Here’s the Single Biggest Social Security Change Joe Biden Wants to Make

It’s no secret that changes are needed to Social Security. The federal program is on the road to insolvency in the next decade. While Social Security isn’t in danger of going bankrupt, it won’t have enough money to fund benefits at current levels if something isn’t done.

There are plenty of options on the table for fixing and improving Social Security. President Joe Biden is promoting several ideas. Here’s the single biggest Social Security change Biden wants to make.

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A COLA with more pop

Every year, Social Security beneficiaries eagerly look forward to finding out how much their annual cost-of-living adjustment (COLA) will be. These increases are intended to help individuals deal with inflation.

There’s a drawback with the way COLAs are currently calculated, though. It’s such a big problem that a study conducted by the Senior Citizens League last year found that Social Security benefits have lost 32% of their buying power since 2000.

The Social Security Administration (SSA) uses a metric called the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to calculate the COLA each year. The SSA determines the difference in the average CPI-W in the third quarter of the current year from the average in the third quarter of the previous year. The percent increase (if any) is the COLA that Social Security beneficiaries receive over the next year.

President Biden wants to change the metric that the SSA uses from the CPI-W to the Consumer Price Index for the Elderly (CPI-E). The CPI-E focuses specifically on spending patterns of Americans ages 62 and older, while the CPI-W looks at the spending of all urban workers. In particular, the CPI-E gives a higher weighting to healthcare costs, which are typically higher for older Americans.

Using the CPI-E instead of the CPI-W to calculate COLAs would almost certainly lead to larger increases in most years. We’re not talking about a huge difference. The Senior League found that COLAs based on the CPI-E would have been around 0.25% higher on average than increases using the CPI-W between 1983 and 2000. Over time, though, this small difference would compound and translate to meaningfully higher Social Security benefits.

More impact for more people

President Biden also would like to make several other changes to Social Security. However, changing the metric used for COLA calculations would have a greater impact on more people than his other proposals.

For example, Biden wants to increase the salary cap for Social Security payroll taxes. This change would only impact Americans who make more than $400,000 per year.

The president also seeks to pay more to Social Security recipients who have received benefits for at least 20 years. Again, not everyone would be affected by this proposal.

In addition, Biden thinks that Social Security should have a higher minimum benefit. His plan is to give anyone who worked 30 years or more a benefit that’s at least 125% of the poverty level. Of course, many Social Security recipients already receive benefits above this threshold.

The bottom line is that changing the COLA calculation method as Biden desires would impact every person who receives Social Security benefits. Biden’s other proposals would only affect some Social Security recipients.

How likely is this change?

You might have spotted the primary issue with using the CPI-E instead of the CPI-W to calculate Social Security COLAs. This change would result in the federal program spending more money than it already does. And it would worsen the looming insolvency problem.

Because of this downside, the odds of this particular proposal being enacted by itself are low. However, there are other ideas for fixing Social Security that receive widespread bipartisan support. It’s quite possible that the COLA calculation change could be thrown in as a “sweetener” to an overall Social Security reform package.

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