How does Joe Biden plan to save Social Security?
Social Security is in trouble. The popular federal program is on the verge of becoming insolvent by 2034 if nothing is done. Everyone in Washington DC knows this, including President Joe Biden.
The president spoke last week about Social Security, promising to protect and strengthen it. But he has not announced any details on how he will get there. How does Biden plan to save Social Security?
Biden’s 2020 vision
We know more about what President Biden won’t do than what he will do about Social Security, based on what he has said and done so far. Clearly, the president opposes a proposal by Sen. Ron Johnson (R.-Wisc.) that Congress reassess the program on an annual basis. Biden said the idea would put Social Security “on the chopping block.”
However, Biden included several changes to Social Security in his 2020 presidential campaign. His vision as a candidate for the federal agenda is likely the blueprint for any proposals the president may make in the future.
The first element of Biden’s plan two years ago was to prevent Social Security from becoming insolvent by forcing high earners to pay additional taxes to fund the program. Specifically, he proposed subjecting all income over $400,000 to Social Security payroll taxes. Currently, the maximum amount of taxable income is $147,000.
Biden has also proposed increasing Social Security benefits in several ways. His 2020 plan included higher benefits for people who have received pension benefits for at least 20 years. He promoted a special minimum benefit of at least 125% of the federal poverty level for anyone who has worked for 30 years.
In addition, then-candidate Biden wanted surviving spouses to receive a higher share of benefits. He advocated for the elimination of penalties that prevent public sector workers with pensions from receiving full social security benefits. Biden also proposed replacing the measure of inflation used to calculate Social Security cost-of-living adjustments (COLAs) with a target for seniors.
How the proposals would help (and hurt)
Only one element of Biden’s 2020 Social Security plan would actually help prevent the program from becoming insolvent by 2034. Raising the payroll tax cap to $400,000 would generate more money for Social Security.
An analysis of the University of Maryland’s Public Consultation Program (PPC) found that this change would eliminate 61% of the projected funding gap for Social Security. The proposal would likely lead to all income being subject to payroll taxes for the program since the maximum taxable annual level for taxation increases as average wages rise.
The other ideas proposed in the president’s plan would help many Social Security recipients. However, they would weaken the federal program from a financial point of view and would partially offset the positive impact of the increase in the social security contribution ceiling.
For example, Social Security would become insolvent a year earlier than expected if retired civil servants received full Social Security benefits. Raising minimum benefits for older retirees would worsen the estimated funding gap by 5%, according to the PPC analysis. The introduction of a special minimum benefit for anyone working 30 years or more would increase the shortfall by 6%.
Some members of Congress have introduced legislation that would enact some of Biden’s campaign proposals. None of them, however, were put to a vote in either chamber.
The outcome of November’s congressional elections will likely have a huge impact on the president’s next steps on Social Security. Some of his proposed changes, particularly the increase in the payroll tax cap, have significant bipartisan support among Americans.
Hopefully Democratic and Republican politicians can work together to find a solution that will preserve Social Security benefits for decades to come. In the meantime, it’s pragmatic for Americans to do whatever they can to boost their retirement incomes, in case their elected officials in Washington don’t come to the rescue of Social Security.