WASHINGTON — A bipartisan group of senators has discussed ways to reform Social Security to avoid a funding gap expected in about a decade.
And one point under debate is raising the eligibility age for Social Security benefits for prospective retirees — a politically charged move that is more likely to infuriate voters than become law any time soon.
In addition to potentially raising the age of eligibility for future retirees, the group has looked at establishing an investment fund that would improve long-term Social Security finances.
“It’s not set in concrete yet, but it’s a reasonable proposition because it doesn’t call for changing benefits over the next 75 years,” Sen. Mitt Romney (R-Utah) told HuffPost Wednesday. “In fact, it improves benefits, especially for people at the lower end of the income scale, which is something that would be helpful.”
The negotiations in no way indicate impending changes to popular retirement programs. They reflect an ongoing political debate, driven primarily by Republicans, over long-term federal spending. Congress is unlikely to pass changes to Social Security or Medicare this year; House Speaker Kevin McCarthy (R-Calif.) has said the House “will not touch” the programs.
Nevertheless, the senators are discussing changes in how Social Security benefits are calculated, plus increasing the wage income subject to the taxes that fund the benefits. As of this year, only the first $160,200 of an employee’s earnings are subject to the 12.4% tax that is shared between employees and employers.
First, the broad outlines of the group discussions were discussed Semafor reported on Tuesday. Half a dozen senators are involved in the talks, led by Maine Independent Angus King, who consults with the Democrats, and Senator Bill Cassidy (R-La.).
Raising the retirement age is probably the most controversial idea being considered — and arguably essential for Republicans.
“I think that’s part of the appeal of getting both parties together. To make sure we save these programs forever, you have to recognize that life expectancy is much higher today than it was when Social Security was established.” said Romney. “So a modest increase in age – what, you know, 20 years from now? – is probably something that makes sense.
When Congress first created Social Security retirement insurance in the 1930s, lawmakers set the age of eligibility for maximum benefits at 65. In a bipartisan reform passed by Congress in 1983, the full retirement age was gradually increased to 67 over a 22-year period beginning in 2000. Thus, for workers born in 1960 or later, the full retirement age is 67.
Sen. Tim Kaine (D-Va.), one of the Democrats involved in the discussions, brushed aside questions about a higher retirement age.
“That’s not something I really focus on,” Kaine told reporters. “The thing I’m focused on is this investment fund, because that hasn’t been done yet in Social Security, but I think it’s really promising.”
The basic idea, sometimes described as a sovereign wealth fund or a social wealth fund, is that the government would invest payroll tax revenues in the stock market, rather than Treasury bills as is currently the case, to earn higher returns. (It’s a different idea from former President George W. Bush’s call for private bills in the early 2000s.).
“If you look at the 20-year moving average since 1929 of the stock market [the return] ranges from 5.5% to 10.5%, but the average is 8.8%,” Cassidy told HuffPost. And treasure chests are Treasure Chests.”
Yields on most securities issued by the US Treasury this week range from about 3% to about 5%.
Senator Ron Wyden (D-Ore), who chairs the Senate Finance Committee, which oversees Social Security, and who does not participate in the informal talks, said he was open to ideas for new policies “on top” existing benefits. He was hostile to the idea of raising the retirement age.
“It’s almost like a generational war, really, because you have millennials, Generation X, and baby boomers, and it’s a discount on earned benefits,” Wyden said.
CORRECTION: An earlier version of this story erroneously said Wyden was part of the bipartisan talks.