A bipartisan group of senators has unveiled legislation designed to force Congress to address Social Security’s approaching funding crisis.
The proposal, known as the Protecting Retirement Opportunities and Maintaining Income Security for Everyone (PROMISE) Act, would not immediately raise taxes, cut benefits or change eligibility rules. However, it would create a mechanism requiring lawmakers to vote on a plan to restore Social Security’s long-term finances after years of political gridlock.
“Social Security is the bedrock promise of a secure retirement, earned after a lifetime of hard work,” Democratic Illinois Senator Dick Durbin, one of the lawmakers who introduced the bill, said in a statement. “But the longer Congress waits, the more difficult it will be to address the program’s financial shortfall.”
Politics
The legislation arrives as Social Security’s retirement trust fund is projected to face a funding shortfall in 2032, one year earlier than previously forecast. At that point, beneficiaries would see an automatic benefit cut of roughly 20 percent if lawmakers don’t do anything.
Why It Matters
More than 70 million Americans receive Social Security benefits, and the program remains the primary source of retirement income for millions of households.
According to the latest trustees report, if lawmakers do nothing and the retirement trust fund becomes depleted in 2032, Social Security would still collect payroll taxes and continue paying benefits but would be able to pay only about 78 percent of scheduled benefits, resulting in an automatic reduction of 22 percent.
For a retiree receiving a typical monthly benefit, that could mean hundreds of dollars less each month.
What to Know
Under the proposal, the bipartisan Social Security Advisory Board would be tasked with developing a solvency plan designed to keep Social Security financially stable for at least 50 years. Congress would then be required to consider and vote on that proposal rather than indefinitely postponing action, which has happened frequently.
“We say to our colleagues: join us in doing what we were elected to do—legislate on hard issues and protect this lifeline program for our kids and grandkids,” Durbin said last month in a joint statement with Senators Bill Cassidy, a Louisiana Republican, Tim Kaine, a Virginia Democrat, and Thom Tillis, a North Carolina Republican.
Unlike many Social Security bills, the PROMISE Act does not endorse any specific fix. Instead, it creates a framework that would likely force lawmakers to finally choose among many competing solutions.
“Our bipartisan proposal opens Congress to debate this issue in a transparent, fair, and bipartisan way,” Durbin said in the statement.
Why Social Security Is Facing Pressure
Several factors are contributing to the shortfall.
For one, Americans are living longer and collecting benefits for more years, and birth rates have declined, reducing future payroll-tax contributors.
The ratio of workers paying taxes to beneficiaries is also continuing to shrink. The Bipartisan Policy Center found that the worker-to-beneficiary ratio has fallen from more than five workers per beneficiary in 1960 to fewer than three today.
“The fight isn’t whether Social Security breaks,” Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek. “It breaks, there is no way around that now. The fight is who bears the cost.”
Drop in Workers Per Beneficiary
Source: Bipartisan Policy Center
Major Social Security Proposals Already on the Table
Because the PROMISE Act does not prescribe a solution, it would likely bring back the debate to various reform ideas that are already circulating in Congress.
Raise or Eliminate the Payroll Tax Cap
Currently, earnings above a specified threshold are not subject to Social Security payroll taxes.
However, former Social Security Administration (SSA) Commissioner Martin O’Malley said that increasing or eliminating the cap would require higher-income Americans to contribute more but could also significantly improve Social Security’s finances.
“The insolvency date is an entirely solvable problem,” O’Malley previously told MarketWatch. “Scrap the cap. We need all the people to pay into Social Security.”
Bills like the Social Security Expansion Act, which is championed by independent Vermont Senator Bernie Sanders, would raise the taxable earnings cap and increase taxes on some high-income households.
Increase the Retirement Age
Another frequently discussed option is gradually raising the age at which workers qualify for full benefits as Americans are living longer than when Social Security was designed.
However, if the change is implemented, it would effectively reduce Americans’ lifetime benefits, especially for lower-income workers and those with physically demanding jobs.
Means-Test Benefits
Some lawmakers and policy experts have suggested reducing or limiting benefits for wealthier retirees, believing that resources should be concentrated on those who rely most heavily on Social Security. Some controversy remains about the idea, though, as it could turn a universal earned-benefit program into a welfare-style system.
“A plumber earning $160K pays on every dollar. A CEO hits the cap in February, pays nothing the rest of the year,” Ryan said.
Adjust Benefits Formula or COLAs
The SSA could also obtain more money in its trust fund by modifying annual cost-of-living adjustments or changing how initial benefits are calculated.
The con is that it could further erode seniors’ buying power at a time when retirees already face rising healthcare and housing costs.
Increase Payroll Tax Rates
Another option involves raising the Social Security payroll tax rate paid by workers and employers. That would be one of the most direct methods to close funding gaps, though it would increase taxes on workers.
“Opponents will say it’s a tax increase. They’re right,” Ryan said. “But the alternative isn’t ‘nothing.’ It’s benefit cuts or broader taxes on everybody. Pick one.”
Another Bipartisan Proposal Already Exists
The PROMISE Act is not the only bipartisan reform effort.
Representatives Tom Cole, an Oklahoma Republican, and Tom Suozzi, a New York Democrat, recently introduced the Bipartisan Social Security Commission Act, which would establish a commission specifically charged with developing legislation to restore long-term solvency.
Like the PROMISE Act, the commission proposal attempts to force congressional action rather than prescribe a specific solution.
Not everyone thinks this sort of bipartisan legislation to bring about a fix to Social Security is positive.
Drew Powers, the founder of Illinois-based Powers Financial Group, called the recent bill “redundant and performative.”
“Congress already has a process to initiate action; that is exactly their job description and what we elect them to do,” Power told Newsweek.
“We do not need a new committee, commission or act that continues the discussion; we need action. The fix for Social Security is simple, but not easy. We need more money flowing into the system, likely in the form of raising or removing the earnings cap on payroll taxes, and we need less money flowing out of the system, possibly a combination of means testing and slightly raising the full retirement age.”
What Happens If Congress Does Nothing?
Source: Social Security Trustees projections
“If enacted, the bill would strengthen Social Security’s long-term finances and reduce the likelihood of across-the-board benefit cuts,” Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek.
“Higher earners could pay more in payroll taxes, but that may be preferable to a future benefit reduction of roughly 20 percent if the trust fund becomes depleted.”
What Happens Next
The PROMISE Act faces a challenging path in Congress, where previous attempts to create commissions or special processes for Social Security reform have struggled to gain traction.
“I don’t expect the bill to pass anytime soon,” Thompson said. “The current administration is focused on other priorities… Proposals such as raising payroll taxes, increasing retirement ages or taxing higher benefit earners just seems politically unpopular.”
Inside and outside of Congress, however, there’s been increasing concern that lawmakers may be running out of time to avoid automatic benefit reductions early in the next decade.
Higher taxes, slower benefit growth, a higher retirement age or some combination will likely be necessary to save the program’s funding in the next few years.
Contact Newsweek editors on this story: Jason Lemon and Dave Siminoff.
