Bad news is generally given more coverage than good news is. That’s especially true when it comes to the Social Security program, which is one that millions of Americans depend on to help them make ends meet every month.
There’s been so much bad news about Social Security recently. The Social Security Trustees just published their 2022 outlook. It wasn’t a surprise that they predicted the program’s trust funds would run out of money in 2035. However, the prospect of a 20% pay cut for seniors on Social Security down the road didn’t make matters any better.
However, there could be some good news. Is it possible that a $2,400 pay increase for Social Security recipients will happen instead of a large wage reduction?
Boosting benefits
On June 9, 2022, U.S. Rep. Senator Bernie Sanders (I-Vt.) and Peter DeFazio (D-Ore.) introduced the Social Security Expansion Act (SSEA) in both houses of the US Congress. This bill attempts to keep Social Security solvent until 2096 by a variety of means.
The Social Security Expansion Act, or SSEA, would increase monthly benefits for current and future Social Security recipients by $200 each month, or $2,400 each year. Individuals wouldn’t have to wait till age 65 to receive the benefit under the bill. Anyone who becomes 62 years old will be able to benefit from it.
DeFazio and Sanders also want to raise Social Security’s cost-of-living adjustments. They have proposed using the Consumer Price Index for the Elderly (CPI-E), which incorporates healthcare expenditures, to modify the formula used to calculate COLA amounts.
As of April 2022, the typical Social Security payment for retired workers was $1,666 per month. A 12% boost to this amount would be $200 more per month.
Footing the bill
Would this be feasible in the future? Where would the additional funds come from to cover the SSEA’s additional expenditures? Wealthier Americans would have to pay for it.
The Social Security tax is currently paid only on the first $147,000 of income. DeFazio and Sanders want it to be changed. The proposed bill would also impose a tax on earnings of more than $250,000. According to a fact sheet on the proposed legislation, “nearly 93 percent of households would not see their taxes rise by a single penny.”
One thing to remember about the proposal is that it maintains a “doughnut hole.” Any income between $147,000 and $250,000 would be exempt from Social Security taxes.
Income from employment is currently the only type of income subject to Social Security taxation. The SSEA, on the other hand, would expand the tax to investment and commercial income.
Assessing the prospects
In the United States House of Representatives, the bill has already gained a large number of supporters. More than 40 organizations have voiced their support for the SSEA, including the AFL-CIO, Alliance for Retired Americans, and American Federation of Teachers.
In the House of Representatives, the SSEA appears to have a good chance of winning enough votes to pass. The Senate, on the other hand, is a considerably more challenging situation.
Following the November elections, prospects for important Social Security reform might become even more difficult. However, regardless of whether benefit increases aren’t on the table, political leaders will be under pressure to improve the federal program at some point.
“I’m confident changes will be made,” said Martha Shedden, in an interview with CBS News. “I do not know if this is the bill that will end up passing, but there continues to be more and more movement on this issue.”
The bad news is that the promise of a $2,400 increase in Social Security payments may be nothing more than a fantasy. The good news is that the huge cuts many people are dreading may not happen after all.
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