A bipartisan effort in the Senate is gaining traction, aimed at strengthening the long-term viability of Social Security.
Senators Bill Cassidy (R-La.) and Tim Kaine (D-Va.) propose an investment of $1.5 trillion over five years, designed to maximize growth for the next 70 years.
“People will either rely on this system now or will have to in the future, so it’s essential to secure Social Security and the associated benefits,” Cassidy explained to a news outlet last month.
This is the current consensus among lawmakers and some experts.
How it works
Although Cassidy hasn’t released the full text of the proposal yet, he noted that a new investment fund would be created separate from the current Social Security Trust funds. The plan includes an annual contribution of $300 billion over the following five years.
The investments would span stocks, bonds, and other assets. Cassidy indicated these funds will be held “in escrow for 70 years.”
“Dividends from these investments will be reinvested back into the funds. Additionally, we could repeal certain laws requiring benefit reductions tied to our income,” Cassidy stated.
The Treasury Department would back these payments over a span of 75 years, according to Cassidy.
He emphasized that this plan wouldn’t worsen the national debt, which is already exceeding $30 trillion.
“If you have funds locked away in escrow, it’s possible to liquidate them as needed for Treasury payments,” he clarified. “Thus, while there’s an outstanding balance, it doesn’t inflate national debt, and the gains from these investments should surpass the interest on borrowed funds.”
Cassidy is optimistic that this initiative might cover “at least 70% of borrowing requirements for the next 70 years.”
Next steps
Senators are still in the early stages of gathering feedback about their proposal, although it bears resemblance to Cassidy’s past collaborations, involving senators across party lines.
“Previously, we had a coalition comprising seven Republicans and seven Democrats. We’re aiming to re-establish that group,” Cassidy said. While they continue to gauge opinions, Cassidy noted that only a handful of Republicans have expressed clear support, but they’re eager to learn more.
“I felt it was crucial to discuss more ideas before drafting any legislation,” said Kaine, who has received some input from experts.
“If I were to summarize the feedback, I’d say it could be a significant component of our overall solution,” Kaine remarked, recognizing it might not encompass the entire solution as there are limitations.
He suggested that if the situation improves over the next decade, a variety of strategies could be employed, but the groundwork of this proposal could be a pivotal element that hasn’t been fully considered before.
“This could simplify the route to solvency,” he added, hinting that innovative ideas from Cassidy might spare Congress from more drastic measures to sustain the program.
Criticism
While the Senators’ push for bipartisan discussion has garnered interest, several experts have voiced skepticism regarding the proposal.
Feedback from various retirement authorities has indicated concerns; representatives from think tanks like the American Enterprise Institute and the Brookings Institution analyzed the plan.
“Senators Cassidy and Kaine deserve recognition for spotlighting the urgent issue surrounding Social Security funding,” noted Sita Nataraj Slavov from AEI. “However, their proposal doesn’t effectively address the program’s financial challenges, as it avoids the necessary tax adjustments or benefit modifications needed for solvency.”
Gopi Shah Goda from Brookings cautioned that relying on borrowed funds could hinder economic growth and complicate essential reforms for the program.
In a conversation on Tuesday, Andrew Biggs from AEI likened the proposal to state-level “pension obligation funds,” highlighting its risks.
“This strategy hinges on the premise that stock returns will exceed those of bonds,” he remarked. “Some states that ventured down this path ended up with mixed results—some profited, while others didn’t.”
Social Security’s Future
A recent annual report indicated that Social Security could deplete its trust funds by 2034.
The findings suggested that the old age and survivors’ insurance (OASI) funds can support “100% of scheduled benefits through 2033,” while the Disability Insurance (DI) Trust Fund might sustain “100% of planned benefits” until 2099.
However, combining forecasts reveals that the total fund would only meet its obligations up to 2034, a year sooner than previously reported. Changes in tax regulations last year impacted these projections, leading to an uptick in benefits for certain workers.
That timeline might feel even tighter with recent legislative changes, as estimates from the Trump administration’s initiatives suggest a potential earlier depletion of the trust fund.
What’s next for social safeguards?
Bipartisan interest exists to enhance the program’s solvency, but enacting changes in Congress still poses challenges.
Cassidy, a member of the Senate Finance Committee, mentioned possibility of upcoming hearings related to the legislation.
Others are also eager for movements regarding Social Security reform.
“We all wish to address this matter before it becomes critical,” said Sen. Angus King (I-Vt.), highlighting the historical significance of current initiatives aimed at program sustainability.
“Historically, serious fixes came too close to bankruptcy—much like what occurred with O’Neill and Reagan. I hope we don’t have to wait that long,” he shared.
“I genuinely believe we can achieve something. Discussions are underway,” King noted, recalling past bipartisan endeavors with Cassidy.
However, Sen. Jerry Moran (R-Kan.) remarked that navigating through Congress to secure meaningful outcomes feels particularly challenging, especially with elections approaching. “Efforts to ensure Social Security remains solvent now and into the future will be tough,” he added.
