The Honorable Senator Bill Cassidy discusses the recent actuarial projections indicating Social Security’s insolvency in just 6 years.
Social Security is projected to face major funding stress in the coming years. Social Security’s pay-as-you-go structure means today’s benefits must be funded by today’s payroll income—and demographic changes are shifting the balance. The program was designed decades ago when workers-to-retirees ratios were different, families were larger, and average lifespans at retirement were shorter. Now, more people are living longer, fewer workers are supporting each beneficiary, and the large “baby boomer” generation is reaching retirement age.
Jeffrey Snyder, Broadcast Retirement Network
Senator Cassidy, it’s great to have you back on the program. Thanks for joining us this morning, sir.
The Honorable Bill Cassidy, United States Senator
Jeff, it is great to speak with you. You and I are two people who are enthused about Social Security and enthused about his contribution to the retirement security of Americans. So it’s fun to be on with you.
It’s fun to be on with another Social Security nerd.
Jeffrey Snyder, Broadcast Retirement Network
Well, you know, I’ve been nerd. I’ll take that as a badge of honor, especially coming from you, sir. And I know you chair a very important committee in the United States Senate.
So we appreciate the few minutes that you can give us. As you know, Senator, the reason why we had reached out is, of course, there’s been a lot of conversation about the insolvency of Social Security. And I figured I would come to you because this is a passion of yours.
I know you are working really hard to ensure the program solvency over the coming decades.
The Honorable Bill Cassidy, United States Senator
I am. And I meant nerd as a compliment because we’re only going to figure out how to address it if we try and think creatively. And just to put this in context, for those who may not know, but according to the actuaries, the Social Security Trust Fund will go insolvent in about six years.
And why is that? Because people say we’ve paid into it forever. Why is it going insolvent?
Well, about 10,000 boomers a day become eligible for Social Security. And when the Social Security system was designed in the 1930s or 40s, people typically died on average around age 62, but you weren’t eligible until you were 65. And by the way, there’s about six kids per family.
So more children paying in for those few adults. Now, praise God, we live on average until we’re 82. The family size has decreased from six to about two.
So we have more retirees relative to the number of people contributing. And then add to that, the boomer population is just the largest generation in our nation’s history. So we’ve got a situation where the money we’ve stacked up is rapidly draining.
By law, whatever is going out has to match with the income, but the income is less than that which is going out. The trust fund is supplementing, but when that trust fund is exhausted and there’s nothing to add to the money coming in, by law, the amount going out in benefits has to fall to match the amount of money going in. It’s anticipated that there’d be a 20 to 25% benefit cut for current retirees and all future retirees if we follow the law.
Jeffrey Snyder, Broadcast Retirement Network
Yeah. And obviously people, retirees tend to be on a fixed income. That would be obviously devastating to them and obviously devastating to the future recipients of the program.
Senator, there’s been a lot of conversations about ways to fix the program. I don’t necessarily think because we would need an hour or probably two hours to get some resolution there. But let’s talk about the process that would have to be undertaken by the U.S. Congress and the U.S. Senate. What’s the process to try to resolve this, to get through the compromises that need to happen to reform? I’m going to call it reform to security. That’s my word, not yours.
The Honorable Bill Cassidy, United States Senator
Well, first, by the way, just on your earlier point, it’s estimated that if benefits fall 20%, that the poverty rate among those over 65 will double. This will be really significant. Absolutely.
The problem with doing the reform is that nobody wants to cut benefits and nobody wants to raise taxes. And folks say we’ll always raise taxes on somebody else, but that somebody else has a voice too. And there’s consequences of raising taxes on a retiree who’s planning to live on the money that her husband left her and she’s getting income, which currently is not being taxed, but now under some proposals taxing it at 12 to 14%.
Now, that’s negative for that person, that widow who’s trying to survive. She’s now 70, but may live until she’s 94. We’ve got to think about those issues.
We’ve taken a different approach, the folks I’m working with. We’re patterning it after something the federal government has already done and which was successful. Jeff, under George W.
Bush, there’s something called the Federal Railroad Retirement System. And in the Federal Railroad Retirement System, there’s a trust fund that retirees that railroad workers pay into. When they retire, they’re paid from it.
And current workers pay into the fund to continue the pay of forward benefit. But that system had more retirees and fewer workers. Sounds familiar, doesn’t it?
Yeah, it does. It does. Under George W.
Bush, there was a bipartisan proposal that said, let’s take the money in our account. Instead of putting it in treasuries or cash, which is the only place they could put them by law, by the way, that same for social security, let’s put it in the broader economy. They did that.
