Yesterday, the conservative House Republican Study Committee released its latest budget plan. To the RSC’s credit – and, honestly, to my own surprise – the RSC took on the dangerous issue of reforming Social Security, standing up not only to Democrats looking to demagogue the issue but to former President Trump’s efforts to duck the issue. The RSC’s proposals “include modest and delayed changes to the Primary Insurance Amount PIA) benefit formula, the retirement age, auxiliary benefits for high income earners, and gradually moving towards a flat benefit.” If you don’t want the biggest tax increase in history, those are the sorts of things you have to do. So two cheers for the RSC.
Why not a third cheer? Because the RSC is going to take a lot of grief from both Trump and Congressional Democrats for a proposal that seemingly fixes just a fraction of Social Security’s $20 trillion-plus long-term funding gap, without the plusses of a comprehensive plan to make Social Security work better for Americans. In for a penny, I’d argue, in for a pound.
President Trump has since 2016 argued that Social Security benefits need not be cut, even for the richest seniors. First, Trump argued (incorrectly) that faster economic growth would keep Social Security solvent. Later he (again, falsely) claimed that a “drill, drill, drill” policy to natural resources could do the job. The reality is clearer: Trump wishes to take the political hit neither for cutting benefits nor for raising the taxes needed to avoid those cuts. President Biden, for his part, isn’t doing much better: his recent State of the Union address called for raising taxes on the rich, but the Biden budget released days later didn’t even pencil in that fix. The President realizes that massive tax increases aren’t popular.
Congressional Democrats, to their credit, have been forthright on what they would do: increase taxes to fill Social Security’s solvency gap, then raise taxes even more to expand benefits. Of course, like President Biden, they never followed up on this commitment when they had the power to do so.
The Republican Study Committee counts nearly 80% of House Republicans as members, including Speaker Mike Johnson. The RSC proposes three changes to Social Security benefits. First, the RSC would modestly reduce benefits for “individuals who are not near retirement” and whose career-average earnings were over $85,000. Second, the RSC would “make modest adjustments to the retirement age for future retirees to account for increases in life expectancy.” And third, the RSC “would limit and phase out auxiliary benefits for high income earners.” This change would, for instance, limit benefits to a non-working spouse of a high-earning worker.
On cue, Congressional Democrats protested: California Democratic Rep. Linda Sanchez declared the RSC plan would “end Social Security as we know it.”
But it is hard to know what to make of such claims.
On one hand, the benefit changes proposed by the RSC seem modest relative to Social Security’s larger funding gap. The RSC doesn’t offer enough specifics to be precise, but based on the SSA actuaries’ projections of similar reforms and my own guestimates of how much savings are lost by protecting current and near-retirees, I guess the RSC proposals would address perhaps 15% of Social Security’s long-term funding gap. That leaves a long way to go.
On the other hand, the RSC budget claims that it would reduce Social Security/Disability Insurance outlays by $1.5 trillion over 10 years, relative to a baseline of about $19.7 trillion. I honestly don’t know how they’re getting 7.7% cost savings while sparing current retirees, unless the RSC would go hard on disability benefits in ways their budget doesn’t specify. I suspect there’s some dynamic scoring going on – the RSC claims that total federal revenues over the next decade would rise by 0.7% of GDP, despite not increasing tax rates. But that doesn’t explain why Social Security outlays would fall so much in dollar terms.
So two cheers for the RSC: They’ve stood up to Congressional Democrats by at least putting a plan on the table. And, more importantly, they’ve stood up to Donald Trump’s position that Social Security reform can be ignored or hand-waved away. But a third cheer requires a comprehensive plan that makes Social Security full solvent and more effective in serving Americans. (Need help on that? See the chapter I prepared for the American Enterprise Institute’s book, American Renewal.)