The Social Security 2100 Act Is aBad Deal for Workers
pa href=https://www.cato.org/people/romina-boccia hreflang=undRomina Boccia/a
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pDemocrats are reportedly gearing up to move the Social Security 2100 Act (H.R. 5723) in the House Ways and Means Committee this fall. Their goal is to bring the bill to the House floor before the election./p
pIntroduced last year by Rep. John Larson (D‑CT), Democrats a href=https://www.cnbc.com/2022/08/15/what-democrats-call-for-social-security-reform-means-for-benefits.htmlannounced/a their plans earlier this month, around the time a href=https://www.cato.org/blog/overdue-change-social-security-age-87Social Security marked 87 years since enactment/a. President Biden also jumped on the bandwagon along with 202 Democratic co‐sponsors./p
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blockquote data-toggle-class=twitter-tweet class= lozad-slowp lang=en dir=ltr lang=en lang=enI believe rebuilding the middle class is the moral obligation of our time – that's why I'm so proud to celebrate Social Security's birthday.br /br /It's why me and my Democratic friends on the Hill are working to protect and expand it.br /br /Republicans in Congress want it sliced. a href=https://t.co/rYd6t7PIFzpic.twitter.com/rYd6t7PIFz/a/p— President Biden (@POTUS) a href=https://twitter.com/POTUS/status/1559253697493929985?ref_src=twsrc%5EtfwAugust 15, 2022/a/blockquote
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/ppThis is not the first time that Rep. Larson introduced a Social Security reform bill. Yet, the version before Congress now is very different from previous iterations. A closer look at the changes to the Social Security 2100 Act indicate that Democrats’ election timing is likely no accident./p
pH.R. 5723 would expand Social Security in size and scope, to the detriment of workers. And it would do so in a politically driven way that lacks transparency and good policy principles./p
pWhile I was no fan of the original bill nor of the version introduced last Congress, I could appreciate what Rep. Larson was trying to accomplish by making the program solvent over the 75‐year projection period. The new version of the bill gives up on long‐term solvency, undermining one long‐standing principle./p
pH.R.5723 is also far less transparent and far more political than its previous version (H.R.1902). H.R. 1902 introduced last Congress would have raised taxes and benefits across the board, growing a href=https://www.cato.org/blog/overdue-change-social-security-age-87this outdated and poorly targeted old‐age entitlement program/a in size and scope. As my then‐colleagues Rachel Greszler and Drew Gonshorowski at the Heritage Foundation a href=https://www.heritage.org/budget-and-spending/report/the-personal-and-fiscal-impact-the-social-security-2100-actpointed out/a, the Social Security 2100 Act would have doubled down on what’s already a raw deal for most workers:/p
blockquotepA comparison of the additional Social Security benefits that workers would receive under the Social Security 2100 proposal versus what they would earn if they set those taxes aside in their own personal retirement accounts shows that all workers would be better off keeping their own money and saving it for retirement. […] if a median‐income worker who retires today had been able to invest his payroll taxes […] he could have purchased a private annuity that would provide at least $25,000 more every year than the amount he receives from Social Security./p
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pAnd yet, the new version is even worse. H.R. 5723 adopts more than a dozen benefit increase provisions, but emonly for five years/em. Previous changes to Social Security have always been permanent because workers are supposed to be able to plan for how much to save to supplement their Social Security benefits in retirement. Temporary changes that introduce legislative uncertainty undermine that goal./p
pThe temporary nature of the benefit increases is rarely mentioned by lawmakers or by the media. In an a href=https://theintercept.com/2022/02/19/deconstructed-social-security-john-larson/interview/a with The Intercept’s Ryan Grim and Jon Schwarz, Rep. Larson explained that the intention is for these benefits to be made permanent. In his own words: “once that benefit is implemented it would be extraordinarily hard to take off.”/p
pRep. Larson also points to President Biden’s proposal that there would be no tax increases for families making $400,000 or less to explain changes to the payroll tax provisions in the bill. Even in this respect, critical details go unmentioned./p
pThe $400,000 threshold level is a fixed amount that is not indexed to price inflation or the national average wage index (AWI). This means that more and more earnings would be subject to payroll taxes as time goes on. Eventually, all covered earnings would be subject to payroll taxes, as the current‐law taxable maximum rises with AWI to exceed $400,000. Social Security projects that this will occur in 2050. Technically then, this proposal would automatically increase taxes on households earning $400,000 in the future./p
pThe Social Security Administration provided a href=https://www.ssa.gov/oact/solvency/JLarson_20211026.pdfestimates/a of all provisions of H.R.5723 and their impact on Social Security’s finances assuming legislative changes were to take effect as enacted. This assumes that benefit increases would be allowed to expire after five years. This is a common gimmick in spending and tax bills to obscure long‐term budgetary impacts from provisions that will most likely be made permanent./p
pInterested readers can get a better sense of the various provisions in this bill by reading through Social Security’s a href=https://www.ssa.gov/oact/solvency/JLarson_20211026.pdfletter to Rep. Larson/a. Though you should take the numbers with a heap of salt because I agree with Rep. Larson on this point: once you put a benefit increase in place, good luck trying to get rid of it later./p