While the national debt continues its climb above $14.3 trillion, the day is fast approaching when Congress will, once again, vote to increase the debt limit. This brings new urgency to the need to rein in Washington’s out-of-control spending binge. Since entitlement programs (Medicare, Medicaid, and Social Security) are the largest sources of deficit spending moving into future decades, they must be at the center of any solution.
Social Security in particular is in big trouble. Americans pay into this program and rely on it for income security during retirement. But Social Security is already running deficits and will continue to do so permanently. By 2036, the program’s trust fund will be completely exhausted, at which point retirees will experience an automatic, across-the-board benefit cut of 23 percent. That’s $271 per month in today’s dollars. To fund the benefits seniors have been promised for the next 75 years, Washington would need to come up with $6.5 trillion in additional revenue.
To address this shortfall, Senator Kay Bailey Hutchinson (R–TX) has introduced legislation that would preserve Social Security for Americans entering retirement this century. Under the Defend and Save Social Security Act, current recipients and those preparing to enter retirement (ages 58 and above) would be unaffected. For younger generations, the proposal would gradually raise both the normal and early retirement ages. It would reduce the annual cost of living adjustment by 1 percent, which would work out to approximately $11 a month. This would be significantly less painful than the $271 reduction seniors face if nothing is done.
Senator Hutchinson’s proposal would eliminate the entire Social Security shortfall, preserving the program for today’s seniors, their children, and their grandchildren. The plan would give those already in and nearing retirement peace of mind that the benefits they depended on when planning for retirement would continue to be there, and it gives younger generations time to prepare for the changes.
As part of our “Saving the American Dream” proposal, The Heritage Foundation has offered our own plan to strengthen and preserve Social Security. Our plan would transform Social Security into true social insurance, ensuring that no senior fell below the poverty line (which the current system fails to do), while reducing the checks the government cuts to those with higher incomes and eliminating benefits altogether for the very affluent. The Heritage plan would increase benefits according to wage growth and, like Senator Hutchinson’s proposal, would raise the eligibility age. Paired with other reforms that encourage individuals to save for retirement—including a complete restructuring of the tax code—these reforms would reverse the pending entitlement crisis, lifting the burden on taxpayers and strengthening the programs for beneficiaries.