reserve depletes in 2034, look for Yellen's proposal to get traction.
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