President Trump has pledged to fix Social Security, but some of the major changes he has proposed and that the government aims to make are still stalled. While there is a growing urgency to address the long–term funding issues facing the Social Security Administration (SSA), many of the reforms being talked about are out of the president’s control and firmly in the hands of Congress.
The changes the government wants to make to the SSA include eliminating taxes on benefits, adjusting the retirement age, and modernizing Social Security. Here’s what the government wants to do with Social Security.
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Eliminating Taxes on Social Security Benefits
Eliminating taxes on Social Security benefits was proposed by President Donald Trump. He publicly stated his desire to cut these taxes during his presidential campaign, but until now this change has not been implemented because it Congress has not approved. Currently, up to 85% of a recipient’s Social Security income can be taxed depending on the level of income.
To eliminate taxes on Social Security benefits, bills like the “You Earned It, You Keep It” have been introduced, but none have been passed because the tax structure of Social Security is codified in federal law, and changing it requires a majority vote in both the House and Senate.
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Changing How COLAs Are Calculated
Changing how the cost-of-living adjustments (COLAs) are calculated is another ongoing debate. Currently, COLAs are based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Critics argue that this method does not accurately reflect the expenses retirees face, such as the rising cost of healthcare.
Lawmakers propose using an index that focuses more on seniors, like the CPI-E (Elderly). Although this argument is sensible, not even the president can unilaterally change the formula. This change requires an act of Congress, and unfortunately, no legislation has made it through both chambers to change the COLA formula despite bipartisan interest.
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Adjusting Payroll Taxes
Social Security is mainly funded through payroll taxes, 6.2% from employers and another 6.2% from employees. To boost the finances of the SSA program, some suggest raising or eliminating the income cap for these taxes. However, the president cannot change the payroll tax rates since only Congress has the mandate to raise or lower tax rates. The only thing the resident can do is to temporarily defer collection and recommend changes.
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Raising the Full Retirement Age
Some legislators have proposed the raise of the Full Retirement Age (FRA), which is currently 67 for those born in 1960 or later. This is in response to the increase in life expectancy among Americans, which has led to drawing benefits for more years. Although the idea is controversial, especially among working-class Americans, it is part of a larger effort to address the looming solvency of the SSA.
Again, only Congress can change the retirement age, and the last time this happened was in 1983 when the FRA was increased from 65 to 67. Although Trump has said that he opposes the raise of the FRA, there is no legislative movement to push through this major change despite proposals.
Why There is No Change Implemented Yet
Despite legislative proposals and public concern, there has still been no major Social Security reform that has been passed in decades because of several political and structural reasons. First, bipartisanship is rare in today’s congress yet any reform requires both parties to agree for any proposal to be passed.
Secondly, reforms are usually politically risky, and many lawmakers avoid touching issues such as Social Security, which are “hot topics” to protect their re-election chances. Thirdly, issues such as Social Security’s financial issues are long-term projects, but lawmakers tend to focus on immediate issues such as annual budgets and elections.
What the President Can Do
While the president has no power to change the law, he can influence Social Security through administrative changes and executive appointments. For instance, he recently ended paper checks for benefits, appointed new leaders, and adjusted internal operations at the SSA. The president has no power to make structural changes like benefit formulas, retirement age or taxes without Congress.