Since President Franklin D. Roosevelt signed the Social Security Act into law on August 14, 1935, Social Security has time and again proven to be our country's most successful and popular anti-poverty program. Without Social Security benefits, more than 40 percent of Americans 65 years and older would live below the federal poverty line. Even more striking is that Social Security is the only source of retirement income for almost a quarter of elderly beneficiaries. Due to sharp income disparities during working years, nearly half of women and 37 percent of seniors of color rely on Social Security as their sole source of income.
With more than half of the American workforce without private pension coverage, Social Security provides economic certainty within a system that is fair, equitable, and easy to understand. You work hard, pay into the system, and the federal government makes a promise to pay back your earned benefits when you retire. It's that simple.
However, while Social Security has consistently served as the backbone of our retirement system, it remains imperfect. For instance, benefits are fairly modest, averaging a little over $1,300 a month. This is barely enough to make ends meet, especially as the price of food, rent, and medicine continues to rise. On top of this, Social Security only has enough money in its trust funds to pay out full benefits until 2034. This is an issue that will become increasingly difficult to solve as demographic pressures build and the ratio of workers to beneficiaries continues to decline.
These basic realities highlight the need to expand and strengthen Social Security for today's seniors, while ensuring that the next generation of Americans--our children and our children's children--continue to benefit from that same retirement security.
There are several options that Congress can and should pursue immediately to provide today's retirees with much welcome relief and peace of mind. For just the third time since 1975, beneficiaries were denied a cost-of-living adjustment (COLA) last year. For seniors still struggling to recover from the recession, this was a particularly painful outcome. That is why Congress needs to stop stalling and pass the SAVE Benefits Act (H.R. 4144), which would provide a one-time payment of $580 for all Social Security recipients using money saved from closing the corporate bonus tax loophole for wealthy CEOs.
If we are to guarantee that future COLAs adequately reflect the true cost-of-living for seniors, Congress must modify the method that it is calculated. COLAs are currently based on the Consumer Price Index for Urban Wage and Clerical Workers (CPI-W). However, CPI-W understates inflation for seniors by tracking the prices of goods and services that are not reflective of seniors' actual spending habits. Instead, Congress should adopt the Consumer Price Index for the Elderly (CPI-E). This index better reflects the day-to-day spending patterns for seniors who tend to spend about twice as much on healthcare than the general population. If CPI-E had been used to calculate COLA last year, then Social Security recipients would have received a 0.6 percent increase in benefits this year as opposed to no increase under CPI-W.
While more generous benefits are necessary to ensure middle class retirees do not fall into poverty after retirement, we have to make sure that the program is preserved for future generations. Congress must take some thoughtful and targeted steps towards long-term solvency in the Social Security program. One such step is to eliminate the cap on income that is taxed for Social Security. Currently, income over $118,500 a year is not subject to the payroll tax. Increasing and eventually phasing out this cap is estimated to preserve the Social Security Trust Fund for decades more without putting additional burdens on middle-class families or slashing benefits.
There was a time not too long ago when American seniors were too often forced to go without food, medicine, and quality healthcare. But thanks to transformative programs like Social Security, most seniors in this country are provided the opportunity to live with the stability and peace of mind they have earned and deserve. In Congress, I will continue to fight against efforts to undermine this critical safety net so that our seniors can live out their years with dignity.