This has been a crazy year. The 2019 coronavirus disease pandemic (COVID-19) has raised social standards, pushed unemployment levels to levels not seen since the 1930s, and tragically cost the lives of more than 160,000 Americans.
But we are not ready yet, because it is also an election year. In just 79 days, people across the country will go to their local polling station or email in their polls to determine the path this country will take. On the muscle, all 435 seats are in the Second Chamber, about a third of all Senate seats, and the large seat in the White House.
While many remain decision-makers with more than 11 weeks to go until election day, polls have constantly shown that the challenger of the Democratic Party Joe Biden has leading quote Republican Donald Trump in the presidential race. This puts Joe Biden’s policy more in focus now than ever before.
Joe Biden listens to former President Barack Obama. Image Source: Official White House Photo by Pete Souza.
Social security comes at a gap of nearly $ 17 trillion in funding
If Biden wins in November, he will have a host of problems to tackle immediately, including the ongoing response to the coronavirus pandemic, employment, and the growth of the U.S. economy. But oversight may not be the biggest long-term challenge for the president: expanding social security deficits.
Each year, the Social Security Board of Trustees publishes a report that examines the short-term (10-year) and long-term (75-year) prospects for the program. In each of the past 35 years, trustees have warned that long-term income revenues will not be enough to cover expenses. This is a hefty way of saying that the existing payout scheme, including cost of living (COLA), is not sustainable. Social security faces an estimated $ 16.8 trillion funding shortfall between 2035 – as trustees expect the program to unpack its $ 2.9 trillion in asset reserves – and 2094. Benefit cuts of up to 24% can be expected with retired workers as a result.
Something needs to be done soon to judge Social Security; otherwise the retired workforce of our nation could be in major financial trouble in less than 15 years.
Biden, however, has a plan.
Image Source: Getty Images.
Joe Biden wants to make some big changes to Social Security
Here are the four key Social Security changes proposed by the Democratic Party challenger to strengthen the program.
1. Increase tax rates on high earners
In line with the Democrats’ Social Security proposal, Biden would like to pay that high-income earner more into the program.
Currently, the Social Security tax rate is 12.4% on earned income (that is, salary and salary, but not investment income) applicable to income between $ 0.01 and $ 137,700. The vast majority – 94% – of all workers fall into this range by 2020, which means these workers pay into Social Security with every dollar they earn. Meanwhile, high-income earners will see every dollar earned above $ 137,700 exempt from tax. It is estimated that the amount of tax-exempt earnings nearly doubled from just over $ 300 billion in 1983 to $ 1.2 trillion in 2016.
Under Biden’s plan, a donut gap would be created between the maximum taxable cap of $ 137,700 and $ 400,000, where earned income would remain tax-exempt. Note, however, that the maximum tax capital for payments increases almost every year, equal to the National Average Wage Index. So over time, this donut hole would shrink. If for people who generate more than $ 400,000 in earned income, the tax rate of 12.4% would return on income above this threshold.
Image Source: Getty Images.
2. Provide an improved special minimum benefit
Another major change proposed by Biden would be to secure the special minimal benefit of Social Security.
As of 2019, the full special minimum benefit for lifetime low-income representatives was $ 886.40 per month. By comparison, monthly benefits would need to be significantly higher just to be above federal poverty levels.
While it would not affect retirement workers too much, Biden’s proposal implies that the special minimum benefit limit be set at 125% of the federal poverty line. In 2019, 125% of the federal poverty line for an individual was $ 1,301 a month – so we’re talking about a significant hug in the monthly payout for lifelong low-wage earners with between 10 and 30 years of work history.
Following this initial adjustment to increase benefits for low-wage earners, payouts would increase in line with the National Average Wage Index in subsequent years.
Image Source: Getty Images.
3. Boost benefits for long-term benefits
A third change that Biden wants to implement is an increase in benefits for retired workers who receive Social Security benefits for a long time.
As people get older, some of their expenses can die down, including health care costs, transportation costs, and personal assistance services. Unfortunately, Social Security benefits are not growing fast enough to cover this uptick in spending late in life.
Under Biden’s proposal for social security, beneficiaries between the ages of 78 and 82 would receive a 1% bend in their primary insurance amount each year until it reaches a full 5% increase in the primary insurance amount. This would provide a modest larger payout for older beneficiaries that would help curb a decline in living standards.
Image Source: Getty Images.
4. Switch the inflation tether of the program to the CPI-E
Fourth and finally, Biden has suggested that the inflation tether for social security be changed from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to the Consumer Price Index for the Elderly (CPI-E).
The CPI-W has been the program’s inflation measure since 1975, and although it has resulted in a positive COLA in 42 of the past 45 years, the purchasing power of dollars for social security has declined by 30% since 2000. This is because the CPI-W does not do a very good job of accurately measuring the costs that seniors face. Even though more than 80% of Social Security beneficiaries are seniors, the CPI-W follows the spending habits of urban and church workers, who are often not seniors or receive Social Security benefits.
Under Biden’s plan, the CPI-E would become the new inflation tether. The CPI-E specifically tracks the spending habits of households with persons 62 years and older. In theory, this should result in a more accurate COLA each year.
Image Source: Getty Images.
Biden’s Plan for Social Security has major obstacles
While there is little doubt that taxing high earners would provide a direct income tax for Social Security, and Biden’s other tactics would support lower benefit recipients, it is not clear if he would be successful in enacting one of these amendments into law. signing.
The biggest hurdle for Biden would be convincing 60 senators to vote for these proposals. Since there has been no real super-majority for a single party (not counting independents) for more than 40 years, any amendments to the Social Security Act would require bipartisan support. Republicans were well aware that they did not support raising taxes on what they wanted to do, nor were they fans of the CPI-E. Without GOP support, Biden’s Social Security plan would not have entered the House of Representatives.
There are other nuances as well, which probably need to be addressed. For example, the CPI-E is an experimental inflation measure that has yet to be refined. This means that it cannot be inserted as a CPI-W replacement.
Another concern is that raising taxes on high earners does not, by itself, preserve Social Security. It would certainly extend the date of the program’s asset reserve depletion further, but it would not solve other notable problems, such as a steady decline in net legal immigration, record-low birth rates, and increasing longevity.
Once again, a lot could happen between now and election day. But if Biden were to get the nod as Commander in Chief, he would fight to implement a very direct translation of the Social Security program – and would encounter various obstacles in the process.
