Adjustment To One Social Security Type Could Cut Shortfall In Half

Social security has been on a march to insolvency for some time now, with action needing to be taken before 2032 to avoid the program collapsing entirely. Republicans have been gunning for reforms for years, to no avail, while spending continues ballooning out of control. Lawmakers have been throwing any ideas at the wall to see what sticks, and their latest might be one that goes over the worst.

The nonpartisan Committee for a Responsible Federal Budget (CRFB) recently proposed a cost-of-living adjustment (COLA) cap. That would limit the dollar amount of the annual increase in benefits received by those with higher benefit amounts. Essentially, even though you have paid into the program for years, you are going to be hit hard and may never see the money you paid into the system.

Sam Karnick of the Heartlands Institute says the idea is to lump everyone in at the 20th percentile, which has far-reaching consequences.

"A person at the 20th percentile may get a $200 adjustment...a person who would ordinarily gotten a $1,000 adjustment would get just the $200," he says.

Analysis from the Urban Institute found a flat-rate COLA at the 20th percentile would close half of the 75-year shortfall for Social Security. So, in the end, the idea might extend solvency of the program, but it comes at a cost.

This whole thing is being portrayed as the stab to save Social Security and entitlements. But in reality, it is another way to come after hardworking Americans, who have spent years paying into the system.

"They are creating a stealth benefit cut that is basically a stealth tax hike on those people," Karnick says. The arithmetic says it will be a 19-percent decline in benefits for the top fifth of earners over time...that is 20-percent, that is a lot."

Essentially, this is the newest form of progressive tax trying to be leveled on Americans. It starts with the top level and eventually works its way down, as most progressive taxes usually do.

In the case here, and in all the others, this hits not just the wealthy earners.

"This is going to affect the top 80-percent of beneficiaries...that is not the top one percent, that is almost everybody," says Karnick.

It might be a stab at saving Social Security, and there has to be a tip of the cap for at least presenting an idea. On the surface, it seems like a good one. But checking under the hood, it will do nothing but hurt Americans.

So, Social Security will continue its slide to insolvency until a beneficial idea is presented.