by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Andrew Biggs offers one recommendation to help address Social Security’s long-term viability.
Social Security remains the largest federal spending program. After Medicare, it’s the second-largest driver of long-term deficits. As the new Republican House majority looks to rein in the budget, Social Security reforms could be on the table.
Though vital to addressing the national debt, getting a comprehensive reform package—or any major entitlement reform—through Congress will be tough. Instead, lawmakers might consider a simple but meaningful start: capping the maximum retirement benefit. A cap would put a dent in Social Security’s 75-year funding gap of more than $20 trillion and send a message that government benefits to high-income retirees can’t be unlimited.
Social Security is often described as a safety net against poverty in old age. But if every senior simply received a benefit equal to the 2022 poverty threshold—just over $14,000 for a single retiree and about $17,600 for couples—Social Security’s $1.3 trillion annual cost for 2023 would be nearly cut in half.
Social Security is expensive because it’s more than a safety net: The average new retiree in 2021 received an annual benefit of nearly $21,000, 1.5 times the poverty threshold without counting their own savings. And the highest-earning Americans receive even more than that, with the maximum benefit at the normal retirement age of 67 coming in at $42,238 in 2023. This blows through any reasonable idea of a safety net: It’s more than three times the federal poverty threshold and about 5% higher than the median employee’s salary in the U.S. It’s also two to three times higher than the maximum benefit paid in the United Kingdom, Canada, Australia and New Zealand.
Social security’s maximum benefit increases every year. In 2000 it was about $28,300 in inflation-adjusted dollars, about a third less than today. By 2035 the maximum Social Security benefit will reach $49,825 and by 2050 it will rise to $59,234.