The idea of expanding Social Security is gaining momentum. Senators from the blue states of Massachusetts and Vermont (Senators Elizabeth Warren and Bernie Sanders), the swing states of Iowa and Ohio (Senators Tom Harkin and Sherrod Brown), and the red state of Alaska (Senator Mark Begich), are all championing the idea. So are about half the Democratic caucus in the House of Representatives. Indeed, a member of the Democratic leadership, Senator Patty Murray, has a bill expanding Social Security.
In the last month alone, three bills expanding Social Security have been introduced. The three add to a growing number which see Social Security as the solution to a looming retirement income crisis, as well as to other serious challenges facing the nation. Some proposals expand benefits across the board; some target the expansions to working families with the highest levels of poverty; some strengthen the program's cost-of-living protection; some provide financial support for workers who must leave work to care for a family member or themselves. All put Social Security on a sounder financial footing.
We focus in this post on a new and excellent addition, the Social Security 2100 Act, introduced on July 31, by Representative John B. Larson (D-CT). In upcoming blog posts, we plan to highlight other Social Security expansion bills.
Representative Larson's bill would provide all Social Security recipients with greater benefits - an average of $300 extra annually. This modest but important benefit increase would reduce financial pressures on hundreds of thousands of Americans, some of whom are currently forced to choose between buying groceries and paying for vital medications. For those most in need, the bill also expands Social Security's minimum benefit to 125 percent of the poverty line, so that no one who has worked hard and earned Social Security is forced to spend his or her retirement years in poverty.
The Social Security 2100 Act has a long-term focus, with key provisions that ensure benefits remain strong well into the future. The bill implements a more accurate means of determining Social Security's yearly cost of living adjustments, so that benefits are not slowly chipped away by inflation. The minimum benefit would be indexed to wages so that it does not deteriorate in value.
Very notably, the bill addresses Social Security's projected shortfall and provides additional resources to pay for benefit improvements. Through several measures, including having millionaires and billionaires pay the same rate into Social Security as ordinary workers, the bill ensures that Social Security will pay 100 percent of benefits for the next 75 years and beyond. One particularly innovative provision increases Social Security's revenue without either cutting benefits or raising taxes. The Larson bill would allow Social Security to earn a higher rate of return by gradually investing a portion of its reserves, now $2.8 trillion, in equities. This provision alone would generate billions of dollars.
Investing in stocks and bonds is something that virtually every pension plan does, including many public pension funds. Every investment adviser around recommends that all investors diversify their portfolio. Yet, despite the recommendation of experts beginning in the 1930s, Congress has never given the Social Security trustees this authority. The nation is fortunate that Representative Larson recognizes the benefits of trust fund diversification and, that he, in the best legislative tradition, is putting the idea forward to encourage constructive debate and lay the groundwork for its eventual enactment.
In light of a looming retirement income crisis, the increasing squeeze on middle class families, and the perilous upward redistribution of wealth, Representative Larson is to be applauded for legislation that addresses all three challenges. His bill represents a growing recognition by policymakers that expanding Social Security is the right thing to do.
For more information about why it's time to expand Social Security, see Nancy Altman's and Eric Kingson's forthcoming book, Social Security Works: Why Social Security Is Not Going Broke and Why Expanding It Will Help Us All (The New Press, January 2015)