Every lawmaker would love to be able to say they gave Social Security (SS) recipients a raise come re-election time. But what about when the bill comes due? The Social Security Fairness Act passed the House easily with bipartisan support, and it seems poised to do the same in the Senate sometime in the next week or so. But some legislators worry about the cost down the road. Neither side, however, seem concerned about the fairness of the bill itself. Perhaps it shouldn’t be surprising that government employees paid by tax dollars don’t see a problem with a bill that only gives a raise to government employees.
Social Security and the Government Pension Offset
The Government Pension Offset (GPO) was created by Congress in 1977. It was amended in 1983, and the Windfall Elimination Program (WEP) was added. Under this set of rules – which has been the law of the land for the last four decades – anyone who draws both Social Security and an additional, non-SS pension has their SS benefits reduced by 80% of the amount of the other pension.
Here’s a hypothetical example using unrealistic but very simple numbers: John, a retired police officer, gets a pension because he was a police officer, but he also draws Social Security. Let’s say John gets $100 a month from his police pension and $150 a month from SS. Since he draws both, his SS is reduced by 80% of his police pension, or $80. So, in reality, John gets $100 from his police pension and $70 ($150-$80) from Social Security. Again, these numbers weren’t chosen for their realism, but for their simplicity. Numerous factors – like years in service, retirement age, final salary, and, of course, the state in which the officer served – can affect how much a retiree actually makes, and the numbers swing wildly for law enforcement from about $40,000 a year to around $120,000 a year. It’s also entirely possible for those with large gaps in pension and Social Security amounts to lose their SS benefits entirely because of the offset. But, luckily for any retired LEOs named John, the average police pension in the US is, according to Glassdoor, over $90,000 a year (more than $7,500 a month). So, with or without Social Security or any WEP offset, real-world John probably isn’t headed for financial ruin.
That said, our hypothetical officer will be riding much higher on the hog, so to speak, if he doesn’t see his monthly Social Security benefits cut by 80% of his pension amount. This can, depending on the pension and SS numbers, make a massive difference in income for the retiree – and that’s precisely what Congress seems poised to do now by repealing the GPO and WEP.
A Bipartisan Deal – Everyone Wins but the Taxpayer
The Social Security Fairness Act of 2023 passed the House on November 12 with a bipartisan 327 to 75, with one “present” vote. The majorities of both parties approved, with 136 Republicans and 191 Democrats voting to pass to just 71 Republicans and four Democrats opposing. Missouri Republican Jason Smith was the present vote. Senate Majority Leader Chuck Schumer (D-NY) announced that he plans to bring the bill to a vote next week, and since the Senate version has 60 co-sponsors, it seems destined for success. So, what exactly would the bill do? Here’s the legislative summary, which seems clear enough:
“This bill repeals provisions that reduce Social Security benefits for individuals who receive other benefits, such as a pension from a state or local government.
“The bill eliminates the government pension offset, which in various instances reduces Social Security benefits for spouses, widows, and widowers who also receive government pensions of their own.
“The bill also eliminates the windfall elimination provision, which in some instances reduces Social Security benefits for individuals who also receive a pension or disability benefit from an employer that did not withhold Social Security taxes.
“These changes are effective for benefits payable after December 2023.”
Simply put: Make it so that people with pensions and their spouses get full Social Security benefits in addition to their full pensions. But as popular as the bill is, there are issues.
How will this be funded? Or, perhaps more importantly, will it be funded? The Congressional Budget Office estimated this act will cost around $190 billion over a decade, or about $19 billion a year on top of what is already being spent. This problem of cost is one that comes with its own set of secondary issues. Where will this money come from? For the most part, more borrowing. More borrowing means more national debt, which means larger interest payments on that debt.
According to the US National Debt Clock, American taxpayers are already on the hook for $36.2 trillion (almost $272,000 per taxpayer), and the interest required just to not default on the debt costs us more than a trillion.
Define “Fair”
The next issue is Social Security insolvency. This welfare program is funded by a trust that will eventually – if not continually refilled at an ever-increasing rate – run out of money. When that happens, no more monthly checks. The current estimate has Social Security going bust in about nine years. That date keeps getting pushed back, of course, by more borrowing, but that only means the collapse will be even more devastating when eventually the interest payment gets so high it can’t be maintained. This bill is expected to bring that insolvency date anywhere from six months to a year closer.
Now, let’s look at who benefits from this in the short term. Since this only affects Social Security recipients who also have other government pensions, it effectively is a pay raise for government retirees at the expense of the taxpayer today and future retirees in general later.
“The Senate is going to vote on the Social Security Fairness Act before the end of the year,” Schumer said Thursday, December 12. He called on his fellow senators to “do the right thing for our teachers and nurses and postal workers and law enforcement officers and firefighters.”
But how fair is the bill, really? These government workers already get a pension funded by the government – that is, by the taxpayers – and it’s often more than what someone with the same lifetime earnings would get on Social Security. Is it fair that people working today have to pay this special set of retirees more than anyone else under the law as it already exists by paying both the full pension and some reduced amount of Social Security? Is it then somehow more fair to remove the offset and increase this gap even more? And finally, is it fair to any retiree, now or in the future, to do this not just at the expense of our economy today, but of shortening the lifespan of the Social Security program all together?
The cost question has some Republicans cautious – not deadset against it, mind you, but cautious. Sen. Grassley, who raised the cost concern, followed up by saying: “Now, that doesn’t say how I’m going to vote on the bill. I’m just saying that I’m going to alert everybody to that so that we all know if they pass it, that we got to deal with Social Security almost a year sooner.” Interestingly enough, none of these government employees seem to be asking the question of fairness to non-government retirees. Shocker.
