Post-Election Social Security Cuts Less Likely Now

Nov 14, 2022 / By Elaine Floyd, CFP®

Prior to the midterm elections, when it was looking like Republicans might take control of both the House and the Senate, attention was focused on comments by Senator Rick Scott (R-FL), Senator Ron Johnson (R-WI), and other influential Republicans who proposed subjecting Social Security and Medicare to a renewal vote every year or every five years in the hope of reducing spending on these now-mandatory government programs. Republicans floated a number of ideas, including raising the full retirement age to 70 and cutting benefits for higher-income retirees. But subjecting Social Security and Medicare to the annual budget process would be a major distortion in how these programs operate, subjecting them to the whims of whoever happens to be in power.

Right now, Social Security and Medicare are nondiscretionary budget items. Politicians who want to reduce government spending can do it in other areas, but not Social Security or Medicare. In fact, it would take an act of Congress to change the authorizing rules that make these benefit payments non-mandatory, which is why Scott, Johnson, and others felt emboldened by the prospect of Republicans having a majority in both chambers. Finally, they might get their wish of cutting Social Security and Medicare payments. Alas, it did not happen. Without a majority in the Senate (not to mention a Democrat still in the White House) there is no chance Social Security and Medicare will be made discretionary expenses and subject to annual budget cuts.

This is not to say Republicans won’t continue to try to undermine entitlement programs, as they have done since the Social Security Act was passed in 1935. It’s also not to say that legislators won’t continue to propose legislation designed to change Social Security in some way. And it’s definitely not to say that the program won’t be reformed sometime before 2035, when the trust fund exhausts and benefits are expected to be cut by 20%. Between now and then there will be many more elections, many more power shifts, and many more campaign promises both for and against Social Security and Medicare. In the meantime, please reassure your clients that some of the more extreme ideas to revamp Social Security and Medicare are not so easy to implement. People should relax and take these headlines with a grain of salt.

Further reading: Republicans, Eyeing Majority, Float Changes to Social Security and Medicare

As director of retirement and life planning for Horsesmouth, Elaine Floyd helps advisors better serve their clients by understanding the practical and technical aspects of retirement income planning. A former wirehouse broker, she earned her CFP designation in 1986.

 

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