Seventeen newcomers from both parties will enter the next U.S. Congress and face one of the most pressing domestic policy issues: how to preserve the Social Security program. The Social Security trust fund is projected to be exhausted by the end of 2032. After that, payroll tax revenue will be enough to cover about 78 percent of scheduled benefits, and without a decision by Congress, benefits would automatically be cut by roughly 22 percent.
Senators elected to full terms will serve in the Senate until January 2033, that is, until the point when the fund is projected to be in jeopardy. Democrats gained control of the Senate by winning seven seats in states traditionally considered Republican. However, Social Security cannot be changed through the budget procedure known as "budget reconciliation" alone, so genuine reform will likely require 60 votes, and therefore support from both parties.
The key point of contention remains the payroll tax cap. This tax is levied only on the first $184,500 of annual income. According to estimates by the Social Security Administration's actuaries, eliminating this cap starting in 2027 would close about 58 percent of the shortfall calculated over 75 years.
Democrats generally support eliminating or raising this cap. Senator Stratton of Illinois proposes completely removing the cap on the payroll tax. Senator Terek of Iowa supports raising it but opposes increasing the age for full retirement benefits. Senator Hamilton of Kansas favors raising the cap rather than eliminating it and has not yet decided on a position on the retirement age.
Some Democrats have put forward more radical proposals. Senator Jackson of Maine calls for eliminating the cap and increasing benefits, while rejecting privatization and raising the retirement age. Senator El-Sayed of Michigan supports eliminating the cap and ending the taxation of benefits. Senator Flanagan of Minnesota backs an expanded Sanders bill that would impose a tax on earnings above $250,000. Senator Talarico of Texas proposes eliminating the cap for those who earn more than $400,000.
Republicans emphasize other measures. Senator Barr of Kentucky states that current retirees will not be affected and supports bipartisan reforms for young workers and the promotion of private savings. Senator Alme of Montana proposes directing funds saved through cuts in government spending to Social Security. Senator Hageman of Wyoming believes that economic growth and greater workforce participation will strengthen the program.
Eliminating the taxation of benefits also carries a cost. According to figures cited in the materials, abolishing this tax without compensation would cost the Social Security system about $1 trillion over 10 years. The same proposal would add about $700 billion over the same period to the Medicare program. Senator Moore of Alabama has already co-sponsored a bill to abolish the federal income tax on benefits.
Many newcomers have not yet offered a concrete plan, and the question of financing remains unresolved. Nevertheless, whether Congress can reach an agreement before the fund reaches its critical threshold will largely depend on the positions of these senators.