Social Security has now been in place for over 80 years and has likely helped billions of people supplant their incomes, especially later in life when they retire.
But despite its success, it’s no secret that the Social Security program is in a dangerous situation considering that it may not be able to cover all eligible people who qualify here. 2035. Plus, many say the benefits are no longer enough to keep up with the cost of living.
Something will probably have to happen at some point to keep the program running at full capacity. Now, a congressional bill aims to not only fund the program well beyond 2035, but also to increase Social Security benefits.
The social security extension law
The Social Security Trust currently has $2.85 trillion in assets, which will be enough to cover every qualified American in the program through 2035. After that, the Social Security Administration projects it will be able to pay out about $80 % benefits to those who qualify.
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Sponsored by a slate of Democratic politicians, including Sen. Bernie Sanders (I-Vt.), Sen. Elizabeth Warren (D-Mass.) and Rep. Peter DeFazio (D-Ore.), the law expanding the Social Security (SSEA) would increase the solvency of Social Security trust funds by 75 years. The bill plans to do this by increasing the program’s tax caps. Currently, Americans only pay Social Security taxes on the first $147,000 of their income. SSEA would significantly increase this limit and tax all income over $250,000.
With this additional tax revenue, the bill would increase monthly benefits by $200 across the board, which means an additional $2,400 per year for program participants. That equates to a nearly 13% hike for those who receive the average Social Security check of $1,540 a month.
Several other provisions of the bill are also important. Another important issue concerns the annual increase in the cost of living adjustment (COLA) of social security benefits, which is made each year to take inflation into account.
Currently, the calculation is based on the increase in the consumer price index for urban wage earners. But the SSEA would base the COLA adjustment on the consumer price index for the elderly. The bill’s authors believe this index more accurately reflects what older Americans spend their income on — it’s weighted more heavily by health care and prescription drugs. This would likely mean higher annual COLA adjustments.
Can the bill be passed?
The bill was only introduced in June, and it doesn’t appear that much legislative action has happened since, although 52 groups have endorsed the bill. Congress also hasn’t passed major Social Security legislation since the early 1980s, so passage of this bill in its current form is likely more unlikely at this time.
Democrats and Republicans have long been at odds over Social Security because extending trust fund solvency would likely require tax increases one way or the other, which has long been a hot issue.
That said, as 2035 gets closer there will be more pressure on Congress to do something, so expect more bills and proposals to be introduced and the issue to become a bigger debate. in the years to come.
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