Opponents of Social Security are latching onto the worldwide pandemic and resulting economic collapse to, at best, undermine confidence in Social Security and, at worst, slash its modest benefits. Here are the facts.
Despite fearmongering to the contrary, Social Security will continue to pay benefits in full and on time. Social Security has a reserve of $2.9 trillion, which provides more than enough cushion to ensure that benefits will continue without interruption, no matter how long the pandemic lasts. When looking at the long-term — the next three-quarters of a century and beyond — the pandemic will be absorbed, as the Great Recession was.
While benefits are secure, the unprecedented conditions of the COVID-19 economic crisis have unearthed a technical glitch. If left uncorrected, a COVID-19 notch will result: Those turning 60 this year – more than 4 million workers – and their families will receive substantially lower Social Security benefits than workers (and their families) with identical earnings who turned 60 last year.
Fortunately, the solution is easy and straightforward. But Congress must act.
Social Security’s earned benefits are based on each worker’s individual earnings history appropriately adjusted to reflect the growth in aggregate economy-wide wages. This structure is ingenious and fair, has numerous advantages, and works extremely well in almost all economic times. But these are not normal times.
Thanks to the pandemic and the economic collapse, aggregate wage levels are highly likely to decline substantially this year. Because this drastic decline in aggregate wage levels is so unusual, our Social Security system does not take that possibility into account. Congress must fix that understandable oversight to avoid the COVID-19 notch.
Fortunately, the fix is easy. Congress should enact a simple correction that mirrors other parts of our Social Security system. Social Security’s automatic annual cost of living adjustment, for example, can never result in a decrease in benefits, notwithstanding what is happening with inflation. Similarly, Congress should amend Social Security’s indexing of earnings so that it does not result in lower benefits no matter what is happening with aggregate wages nationwide.
That simple fix – ensuring that the decline in overall wages doesn’t produce lower benefits – solves the problem. Those turning 60 this year will not get less than those who turned 60 last year.
Congress should immediately enact this change in a carefully constructed way, so that no one’s benefits are cut. Americans should not have to worry about the loss of several thousand dollars a year of Social Security benefits for those unlucky enough to turn 60 (and their families) during this unprecedented economic crisis.
What Congress should not do is use the need for a technical fix to cut benefits. Andrew Biggs of the conservative American Enterprise Institute, for example, has called for price-indexing as a response. That is a radical change that conservatives have been seeking for almost half a century.
Rejected by both the Ford and Carter administrations, though embraced by George W. Bush in his effort to privatize Social Security, price-indexing would radically transform Social Security. The wonky-sounding change would gradually but inexorably erode Social Security benefits so that they would eventually provide everyone with only a very low, subsistence level benefit, unrelated to prior earnings.
Congress should also avoid following the Trump administration’s lead in using our current crisis as a cover to undermine Social Security in other ways. As just one example, Trump, in the name of economic relief, has repeatedly demanded that Congress enact an elimination of payroll contributions, which are Social Security’s dedicated funding.
As a response to the economic crisis, this makes no sense. It’s slow, inefficient and fails to get money into the pockets of those who need it most. The only reason to support this policy over better targeted, more efficient measures is if your true goal is to undermine Social Security and its self-funded structure.
As a related concern, 60 representatives have urged Speaker Nancy Pelosi (D-Calif.) to include in the next emergency package a provision creating a commission to cut Social Security in a manner that would avoid accountability. This commission’s recommendations would be voted on by Congress without the ability to amend the package. Of course, the legislation does not explicitly state that Social Security would be cut, but that is the obvious intent.
In stark contrast to those who want to cut Social Security behind closed doors, those who want to expand Social Security are ready to do so in the sunshine. The Social Security 2100 Act, which expands benefits with no cuts and ensures that all benefits can be paid in full and on time through the year 2100 and beyond, does just that.
Introduced by Ways and Means Social Security Subcommittee Chairman John Larson (D-Conn.) with over 200 original co-sponsors, it has been the subject of a number of hearings, open to the public and streamed online. A number of other bills to protect and expand Social Security benefits have been introduced in the House and Senate for all to read, as well.
In direct response to the pandemic, Larson has authored the Social Security COVID-19 Correction and Equity Act, which fixes the COVID-19 notch and expands benefits on an emergency basis during the crisis. The presumptive Democratic nominee for president, former Vice President Joe Biden, has endorsed a plan from Sens. Elizabeth Warren (D-Mass.) and Ron Wyden (D-Ore.) that would provide all Social Security beneficiaries with an extra $200 a month during the crisis.
Unquestionably, today’s crisis would be much worse without Social Security. And all of us would be far better off if Social Security’s modest but vital benefits were more adequate. Congress should eliminate the COVID-19 notch as soon as possible. Those we elect should not cut Social Security, but expand it.
Nancy Altman is president of Social Security Works.