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Congress Contemplates Solutions to Potential 20% Social Security Benefit Reductions in the Next Decade

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Potential Social Security Benefit Cuts Prompt Congress to Seek Solutions

Millions of Americans eagerly anticipate claiming Social Security retirement benefits after years of contributing to the program. However, beneficiaries now face the looming possibility of a 20% across-the-board benefit reduction in the next decade due to an impending funding shortfall. To address this issue, Congress must take action before the projected depletion date of 2034 for the program's combined funds.

Lawmakers' Perspectives on the Issue

At a Social Security forum held by AARP, Republican Sen. Bill Cassidy of Louisiana and Democratic Rep. John Larson of Connecticut, both working on Social Security reform proposals, discussed the stumbling blocks their respective plans have encountered. Cassidy noted that President Biden's reluctance to act before the next presidential election has hindered progress. Larson, on the other hand, has introduced the Social Security 2100 bill in multiple Congress sessions, aiming to enhance benefits and strengthen the fund.

Proposed Solutions

Cassidy proposes the creation of a new Social Security fund by raising $1.5 trillion to be invested in the stock market. This separate fund would help the program keep up with inflation, which may run at 6% to 7% annually, compared to the lower returns of Treasury notes. Cassidy believes this approach, along with bipartisan compromise, can address 70% of the program's shortfall. However, any changes to Social Security would require 60 votes in the Senate and bipartisan agreement. Larson's Social Security 2100 bill seeks to increase benefits across the board by 2% and make benefits more generous for various groups, including long-term beneficiaries, widows and widowers, and dependent children who are students. The bill also aims to lift 5 million people out of poverty by raising the minimum benefit. Larson expects the proposal to be prioritized by the next Democratic House speaker.

The Need for Congressional Action

While both lawmakers present different approaches to ensure the program's long-term solvency, they agree that leadership from the top is crucial for bipartisan compromise. Larson dismisses the idea of study commissions, emphasizing that the options are either cutting benefits or increasing revenues. He urges voters to pressure Congress to act, highlighting the importance of individual proposals and bills to drive change.

Concerns for Social Security Beneficiaries

The potential for benefit cuts raises concerns among current Social Security beneficiaries. Alfred E. Mason, the Louisiana state volunteer president at AARP, emphasizes the significant impact such cuts would have on individuals and their families. With uncertainty surrounding the program's future, it becomes imperative for Congress to address the issue promptly and protect the financial well-being of Social Security recipients.

Implications of Potential Social Security Benefit Cuts for New Businesses

The potential 20% reduction in Social Security benefits over the next decade presents a significant concern for millions of Americans. This looming issue, caused by an impending funding shortfall, has prompted Congress to seek solutions before the projected depletion of the program's combined funds in 2034.

Impact on New Business Formation

The potential cut in Social Security benefits could have a profound impact on new business formations. Entrepreneurs often rely on their retirement savings or benefits as a safety net when starting a business. A reduction in these benefits could deter potential business owners, particularly among older Americans, from taking the entrepreneurial leap.

Lawmakers' Proposals and Their Implications

The proposals put forth by Republican Sen. Bill Cassidy and Democratic Rep. John Larson offer different approaches to address the program's long-term solvency. Cassidy's plan to create a new Social Security fund through stock market investment could potentially stimulate the economy and indirectly benefit new businesses. On the other hand, Larson's Social Security 2100 bill, which seeks to increase benefits and strengthen the fund, could provide a more secure safety net for potential entrepreneurs.

Need for Swift Congressional Action

The urgency for Congressional action cannot be overstated. The potential benefit cuts raise concerns not only for current Social Security beneficiaries but also for those planning to start a business. Swift and effective action from Congress is necessary to alleviate these concerns and foster a conducive environment for new business formation.

Role of Social Security Beneficiaries

Social Security beneficiaries, like Alfred E. Mason, emphasize the significant impact such cuts would have on individuals and their families. Their voices are crucial in urging Congress to act promptly and protect the financial well-being of Social Security recipients, thereby indirectly supporting the entrepreneurial ecosystem.
Story First Published at: https://www.cnbc.com/2023/09/22/social-security-how-congress-may-fix-the-program-before-benefit-cuts.html
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