Will “Means Testing” Drive a Solution to Social Security’s Insolvency Dilemma? - AMAC Foundation, Inc.
As we await publication of this year’s annual Social Security trustees report, we’re seeing a fairly consistent assumption that the trust fund depletion date will be “officially” advanced to 2032. Some pundits also hint at 2031 as a more realistic projection, but we’ll just need to sit tight for a few more days until the trustees’ annual financial assessment of the Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) trust funds hits the street. Ms. Karen Glenn, Social Security’s Chief Actuary, noted in the March 25 Senate Budget Committee hearing1 that publication of the report is on track for later this spring.
The March 25 hearing featured a panel including Ms. Glenn, Dr. Molly Dahl (CBO’s Chief of Long-Term Analysis), and Mr. Barry F. Huston (CRS Specialist in Social Policy), who fielded questions from the Committee on Social Security about the financial outlook and pathways to resolving the looming insolvency problem. During the interaction between panelists and Committee members, Chairman Lindsey Graham (R – SC) summarized Social Security’s plight as being one in which increasing taxes would not be a full solution, and suggested that “means testing time has arrived.” Chairman Graham defined means-testing as “…asking people to consider taking a little bit less if they can afford it.”
Organizations are Addressing Means Testing
In her response to questions from Committee members, Ms. Glenn cited proposals that have been evaluated by the Office of the Chief Actuary (OCAT) to either produce additional revenue or lower the costs of operating Social Security. These proposals and their impact on Social Security can be viewed on the OCAT website2, and it’s clear that many of them do indeed address a form of means testing of benefits paid under the program. As the point of insolvency draws closer, new proposals are emerging that address means testing, including, for example, the Committee for a Responsible Federal Budget’s “Six-Figure Limit” proposal to cap benefits for higher earners and its proposal to place a ceiling on Social Security’s annual cost-of-living adjustment.
Many organizations are developing proposals to address the insolvency problem, and many include specific adjustments affecting higher earners. The Association of Mature American Citizens (AMAC) is one such organization, with its Social Security Guarantee proposal containing several recommendations that touch on the objectives relating to means testing, including price indexing for initial benefits for higher earners, a change to the schedule for annual increases in the taxable maximum, and a proposal to distribute annual cost-of-living adjustments on an average-dollar basis rather than an average-percent basis. These recommendations are part of AMAC’s 15-point plan to address the 76-year funding shortfall identified by Social Security’s actuaries.
How Means Testing Relates to the Insolvency Issue
With this comment in the 3/25 hearing, Committee Chairman Graham summarized the importance of considering means testing: “If we do nothing (to resolve the insolvency problem), then shame on all of us, because nothing has a very severe consequence for people who can afford it the least.”
1 – Social Security: A Discussion on the Facts and the Path Forward (Full Committee Hearing)