The SSFA would end two provisions of current law that reduce benefits for millions of public employees at all levels of government with separate pension systems. Eliminating the provisions means more Social Security benefits for such workers.
In other words, the SSFA would increase the total amount of Social Security benefits paid out without providing new revenues to fund them. Even so, the bipartisan proposal is likely to pass Congress, and President Joe Biden, who promised in his 2020 campaign to eliminate the provision, is expected to sign it into law when lawmakers reconvene after the election.
For decades, Social Security has been the “third rail” of U.S. politics, which virtually no Democrat or Republican dares to propose changing for fear of angering legions of elderly and disabled voters who depend on the program.
About 70 million Americans are beneficiaries, making Social Security the largest federal entitlement program.
Politicians increase benefits but are loath to increase Social Security taxes or slash benefits.
The seemingly impossible challenge for Congress and the White House is how to reform Social Security if increased taxes and reduced benefits are untouchable. The last president to propose a major reform was George W. Bush, who, shortly after being reelected in 2004, suggested privatizing the system.
Under that proposal, Americans would have been allowed to divert some of their Social Security taxes into government-approved private investment funds. Bush hastily dropped the plan because of opposition from both parties and the mainstream media.
Raising the Tax Cap
Rep. John Larson (D-Conn.) has introduced his Social Security 2100 Act repeatedly in recent years, and it has gained strong support (188 co-sponsors) among his Democratic colleagues. Larson is the top Democrat on the House Ways and Means Committee’s Subcommittee on Social Security.Larson noted that it has been decades since Congress approved changes designed to shore up the Social Security system’s finances. He also rejected suggestions from House Republicans that a study commission be created to recommend reforms.
“It’s long overdue that we not study this—how about we do what we’re elected to do by the public and actually vote,” he said.
“I commend President Biden for saying, ‘Look, the way we’re going to pay for this is by lifting the cap ... on people making more than $400,000 a year.’”
The present salary cap on Social Security taxes is set at $168,600, meaning that is the maximum amount of earnings on which a person must pay Social Security tax. Larson’s bill would not hike the Social Security tax rate but additionally would apply Social Security payroll taxes to all income of more than $400,000 annually.
“Millionaires have already stopped paying into the Social Security program. Bill Gates stopped paying back in January. That is wrong, it’s not right, but to lift that cap will allow us to not only extend the solvency of Social Security, but increase benefits across the board,” he said.
According to an analysis by the Peter G. Peterson Foundation, an individual making $500,000 annually pays Federal Insurance Contributions Act (FICA) levies on only the first $168,600 of income, which equals $10,453 a year. Under the Larson proposal, the same individual would pay $16,653 a year initially. However, as a “donut hole” between the cap and $400,000 amounts is phased out over time, that person eventually would pay $31,000 in FICA levies, nearly three times as much, according to the analysis.
The Big Idea
Venturing even further into reform is Sen. Bill Cassidy, a Louisiana doctor and ranking Republican on the Senate Committee on Health, Education, Labor and Pensions.Cassidy calls his proposal the “Big Idea,” and it is based on the creation by Congress of a new $1.5 trillion investment fund that is totally separate from the Social Security Trust Fund—which receives FICA revenues that pay for benefits.
Asked by The Epoch Times how the new fund would be financed, Cassidy said: “That is open to negotiation. You could sell government assets to fund it over time, you could borrow it and put it in there.
“Folks say, ‘But wait a minute, isn’t that going to increase your debt?’ It turns out you’re not spending it, you’re putting it into escrow. And according to the Congressional Budget Office, that’s going to be considered a wash.”
The Big Idea escrow fund would be managed by an independent company that would bid for the job, assume a fiduciary responsibility for the results, and invest the fund in a conservative portfolio of private-sector entities to function like Sovereign Wealth funds.
“[Wall Street executive John] Paulson and [former President Donald] Trump have talked about creating a Sovereign Wealth fund,” Cassidy said. “Advisers to Joe Biden have talked about creating a Sovereign Wealth fund. Now what we’re talking about with our Big Idea is somewhat of a Sovereign Wealth fund.”
Paulson is often mentioned as a potential Secretary of the Treasury if Trump is reelected.
Cassidy said the fund is projected to generate sufficient profits to cover 75 percent of Social Security’s revenue shortfall and that he is open to alternative approaches to covering the remaining 25 percent.
Asked how misuse would be avoided, Cassidy said, “We’ve got a couple of mechanisms; we had the Heritage Foundation help us draft the way by which to prevent political meddling.”
He said former Comptroller General David Walker has also suggested several solutions.
Cassidy’s approach won bipartisan support on an informal basis in the Senate in 2022, so much so that he was able to join with Sen. Angus King (I-Maine) in forming a working group to push the Big Idea.
A total of 14 senators at one point—seven from each party—were working with the group early in 2023, and senior White House aides had been briefed multiple times on the proposal and its progress in Congress.
However, Biden in his 2023 State of the Union address claimed that some Republicans want to “sunset Social Security and Medicare,” a claim that brought a loud chorus of boos from the GOP side of the House chamber.
Biden was referring to a proposal introduced by Sen. Rick Scott (R-Fla.) to require all federal programs, including Social Security, to be reauthorized by Congress every five years. The senator subsequently agreed to exempt Social Security and Medicare from the sunsetting proposal.
“The way we learned that [the Biden administration] were a no-go was when Biden came out in his State of the Union Address and started attacking Republicans,” Cassidy said. “My Democratic colleagues said [Biden] is running for re-election and is attacking Republicans on Social Security so this isn’t going anywhere.”
Cassidy said he remains hopeful that a window will open in 2025 that will prompt Congress and the new chief executive to focus on saving Social Security and enable his Big Idea to again be on the table.
There are other, less widely known, approaches to reforming Social Security to avoid the coming insolvency. Romina Boccia, director of budget and entitlement policy for the Cato Institute, points to the current system’s formula for calculating how much a beneficiary should receive.
Boccia calculates that switching the benefit formula to inflation indexing rather than wage indexing at the outset of a beneficiary’s checks would dramatically slow the rate of growth without cutting total benefits.
“Wage indexing leads to higher benefits for future retirees compared to current ones, driving up long-term costs, especially since wage growth tends to outpace inflation,” she told The Epoch Times.
“By tying initial benefits to inflation, price indexing slows the growth in future benefits, helping to extend Social Security’s solvency without cutting benefits for today’s retirees.”
The last major Social Security reform was the compromise reached by President Ronald Reagan and Speaker of the House Thomas “Tip” O'Neill (D-Mass.) in 1983 that gradually raised the full retirement age.
In the 41 years since, the system’s finances have become steadily more precarious, but there are reasons for hope, according to Andy Puzder, former CEO of CKE Restaurants and now a distinguished visiting fellow for business and economic freedom at the Heritage Foundation.
“Similar to what any financially rational person would do with their own assets,” Puzder told The Epoch Times.
“This would strengthen Social Security without increasing taxes or reducing benefits. Given the growing pressure to find solutions, I’m sure there will be other creative free market-oriented proposals. Hopefully, they will be acceptable to both parties. We owe retired Americans at least that much.”
Meanwhile, 218 House members signed a Discharge Petition for the bipartisan Social Security Fairness Act introduced by Rep. Garret Graves (R-La.) and Rep. Abigail Spanberger (D-Va.)—enough to force a House vote on the proposal. Such petitions almost always fail, however.
Normally, under House rules, the vote would have followed within a few days, but, as of publication time, a roll call has not been scheduled. Paul Sawyer, Graves’s chief of staff, told The Epoch Times the House most likely will vote when it returns to session on Nov. 12 after the election.
