While the government could, at any time, decide to deficit spend to maintain full Social Security benefits in roughly twenty-five years, if CBO estimates are to believed (and they should be taken with a boulder of salt), Social Security will only be able to pay out 75 – 80 percent of current benefits. Most of the ‘serious’ proposals involve either raising the retirement age or cutting benefits (by having them increase at a rate lower than inflation). There is, of course, a third option, one championed by Democratic Senator Mark Begich (boldface mine):
The Begich bill would lift the current payroll tax cap, which exempts wages in excess of a certain amount ($110,100 this year) from the tax. In turn, it would give high earners, who would pay more, additional benefits upon retirement, just as benefits increase as wages do for workers below the cap.
According to the Congressional Research Service, a change like that would almost entirely wipe out the program’s long-run actuarial imbalance. Specifically, it would eliminate 95 percent of the shortfall, meaning that a mild increase in the payroll tax rate from 12.4 percent to 12.5 percent would be enough to cover the tiny remaining gap. And without any changes at all, the program would be able to pay out full benefits until after 2085. Indeed, the exhaustion date for the trust fund following such a change is so far in the future that CRS didn’t even calculate it.
But Begich’s bill doesn’t just increase taxes for high earners. It also increases benefits across-the-board. While Bowles-Simpson and Domenici-Rivlin adopt a stingier “chained CPI” measure for inflation, Begich adopts “CPI-E,” or a measure that specifically captures inflation in goods that seniors buy.
Due to deteriorated health and other considerations, goods seniors buy tend to be more expensive than those younger people purchase. Begich’s CPI-E change would mean, effectively, a 4.5 percent benefit increase for the program’s beneficiaries, including not just seniors but their designated survivors and disabled Americans as well.
A proposal that would allow the elderly to finish their lives with dignity? Who knows, maybe it will pass. It is good to see at least one Democrat remember whom the Democratic Party is supposed to represent.