The Social Security system, which provides monthly benefits to retirees and people with disabilities, is facing a funding crisis. With more baby boomers retiring and fewer younger workers contributing, the Social Security Administration (SSA) could run out of money to pay full benefits by the mid-2030s. To address this, many Americans are now considering significant reforms, including cutting benefits, though opinions vary on who should be affected.
Targeted Cuts
A recent study by the Program for Public Consultation at the University of Maryland revealed a surprising shift in public opinion. While most Americans are opposed to across-the-board cuts in Social Security benefits, many support reductions under specific conditions.
The survey, which included about 4,600 participants, found that 53% of respondents would accept cutting benefits for the top 40% of earners. This approach would reduce the looming Social Security shortfall by about 23%.
However, some experts warn against targeting higher-income earners for cuts. Alex Been, a financial literacy instructor at the University of Tennessee, argues that such cuts could undermine confidence in the Social Security system. Reducing payments to certain groups may also make people fear that their benefits will be next.
Debate
The idea of cutting benefits for wealthier Americans has its supporters and detractors. Critics argue that people who have paid into the system should not see their benefits reduced, regardless of their income.
Reducing benefits for some could also set a precedent for further cuts, a concern raised by experts like Alex Been. He believes this could mislead politicians into thinking cuts could be expanded to other groups, eroding public trust in the program.
To investigate potential reforms, the University of Maryland’s survey used an online simulation where participants acted as policymakers. They considered various options, including cutting benefits, raising payroll taxes, and increasing the retirement age.
Tax Increases
Interestingly, both Democrats and Republicans seem open to other solutions. In particular, there’s bipartisan support for raising the payroll tax cap. Currently, wages above $169,000 are not taxed for Social Security, but many participants supported raising this limit to $400,000. This change could generate more funds for the SSA without cutting benefits.
Another popular reform is raising the retirement age. Nearly 90% of respondents in swing states supported increasing the retirement age to help close the 15% gap in Social Security benefits. This would reflect the fact that people are living longer and working later in life.
Public Perception
Drew Powers, founder of Powers Financial Group, noted that public opinion on Social Security cuts is often influenced by the language used to describe the policy. When survey questions mentioned cutting benefits for the “top 20%” or “top 40% of earners,” support was relatively high. However, when participants were told that these high-income earners include people living in high-cost areas or those who paid into Social Security for years, support for cuts dropped.
This suggests that Americans may be open to nuanced reforms, such as means testing, where benefits are based on a person’s income or assets. Powers pointed out that for top earners, Social Security benefits make up a small portion of their retirement income. Many would likely not miss the reduced benefits, especially if they have other financial resources.
Full Cuts
Despite some support for targeted cuts, many financial experts believe that reducing Social Security benefits outright will face significant opposition. Kevin Thompson, president and CEO of 9i Capital Group, argues that even high-income earners, who don’t rely heavily on Social Security, would oppose benefit cuts. According to Thompson, a means test could be a more viable solution, but even this approach could face resistance from both the public and their representatives.
At its core, the debate over Social Security reform reflects the challenges of maintaining one of the nation’s most important safety nets. While targeted cuts and tax increases may offer short-term relief, deeper structural changes may be needed to ensure the program’s long-term viability.
FAQs
How much could cutting benefits save Social Security?
Reducing benefits for the top 40% of earners could cut the shortfall by 23%.
Do most Americans support cutting Social Security?
Most Americans oppose across-the-board cuts but support targeted reductions.
What other reforms are people open to?
Raising the payroll tax and increasing the retirement age have broad support.
Will raising the retirement age help Social Security?
Yes, raising the retirement age could help close the 15% benefits gap.
Is a means test for Social Security likely?
A means test is a possibility but could face strong opposition from the public.
