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Rep. John Larson (D-CT) has reintroduced the Social Security 2100 Act: A Sacred Trust in Congress, which promises to expand benefits and strengthen Social Security.
The bill does not do either. The main takeaway from this legislation, even at the highest level, is that it does not fix Social Security and, in many cases, creates conditions which will render the entire system less stable.
Even the most partisan politician should take note of how little time can be bought even with trillions of dollars in new revenue. The time is now when we are not kicking the bucket. This proposal shows us that trillions in additional revenue can only kick the can a little.
Change in the program’s finances is desperately needed. The system will likely run out of revenue in 12 years. This could lead to benefits being reduced 22 percent. Another way to look at this timeline is a typical 75-year-old now expects to outlive Social Security’s ability to pay scheduled benefits in full.
Larson’s proposal combines temporary spending now with higher taxes that increase with time. According to the actuaries at the Social Security Administration (SSA), the changes would raise roughly $11 trillion by phasing out the cap on taxable wages by 2050, which more than offsets the increase in spending on $1 trillion — almost all of which comes in the form of new benefits expiring after five years.
In combination, the SSA thinks the proposal will increase the Trust Fund’s expiration date to 2038. In exchange for $10 trillion, workers would get an extra four years of benefits, provided that all of the new benefits created by this legislation are terminated in 2027.
Historically, the “Social Security 2100” brand meant structural changes would enable the program to pay out more benefits through the end of the century. The goal of the program now is to provide payments up until 2038.
The extension is argued by supporters as giving Congress more time for the long-term sustainability of the program. These changes will lead to a benefits crisis by 2026. The law will phase out the extended benefits following a trial period of five years. Social Security will replace the benefit crisis of 2034 due to insufficient funding by a man-made crises in 2026 because there has been insufficient planning.
The new benefits appear to raise the near-term cost of the program by 10 percent. That is more than $100 billion per year. Even the casual observer of politics needs to understand that dates like 2038 and 2034 go out the window if the expanded benefits remain in place beyond what is appropriated in the legislation.
It isn’t possible to discuss the wisdom of the new benefits because there are no cost projections past the initial five-year window. To illustrate, the SSA estimate of this proposal indicates the COLA to use CPI-e would cause the actuarial balance to decline by .01 percent. If enacted independently, the cost would be about 12 times larger because it would be permanent. However, this estimate does not include the addition of CPI for the enhanced benefits. We don’t know what the changes will be in 2026.
The window to crisis is being reduced from twelve years to five. Congress already has what may be the most important revenue source for policymakers. Beneficiaries will face 150 billion dollars in benefits cuts by 2027. This is about 10% of total payments. It is reasonable to inquire about the sources of this money from supporters, given that they have eliminated the limit on taxable wages. It is something that Congress will have to consider in five years. It is possible that Congress ought to be considering it.
This legislation should be named “Social Security 2038: The Brutal Truth.” The brutal truth is that Congress has ignored Social Security for so long that we aren’t able to balance the system’s finances even with draconian tax increases.
The last time that Rep. Larson and company looked at Social Security was in 2019, when the program’s unfunded liability was $6 trillion smaller. This growth was driven by the passage of the time. It reflects the low interest in the program, which is dependent on millions. In 2020, the system generated roughly $700 billion in unfunded liabilities as a matter of moving the valuation date forward by a year. This amount may seem small in comparison to spending by government, but it’s because Congress did nothing in four decades.
The Social Security 2100 Act: A Sacred Trust has 200 cosponsors in Congress, promising to expand benefits and strengthen Social Security. Again, the legislation doesn’t do neither.
Social Security is no longer sustainable in five years. It makes Social Security insurmountable within five years instead of 12.
Brenton Smith is a policy advisor at The Heartland Institute, with work appearing in nationally recognized publications including Barron’s, Forbes, MarketWatch, The Hill, USA todayFind out more.
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