How Would This Massive Proposed Social Security Change Impact Retirees? | personal finance

(Keith Speights)

Pretty much everyone on Capitol Hill in Washington, DC understands that changes will be needed for Social Security to remain solvent. What they don’t agree on, though, is exactly what changes should be made.

One senator has some controversial thoughts on what needs to be done. Sen. Ron Johnson (R-Wis.) recently shared his ideas on revamping the federal program. How would the massive Social Security proposal from the GOP senator impact retirees?

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Let Congress decide

Sen. Johnson stated earlier this month on “The Regular Joe Show” podcast hosted by Joe Giganti that he doesn’t think Social Security should be an entitlement. His view also extends to Medicare, the federal healthcare program for seniors.

What does he propose instead? Johnson wants to let the US Congress decide each year how much money should be allocated to Social Security and Medicare.

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Johnson told Giganti: “If you qualify for the entitlement, you get it no matter what the cost. And our problem in this country is that more than 70% of our federal budget is all mandatory spending.” He added, “What we ought to be doing is we ought to turn everything into discretionary spending so it’s all evaluated.”

By making all Social Security and Medicare spending discretionary, the amount of funding for the programs would be determined in the annual budget passed by Congress. The programs would be included with all other federal budget items.

This is not a new position for Johnson. He noted, “I’ve been saying for as long as I’ve been here that we should transfer everything, put everything on budget so we have to consider it every year.” But the Wisconsin senator thinks that this change is necessary to save and fix Social Security.

What it would mean for retirees

The most obvious way that Sen. Johnson’s proposal would impact retirees receiving Social Security benefits is the elimination of their automatic annual cost-of-living adjustments (COLAs). These COLAs are intended to help Social Security recipients cover rising costs due to inflation.

Automatic COLAs haven’t always been around. Before 1975, Social Security increases were set by legislators along the lines of what Johnson wants to do.

But a transition of Social Security from an entitlement program to a discretionary one could go well beyond affecting just COLAs. Congress would have the authority to even cut benefits at any time if the funding decisions were made on an annual basis.

Also, the criteria for receiving benefits could theoretically change more frequently if Social Security funding was deliberated each year. There have been changes to these criteria in the past, such as increasing the full retirement age. However, such changes have been relatively infrequent.

The proverbial snowball’s chance

Sen. Johnson’s comments stirred up a hornet’s nest. Speaker of the House Nancy Pelosi issued a public statement referring to Johnson’s ideas as “contempt for Social Security as we know it.” Senate Majority Leader Chuck Schumer and White House press secretary Karine Jean-Pierre said that Johnson wants to put Social Security “on the chopping block.”

Johnson disagrees with those characterizations. His spokesperson said that the senator wants to save Social Security and Medicare.

Perhaps most importantly, other GOP legislators haven’t stepped up to agree with Sen. Johnson’s proposal. Without widespread support within his own party, Johnson’s idea to transition Social Security into a discretionary program probably has the proverbial snowball’s chance in hell of being enacted.

However, there are other potential changes to Social Security that enjoy bipartisan support among Americans. For example, majorities of both Democrats and Republicans favor increasing the salary cap for the Social Security payroll tax, reducing benefits for high earners, and increasing the full retirement age.

It’s likely that retirees could see changes to Social Security within the next few years. But allowing the US Congress to vote every year on the program’s funding almost certainly won’t be one of them.

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