A key House Republican on the issue of Social Security introduced a bill Thursday that would impose major cuts to the program. The bill, the Social Security Reform Act of 2016, was introduced by Rep. Sam Johnson (R-TX), the chair of the House Ways and Means subcommittee on Social Security.
It would, among other things, gradually raise the retirement age from 67 to 69 on Americans 49 or younger at the present. It would change the formula that determines the size of a retiree’s initial payments. And it would switch the program to a less generous formula for raising payments according to cost of living increases.
Big picture, the most concerning element for many experts is that its approach to make the program more solvent rest entirely on cuts, and does not raise revenues for the Social Security Trust Fund, as some bipartisan proposals have. Across the political spectrum, solutions for long term solvency range from cuts-only approaches like Johnson’s bill to plans that achieve 75-year solvency by raising the current income cap on social security taxes.
“Ultimately, we are going to need something that’s a little more balanced between benefits saving and revenue changes in order to get a proposal that could pass Congress and get approved by the president,” said Shai Akabas, director fiscal policy at the Bipartisan Policy Center.
The cuts in the bill lean more heavily on high income-earners, but most workers would see cuts — some of them drastic — if Johnson’s bill became law.
The initial cuts come in the form of the two-year retirement age increase, which according to Paul Van de Water, a senior fellow at the left-leaning Center on Budget and Policy Priorities, amounts to a seven percent cut each year.
The changes to the formula to determine the initial benefit — known as the Primary Insurance Amount (PIA) — are more complicated and involve multiple moving parts. In general though, they negatively impact higher earners the most.
“The change in the formula, it’s structured so that it produces the largest decreases on benefits for the people with the highest pre-retirement earnings,” Van de Water said.
Almost all beneficiaries, however, would see reductions as time went on when compared to current law, due to the legislation’s use of a less generous inflation metric.
“That’s another cut in benefits, and one that grows the longer the person is on the benefit rolls,” Van de Water said.
Some low wage earners — particularly those who have participated in the workforce the longest — are shielded from these cuts due to an increase minimum benefit the legislation includes that acts as a floor for those at the bottom of the scale.
The Republican proposal comes as GOP lawmakers are in the midst of figuring out a plan to implement an Obamacare repeal, which. Many pointed out that President-elect Donald Trump campaigned on protecting social safety net programs.
Trump was quick to condemn the Social Security overhaul proposal, even before most news outlets had picked up on the legislation.