Three Republican senators stepped forward Wednesday with what could be a politically-perilous plan to reform Social Security, known as the "third rail" of politics, by gradually increasing the retirement age and pegging benefits to income, a concept called "means testing."
Why just three members? "These are only two guys I could find," said Sen. Lindsey Graham, R-SC, referring to freshmen Tea Party Republicans, Rand Paul of Kentucky and Mike Lee of Utah. Graham has worked for years to make changes to the retirement system, to no avail.
"This is a solution. We're not afraid to propose this solution," Paul said, noting that he and his fellow GOP senators had not yet given up their plan to give Americans the option of investing some of their retirement savings in private accounts, but that they had set aside that goal, first proposed by President George W. Bush but rejected by a GOP-led Congress, in order to try to find a compromise.
The Social Security Solvency and Sustainability Act would gradually increase to 70, by 2032, the age at which seniors are eligible for full benefits, an age that could change in the future as the lawmakers indexed that change to life expectancy. Anyone 56 years of age and over would be unaffected by the proposal. Also, after 2018, all new retirees entering the system making less than $43,000 a year would receive benefits based on the current formula. Those making above that threshold would see a lower rate as their earnings rise.
The group rejected any plan that raises the cap on income that is taxed for benefits. Currently, Social Security is financed by a 6.2 percent payroll tax on wages below $106,800.
"We're asking upper income Americans to forgo future benefits rather than raise their taxes," Graham said, adding, "If you propose saving Social Security by raising taxes, it will not get the votes."
According to the most recent report of the Trustees of the Social Security and Medicare trust funds, "Social Security expenditures are expected to exceed tax receipts this year for the first time since 1983," noting that "reserves are exhausted in 2037, at which point tax income would be sufficient to pay about 75 percent of scheduled benefits through 2084. The projected exhaustion date for the combined OASI and DI Trust Funds is unchanged from last year's report."
But Congressional leaders have shown little appetite for tackling Social Security, and many say the problem is decades away. Just Tuesday, Senate Majority Leader Harry Reid, D-Nev., told reporters, "I think that we have to look at entitlements. I have no problem with the president doing that, as I've said on a number of occasions, though Social Security has not contributed one penny to the deficit. Leave Social Security alone."
And the president, in a deficit reduction speech at The George Washington University Wednesday, merely called for bipartisan efforts to "strengthen the program."
"Once again the President is failing to lead on one of the most critical issues this country faces," Paul said after the speech. "He doesn't believe Social Security is in trouble, but it is and this problem has to be dealt with today; waiting will lead to a much worse situation for every American from every income level."
But the Strengthen Social Security Campaign, that describes itself as "a coalition of 300 organizations representing more than 50 million Americans," applauded the president's position and asked for more. In a statement released after the speech, Campaign Co-Chair Eric Kingson said, "We urge the president to take the next logical step: Remove Social Security from the bipartisan budget negotiations he is initiating. Past Congresses have diligently kept Social Security separate from deficit debates. Social Security is essential to the economic security of millions of Americans and can pay all benefits in full for the next quarter century. It should not be held hostage to a deficit-reduction deal."
The three GOP senators urged immediate action on their plan despite the obvious uphill political battle saying that otherwise, any solution gets more difficult and cuts much deeper.
"I'm quite familiar with the scare tactics and know first-hand the demagoguery that is sure to come our way," Graham said, "But the American people know the problems facing Social Security are real and must be addressed. Every year we delay, the solutions get more difficult and the consequences of inaction become more."