For many decades, the Republican party has sought to cut Social Security, Medicare and Medicaid benefits, privatize these programs or end them altogether. During President Biden’s Feb. 7 State of the Union address, he called out GOP plans to sunset or make cuts to these popular programs in upcoming debt limit and budget negotiations. When Republicans shouted, “Liar” and jeered him, the president said he took that as a sign that cuts to the nation’s social safety net programs would be “off the table.”
But due to the aging of the U.S. population and declining birth rates, the Social Security Trust Fund will face a shortfall as soon as 2035, when the system will only have enough funds to pay out 80 percent of scheduled benefits. However, simple changes to federal tax policy changes could easily fix the shortfall problem and strengthen Social Security for decades to come.
Currently, only the first $160,000 in earnings are subject to Social Security payroll taxes, meaning that somebody making $10 million in a year is contributing the same amount into Social Security as somebody making $160,000. Legislative proposals have been introduced to raise the cap so that wages above $250,000 or $400,000 would be subject to the payroll tax, along with wealthy earners’ non-salary income. Between The Lines’ Scott Harris spoke with Sarah Rawlins, program associate with the Center for Economic and Policy Research, who explains how “scrapping the cap” would safeguard and expand Social Security for the future.
SARAH RAWLINS: There is a shortfall in the Social Security Trust fund, which I think absolutely everyone knows at this point because it’s heavily talked about whenever Social Security comes up. I think a lot of people don’t realize, though, that the shortfall that we’re talking about, while it’s certainly not ideal because the program is really valuable, it’s not like the world-ending cliff that a lot of people see it to be.
Right now, we would be looking at reducing benefits to maybe like 70 or 80 percent of what they are now starting in 2035. So while that’s definitely not good, it’s also not a catastrophe. Social Security will still be there, when I retire.
SCOTT HARRIS: Right. But nobody wants to see a decrease of 15 or 20 percent of the benefits that people have contributed over the years. Right? So it is a big issue. But it’s good to put it in perspective, as you did.
So, while Republicans have proposed both increases in the eligibility age to receive Social Security as well as benefit cuts, there is one very simple adjustment that can be made to Social Security payments that would fix the system for decades to come.
And I wondered if you’d tell us more about what’s for shorthand called “scrapping the cap.”
SARAH RAWLINS: Yeah, absolutely. So I just wrote a piece about this last week. So what a lot of people don’t realize is that Social Security contributions to the trust fund are actually capped at the first $160,200 that someone makes in just wage income. So for most people, that has no effect because 94 percent of the population makes under $160,000 a year.
But for the 6 percent of the population who make more than that, as soon as they earn over that cap, they no longer pay Social Security taxes out of their paycheck. So if you make $1 million you stopped paying Social Security on Feb. 28 and for the rest of the year, you wouldn’t pay into that program. That doesn’t apply to most people.
And, you know, when we do have very pervasive conversations around Social Security, I think every year really where it comes up that the program has a shortfall, it’s pretty disappointing to leave it underfunded by giving way to the wealthy instead of having them pay their fair share.
And I think a lot of people don’t realize that and it’s pretty disappointing.
SCOTT HARRIS: So what is the status of the proposal now to change the cap? And maybe you could describe for our listeners, if that cap were lifted, how secure would Social Security be in the coming years?
SARAH RAWLINS: Yeah. So if that cap were lifted, all it would mean is that the 6 percent of people who don’t pay into Social Security all year long would have to start. They pay 6.2 percent of their paycheck just like every other American. And the Congressional Research Service actually estimated that just scrapping the cap would eliminate 73 percent of the shortfall in the trust fund, which is not all of it, but 73 percent of a problem solved is quite a bit.
And there could be other small changes made to the program that could give it solvency in the long run very easily. For example, increasing the tax from 6.2 percent of a paycheck to 6.9 percent of the paycheck could keep the program solvent for the next 75 years.
SCOTT HARRIS: As someone who does a lot of research on Social Security issues and the problems the system faces and the solutions, how would you rate our corporate media system’s coverage of this issue, whether it be the major newspapers or the TV networks? What kind of job have they done?
SARAH RAWLINS: I think a lot of people my age — you know, I’m like a millennial — think that Social Security won’t be there for them when they retire. It’s very common to hear my peers joke, like, “Oh, I’m never going to be able to retire. I’ll have to work until I die.”
And I think that’s really disappointing and especially given what I said to you at the beginning of our talk here today about benefits being reduced maybe to 80 or 70 percent in ten years — that’s a little more than ten years — but you know, they’re still going to be there.
And I think it’s disappointing that the coverage of this issue never talks about expansion and presents a scenario of already defeat instead of all the opportunities to make Social Security even stronger than it was when it was introduced 90 years ago.
For more information, visit the Center for Economic and Policy Research at cepr.net.
Listen to Scott Harris’ in-depth interview with Sarah Rawlins (18:27) and see more articles and opinion pieces in the Related Links section of this page.
For the best listening experience and to never miss an episode, subscribe to Between The Lines on your favorite podcast app or platform: Apple Podcasts, Spotify, Stitcher, Google Podcasts, Amazon Music, Tunein + Alexa, Castbox, Overcast, Podfriend, iHeartRadio, Castro, Pocket Casts, RSS Feed.