Wisconsin Republican Rep. Reid Ribble recently introduced the “Save Our Social Security Act,” which combines tax increases and benefit reductions to restore Social Security to 75-year actuarial balance. The bipartisan bill has been co-sponsored by Reps. Dan Benishek (MI), Jim Cooper (TN), Cynthia Lummis (WY), Scott Rigell (VA) and Todd Rokita (IN).
More information is available at Rep. Ribble’s web page, but following are the main provisions of the bill and the percentage of the 75-year actuarial deficit that each provision would address.
Increase Contribution and Benefit Base (34%)
- Increase payroll subject to taxes over 5 years to 90%, then index to 90% (current cap is $118,500)
- FY2017: $156,550
- FY2018: $194,600
- FY2019: $232,650
- FY2020: $270,700
- FY2021: $308,750
- FY2022: shall be determined by the Commissioner – “such that the percentage of the total earnings for all workers that are taxable is equal to 90% for each calendar year.”
Modification of Primary Insurance Amount (PIA) formula (10%)
Changes to the formula factor used to calculate benefits of high earners from 15% to 5% over 5 years or 2% a year from 2017-2021.
- Adds an additional benefit of 2.5% of earnings over $9,875 (# is equal to current tax cap)
- Current PIA formula for an individual becoming eligible in 2016, will be the sum of:
- 90 % of the first $856 of average indexed monthly earnings (AIME), plus
- 32 % of AIME over $856 and through $5,158, plus
- 15 % of AIME over $5,157 up to $9,875 (# will change to current the tax cap)
Increase Full/Maximum Retirement Age, early retirement remains 62 (35%)
- Starting in 2022, full retirement age increases from age 67 to 69
- Phase-in of adding 2 months to retirement every year for 12 years (currently 1 month).
- After the phase-in is complete in 2034
- Increase the NRA 1 month every 2 years to keep up with life expectancy and the ratio of work/retirement, examined every 10 years in case of needed adjustments.
- Extension of maximum age for entitlement to delayed retirement credit to 72 (was 70)
Cost of Living Adjustments (19%)
- Move from current CPI-W to C-CPI-U
- CPI-U is a more general index and seeks to track retail prices as they affect all urban consumers.
- Encompasses about 87 % of the U.S. population.
- C-CPI-U accounts for how people switch their purchases as relative prices change
- CPI-W is a more specialized index and seeks to track retail prices as they affect urban hourly wage earners and clerical workers.
- Encompasses about 32% of the U.S. and is a subset of the CPI-U group
- Places a slightly higher weight on food, apparel, transportation, and other goods and services.
- It places a slightly lower weight on housing, medical care, and recreation.
- CPI-U is a more general index and seeks to track retail prices as they affect all urban consumers.
Create minimum benefit at 125% Poverty (-5%)
- Percentage of benefit is phased-in dependent upon number of eligible working years
Offer bump-up for very old beneficiaries (-6%)
- Increase benefit amount after 20 years of eligibility
Calculate benefit based on highest 38 years (13%)
- Changes a portion of how benefits are calculated to be based on highest 38 years of work instead of the current 35.
- Change is phased in
Protection of Social Security Trust Fund
- Provides a point of order against consideration of any spending or tax legislation that would cause Trust Fund totals to be less than needed for the covered fiscal year.
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3 comments:
This is a legislated benefit cut. It is no different than doing nothing and having automatic across the board cuts take place.
The increase in retirement age of two months for every year going forward is four times greater than the increase for a cohort. For example. a baby born this year can expect to live 18 days longer at age 67 than a baby born last year. To be equal or closer to actual increase in life expectancy would have the increase in full retirement age increase one month every two years. But even this is misleading. For every one month delay in drawing benefits, requires on an actuarial level to collect 2 additional months.
This is nothing more than a legislated benefit cut. If individuals were angry about across the board cuts "I paid in and I earned those benefits", they should feel equally angry with this proposal.
Millennials and those under age 55 are getting hosed by the greedy geezers who created and supported SS without paying meaningful payroll taxes to support their benefits.
Why not just scrap SS and let individual save for retirement like they did before. Some will fail, but the vast majority succeeded.
The increase of age equates to a 13.3% benefit cut. People will still retire at 67, but will get 13.3% less. Given that the mix is 1/3 new taxes, 1/3 increase in retirement age, and 1/3rd in other benefit cuts, the total benefit adjustments (including the positive adjustments) is about a 26.6% cut.
So we are going to take a 26.6% cut and throw a couple of trillions in new taxes to avoid a 21% cut.
JoeTheEconomist said it very clearly where it took me many more words. Are we like the proverbial frog?
"“If you place a frog in a pot of boiling water, it will immediately try to scramble out. But if you place the frog in room temperature water, and don't scare him, he'll stay put. Now, if the pot sits on a heat source, and if you gradually turn up the temperature, something very interesting happens. As the temperature rises from 70 to 80 degrees F., the frog will do nothing. In fact, he will show every sign of enjoying himself. As the temperature gradually increases, the frog will become groggier and groggier, until he is unable to climb out of the pot. Though there is nothing restraining him, the frog will sit there and boil. Why? Because the frog's internal apparatus for sensing threats to survival is geared to sudden changes in his environment, not to slow, gradual changes”.
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