Many older Americans received a Social Security benefit in November. These payouts are seen as a necessity by almost 50 million retirees.
America's top retirement program is in deep trouble even though it provides a financial foundation for our nation's retirees. President Joe Biden thinks he has a solution to Social Security's problems, but he needs the help of newly elected lawmakers to fix it.
President Biden is giving a speech. The official White House photo was taken by Adam Shultz.
Each of the past 83 years, the Social Security Board of Trustees has released a report that looked at the financial status of the program over the short and long term. Anyone can see how revenue is collected and where it ends up with the Trustees Report.
The trustees report factors in macroeconomic and demographic factors to determine the financial health of social security
Every Trustees Report since 1985 has projected a long-term funding shortfall.
demographic shifts are to blame for the dire financial footing of Social Security. The United States has historically low birth rates, a near-halving in net immigration into the country over two decades, and growing income inequality. The program's financial foundation will only get worse with these changes weighing on the worker-to-benefit ratio.
The Old- Age and Survivors Insurance Trust Fund is expected to run out of assets in 2034. The OASI pays benefits to over 50 million retired workers and over 5 million survivors of deceased workers every month. The Trustees believe that an across-the-board benefit cut of 23% would be necessary if the excess cash were to be exhausted in the next 12 years. A 23% benefit cut would reduce the average Social Security check by about $420 per month.
The size of Social Security checks paid to retired workers 12 years from now is very much in question.
The image came from the same source as the one above.
Joe Biden released a plan to strengthen Social Security before he was elected president. Two of the four changes Biden wants to make to Social Security are key toshoring up the program.
The biggest Social Security change proposed by Biden would tackle income inequality.
Social Security's payroll tax will be applicable to earned income of between $0.01 and $160,200 in the year 2023. Earned income is wages and salary but not investment income Almost all of the working Americans earn less than the maximum tax rate. Earned income above this level is not subject to the payroll tax.
The payroll tax on earned income above $400,000 would be reintroduced under the proposal by Joe Biden. This doughnut hole would eventually close due to the fact that the maximum taxable earnings cap tends to rise with inflation. The asset reserve will be pushed back by this increase in payroll tax revenue.
Replacing the program's measure of inflation is one of the changes President Biden wants.
Social Security's cost-of-living adjustment is determined by the Consumer Price Index for Urban Wage Earners and Clerical Workers. This is a price-measuring index that focuses on the spending habits of wage earner and clerical workers. People who aren't receiving a social security benefit.
Biden would like to see the consumer price index for the elderly used to calculate cost of living adjustments. An annual cost-of-living adjustment is likely to be provided by the tracking of the spending habits of older Americans.
Joe Biden needs the support of Congress to amend the Social Security Act. The 118th Congress was formed a few days ago.
Will the new Congress work with the president to make Social Security better? The "All signs point to no" answer would pop up if I shook the Magic 8 Ball.
The previous Congress had a razor-thin majority in the Senate for Democrats and a small majority in the House.
Both parties agree that Social Security needs to be looked at. They've approached their fixes from different points of view. Biden's proposal seeks to raise additional revenue from high-earners and boost benefits for low-earning workers, whereas the Republican solution seeks to increase the full retirement age and shift the inflationary measure to the ChainedCPI. Reducing long-term expenditures to save Social Security money is the focus of the GOP plan. Both parties have solutions that work on different timelines.
The Senate needs to approve amendments to Social Security. 60 votes are needed to change America's top retirement program. Legislation to alter Social Security would need bipartisan support if it were to go through. Since Ronald Reagan, it has been almost impossible for a president to get support.
Biden's Social Security changes are not likely to be supported by the Congress.