Social Security
Above Congresswoman Granger speakes to concerned individuals at the Hills Nursing Home int he 12th District. Specifically she spoke on Social Security and Medicare and answered the questions of these senior citizens.
Social Security is currently running a surplus ($79 billion in 2008); taxes paid by today's workers are more than enough to pay promised benefits. However, Social Security’s pay-as-you-go system is unsustainable in the long run because the population is aging, women are having fewer children, and people are living longer. According to the Congressional Budget Office (CBO), Social Security spending is projected to nearly double from $667 billion this year to $1.1 trillion in 2018.
Starting in 2017, revenues will fall short of the amount needed to pay promised benefits. Since benefits are paid in cash, not Treasury bills, and since no money has been set aside to honor these Treasury bills, the government will have to raise taxes, cut spending, or increase the debt to redeem these Treasury bills. Even if we do find the funds to redeem the Treasury bills in the trust funds, they will be depleted by 2041 and annual tax revenues would be sufficient to pay only about 78 percent of promised benefits. In other words, if no action is taken to reform Social Security, benefits will have to be cut by 22 percent in 2041, with reductions reaching 25 percent in 2082. Alternatively, the payroll taxes would have to increase to almost 16 percent in 2041 to pay full benefits, and continue rising to about 16.6 percent by 2082 - the equivalent of an annual tax increase of $1,834 for a worker earning the estimated average wage ($43,679) today.
The size of Social Security’s shortfall is substantial. The government is already committed to raising taxes, increasing the debt, and/or reducing spending to cover $2.2 trillion in Treasury bills that have already accumulated in the trust funds. The government would have to invest an additional $4.3 trillion today to cover full benefits for the next 75 years, and $13.6 trillion today to cover full benefits over the infinite future.
Over the past few years, Congress has taken steps to improve the management and accounting of the Social Security trust fund. However, more action is needed to ensure Social Security is available for tomorrow’s seniors. I believe that any changes in the way Social Security operates must be approached with extreme caution. Our main objective must be to ensure Social Security’s solvency for many years to come.
Government Pension Offset (GPO) and Windfall Elimination Provision (WEP) Formulas
The Government Pension Offset (GPO) and the Windfall Elimination Provision (WEP) reduce Social Security benefits, particularly for teachers and other public servants.
Social Security monthly benefits are computed by applying a formula to an average of a person’s earnings from work subject to the Social Security tax. The formula is designed so that workers with low average career earnings receive a larger proportion of their earnings than do workers with high average earnings.
The “windfall elimination provision” was enacted in 1983 as part of major efforts designed to shore up the financing of the Social Security program. This provision’s purpose was to remove an unintended advantage that the regular Social Security benefit formula provided to persons who also had pensions from employment not covered by Social Security, such as work under the Federal Civil Service Retirement System.
Some opponents believe the provision is unfair because it substantially reduces a benefit that workers had included in their retirement plans. Others criticize how the provision works, claiming the windfall elimination formula is an inaccurate way to determine the actual windfall when applied to individual cases. For example, they say it over-penalizes lower paid workers with short careers, or with full careers that are fairly evenly split. They also say it is regressive, because the reduction is confined to the first bracket of the benefit formula and causes a relatively larger reduction in benefits for low-paid workers.
I have cosponsored a number of bills to repeal the GPO and WEP formulas.