By Sybil Boutilier
Marin Commissioner on Aging
It would not be surprising if your patients, clients, or community members who are currently social security recipients, or hoping to be in the future, are wondering how the budget maneuverings in Washington will affect their retirement situations.
The Social Security Act was passed August 14, 1935 as part of President Roosevelt’s New Deal, primarily thanks to Francis Perkins, his labor secretary and the first woman cabinet member. It’s been tinkered with over the years but remains largely intact.
The median social security retirement benefit for California participants is $1,496, based on credits from lifetime wages paid into a federal trust fund. Recipients are fully eligible to receive benefits at age 67, but can opt to begin earlier, at age 62, to receive a lower benefit amount.
Two other programs serve younger adults: Supplemental Security Income (SSI) is based on financial need and is funded by general revenue, and Social Security Disability Insurance (SSDI), is for people unable to work due to a disability. Only social security retirement benefits and SSDI are funded by the 12.4 percent payroll tax, of which half (6.2 percent) is paid by the employee and half by the employer. In 2019, the trust fund dispensed $903 billion among 65 million retirees and $145 billion among 10 million disabled adults. The trust fund balance was $2.9 trillion in May 2020.
These big numbers attract a lot of attention from many interests, some of whom want to use the trust fund reserves to pay for general fund deficits, which is not allowed.
The trust fund is not part of the general fund, and despite rumors to the contrary, should cover all benefits fully until 2035, after which, it could pay 75 percent of owed benefits if no changes are made. This is a contentious topic. Some policymakers have introduced bills to strengthen the trust and ensure full funding for 75 years, while others would like to eliminate the program altogether, bringing all retirement savings into the stock market.
President Trump just issued an executive older suspending payroll tax deductions, as a “relief measure”. If it stands, it means less money coming into the trust fund for future beneficiaries. Hopefully, it won’t stand.
Another proposal seeks to “chain the CPI.” The Consumer Price Index is an average worker’s “market basket” of consumer products whose price determines the cost of living adjustment. Chaining the CPI is a method to reduce the cost of living adjustment through substitution of products even if prices go up.
Last year, a stealth attack on social security was proposed, but turned down. A federal bill requiring a balanced budget would have swept the social security trust and the Medicare Trust into the general budget, allowing the funds to be used for other purposes besides paying earned benefits.
Especially alarming is that the Senate’s proposed Covid Relief 2.0 budget includes the TRUST Act. Richard Neal, Chairman of the Ways and Means Committee condemned the TRUST Act, saying, “It will result in far-reaching cuts to Social Security and Medicare — that is the intention of the bill. The legislation sets up closed-door commissions to fast-track the destruction of these programs. It requires Congress to immediately vote on the TRUST Commission’s recommendation (under restrictive rules), ignoring regular order.” The chair of the Social Security Committee called it, “A direct assault on social security benefits,” and a failure to meet the urgent need to strengthen social security, especially during this pandemic.
A popular option to secure social security is to “raise the cap.” In 2020, the 12.5 percent payroll deduction only applies to salaries up to $137,700 (the “cap”). But what if you make more? You don’t pay another penny. Thus, a lower wage worker pays on their entire salary, whereas someone making double only contributes on half their earnings or less. Raising the cap would bring more money into the trust while being more equitable.
Several promising bills have been introduced in Congress to build up and protect the trust fund while improving benefits for retired workers. Bills like the “Strengthening Social Security Act,” which includes raising the cap and improving the CPI calculation, and other helpful measures. This and other legislative efforts are well-supported opportunities to defend against the threats described above. Marin’s Commission on Aging, the Aging Action Initiative, and allies across the country work closely with federal policy makers to ensure social security will remain truly secure.