WASHINGTON ― A bipartisan group of senators has been talking about ways to reform Social Security in order to avert a funding shortfall expected sometime around a decade from now.
And one item under discussion is raising the eligibility age for Social Security benefits for future retirees ― a politically fraught move that is more likely to enrage voters than it is to become law in the near term.
Along with potentially increasing the eligibility age for future retirees, the group has looked at creating an investment fund that would improve Social Security’s long-term finances.
“It’s not locked in concrete yet, but it’s a reasonable proposition in that it doesn’t call for changing benefits over the next 75 years,” Sen. Mitt Romney (R-Utah) told HuffPost on Wednesday. “As a matter of fact, it improves benefits, particularly for people at the low end of the income scale, which is something that’d be helpful.”
The negotiations by no means signal imminent changes to popular retirement programs. They reflect an ongoing political debate, driven mostly by Republicans, over long-term federal spending. It is unlikely that Congress would approve any changes to Social Security or Medicare this year; House Speaker Kevin McCarthy (R-Calif.) has said the House “won’t touch” the programs.
Nevertheless, the senators are talking to each other about changes to the way Social Security benefits are calculated, plus increasing the amount of payroll income that is subject to the taxes that fund benefits. As of this year, only a worker’s first $160,200 in earnings are subject to the 12.4% tax shared by workers and employers.
The broad outlines of the group’s discussions were first reported by Semafor on Tuesday. A half-dozen senators are involved in the talks, led by Maine Independent Angus King, who caucuses with Democrats, and Sen. Bill Cassidy (R-La.).
Raising the retirement age is probably the most controversial idea under consideration ― and one that may be essential for Republicans.
“I think that’s part of the attractiveness in getting both sides to come together, which is in order to make sure that we save these programs forever, you have to recognize that life expectancy is a lot more today than it was when Social Security was established Romney said. “So modestly increase the age – what, you know, 20 years from now? ― is probably something that makes sense.”
When Congress first created Social Security retirement insurance in the 1930s, lawmakers set the eligibility age for maximum benefits at 65. In a bipartisan reform Congress approved in 1983, the full retirement age gradually increased to 67 over a 22-year period that started in 2000 So for workers born in 1960 or later, the full retirement age is 67.
Sen. Tim Kaine (D-Va.), one of the Democrats involved in the discussions, brushed off questions about a higher retirement age.
“That’s not one that I’m really focused on,” Kaine told reporters. “The one I’m focused on is this investment fund, because that’s one that hasn’t been done yet in Social Security but I think has real promise.”
The basic idea, sometimes described as a sovereign wealth fund or a social wealth fund, is that the government would invest payroll tax income into the stock market, instead of Treasury bills as it currently does, in order to bring in a higher return. (It’s a different idea from former President George W. Bush’s call for private accounts in the early 2000s.).
“If you look at the rolling 20-year average since 1929 of the stock market [the return] varies from 5.5% to 10.5%, but the average is 8.8%,” Cassidy told HuffPost. “Go Treasuries are Treasuries.”
The yields on most securities issued by the US Treasury this week range from around 3% to around 5%.
Sen. Ron Wyden (D-Ore), who is chairman of the Senate Finance Committee, which oversees Social Security, and who is not participating in the informal talks, said he was open to ideas for new policies “on top of” existing benefits. He was hostile to the idea of raising the retirement age.
“It’s really almost generational warfare, because you’ve got Millennials, Gen X and Baby Boomers, and it’s a cut in earned benefits,” Wyden said.
CORRECTION: An earlier version of this story incorrectly said Wyden was part of the bipartisan talks.