Efforts to Revive Social Security: A Herculean Task for Lawmakers

Understanding the Social Security Fairness Act

The Social Security Fairness Act (SSFA) was co-sponsored by 329 members of Congress in 2024, making it one of the most supported legislative proposals of the year. However, this high level of support does not necessarily indicate a willingness among lawmakers to address the core issue of insolvency within the retirement pension program. The SSFA aims to eliminate two existing provisions that reduce benefits for millions of public employees who have separate pension systems. This means more Social Security benefits for these workers. However, the SSFA would increase the total amount of Social Security benefits paid out without providing new revenues to fund them. Despite this, it is anticipated that the bipartisan proposal will pass Congress and President Joe Biden, who promised to eliminate these provisions during his 2020 campaign, is expected to sign it into law.

The Social Security Challenge

For many years, Social Security has been considered the "third rail" of American politics, a topic that neither Democrats nor Republicans dare to propose changes to for fear of upsetting the elderly and disabled voters who rely on the program. Approximately 70 million Americans are beneficiaries of Social Security, making it the largest federal entitlement program. The Social Security Trustees' most recent report suggests that the system will become insolvent by 2035 unless Congress approves major reforms soon. The ratio of workers contributing to the system compared to beneficiaries is decreasing, with the ratio standing at 16 workers to one beneficiary in 1950, compared to today's ratio of 2.8 workers per beneficiary. Furthermore, retirees are living longer, drawing more benefits over time.

Proposed Reforms: Raising the Tax Cap and the "Big Idea"

Two lawmakers have recently proposed solutions to the Social Security crisis that go beyond the traditional approach of raising taxes or reducing benefits. Rep. John Larson (D-Conn.) has repeatedly introduced his Social Security 2100 Act, which has garnered strong support among his Democratic colleagues. Larson's bill would not increase the Social Security tax rate, but it would apply Social Security taxes to all taxpayers earning more than $400,000 annually. On the other hand, Sen. Bill Cassidy, a Louisiana doctor and ranking Republican on the Senate Committee on Health, Education, Labor and Pensions, has proposed the "Big Idea". This proposal involves the creation of a new $1.5 trillion investment fund, separate from the Social Security Trust Fund. The fund would be managed by an independent company and invested in a conservative portfolio of private sector entities, functioning like Sovereign Wealth funds.

Bottom Line

The challenge of reforming Social Security is a complex one, with many potential solutions and many potential pitfalls. The proposals put forth by Rep. John Larson and Sen. Bill Cassidy represent innovative approaches to this issue, but whether they will be successful remains to be seen. What are your thoughts on these proposals? Do you think they could be the solution to the Social Security crisis? Share this article with your friends and let's start a conversation. Don't forget to sign up for the Daily Briefing, which is delivered every day at 6pm.