According to the 2020 Social Security Board of Trustees report, the program is staring down a $16.8 trillion funding shortfall between 2035 and 2094. If we do not close the gap, retired workers might see their monthly benefits slashed simply to maintain program solvency in 2035.
What about the nearly 65 million retirees who rely on Social Security for at least part of their income?
Could we face cuts in benefits much sooner, even as soon as President Joe Biden‘s first term?
Biden has laid out a clear proposal to strengthen Social Security that doesn’t call for a benefit cut. However, that doesn’t mean a cut is entirely out of the question. The key to Biden’s plan not to have to touch Social Security, lies in his ambitious tax plan. He intends to make up for the coming shortfall in Social Security by making changes to the program. The main one is to close the loophole on top-earners not having to pay into the system.
The 12.4% payroll tax is what primarily funds Social Security. That tax is applicable on any earned income between $0.01 and $142,800. For the 6% of working Americans who earn more than $142,800 in wages or salary, any income above that threshold has been exempt from the payroll tax. Biden’s tax plan calls for an elimination of this exemption on wages up to $400,000. Wages above $400,000 would be exempt from the 12.4% Social Security tax.
Such a move would fund Social Security well beyond the projected deficit. However, there is no guarantee that Biden could get this change to Social Security made. The big problem is that it requires a super-majority Senate vote, i.e., 60 yea votes – to amend Social Security. Biden will need bipartisan support to pass any big program changes he has proposed.
The Republicans have offered raising the full retirement age to as high as 70. This would help to make Social Security more solvent for future generations.
Biden’s history of centrist approaches to resolving the Social Security crisis makes him far likelier than his recent predecessors to consider a bipartisan solution that would increase revenue collection on the top 1% — while also gradually raising the full retirement age and cutting long-term benefits.
Biden ran on a platform of reaching across the aisle and ushering in a new age of renewed bipartisan legislation, particularly on big issues such as Social Security. Whether he can accomplish that as President — as he often did as a senator — remains to be seen. If he cannot bring the parties together, while it is unlikely, a cut in Social Security by Biden may still be necessary.