Half of millennials don’t think Social Security will be there for them when they retire. Republican presidential candidate Jeb Bush’s new plan looks to change that, and Opportunity Lives breaks down the details.
On its current path, the Social Security trust fund will run out in 2033. When this happens, all beneficiaries will see their benefits immediately cut by 23 percent, unless Congress acts. That means we have to do something now. The longer we wait, the more benefits will need to be cut – a chart by the Committee for a Responsible Federal Budget demonstrates just how dire the situation is.
Unfortunately, tackling Social Security can be a career-ending move, leading to its classification as the “third rail” of politics. Even though Jeb Bush’s campaign has been struggling recently, effectively facing this important issue is a sign of serious policymaking ability.
The first heading of Bush’s plan is: “Encourage private saving to reduce government dependency.” This is absolutely crucial.
A quarter of full-time workers don’t have access to some type of retirement plan through their employer, and often these people assume that Social Security will be sufficient for them. With Social Security paying average benefits of only $14,000 a year, people who don’t plan ahead by saving through private retirement plans will face serious difficulty.
Bush has a number of achievable suggestions for increasing access to private plans (which usually provide better returns and more financial security). Regulations and reporting requirements make it difficult for small businesses to offer retirement plans to their employees, so a Bush administration would allow small businesses to pool together. Bush would also put a stop to new government regulations that limit who can give financial advice.
He also proposes removing some of the disincentives to work inherent in the Social Security program. Bush would eliminate the retirement earnings test, a confusing provision that temporarily reduces benefits for seniors who continue working up to retirement age while claiming early benefits.
Bush would also scrap the employee portion of the payroll tax for seniors 67 or older, essentially giving a 6.2 percent pay raise to people who continue working past the normal retirement age. “Reforms should update Social Security to respect seniors’ desires and abilities to work later in life,” he said.
Among some of the more controversial changes, Bush’s proposal includes an increase of the retirement age to 70. Though the change would be spread out over the next 36 years (the retirement age would increase one month every year), many on the left oppose such a change.
Bush also proposes modifying the way Social Security’s annual cost of living adjustments are calculated by switching to the Chained CPI (a more accurate measure of inflation). Though President Obama was once a supporter of this exact change, public backlash over the reductions to benefits that could occur eventually convinced him to drop the idea.
Perhaps most importantly, Bush’s proposal would implement a new minimum benefit to make sure that no one who has paid into Social Security and is receiving benefits will be living in poverty. As long as individuals paid into Social Security for at least 30 years, they would be entitled to a minimum benefit at retirement of at least 125 percent of the poverty line.
Using models developed by the Policy Simulation Group, noted Social Security expert Andrew Biggs writes that the Bush plan would balance Social Security over the next 75 years. That’s a remarkable achievement and something that shouldn’t be ignored.
The Bush plan for Social Security is a serious and reasonable solution, and it should be discussed and considered by candidates on both sides of the aisle.