Legislators have just 13 years to fix the Social Security program before it can no longer pay full benefits, according to the latest report from the Social Security Trustees.
After 2034 report notes that the $2.9 trillion trust fund will be depleted, and without any legislative action, Social Security will have to rely solely on current tax income to pay benefits. This income will make it possible to pay only about three-quarters of the planned benefits.
However, there is also good news. There are several proposed policy changes to close the Social Security funding gap that are overwhelmingly supported by voters on both sides of the aisle.
Recent Poll Shows Americans Agree With Social Security Fixes
University of Maryland Public Consultation Program (PPC) examined over 2,500 registered voters in an online “policy development simulation” process. Respondents were briefed on the state of the welfare program and then asked for their opinion on the arguments for and against various proposals to address the budget shortfall.
Surprisingly, the vast majority of Republicans and Democrats supported various proposals to increase income, reduce benefits, and even increase benefits for the low-income. According to PPC researchers, these measures will eliminate 78-95% of the deficit over the next 75 years, depending on the policies implemented.
Here are seven proposals that the Americans have agreed to make.
1. Increasing the cap on the payroll tax
General support: 81% (Republicans 79%, Democrats 78%)
Currently, only the first $147,000 of income is subject to payroll taxes. The proposal to raise the payroll tax cap to $400,000 would go a long way in closing the budget deficit. The researchers estimate that this fix alone would eliminate 61% of the deficiency. An overwhelming majority of both Republicans and Democrats in the poll supported the proposal, which could spur politicians to push legislation that would sign it.
There was already some movement in Congress, with one sentence Bernie Sanders and Elizabeth Warren to increase payroll taxes on all income above $250,000, including capital gains. Another suggestion called Social Security 2100: Sacred Trust will increase the payroll tax cap to $400,000 on earned wages.
2. Cut benefits for high earners
General support: 81% (Republicans 78%, Democrats 86%)
Those beneficiaries who earned higher wages during their years of employment are also more likely to have other ways to fund their retirement, such as pensions, 401(k) accounts, and other savings.
One proposal, which received overwhelming bipartisan support, would cut benefits for the top 20% of workers and eliminate an 11% deficit. While workers who earn more money will still earn more than others, it will be less than in the current program.
3. Raising the retirement age
General support: 75% (Republicans 75%, Democrats 76%)
One of the first changes to the original Social Security program, adopted in 1983, was a gradual increase in the full retirement age from 65 to 67. As people live and work longer on average, one of the proposals would be to raise the retirement age slightly to 68. This change will reduce the budget deficit by 14%.
4. Increasing the payroll tax rate
General support: 73% (Republicans 70%, Democrats 78%)
Currently, the payroll tax rate that funds Social Security is 6.2% of wages, up to the first $147,000 earned. Increasing the tax rate to 6.5% would eliminate 16% of the estimated deficit.
5. Raising the minimum benefit
General support: 64% (Republicans 59%, Democrats 71%)
Many low-income individuals rely on Social Security to provide most if not all of their income after retirement. Surviving on the current $951 minimum benefit can be extremely difficult. Most Democrats and Republicans backed a proposal to raise the minimum pay for those who have worked 30 years or more to $1,341, which would increase the deficit by 7%.
6. Changing cost-of-living adjustments
General support: 55% (Republicans 55%, Democrats 59%)
There are many different measures of inflation used by the government. Currently, Social Security benefits are adjusted annually based on the consumer price index for urban employees and clerks (CPI-W). However, some argue that this is not the best measure of inflation for the unique costs incurred by the elderly and prefer to use the Consumer Price Index for Older Persons (CPI-I) instead. Making this change to help support older household budgets would increase the deficit by 12%.
7. Increasing benefits for the elderly
General support: 53% (Republicans 53%, Democrats 56%)
Despite a slim majority, both parties still support an increase in benefits for the very old. A 5% increase in benefits for those over 80 would increase the budget deficit by 5%, but would help retirees cover rising costs as they age.
Americans are ready to save Social Security, but is Congress ready?
While Congress has proposed most of the polling options listed above in one form or another, there is still no consensus on the way forward.
“Many politicians think that addressing welfare issues is the third rail, so they stubbornly avoid taking action,” said Stephen Kull, director of PPC. “But a sizable bipartisan majority says they are ready to take tough steps to secure the welfare program for future generations.”
While uncertainty remains about how to tackle Social Security funding problems, one thing is clear: the clock is ticking and time is running out.
Andrew Herrig is the founder of Wealthy Nickel, where he writes about personal finance, jobs and entrepreneurship. As an avid real estate investor and owner of several businesses, he has a passion for helping others create wealth and shares his family’s experiences on his blog. Andrew’s advisory board has been featured on CNBC, Entrepreneur, Fox News, MSN and more.
