WASHINGTON – U.S. Senator Bill Cassidy, M.D. (R-LA) authored an op-ed in State Affairs discussing his “Big Idea” to save Social Security. America needs a bipartisan solution to save all Americans from a 23% cut in Social Security benefits in nine years.
“Our ‘Big Idea’ would repeal the automatic benefits cut, while the investment fund would also offset any borrowing required to pay benefits in the meantime,” wrote Dr. Cassidy. “Combined with some relatively minor tweaks to the program, at the end of 75 years, all the accumulated debt would be paid off, and the Social Security program would be able to cover its obligations in perpetuity.”
In addition to laying out the investment fund, Cassidy highlights provisions to create a stronger and fairer program, including the full repeal of the Windfall Elimination Provision, Government Pension Offset, and Retirement Earnings Test.
“This also gives us a chance to address the Windfall Elimination Provision and Government Pension Offset, which penalize state and local government workers who also worked in the private sector,” continued Dr Cassidy. “We would also repeal the ‘Retirement Earnings Test,’ which mandates that if someone continues to work after beginning to draw Social Security, their monthly benefit check is reduced one dollar for every two dollars earned.”
Read the full op-ed here or below.
A Plan to Save Social Security
The Social Security Trust Fund is going broke in nine years. When it does, there will be a 23% cut in benefits for every current and future retiree.
About 10,000 Baby Boomers become eligible for benefits every day. When Social Security began, the average lifespan was 62; now it is nearly 80.
Families are having fewer children, meaning that fewer people pay into Social Security for each recipient compared to when the program started. And the money in the Trust Fund is only invested in Treasury notes, which have a poor return on investment.
Social Security is a pay-as-you-go system. As workers pay payroll taxes, monthly checks are sent to beneficiaries.
Any extra tax receipts are put in the Social Security Trust Fund and invested in Treasury notes. If there is not enough money coming in through payroll taxes to pay current obligations, then the money in the Trust Fund supplements tax receipts.
Unfortunately, the Trust Fund has been supplementing payroll tax income for so long that it will be insolvent in nine years. When this happens, by law, benefits will be cut by about 23% to match income, which will double the poverty rate among the elderly.
If current law is ignored and the federal government just borrows to pay benefits, the accumulated debt to the taxpayer will be approximately $560 trillion over 75 years. We need to find a comprehensive solution to save Social Security, but finding this solution means daring to touch the third rail of politics.
I am working on a solution with other senators called the “Big Idea,” which invests $1.5 trillion over five years into an investment fund separate from the Social Security Trust Fund. The fund would be invested into the U.S. economy, and any dividends would be reinvested and kept in escrow for 70 years.
The U.S. Federal Railroad Retirement System also was going insolvent in the 2000s, so Congress changed it to an investment fund like I am proposing. Now the fund is in the black.
Our “Big Idea” would repeal the automatic benefits cut, while the investment fund would also offset any borrowing required to pay benefits in the meantime. Combined with some relatively minor tweaks to the program, at the end of 75 years, all the accumulated debt would be paid off, and the Social Security program would be able to cover its obligations in perpetuity.
This also gives us a chance to address the Windfall Elimination Provision and Government Pension Offset, which penalize state and local government workers who also worked in the private sector. We would also repeal the “Retirement Earnings Test,” which mandates that if someone continues to work after beginning to draw Social Security, their monthly benefit check is reduced one dollar for every two dollars earned.
One of the most appealing aspects of the separate fund is that individual beneficiaries don’t have any risk and their benefits are paid no matter what. History shows we can expect a more than 8% rate of return on our investment, compared to Treasuries that only yield between 1-5%.
There would also be safeguards preventing future Congresses from meddling in the investment strategy. In short, the “Big Idea” is a much better investment for the American people.
Background
Cassidy led a bipartisan working group with U.S. Senator Angus King (I-ME) to preserve and protect Social Security. Last spring, he released the inaugural Bill on the Hill video where he asked Capitol Hill visitors from across the country their thoughts on the looming 23% benefit cut to Social Security and presented his “Big Idea” to save, strengthen, and secure America’s retirement system.
Weeks ago, U.S. Treasury Secretary Janet Yellen admitted to Cassidy during a U.S. Senate Finance Committee hearing that “[President Biden] doesn’t have a plan” to extend the solvency of Social Security.
Cassidy has discussed the “Big Idea” at a public forum with AARP on the future of Social Security, outlined his Social Security plan in a fireside chat with the Bipartisan Policy Committee, and authored op-eds in the National Review, Washington Examiner, and Wall Street Journal.
In March 2023, the Trustees of the Social Security and Medicare trust funds moved up the Social Security insolvency deadline a full year. One month prior, the Congressional Budget Office updated its estimates saying Social Security is heading toward a financial cliff in 2032. They found Medicare and Social Security spending rapidly outpacing federal tax revenues further hastening the insolvency deadlines.
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