WASHINGTON — Sen. Bernie Sanders (I-Vt.) and progressive Democrats on Monday reintroduced a bill to increase Social Security retirement benefits and shore up the program’s finances solely by taxing corporations and the wealthy.
Sanders has introduced identical bills in the past, including in 2022, but the newest version of the legislation comes out amid a national debate over Social Security between President Joe Biden and congressional Republicans.
Seizing on proposals like Florida Sen. Rick Scott’s plan to force Congress to renew all federal programs every five years and a House GOP plan to raise the program’s eligibility age, Biden has accused Republicans of wanting to use “debt ceiling” negotiations to force cuts to the popular program. The GOP has forcefully denied that it would include Social Security in debt-ceiling talks — a concession that Biden sounded prepared to accept at last week’s State of the Union address.
Sanders’ legislation pushes the boundaries of the present debate over Social Security still further to the left by asking Republicans to respond to the prospect of both bigger benefits and heftier taxes.
“At a time when nearly half of older Americans have no retirement savings and almost 50 percent of our nation’s seniors are trying to survive on an income of less than $25,000 a year, our job is not to cut Social Security,” Sanders said in a release. “Our job is to expand Social Security so that every senior in America can retire with the dignity that they deserve and every person with a disability can live with the security they need.”
Sanders’ Social Security Expansion Act is unlikely to become law, but it lays down a marker for the progressive position — namely that there’s no need to cut future benefits in order close the gap between the program’s projected spending and revenue. The bill serves as an implicit response to complaints from conservative policy experts that the program’s funding gap cannot be closed entirely through tax increases on high earners.
Brian Riedl, a fiscal policy scholar at the conservative Manhattan Institute, acknowledged last week that Sanders’ 2022 proposal, which is identical to the new one, would extend the program’s solvency for a few decades.
But, Riedl wrote on Twitter, “That leaves few ‘tax the rich’ options to close the Medicare gap that is 2-3 times larger. The math doesn’t work.”
Unlike most other federal programs, Social Security is entirely self-funded, meaning that it cannot borrow to pay out promised benefits.
As a result of the ongoing retirement of the historically large Baby Boomer generation, the program is slated to fall short of the revenue needed to pay out future benefits in the coming years. If Congress fails to make any changes to the program, Social Security will only have enough money to fund 80% of scheduled benefits beginning in 2035. That would amount to an across-the-board 20% cut in benefits.
To ensure the program can pay out future benefits and then some, Sanders proposes subjecting earnings over $250,000 to the 12.4% payroll tax while not counting the new taxed earnings toward a person’s benefits. As of this year, only $160,200 of wage income is subject to payroll taxes. Sanders proposes levying other taxes as well, such as subjecting investment income over $200,000 to payroll taxes.
Sanders released a letter Monday from Social Security’s Office of the Chief Actuary declaring that his legislation “would extend the ability of the [Old Age, Survivors, and Disability Insurance] program to pay scheduled benefits in full and on time throughout the 75-year projection period.”
In addition, the new revenue Sanders’ bill would generate for Social Security enables him to finance a more generous benefit formula that would increase the benefits of low- and moderate-income earners by about 15%. He would also tie the size of benefits to a consumer price index designed to account for seniors’ higher living costs.
Republicans have signaled since last year that they would demand major cuts to federal spending in exchange for supporting legislation to raise the federal government’s borrowing limit this year. The Treasury Department hit the limit last month and has resorted to “extraordinary measures” in order to pay the government’s bills. If the cap isn’t lifted, the government could fail to make payments to bondholders and even beneficiaries of federal programs like Social Security. A financial crisis and recession could result.
In recent weeks, House Speaker Kevin McCarthy (R-Calif.) has said Social Security and Medicare should be “off the table” in debt ceiling negotiations, though lawmakers such as House Budget Committee Chair Jodey Arrington (R-Texas) had previously said they should be in the mix.
In hallway interviews, Republican lawmakers last week said they don’t want to touch the programs, but that Congress will eventually have to do something — and that Democrats will have to support benefit cuts as part of some future bargain.
“There’s no question, long term, that Social Security and Medicare are going bankrupt within 10 years,” Rep. Bob Good (R-Va.) told HuffPost last week. “Nobody is talking … about cutting Social Security and Medicare benefits for those retired now, nearing retirement, but long term, it’s going to have to be reformed to make it solvent for the future.”
Rep. Dusty Johnson (R-S.D.), a member of the bipartisan Problem Solvers Caucus, suggested Republicans would be open to tax increases if they were part of a bipartisan deal.
“What we know is that doing nothing guarantees insolvency,” Johnson said. “We know that any one solution is going to be unpopular with half of America. And so there probably is going to be a comprehensive solution here that’s going to take a few ideas from the right and a few ideas from the left to really get us to a responsible place.”