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Will Joe Biden Go Along With This Bipartisan “Big Idea” to Avoid Social Security Cuts?

Everyone in Washington, D.C. knows that Social Security is in trouble. They only have to listen to the federal program’s trustees. In their latest report, the trustees projected that Social Security’s combined trust funds will run out of money by 2034.

But some in Washington are working on solutions to prevent the program from becoming insolvent. One of them, Sen. Bill Cassidy (R-La.), recently revealed what he called a “big idea” in a webcast hosted by the Bipartisan Policy Center. But will President Joe Biden go along with this bipartisan big idea?

Social Security on a highway sign.

Image source: Getty Images.

The “big idea”

Sen. Cassidy has been collaborating with Sen. Angus King (I-Maine), who caucuses with Senate Democrats, for months to come up with a plan to preserve Social Security benefits. In the recent podcast, Cassidy unveiled a potential solution that could solve roughly 75% of the program’s projected shortfall.

Their proposal is to create an investment fund that’s completely separate from Social Security’s current trust funds. This new investment fund would invest money in the stock market, whereas Social Security’s trust funds currently put money only in Treasury bills or cash.

Cassidy called Social Security’s current approach “the Silicon Valley Bank of pension funds” — a reference to the failed bank that was acquired by First Citizens Bank at a firesale price. He argued that the federal program has “the absolute worst investment strategy you could have right now” with inflation at the highest levels in decades.

This separate fund isn’t really a new idea. Cassidy pointed to other funds, including the Canada Pension Plan and the Ontario Teachers’ Pension Plan — that were in bad shape financially but became solvent by using a market-based investment strategy.

There are some details remaining to be worked out. For example, Cassidy thinks the proposed plan needs a backstop to guarantee that it wouldn’t lose money if the stock market underperforms. He also wants to ensure that the federal government can’t influence the stock market. And there’s the matter of solving how the remaining 25% of Social Security’s projected shortfall will be addressed.

What will Biden do?

Cassidy said that participation is now needed from both Democratic and Republican leaders. In particular, he wants “leading presidential candidates to step to the plate.” On the Democratic side, that person is Joe Biden.

So far, President Biden hasn’t commented publicly on the plan developed by Sen. Cassidy and Sen. King. Neither has he put forward his own plan to preserve Social Security benefits since he became president.

However, a separate market-oriented investment fund doesn’t align with Biden’s Social Security proposals made when he was running for president in 2020. Back then, the biggest change that Biden pushed for was to raise the cap for the payroll tax that helps fund Social Security to $400,000.

This proposal appears to have the support of many Americans. But it would reduce Social Security’s projected shortfall by only 61%, based on an analysis by the University of Maryland’s Program for Public Consultation.

Still, with a politically popular alternative that he’s previously advocated, Biden could be reluctant to go along with the idea of investing some money in the stock market — even if it’s a bipartisan idea with ample precedent in other countries.

Limited options

Ultimately, the president and Congress have limited options for preserving Social Security benefits. They can either raise additional money, reduce benefits, or both.

President Biden has been adamantly against any reduction in benefits. Sen. Cassidy has steadfastly opposed raising taxes on seniors or increasing the full retirement age for seniors.

Steep benefit cuts are on the way if nothing is done. Because of this, Americans who haven’t retired yet should save as much as they can in retirement accounts such as IRAs and 401(k) plans.

However, it seems unlikely that no action will be taken. It’s possible that some version of the president’s proposal to increase the payroll tax cap could pick up bipartisan support. Perhaps the idea of raising the full retirement age gradually for future retirees could win enough votes to pass in Congress.

Sen. Cassidy stated in the Bipartisan Policy Center podcast that it’s “going to take a give and take on both sides.” On that point, most politicians in D.C. would probably agree.

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