The nonpartisan Committee for a Responsible Federal Budget has proposed capping Social Security retirement benefits at $100,000:
This Trust Fund Solutions Initiative white paper offers a new option to improve Social Security solvency by establishing a maximum benefit level.
The Six Figure Limit (SFL) would set a $100,000 cap on the total benefit a couple retiring at the Normal Retirement Age (NRA) can receive starting this year. The SFL would be adjusted based on marital status and claiming age, with a $50,000 limit for a single retiree collecting at the NRA.
I wonder if they recognize what a “poisoned pill” such a reform would be for Democrats? Clearly, some Democrats do. Connecticut Rep. John Larson:
“Nobody’s getting wealthy on Social Security,” Larson said in a recent interview with CNBC, noting that more than 5 million Americans receive monthly benefit checks that are below the federal poverty level.
“It is the very sustenance that 40% of all Americans need just to get by, and it hasn’t been adjusted in more than 50 years,” Larson said.
Massachusetts Sen. Elizabeth Warren:
Washington, D.C. – U.S. Senator Elizabeth Warren (D-Mass.), Ranking Member of the Senate Committee on Banking, Housing, and Urban Affairs and member of the Senate Finance Committee, published an op-ed in Fox News hitting back at the Trump administration and Elon Musk’s attempts to gut the Social Security Administration (SSA) as a means of slashing benefits for Social Security recipients.
A key problem that goes quietly unmentioned: how can Democrats coherently support a $100,000 cap on annual Social Security benefits without also supporting a $100,000 cap on defined benefit pensions for those who don’t participate in the Social Security system, e.g. teachers?
I don’t oppose the reform in principle but even the CRFB acknowledges it won’t solve much of Social Security’s problems. As I’ve pointed out before the real problem staring us in the face is assumption failure—the 1983 reform didn’t foresee the sharp increase in income inequality that took place in the 1980s to the present day. My proposed solution was to make all wage income subject to Social Security withholding.
Are you sure raising the amount of covered wages is the root cause of the problem.
I checked with Gemini and it says even at 100% of wage income (with corresponding benefit credits), it only fixes 53% of the funding gap. If there are no corresponding benefit credits (completely severing the idea social security is a “earned” benefit), it covers 73% of the deficit.
That’s still a 27% gap that needs to be covered. But importantly, a 12% tax raise on 20% of all income takes much of the fiscal space left on “incomes” — and the Federal Government still need to fund the deficits in medicare.
I’m not saying this isn’t part of the solution, but it clearly won’t be the whole solution.
By my calculation making all wage income subject to Social Security withholding would push the insolvency we expect in 2031 back to 2060. My back-of-the-envelope calculation suggests that capping benefits at $100K indexed to inflation would push the insolvency date back an additional 25 years at least.
What’s the “root cause”? Being born? Working? Inadequate middle class wage growth?
Gemini says on a cashflow basis, taxing all wage income at 12.4% brings social security back to positive until 2033 or so. That’s buying 6-7 years, not 30 years.
The root cause is the number of workers to retirees is too few for the assumptions of the program. Or that the benefit levels for retirees are set too high vis a vis to the payroll tax rate of workers * amount of income covered.
Cash flow is what I think of as the measure for the long term solvency of the program unless the surpluses (during years which have surplus) are invested in hard assets that generate income (like toll roads, land that is rented), not financial instruments like government debt.
What would be the legal rationale for capping pensions that are not part of SS? Those defined pensions are essentially private contracts. You should also note that many people on defined pensions also worked enough hours in private jobs (which do pay FICA) qualify for SS benefits as well as their regular pensions. I do. Yet under claims of “double dipping”, I only get a small fraction of what my SS credits would normally pay.
The real problem is that most SS beneficiaries do not get enough benefits to live above the poverty line. Rather than reduce benefits, it is clear that benefits to lower income retirees should be substantially increased. Although SS taxes can be raised, nearly all the increase will have to come from general revenues.
The US needs a major overall of public spending, Reducing the defense budget by 75%, or so, is a good place to start. That would also contribute to world peace, as the US is the primary producer of wars since 1945.
Or that the incomes subject to the tax are too low.
What you quote as “Gemini’s findings” are different both from the CBO’s and mine. It may be doing something different than you expect.