And now, okay, this happened under George W. Bush. And so what, 20 something years ago.
Now, because the broader economy has done so well, that the trust fund is in the black, paying all its benefits. And it is a success. I noted that I think every Democrat who was in the Congress then, who’s now in the Senate, voted for the proposal.
A few Republicans voted against it. But the things people feared never happened. Only good things have happened.
So we’ve patterned after that success to say that, okay, we’re going to set up a fund separate from the social security trust fund. All risk is borne by this separate fund. Put money in it, invest it in the broader economy, and use the proceeds from that to help offset any borrowing required to pay benefits, and eventually pay off the borrowing.
Because over a certain number of years, the money grows so big under reasonable projections that we can pay off almost all of that borrowing. So pattern after what we’ve already done. It’s a way to preserve benefits.
In fact, we actually expand benefits for some, but do it in a way which is fiscally responsible for the federal taxpayer and for the United States of America.
Jeffrey Snyder, Broadcast Retirement Network
So, Senator, obviously, you chair an important committee in the U.S. Senate. I would imagine that you have control at some level of bringing bills to the committee for consideration. But do you anticipate, obviously, there’s a shortfall that’s going to happen in six short years.
Do you anticipate that you can at least get this considered in the committee before the end of the year? I realize there’s the November elections, but also, we’re coming up on the end of the year. Obviously, it’s July 1st, or July 2nd, excuse me.
But do you anticipate that you can get this for consideration before the end of the year?
The Honorable Bill Cassidy, United States Senator
Jeff, you have a lot in there. You have both the politics and the process. Let’s speak about the politics first.
This has to be bipartisan. It can’t be one party or the other trying to ram it down the throat of the other because it’s too easy for the party out of power to attack the pushing the proposal as being irresponsible and scaring people on Social Security. That playbook, we’ve seen time and time again.
The only time that this was reformed in a significant way was under Ronald Reagan, who worked with Tip O’Neill, a Republican president, a Democratic Speaker of the House. They assigned people they trusted. They were able to do it just before an election year.
In fact, like a month before a midterm election. It was really remarkable. And by the way, that’s when the program was going insolvent as well.
So fast forward, however many years, 40 something years. So it has to be bipartisan. Fortunately, we have a bipartisan group of people.
Dick Durbin, a senator from Illinois, Democrat, is working with me, a Republican senator from Louisiana, to try and get this done. So we’ve got the politics. We’re trying to address them as much as we can.
What about the process? The process, you’re right. We’ve got to be able to bring it to a vote before this Congress leaves office.
And we’re working to that end. We’ve actually had three hearings related to Social Security in one way or another, in three different committees over the last several months. The last one was a Senate Finance Committee.
That’s the committee that has to judge this. A subcommittee on Social Security. Republicans and Democrats, we all brought our proposals.
We have witnesses, very respectful, very constructive. That gives me hope that as we progress, we’ll see this as a problem to be solved and not a problem to be demagogued for political advantage. Now, there’s still a few things we’ve got to do, but we’re actively trying to do them.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, I’m sorry. I didn’t mean to interrupt you, Senator. I was going to ask you, you would need collaboration, obviously, with the White House, because the president would have to sign into law any bill passed, I believe.
I’m not an attorney, obviously. I’m a retirement nerd. But I’m assuming that you would need the executive branch to sign off on any bill that the Congress, the Senate, and the House passed.
Is that correct? So you need White House support as well.
The Honorable Bill Cassidy, United States Senator
Absolutely. Absolutely. But right now, this is being driven by Congress.
And if you think about the politics of it, I think it’s better that it’s driven by Congress. The president’s very polarizing. Whatever you think about the president, you think strongly about the president.
And on one side, they may love them. On the other side, they don’t. In fact, they hate them.
So I think it’s actually positive that this is being driven by bipartisan congressional action. And we can kind of diffuse it a little bit and get the cooperation and the trust needed to walk hand in hand to make this happen. That’s our goal.
Yeah.
Jeffrey Snyder, Broadcast Retirement Network
Well, look, it needs to happen. I know that there’s all these other factors that kind of play into that, that you talked about. It’s certainly, people look at this and say, well, especially a younger person, they paid into the trust fund.
They deserve to get back what they paid in, right? So I think there’s a lot of people kind of watching this. Senator, we really appreciate you stopping by the program.
We thank you for all your great work, and we look forward to having you back on the program again very soon, sir, with an update.
The Honorable Bill Cassidy, United States Senator
That’ll be great, Jeff. Thanks for having me.
