Root Cause Analysis: The SS Trust Fund Shortfall - Roosevelt Institute
As we have heralded on this website for years, the Social Security Trust Funds are facing a financial crisis in about the year 2033. That is the point, on current course, that the Trust Funds will be fully depleted, necessitating an across-the-board benefit cut of about 23% for all SS recipients. But what is the reason for that financial shortfall, and what can Congress do to fix it? Well, the primary reason is not one which is commonly mentioned. As discussed in this very interesting article by the Roosevelt Institute, the root cause of SS looming financial crisis is the growing imbalance of earnings taxed for Social Security purposes.
The AMAC Foundation endorses this analysis, and has included mitigating factors into our proposed Social Security reform proposal. The Association of Mature American Citizens (AMAC, Inc.) believes Social Security must be preserved and modernized to serve future generations. AMAC’s position is that this can be achieved without payroll tax increases through relatively minor program modifications, including changes to the cost-of-living adjustment (COLA) process and modifications to the formulas for calculating initial benefits for higher-income beneficiaries. Changes to the age for maximizing benefits are included in AMAC’s position, along with (1) an increase in the thresholds where benefits are subject to income tax; (2) indexing of these thresholds annually to account for inflation; (3) changing the taxable maximum formula to address the unintended loss of revenue; (4) improving survivor benefits, (5) eliminating the reduction in benefits for those choosing to work before full retirement age; and (6) improving savings tools for future retirees, including a savings account that builds estate value. AMAC is resolute in its mission that Social Security be preserved for current and successive generations and has gotten the attention of lawmakers in D.C., meeting with many congressional offices and staff over the past decade. See AMAC’s proposal for Social Security reform here.