Social Security Affected by Persistent Unemployment Checks - AMAC

Many economists and Republican governors have been fuming for months now about the so-called “Biden bonus” of paying people an extra $300 per week not to work through early September.  Opponents of this scheme, passed in the last stimulus bill of March 2021 with Democrat votes only, note the bonuses are holding down job gains and even causing shortages and inflation, as employers up the ante with higher wages and signing offers to lure folks off the couch.  Twenty-five governors, all Republican, have already terminated or announced they are soon terminating the $300 bonuses.

But politics aside, what is the impact of all this on the Social Security program?  Turns out, it’s significant.  Why?  People who collect unemployment benefits, as opposed to wages or salaries, do not pay the FICA tax (6.2% to Social Security and 1.45% to Medicare), and neither do their employers.  The longer millions collect unemployment rather than work, the more the Social Security Trust Fund suffers.  As it now stands, the Fund is due to run dry after all surpluses currently being used to keep benefits whole are exhausted in about 2034.  Benefits will then be cut for all by about 23% automatically.  Experts think the reckoning date, though, may even be sooner due to the pandemic.  We won’t know for sure until the 2021 report is released (any time now) by Social Security Board of Trustees.

But it is worse still.  People are actually doing damage to their own futures, likely without realizing it, as time out of the workforce will affect their future monthly Social Security payments for the rest of their lives.  That’s because Social Security uses one’s highest 35 years of earnings (adjusted for inflation) in calculating one’s monthly benefit.  Throw a zero into that mix, because one stayed out of the workforce collecting unemployment, and the benefit calculation will be significantly lower.  As stated, that kind of income is not credited.

Congress could rescind the bonus payments, but that appears off the table.  Congress will still have to fix the long term issues by reforming the Social Security program, and the fixes become more difficult and painful the longer it waits.  Essentially, to shore up its finances, there are three options—cut benefits, raise taxes, or increase the retirement age.  That’s about it.  Of course, a mix of any of those three can be applied as well, as in perhaps trimming benefits for the highest income earners.

But reform can never happen in the current toxic environment where any candidate or elected official who speaks the truth is hit with or accused of “cutting Social Security” or “throwing Granny off the cliff.”  For years we’ve heard these ludicrous lines in commercials and in campaign literature.

The public needs to understand Social Security’s financial problems in order not to fall victim to members of Congress looking only to their next election with lines like, “I pledge to increase everyone’s Social Security benefits.”  It’s a popular thing to say, and that is why so many members propose benefit hike bills.  But it’s incredibly disingenuous.  The tough, courageous, and righteous stance is to advocate for reforming the program so that it will remain sound and stable and continue to exist as we know it for future generations.

AMAC’s Social Security Guarantee is designed to preserve and modernize the program without raising taxes on workers.  One component is Social Security PLUS, a voluntary companion benefit (not privatization of the main program) that would allow all workers to have more money in retirement.  See the full plan here.


Jeff Szymanski works in political communications at AMAC, a senior benefits organization with 2.4 million members.  This piece is part of an on-going attempt to inform Americans of the reality of Social Security’s precarious financial situation and to promote AMAC’s plan to preserve and modernize the program for successive generations.

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