When the fund goes bankrupt, Social Security benefits will be cut to 83 percent of what they are now.
A new report shows that the Social Security system’s main trust fund will be depleted by 2035—one year later than a prior estimate, though concerns remain about the fund’s solvency.
At the point that the combined fund runs dry, Social Security will only be able to pay out 83 percent of scheduled benefits.
In a fact sheet, the Treasury Department said that the improvement in the long-term finances of the Social Security fund was mostly due to an upward revision to labor productivity over the projection period based on stronger economic growth, combined with a lower assumed rate of workers going on long-term disability.
“Eliminating the shortfall will bring peace of mind to Social Security’s 70 million-plus beneficiaries, the 180 million workers and their families who contribute to Social Security, and the entire nation,” he said.
Congress could eliminate the shortfall by increasing revenue, reducing benefits, or some combination of the two.
The latest report also revealed a five-year pushback in Medicare’s go-broke date for its hospital insurance trust fund. Thanks in part to higher payroll tax income and lower-than-projected expenses from last year, the insolvency date of the Medicare Hospital Insurance Trust Fund has been pushed back to 2036.
What’s the Fix?
Democrats have proposed bolstering the fund’s finances by asking wealthier Americans to pay more in payroll taxes, with the Social Security tax currently capped at 6.2 percent of the first $168,600 of employee wages.
Some Republicans have proposed adjustments to entitlement eligibility criteria and privatizing parts of Social Security.
Republican Task Force Proposal
In March, a GOP task force made up of the biggest group of conservatives in the House released a proposal to reform Social Security and avert the fund’s insolvency.
The Republican Study Committee (RSC) said in its proposal that there are basically three ways to address the problem of Social Security’s looming insolvency.
One possible remedy is debt-financed general fund transfer, which the RSC argues isn’t sustainable because it would effectively lock in enormous deficit spending that would expose taxpayers to more than $200 trillion of debt, excluding interest, through 2096.
Another option that is often proposed by those on the left side of the political spectrum is raising taxes. Democrats have proposed raising the upper limit on the level of income subject to payroll taxes, which is currently capped at $168,600.
The RSC blueprint argues against this approach, claiming that applying the payroll tax to all earnings would not only result in the biggest tax increase in U.S. history but also fail to make Social Security solvent while eliminating jobs.
While the GOP task force examines several possible solutions, it has also proposed making a combination of slight changes to the primary insurance amount formula, making a “modest adjustment” to retirement age, and limiting and phasing out auxiliary benefits for high-income earners.
The blueprint makes clear that the proposal “does not cut or delay retirement benefits for any senior in or near retirement.”
“Additionally, the RSC Budget would promote trust fund solvency by increasing payroll tax revenues through pro-growth tax reform, pro-growth energy policy that lifts wages, work requirements that move Americans from welfare to work, and regulatory reforms that increase economic growth,” reads the document.
Original News Source Link – Epoch Times
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