Social Security Reform: An Agreement between Republicans and Democrats Hindered by Division on How to Proceed

Social Security Reform Under Scrutiny

Washington lawmakers have avoided touching Social Security when they crafted the recent bipartisan compromise to raise the debt ceiling. But the program may come under scrutiny as Congress continues to reevaluate federal spending. The idea of forming a commission to look at Social Security reform is not new. In 1983, a commission led by Alan Greenspan, who would later serve as Federal Reserve chairman, issued a report that served as the basis for Social Security reform legislation.

Urgent Need of Social Security Reform

Social Security reform has been on Congress' to-do list for years. But the latest estimates from the program's trustees show the situation has become more urgent. The program's combined funds are due to run out in 2034, one year sooner than previously projected at which point 80% of benefits will be payable. The fund used to pay retirement benefits is due to run out in 2033, just a decade away, according to the trustees.

The Need for a Bipartisan Commission

In January, Reps. Tom Cole, R-Okla., and Jake LaTurner, R-Kansas, reintroduced a bill titled the Bipartisan Social Security Commission Act that calls for the formation of a bipartisan commission that would provide recommendations for improving the program. Cole has been a lead sponsor of the bill for six consecutive congresses. Other Republicans have also called for commissions. Advocates for a bipartisan commission argue the approach may help to smooth out the differences between the parties.

Debate Over Benefit Cuts

A new poll from Social Security Works and Data for Progress raises concern about that approach; it would require benefit cuts. The poll also asked respondents whether they would vote for their member of Congress in 2024 if they joined a commission that recommended cuts to Social Security and Medicare benefits. To be sure, it remains to be seen what recommendations would come out of any commissions yet to be formed. But whether a bipartisan commission is the answer to Social Security's funding woes is the subject of fierce debate.

Changes to Social Security

Any changes to Social Security will require bipartisan agreement. One possible solution is raising the payroll taxes to apply to higher earnings. Gradually phasing in other changes to protect current and near retirees from dramatic changes while protecting low-income people who are dependent on Social Security is also a possible solution. Benefit cuts, such as reducing the amount wealthy beneficiaries receive, are likely to be considered as well.

Transparency and Urgency Required

While commissions, task forces, and special committees have fallen out of favor in recent years, the process was "fairly successful" under Greenspan, and a new commission could be structured in a way that allows for the consideration of amendments after it comes up with a proposal. With the depletion dates approaching and time needed to implement recommendations and phase them in, lawmakers should get started right away with transparent changes and urgency. It has to be transparent, and it has to be out in the open.
In conclusion, the urgent need for Social Security reform impacting retired citizens marks a critical time for new businesses. With bipartisan commissions and debates over cuts to Social Security looming ahead, businesses should take into account these looming changes. Companies need to be prepared to understand the changes in payroll taxes and other potential amendments coming out of these commissions. The potential changes to Social Security could impact the economy, forcing businesses to reevaluate their hiring, benefits, and pension plans.

The need for transparency from Congress and lawmakers regarding any changes is of the utmost importance. Also, there's a need for educating businesses on tax reforms and changes to social security benefits to protect themselves and their employees. Small businesses who offer pension plans may suffer the most, as they face the most significant challenges in the long term due to the additional administrative and cost requirements.

Businesses should take action by allocating budgets for social security and pension plans, understanding any potential changes coming out of these commissions and educating employees, shareholders, and other stakeholders on any potential impacts. As such, the results of the commissions and discussions will impact the entire economy and require immediate action from new and existing businesses alike.