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Sen. Bill Cassidy

Retirement Planning > Social Security

Here's What Should Really Scare Lawmakers About Social Security: GOP Senator

By Melanie Waddell

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What You Need to Know

  • The big fear around Social Security in Washington should be allowing the trust fund to go broke, Sen. Bill Cassidy suggests.
  • He and other senators are proposing an investment fund to shore up the system.
  • Social Security advocates say their plan will result in benefit cuts.

Social Security reform has long been called the third rail of American politics — a dangerous issue for politicians to touch.

But with depletion of the trust fund roughly 10 years away, can we fix the system?

Jason Fichtner, chief economist at the Bipartisan Policy Center, asked this question of Sen. Bill Cassidy, R-La., Tuesday during a video conversation.

“Yes, of course we can,” Cassidy, ranking member on the Senate Health, Education, Labor and Pensions (HELP) Committee, responded. “But we have to redefine what the third rail is.”

He suggested that the leading presidential candidates were afraid to touch the program when what they should be afraid of was “a 24% decrease [in benefits] — without a borrowing capacity to address it.”

Such a benefit cut will result if the trust fund goes bust, which is projected to happen in 2033 if Congress doesn’t act, according to the Social Security board of trustees.

Cassidy continued: “If that 24% decrease goes into effect, it’ll double the rate of poverty among the elderly. That should be the third rail; the conversation has to change to that.”

That’s part of the answer, Cassidy continued, noting that another potential remedy is his plan to create an investment fund, “not using any Social Security funds at all,” that accrues returns over 70 years. “We would end up with enough [funds] to address 75% of the 75-year shortfall” as laid out by the Social Security Administration.

Cassidy and Sen. Angus King, I-Maine, along with a dozen other senators are working on Social Security legislation that includes the creation of a so-called “sovereign wealth fund” to help extend Social Security’s solvency.

The National Committee to Preserve Social Security and Medicare sent a letter to Cassidy and King expressing “deep concern” over their plan, which the group says “would put Social Security on a slippery slope toward privatization — and ultimately cut benefits for future beneficiaries.”

“The Cassidy-King plan attempts to address the projected shortfall in the Social Security trust fund by borrowing $1.5 trillion to invest on Wall Street (modeled on the concept of a ‘sovereign wealth fund’) — in hopes it would yield sufficient returns to pay back the loans and still have enough money left over to cover any future gap in Social Security funding,” according to Max Richtman, president and CEO of National Committee to Preserve Social Security and Medicare.  “But this funding scheme really is a trojan horse for benefit cuts that reportedly are at the core of the Cassidy-King proposal.”

The so-called “sovereign wealth fund” in the Cassidy-King proposal “is an illusion — a smokescreen to promote a deal that is too good to be true,” Richtman told the senators. “Workers who represent the heart of the middle class, along with some of the most vulnerable among us, will bear the brunt of the inevitable benefit cuts from this plan.”

A ‘Semi-Deadline’

“If we wait until just before the trust fund goes insolvent, it is going to be that much more difficult to address the issue,” Cassidy said at the BPC event.

“It may not be that the program is going insolvent tomorrow,” he said, “but I would argue that the window of opportunity to do it with minimal disfunction is rapidly closing — a semi-deadline, if you will. A semi-deadline of not touching that third rail: of giving an elderly senior a 24% cut in the benefits” they’d receive.

Pictured: Sen. Bill Cassidy, R-La.

Melanie Waddell

@Think_MelanieW

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