The Next President’s Social Security Challenges

While we await the results of the presidential election next week, a new government will form the White House early next year and Social Security will be one of the first challenges it faces.

Although both major party candidates, former Republican President Donald Trump and Democratic Vice President Kamala Harris, have campaigned on multiple fronts to win the American election, National Security has fallen especially on the way though there is an upcoming financial signal that could see benefits. cut in the next decade.

Funded by taxes and trust funds, Social Security is the single largest expense in the US government’s annual budget, reaching $1.3 trillion, or 5 percent of GDP, by 2023. It pays benefits to individuals more than 70 million pensioners. , people with disabilities and their relatives or dependents of workers who died every year.

Now, it’s facing cuts to its Old-Age, Survivors and Disability Insurance (OASDI) program funding, something the next administration would be wise to address, according to experts who spoke to them. Newsweek. If a solution is not found in the coming years, benefits could be cut by 21 percent by 2034, according to the latest annual report by the Office of the Inspector General for Social Security (SSA). Summary.

Despite its importance, Social Security has not been high on the agenda in this presidential race. Although the candidates have proposed plans on taxes, including repealing the payroll tax and raising income taxes for America’s highest earners, none have directly affected how solve its financial problem, although the future of benefits is worried about the majority of voters. and a significant contribution to later life earnings.

The Committee for a Responsible Federal Budget (CRFB), a nonpartisan public policy think tank, said in September that a retired couple with a “middle income” who stops working in 2033 could lose $16,500 to their annual retirement benefits in those cases. SSA income is not settled. A single middle-income earner will lose about $12,400.

“Americans, on average, rely on Social Security benefits for about 40 percent of their retirement income. If nothing is done to address the shortfall, it is expected that the 20 percent of benefits will greatly affect the ability of many pensioners to maintain their lifestyles, “Stephen Stephen. Kates, chief financial analyst for RetireGuide.com, said Newsweek.

Financial space

It is not the first time that the SSA has faced the problem of lack of funds, and the early 1980s was another difficult time for the government agency.

In 1983, reforms initiated by former President Ronald Reagan were intended to protect the SSA for the next 80 years or more. The Greenspan Commission on Social Security Reform was created to investigate the issues and propose solutions that would extend its coverage into the future — originally set for 2060, about 80 years in the future. coming.

The proposed solutions include raising the payroll tax, requiring state workers to pay into Social Security for the first time, and raising the retirement age to 67, which it reached in 2022. for those born in 1960 and later.

Burt Williamson, a pension expert at Connecticut-based consultants PlanPrep, said Newsweek there are many ways that the next president can take to solve this problem. He said they should “make an executive order as soon as they enter office to appoint a commissioner who will oversee a bipartisan commission” that will assess the situation and “be responsible for recommending solutions that can work.”

What are the solutions?

Among several solutions, Williamson said that gradually removing the income tax – $ 168,600 this year and $ 176,100 for 2025 – effective immediately, will help reduce financial worries. Currently, workers and employers pay a 6.2 percent tax on income up to this amount, which goes directly to Social Security. An additional 1.45 percent goes to support Medicare and is not subject to the same cap.

Williamson explained that this would affect the top 6 percent of earners and their employers, having a “huge impact and providing urgently needed revenue,” though it may not favored by those who will see their tax rates rise.

Another option would be to invest up to 10 percent of future income in a “long-term account to grow for the future.”

“This will not be privatization, but a separate part of the Social Security trust fund,” he explained, saying that it could be managed by a non-partisan elected committee, and some reports of the government will not be able to borrow from it. .

Additional revenue sources could be created by raising the retirement age, as suggested by The Heritage Foundation, the conservative think tank behind Project 2025. The American Academy of Actuaries said that increasing tax contributions from 6.2 to 7 percent would be another option.

Whatever path is taken, Williamson said it should be done at the right time, with the American people fully on board.

“After satisfactory solutions are presented to the president, he needs to publicly urge Congress to pass the law quickly without delay, or hold press conferences informing the American people of the delay and why,” he said.

Where do Harris and Trump stand?

Both candidates have different visions for SSA.

Trump’s economic plans would worsen the organization’s financial prospects, according to the latest CRFB report. With a combination of tax cuts, including eliminating Social Security income taxes, and a tougher immigration policy, the committee found Trump’s policies would increase the 10-year Defense deficit of the Nation by $2.3 trillion in fiscal year 2035 and brought about a collapse of confidence. money until 2031.

Responding to the report, Trump campaign press secretary Karoline Leavitt said Newsweek: “The so-called CRFB experts have been wrong for a long time over the years. President Trump delivered on his promise to protect the Commonwealth during his first term, and President Trump has will continue to vigorously defend Social Security in his second term.

“The only candidate who poses a threat to National Security is the liberal Kamala Harris – whose massive attack on millions of illegal immigrants will mean that if they are allowed to stay, cause Social Security to falter and collapse.”

Harris’ campaign website says that if he wins, he “will strengthen Social Security and Medicare for the long term by making millionaires and billionaires pay their fair share of taxes.”

President Joe Biden has proposed applying an income tax to incomes above $400,000 a year, a change that would keep the trust fund open until 2066, according to the Social Security Office of the Chief Actuary.

“While it is unfortunate, it is not surprising that Social Security has never played a more important role in the current presidential election as I am sure that neither party wants to tell the American people what is needed fixing the issues—high taxes and/or low benefits—when they’re looking for options,” Tom Buckingham of Nassau Financial Group said. Newsweek.

“Unfortunately, the government keeps kicking the crap out of the way, which makes it more difficult to solve the problems. The bottom line is that we probably need some unpopular reforms, including higher taxes , later retirement dates and lower benefits.”

Correction 11/04/2024 10:48 am ET: This story has been amended to clarify that the American Academy of Actuaries does not advocate an increase in tax contributions.