In late March, the U.S. Senate took three votes related to Social Security benefit amounts that may hold clues to how candidates will line up on the issue in the presidential campaigns.
While none of the proposals passed, they were especially notable for how the parties lined up in their votes, with nearly all Democrats voting to expand Social Security, while every Republican voted no way. Indeed, it was the sharp partisan split that drew most media attention.
“The distinction between Democrats and Republicans couldn’t be clearer,” according to an article by The Huffington Post. “The Democratic Party, which created Social Security, now in its 80th year, is unmistakably the strong champion of the program. The Republican Party which, in 1935, voted nearly unanimously to kill the legislation in the House of Representatives is unmistakably on record for favoring scaling back working American’s modest earned Social Security benefits.”
The late night action on Thursday began when Senator Bernie Sanders (I-Vermont) offered an amendment that aimed to protect Americans against cuts to their current earned benefits amounts.
Shortly after, Senator Orrin Hatch (R-Utah) offered a similar amendment that would protect only current beneficiaries from cuts.
Finally, near 2:30 a.m., Senator Elizabeth Warren (D-Massachusetts) offered an amendment proposing an expansion of the Social Security program. The proposal was co-sponsored by Senators Joe Manchin (D-West Virginia), Patty Murray (D-Washington), Sherrod Brown (D-Ohio) and Brian Schatz (D-Hawaii).
The proposal by Warren and company drew the most immediate attention due to its political ramifications. Though unsuccessful, this proposal forced every member of the Senate to officially go on record as to whether they favor or oppose expanding Social Security benefits.
This is important for three reasons: current estimates are that the Social Security program will exhaust available funds by 2033 unless Congress takes action; the Thursday vote could put Social Security front and center in the president debates in 2016; and a growing number of groups and individuals are calling for Warren to make a run for the White House.
Lesser of Two Evils
While there is still ample time to act before 2033 to “rescue” the solvency of Social Security, at some point Congress will have to take some sort of action, either to increase the Social Security tax or reduce benefits paid out. Either option is a bitter pill.
“Advocates for expanding Social Security have said that payments today are not enough for the roughly 20 million retirees who will receive more than half of their monthly income from Social Security benefits,” according to an article on alnernet.org. “They have proposed lifting the income tax cap as the simplest and fairest way to expand near-term payments and to build up long-term reserves.”
What the Warren and company proposal would have done was “support a sustainable expansion of Social Security benefits and promote the long-term solvency of the Social Security and Disability Insurance trust funds,” explained Warren’s office. ”The amendment requires these changes to be fully paid-for.”
Explaining the need for the measure, Warren said “Out country faces a growing retirement crisis. Two-thirds of seniors rely on Social Security for most of their income in retirement, and for 15 million people, Social Security is what stands between them and poverty. We need to keep our promises to America’s seniors, and that means strengthening and expanding Social Security.”
Adding to Warren’s comments, Senator Murray stated “This amendment begins the process of putting differences aside in order to keep our promises to our seniors by protecting Social Security beneficiaries while working to ensure the long-term solvency of this ital. program. Senator Warren and I are committed to make sure the Social Security Trust remain permanently solvent so that this great promise will be available for generations to come.”
What retirement planners think
So where do retirement planners and financial advisors stand on all of this? Retirement Wire reached out to some for their thoughts on Thursday night’s actions. The consensus was that Congress will indeed have to take action at some point. But they weren’t so sure about the specific measures proposed.
“I would welcome any serious attention from our legislators on addressing the long-term solvency of Social Security; however, efforts to expand Social Security are unrealistic at this time,” said Evelyn Zohlen, founder and president of Inspired Financial. “Our collective energy would be better spent addressing the shortfalls of the existing system and once it is fixed, then we can turn our attention to whether or not Social Security should be expanded. The Senators’ proposed budget amendment is helpful in keeping legislative attention on the Social Security issue, but is unlikely to actually expand Social Security benefits.”
From Ashlee Veneman, senior financial planning analyst at The Planning Center, Inc.: “I applaud that Congress is moving forward and addressing a concerning topic that can’t be ignored much longer, but whether or not this is the right legislative move has yet to be determined. I would ultimately strive to see a hybrid between reducing benefits and increasing revenue to the trust funds to answer the Social Security plight. I do agree with the sentiments expressed by the authoring senators and agree that it would not be beneficial (in fact, probably downright destructive) to let this system collapse.”
Finally, from Catherine Collinson, president of Transamerica Center for Retirement Studies: “The 15th Annual Transamerica Retirement Survey (2014) found that 76 percent of workers are concerned that Social Security will not be there for them when they retire. Unless lawmakers take some form of action, the Social Security Administration projects that the trust fund will be depleted by 2033 – right around the time that first Generation Xers (born 1965 to 1978) will be eligible to start receiving retirement benefits. By taking action sooner rather than later, lawmakers have more time to phase in changes as well as give the public more time to plan and prepare.”