Yesterday, the conservative Republican Study Committee within the House of Representatives released its latest findings Budget plan. To the RSC’s credit—and, frankly, to my very own surprise—the RSC has taken on the harmful issue of Social Security reform, standing up not only to Democrats who sought to demagogue the difficulty, but in addition to the efforts of former President Trump to avoid the subject. The RSC’s proposals include “modest and delayed changes to the primary insurance benefit formula (PIA), retirement age, supplementary benefits for high earners and a gradual move to a flat benefit.” Unless you would like the largest tax rise in history, you could have to do something like this . So cheers to the RSC.
Two older women walk down the road.
Why not a 3rd cheer? Because the RSC could have to endure plenty of grief from each Trump and Democrats in Congress over a proposal that appears to shut only a fraction of Social Security’s long-term funding gap of greater than $20 trillion, without the advantages of a comprehensive plan to Making Social Security work higher for Americans. For a penny, I’d say, for a pound.
President Trump has argued since 2016 that Social Security advantages don’t should be cut even for the wealthiest seniors. First, Trump argued (falsely) that faster economic growth would maintain Social Security’s solvency. He later claimed (again incorrectly) that a “drill, drill, drill” policy in coping with natural resources could do the trick. The reality is clearer: Trump doesn’t need to take the political hit for either cutting welfare or increasing the taxes needed to avoid those cuts. For his part, President Biden is not doing significantly better: in his recent State of the Union address he called for raising taxes on the wealthy, however the Biden budget released a number of days later didn’t even provide for this solution. The president recognizes that massive tax increases will not be popular.
To their credit, Democrats in Congress have been open about what they’d do: raise taxes to shut the Social Security solvency gap, after which raise taxes even further to expand advantages. Of course, like President Biden, they never followed through on that commitment once they had the facility to achieve this.
The Republican Study Committee includes nearly 80% of House Republicans, including Speaker Mike Johnson. The RSC proposes three changes to social security advantages. First, the RSC would barely reduce advantages for “individuals who are not near retirement” and whose average profession earnings are above $85,000. Second, the RSC would “make modest adjustments to the retirement age for future retirees to reflect increasing life expectancy.” And thirdly, the RSC would “limit and phase out additional benefits for high earners”. For example, this variation would limit advantages to the non-working spouse of a high-earning worker.
Right on cue, the Democrats in Congress protested: California Democratic Rep. Linda Sanchez explained The RSC plan would “end Social Security as we know it.”
But it’s hard to know what to make of such claims.
On the one hand, the RSC’s proposed profit changes appear modest in comparison with Social Security’s larger funding gap. The RSC doesn’t provide enough detail to be precise, but relies on information provided by SSA actuaries. Projections Given similar reforms and my very own assessment of how much savings are lost in protecting current and near-retirement retirees, I estimate that the RSC proposals would close perhaps 15% of Social Security’s long-term funding gap. That still leaves an extended strategy to go.
On the opposite hand, the RSC budget claims it would scale back Social Security/Disability Insurance spending by $1.5 trillion over 10 years, in comparison with a baseline of about $19.7 trillion. I truthfully don’t know the way they’ll achieve 7.7% cost savings while protecting current retirees unless the RSC leaves hard about disability advantages in a way that will not be provided for of their budget. I believe there may be a dynamic assessment – the RSC claims that that is what total federal revenue will probably be over the subsequent decade raise by 0.7% of GDP, regardless that tax rates weren’t increased. But that does not explain why Social Security spending would fall so sharply in dollar terms.
So cheers to the RSC: They defied the Democrats in Congress by at the very least putting a plan on the table. More importantly, they represented Donald Trump’s position that Social Security reform may very well be ignored or dismissed. But a 3rd cheer requires a comprehensive plan that makes Social Security fully solvent and more practical at serving Americans. (Need help with this? Check them out Chapter I prepared for the American Enterprise Institute book: American Renewal.)
