With Social Security 2100 Act, Rep. Larson says get reform process right, don't rush

Congressman John Larson, D-CT, is on a mission. For decades — long before Larson was elected to Congress in 1998 — the writing has been on the wall for Social Security, the federal government’s largest mandatory expenditure that paid benefits to 67 million people in 2017.

Immediately after Congress passed amendments to the Social Security Act in 1983, Social Security Administration actuaries warned that the cost of annual benefits would outstrip revenue from payroll taxes absent further Congressional action. At the time, actuaries estimated Social Security’s cash reserves would be exhausted by 2057.

That prediction has of course been moved up. Last year’s SSA Trustees’ Report said reserves in the Old-Age and Survivors Insurance Program would run out by 2034, at which time retirees will see an across-the-board 23 percent reduction in monthly checks.

As is rote in the annual reports, the Trustees recommended lawmakers’ immediate attention to the issue.

Equally rote has been Congress’ apparent indifference to those recommendations.

“Never having a public hearing, and no regular order—that is our frustration,” Larson adamantly said in an interview. “Every idea for reforming Social Security, good or bad, has been stifled.”

That will change in the 116th Congress, says Larson, who was recently appointed chair of the House Ways and Means subcommittee on Social Security.

On Wednesday, Larson reintroduced the Social Security 2100 Act, a bill that first emerged nearly seven years ago that now has nearly 200 Democratic co-sponsors in the House. Companion legislation was introduced in the Senate last year.

With more Democratic sponsors than there are Republican members and already nearly enough support to claim a simple majority to pass out of the House, Democrats could jam the 2100 Act through, where it would likely be dead on arrival in the Senate.

But Larson said that will not be his party’s approach. “We’re going to do this in regular order and flesh out all ideas,” he said, including the testimony of actuaries, economists, retiree activists and even retirees in a series of public committee hearings. “This is not going to be something we rush to the floor. We’re going to go through the whole process because we think that’s what the issue requires.”

2100 Act expands benefits

The math to fixing Social Security’s funding issues is easy, policy wonks say. The politics? Not so much.

Permanently reducing benefits by 17 percent is one approach to putting Social Security on sound actuarial footing. Or, payroll taxes could be increased by 2.78 percent, to 15.18 percent of income. A third option is a combination of the two approaches. Waiting until the program’s cash reserves are exhausted will require more benefits cuts and higher tax increases, according to last year’s Trustees’ report.

But Larson’s bill does not merely seek to make Social Security solvent over the long term, which an analysis by the SSA says it does until the end of the 21st century.

It also expands benefits for all beneficiaries. The neediest seniors would see the largest increase from a baseline benefit of 125 percent of the poverty line. Every other current and future beneficiary would get the equivalent of a 2 percent increase in today’s average benefit.

And the tax threshold on Social Security benefits would increase from $25,000 and $32,000 for non-Social Security income for an individual and couple, respectively, to $50,000 and $100,000. An estimated 12 million more beneficiaries would not pay taxes on Social Security income.

To pay to make the program and expanded benefits solvent, the 2100 Act raises taxes on all Americans. Payroll taxes would be applied to wages over $400,000—wages up to $132,900 are currently taxed.

And the payroll tax would increase from today’s 12.4 percent to 14.8 percent, phased in over a 23 year period. Larson said that amounts to the average worker paying $0.50 more a week.

“We can do this by making sure everyone has skin in the game,” said Larson.

No increase in retirement age

What the 2100 Act does not do is phase in an increase of the retirement age, which was done when Congress passed reform in 1983, and is a measure many economists argue is necessary to pave a bipartisan path that will result in moveable legislation.

Larson is steadfastly against raising the retirement age.

“Actuarially, I get it,” he said. “But the idea demonstrates a lack of understanding of what is going on in people’s lives, and what they subsist on. To have traveled around the country and listened to people and their situations, I don’t see how you can justify it.”

When Social Security was established in 1935, half the country lived in poverty. By 1946, 11 million Americans were 65 or older. Today about 46 million Americans are over 65, and that’s projected to more than double by 2060, according to the Population Reference Bureau, a non-profit think tank.

Mortality has also vastly improved over Social Security’s lifetime. In 1950, life expectancy was 68; by 2013 it was 79.

The longer Americans live, the more they work, in some cases, and the more they collect in Social Security benefits, arguments that minority members on the Social Security subcommittee will undoubtedly make when pushing back on Larson’s bill in hearings.

But a closer look at mortality rates shows a growing disparity in the lifespans of the richest and poorest Americans.

Among men born in 1960, those in the top income quintile have a life expectancy of 12.7 years longer than those in the bottom quintile, according to National Academy of Sciences data cited in a Congressional Research Services report.

Consequently, benefits between the poor and rich are already unevenly distributed. Raising the Social Security claiming age would exacerbate that—arguments likely to emerge early from the majority on the Social Security subcommittee when the question of the retirement age comes up.

“We welcome that debate,” said Larson.

A friend in Trump?

The 2100 Act’s phased increase in payroll taxes is taking the place of the indexing that Congress failed to implement when it last reformed Social Security in 1983, said Larson.

“Taxing people based on 1983 income doesn’t make sense,” he said. “The public understands and knows the experience of paying into the system. It’s not their fault that Social Security is not actuarially sound, it’s Congress’s. That’s what we are aiming to change and improve.”

Larson said he is committed to gathering bipartisan support for his bill. He’s begun reaching out to Republicans in the House, and thinks new ground can be broke. He also points out that more than 20 Republicans are up for reelection in the Senate.

And he has what he calls an “option” in President Trump.

“We have a Republican president who was grilled by 16 other Republican candidates during the 2016 primary who was the only one to resist cutting Social Security benefits,” noted Larson. “I give President Trump credit for standing up when it mattered.”

Despite a divided government, Larson thinks there is an “outstanding” chance reform could happen in the 116th Congress. “We want the kind of bipartisan vote we seek—I don’t think this will be a partisan outcome,” he said.

“But we certainly are going to have a vote in the House,” he added.

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