2023: A Key Year for Biden's Social Security Plan?

Biden presented a plan to boost the social security plan. A difficult reform to achieve, as it would need Republican’s votes too.

1. Strips and Stars-style social security: a giant born weak

Before being elected president, Joe Biden presented a 4-point plan for social security. Covid-19 pandemic worsened social inequalities in the United States, highlighting welfare sate’s critical points.

The Congress members in 2023 seemed to give little margin for the Head of the White House. A turn in social security would be needed in the United States, given the 20-trillion dollars hole in the budget.

Most Americans think social security doesn’t just provide for “some paychecks” that they will receive after retirement. According to Gallup, social security guarantees the income source retired people judge necessary to pay expenses. Since 2002, between 80% and 90% of yearly interviewed retired people answered they leant on their monthly check for personal expenses. Social security is the most successful retirement program in the US and benefits retired workers aged 82 or over. Nonetheless, it seems to have now weak roots, since the unattainable payment cost is now under discussion.

Since payments to retired workers started, in 1940, the Social Security Board has published a yearly record aimed at examining the financial status of the program. This report counts numerous factors, among which demographic changes, tax policies, and many others to try to give a perspective as wide as possible on the safety of the social security program both short term (the next 10 years) and long term (the next 75 years).

2. Washington, we have a problem

The Trustees Report 2021, that represents the current and foreseen financial status of trust funds, advised about the risk that social security incomes could not be enough to refund payments. It is crucial to notice that technically social security can’t “fail” as long as people keep working. Approximately 90% of social security income comes from a 12.4% tax on work-based incomes, like salaries. Even if social security does not risk bankruptcy, does not mean it is financially healthy. If no changes are implemented, the Trustees Report foresees that the insurance trust fund for older people and survivors, responsible to pay over 48 million former workers monthly will require a generalized cut of 23% by 2034. For a retired worker we are talking about thousands of annual benefits cut.

Social security’s dilemma brought Buden to present a 4-point plan to strengthen the program. The core proposal is higher tax pression on salaries and more benefits to old people and law-income people.

3. Biden's plan to boost social security

The first point of the program is to put more tax pression on salaries and higher incomes. This seems to be the most relevant step Biden proposed, and would look for higher tax payments on salaries of high-income workers.

Another strong change Biden would want to propose is to move the inflation link of the plan from urban salaries and employee consumers’ index (CPI-W) to old consumers’ index (CPI-E).

The third step of the reform proposed by the Head of White House would seek higher minimum special payments to low-income workers, life-long. In 2022, the maximum payment for a worker with 30 years of insurance has been $951 monthly, i.e. &180 under poverty range. With plan Biden, a low-income elder would see a monthly payment $ 500 higher.

The fourth and last change would be that primary insurance (PIA) constantly increased for older beneficiaries. Specifically, PIA would be increased by 1% yearly from age 78 and 82, then by 5%. The aim of boosting PIA is to keep under control the higher expenses that can come with age. For example, medical transportation or medicines can become more expensive. PIA increase would compensate these costs.

4. 2023: the right year for social security reform?

The new year will bring new chances for Biden to improve the retirement plan? The answer is most probably not.

The first reason of the failed happy ending of “Plan Biden” is in the current members of the Congress. After mid-term elections, Democrats kept the Senate, but not the Deputes. 2023 will mark the transition from a situation where Biden’s party, ruled both chambers to one where they only rule one.

The main issue, for Biden and almost all USA presidents before him in the last 4 decades, has been obtaining the necessary votes in the Senate to modify the social security: almost impossible. While at the Deputes simple majority is enough, for the Senate 60 votes are needed. Not Gop nor Dem have ever achieved sufficient votes in the Senate since the 1970s. This means all meaningful novelty in the social security requires support by both parts.

Both parties seem lightyears away from an agreement on social security. Both regard their solution as the best to strengthen social security. While Dem prefer to increase taxes, Gop want to gradually put a higher retirement age. The two seem far, far away from each other and none seems willing to meet halfway. Dems push Social Security 2100: A Sacred Trust which aims at widening the benefits of social security, cutting the program’s flaws and would confirm Biden’s compromise in not worsening taxes for those earning less than $ 400,000. According to critics, Dem plan for social security requires tax increasing of $ 3,000 yearly.

The distance between the parties will harden Biden’s plans in reaching his goal on social security in 2023. Failing to achieve the reform would be a heavy defeat for him and on the expenses of millions of Americans.