Social Security recipients received a 3.2 percent increase in their benefits at the beginning of this year thanks to Social Security’s annual cost of living adjustment (COLA). President Biden and his fellow Democrats, and even many conservatives, want them to receive even more money from the U.S. treasury. .
Since 1975, Social Security beneficiaries have received cost-of-living adjustments almost every year (there was no COLA in 2010, 2011, and 2016) based on the increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Between 2013 and 2021, COLAs averaged only 2 percent or less, but in 2022 and 2023, the COLA was 5.9 percent and 8.7 percent, respectively. According to the AARP, the 3.2 percent increase for 2024 will raise the average monthly benefit from $1,848 to $1,907.
As President Biden enters his final year as president and Republicans firmly in control of the House of Representatives, the chances of his Social Security increase being enacted are fading fast. On the campaign trail, Biden put forth a four-point proposal to increase Social Security benefits and pay for the increase at the same time:
- Increase payroll tax liability on high earners. Social Security is funded by a 12.4 percent payroll tax (split equally between employers and employees). For 2024, the wages subject to Social Security tax are capped at $168,600 (up from $160,200 in 2023). Biden wants to exempt wages only between $168,600 and $400,000, creating a “donut hole.” Those who make more than $400,000 would pay Social Security tax on their earnings up to $168,600 and then on any earnings above $400,000.
- Shift the program’s inflationary measure from the CPI-W to the CPI-E. This version of the consumer price index is supposed to track the expenses specifically for Americans who are 62 and older. Thus, basing Social Security COLAs on this index would supposedly result in larger adjustments every year.
- Lift the primary insurance amount for aged beneficiaries. The Primary Insurance Amount (PIA) is the amount of Social Security benefits paid to a retiree at full retirement age. Biden wants to increase this annually by 1 percent between the ages of 78 and 82.
- Boost the special minimum benefit above the poverty level. The special minimum PIA provides a minimum benefit to long-term low earners. Biden wants to increase this to 125 percent of the federal poverty level.
And it is not just President Biden who wants to increase Social Security benefits. Other Democrats have put forth their own plans to do the same, most recently the Social Security 2100 Act introduced by Rep. John Larson (D-Conn.) and Sen. Richard Blumenthal (D-Conn.). Among other things, it would increase benefits by 2 percent across the board, increase benefits for lower-income seniors, and increase benefits by an additional 5 percent for the most elderly, those who have been receiving benefits for 15 years or more.
Although some conservatives may sometimes rail against some welfare programs, even they have accepted the largest and most expensive welfare program in American history — Social Security.
Conservatives at think tanks and Republicans in Congress are fond of Social Security reform plans to “save” Social Security for future generations. These plans generally call for increasing the retirement age to delay benefit payments, using a different CPI that results in lower COLAs, letting workers invest a portion of their Social Security taxes in the stock market, and eliminating the earnings test (which results in people working less) lest 50 percent of their Social Security benefits be withheld until they reach full retirement age. But these plans usually also include a provision for a universal basic income for retired people.
As the Heritage Foundation’s Rachel Greszler explains:
Social Security was not intended to be an income-replacement program, but to prevent poverty in old age; and yet, it provides the largest benefits to the highest-income people with the least need. By very gradually shifting Social Security toward a universal, anti-poverty benefit, increasing benefits for low-income earners and reducing them for upper-income earners, Social Security’s solvency could be preserved and everyone could eventually pay less in Social Security taxes.
But not only would everyone still pay Social Security taxes, some would pay Social Security taxes and receive little benefit. And, of course, “eventually” would never come, just like all the conservative and Republican plans to balance the budget in 10 years. Not one conservative writing for a think tank or Republican member of Congress has ever put forth a proposal to gradually eliminate Social Security, even over a period of decades, let alone do away with it altogether in the near future.
When it comes to Social Security, Democrats and Republicans are both content to tweak the full retirement age, the PIA, the index for determining COLAs, the tax rate, the benefit schedule, the spousal benefit, the eligibility criteria, the benefit formula, and the tax treatment of benefits. They just disagree on the particulars.
There is no philosophical difference between Democrats and Republicans, however, when it comes to the legitimacy of the Social Security program itself — or any other welfare program.