4 Social Security Changes Joe Biden Wants to Make: Is 2024 the Year They Become

For most Americans, Social Security income is, or will be, critical to their financial well-being during retirement. More than two decades of annual surveys from national pollster Gallup have shown that between 80% and 90% of then-current retirees lean on their monthly Social Security check to make ends meet.

America’s top retirement program is also responsible for pulling more than 21 million people out of poverty each year, including nearly 15.4 million adults aged 65 and above. It’s truly an indispensable source of income.

However, this vital program has begun to show cracks in its foundation. To shore up Social Security for existing beneficiaries and future generations of Americans, lawmakers are going to need to act — and that all starts at the top with President Joe Biden.

Joe Biden listening to former President Barack Obama. Image source: Official White House photo by Pete Souza.

Social Security has a $22 trillion (and growing) problem

Every year since Social Security retired-worker payouts began in January 1940, the program’s Board of Trustees has released a lengthy report detailing the program’s current financial situation. The Trustees Report also estimates the future financial health of Social Security, given a number of variables that include fiscal and monetary policy, along with demographic changes.

Since 1985, the Trustees have opined that America’s top retirement program isn’t sufficiently funded to cover its long-term obligations (i.e., all payouts, including benefits and administrative expenses). By “long term,” the Trustees mean the 75 years following the release of a report. As of the 2023 report, the Trustees pegged Social Security’s unfunded long-term obligation at $22.4 trillion.

To be clear, Social Security is in no danger of going bankrupt or becoming insolvent. The program generates around 90% of its annual revenue from payroll taxes on earned income (wages and salary). As long as Americans continue to work and pay their taxes, Social Security will have revenue flowing in that can be disbursed to eligible beneficiaries.

What is at stake is how much current and/or future beneficiaries will receive. According to the Trustees, the Old-Age and Survivors Insurance Trust Fund (OASI), which is responsible for paying benefits to nearly 50 million retired workers and 5.8 million survivor beneficiaries each month, could exhaust its asset reserves by 2033. If the OASI asset reserves are bled dry, sweeping benefit cuts of up to 23% may be needed to sustain payouts through 2097.

The bulk of the blame for Social Security’s $22 trillion (and growing) deficit is ongoing demographic changes. This includes a more than halving in legal immigration into the U.S. over the past quarter of a century, rising income inequality, and historically low birth rates.

At least one or more of Social Security’s deficiencies need to be addressed by lawmakers to strengthen the program, and President Biden believes he has the solution.

Biden has a four-point proposal to shore up Social Security

Prior to being elected president in November 2020, then-candidate Joe Biden released a proposal detailing four ways he’d shore up Social Security.

1. Increase payroll tax liability on high earners

The flagship change offered by Biden would involve increasing the payroll tax liability of high-earning workers.

In 2024, all earned income between $0.01 and $168,600 is subject to the 12.4% payroll tax. Approximately 94% of all working Americans will bring home less than $168,600 next year, which means they’re paying into Social Security with every dollar they earn. Meanwhile, wages and salary above $168,600 are exempted from the payroll tax.

Biden’s plan would reintroduce the 12.4% payroll tax on earned income at $400,000, while also creating a doughnut hole between the maximum taxable earnings cap (the $168,600 figure) and $400,000 where earned income would remain exempt. Since the maximum taxable earnings cap rises most years on par with the National Average Wage Index, this doughnut hole would eventually close over time. In other words, all wages and salary would be exposed to the payroll tax decades down the road.

2. Shift the program’s inflationary measure from the CPI-W to the CPI-E

The second big change President Biden proposed is moving away from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) in favor of the Consumer Price Index for the Elderly (CPI-E).

Since 1975, the CPI-W has been Social Security’s inflationary tether. This means its readings are used to calculate the program’s annual cost-of-living adjustment (COLA).

The problem, as its full name shows, is the CPI-W is an inflationary index focused on predominantly working-age Americans who spend their money differently than seniors….