President-elect Joe Biden won’t take office for another 10 weeks, but it looks like one of his biggest ideas to help retirees is already in trouble. The problem
for Biden, of course, is that he was counting on a stronger hand in Congress. He wants to boost Social Security benefits, particularly for low-income households, by
raising taxes on corporations and individuals earning $400,000 a year. But it’s hardly likely that McConnell and his fellow Republicans will go along with a tax
hike of any kind.
It’s also important to remember that Biden’s proposal to tax more but also spend more does nothing to solve Social Security’s underlying problem:
That the Trust Fund is on track to be exhausted by 2035, at which point retirees could be looking at cuts of about 25%.
Biden’s election does mean one positive for Social Security (and Medicare): Talk of eliminating the payroll tax—which is the principal source of funding
for these gargantuan federal programs—will go away. President Trump spoke often of wanting to eliminate this tax, and pay for entitlement programs from the general
fund. This would have treated Social Security and Medicare like any other federal program—making it vulnerable each year to the whims of lawmakers and the
There may be one thing that Biden and his fellow Democrats can do with Republicans, however, and that is to change the way Social Security benefits are calculated.
Right now, Social Security’s annual cost-of-living adjustment (COLA) is based on a gauge called the “CPI-W”—the Consumer Price Index for Urban
Wage Earners and Clerical Workers. The problem with this: CPI-W places greater weight on things that seniors need less of—like electronics and, again, gasoline—
but less weight on things seniors do spend big on, like medical expenses. For this reason, Social Security benefits have been creeping up at a snail’s pace in recent years.
Of course, changing the way the Social Security COLA is calculated this way would bring us back full circle to the problem we’ve been talking about: The cash
crunch that is coming and isn’t being addressed. All these Washington politicians are doing what they always do, says Chad Parks, founder & CEO of Ubiquity Retirement &
Savings: “They continue to just kick the can down the road.”
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