The United States is at a very important juncture right now, and Social Security is seen as politically impossible to change. This will be hard to maintain. The Social Security Trust Fund will run out of money in a few years.
Social Security payments will be cut by a total of 21% if Congress does not change the law. No matter what, things are going to change.
Maybe the only question left is what change will be made to Social Security and what that change will mean for the millions of people who receive it in the long run.
Starting with a quick look back at how Social Security came to be. As of now, the SSA has a permanent cash flow shortage that started in 2010. Since then, the amount of payroll tax collected has not been enough to cover all the benefits given to retirees.
The program has used trust fund assets that had built up as surpluses in the past to make up the shortfall. Between the changes to Social Security in the 1980s and 2010, the payroll tax brought in more money than was needed to pay wages.
Social Security benefits might change in the coming years
The extra money, the surplus, was given to the Department of Treasury in exchange for IOUs, which are legal promises to repay payments if payroll tax income is not enough to cover all program costs.
Some examples of these deals are building a bridge, going to war, and paying for other costs. The last of the trust fund’s money for the scheme will run out in 2033. In the eyes of the law, Social Security payments can only be used for Social Security.
This covers current taxes on wages as well as other set-aside sources of income like the Social Security Benefits Tax.
While Democrats want to keep all the perks, they want to raise taxes on high-income families by a lot. This is a stupid idea. It would be more expensive than helpful to raise the payroll tax to the level that is needed to get the government back on track.
There is something else that makes a lot more sense. There are more seniors in the top five percent of earners now, and they tend to be richer than younger workers.
Because you keep all of your benefits, whether you are rich or poor, the program moves money from younger, poorer people to older, richer people. That is not right, though. We should set up a system that only gives money to people who need it the most.
Kristin Shapiro and Andrew Biggs In their new study called “A Simple Plan to Address Social Security Insolvency,” they find that if the planned 21% cut is made to all seniors at the same rate,
It would triple the number of elderly people living in poverty and cut the average elderly family’s total income by 14%.
Instead, they say that when a program runs out of money, the executive branch has a lot of freedom to decide how to spend the little money in a smart way.
When the trust fund runs out, the president should give Social Security payments to the people who need them the most first.
Social Security checks could face imminent cuts if Congress doesn’t act
If Congress does not make any changes, Social Security payments will be capped at $2,050 per month starting in 2033. That would cover the full benefits for about half of all pensioners, who depend on Social Security payments the most.
An incremental method would be used to give benefits to the other half of retirees, or those who make more money. People with higher incomes would have to make a bigger cut.
It will cost $40 trillion over 30 years to keep all the perks and borrow money to close the gap. When you think about the $75-trillion Medicare gap, this option puts us at great risk of things like inflation.
No matter what lawmakers say, that monthly benefit will be changed in the end. The program was updated for the 21st century, but it comes from a time when being unemployed and poor were almost always linked for seniors.
