As Social Security faces financial challenges, with projections indicating the Old-Age and Survivors Insurance (OASI) Trust Fund may be depleted by 2033, there is a pressing need for reforms to ensure its sustainability.
Despite political divisions, recent developments reveal bipartisan support for several key changes aimed at strengthening the program.
1. Repealing the Windfall Elimination Provision and Government Pension Offset
In a significant bipartisan move, Congress passed the Social Security Fairness Act, which eliminates the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO).
These provisions had reduced benefits for public-sector employees, such as teachers and firefighters, who also received government pensions. Their repeal restores full benefits to over 3 million retirees.
While this change addresses long-standing concerns about fairness, it also adds approximately $195 billion to federal deficits over the next decade and accelerates the projected insolvency of the Social Security Trust Funds by about six months.
2. Raising the Payroll Tax Cap
Currently, only wages up to a certain limit are subject to Social Security taxes. Many Americans support increasing or eliminating this cap to ensure that higher earners contribute a fairer share.
A proposal from the Brookings Institution suggests raising the taxable maximum earnings to cover 90% of wages, which would significantly bolster the program’s finances.
This approach aims to enhance the program’s progressivity without altering the fundamental structure of Social Security.
3. Adjusting the Retirement Age
Given increased life expectancies, there’s a growing consensus on gradually raising the full retirement age.
The bipartisan Bowles-Simpson plan recommended increasing the retirement age to 68 by 2050 and 69 by 2075, aligning it with longevity trends.
Such adjustments would help reduce the strain on the system while reflecting demographic realities.
4. Expanding Legal Immigration
To address the declining worker-to-beneficiary ratio, expanding legal immigration is seen as a viable solution. Increasing the number of working-age immigrants would enhance the labor force, thereby boosting payroll tax revenues that fund Social Security.
This strategy not only supports the program’s solvency but also contributes to overall economic growth.