A bipartisan Senate duo has sparked interest in a proposal to strengthen Social Security’s solvency.
Sens. Bill Cassidy (R-La.) and Tim Kaine (D-Va.) propose investing $1.5 trillion over the next five years in an investment fund that will be given 70 years to grow.
“It is something to save Social Security, and to save the benefits flowing to the people, frankly, will either already depend on them or will depend upon them going forward,” Cassidy said to The Hill a month ago.
Here’s what lawmakers and experts have said so far.
How it works
While the senators have yet to release the plan’s text, Cassidy stated that the government would establish an investment fund separate from the existing Social Security trust funds and invest $300 billion annually over the next five years.
That money would be invested in stocks, bonds, and other securities, and Cassidy stated that it would be held “in escrow for 70 years.”
“Any dividends paid, for example, go back into the investment fund. As a result, we will repeal the law requiring benefits to be reduced in proportion to income,” Cassidy told The Hill.
The Treasury Department would be in charge of making up the payments for those 75 years, after which the fund would repay the Treasury Department and use the remaining funds to supplement Social Security payments, according to the senators.
Cassidy argued that the plan would not increase the national debt, which is currently well over $30 trillion.
“The reason is that if you have money in an escrow account, you could always just empty the escrow account and pay off the Treasuries required to do the initial funding,” he told me. “And so, even though we’re borrowing that money, it does not increase our nation’s indebtedness and the investment income will exceed the interest that accumulates on the money borrowed.”
Cassidy estimated that the plan could “generate at least 70 percent of the borrowing required to pay the benefits over the next seven decades.”
What are the next steps?
The senators have said they are still gathering feedback on their plan, but the pitch is similar to a previous effort led by Cassidy that included a coalition of senators from both sides of the aisle.
“In the previous Congress, there were seven Republicans and seven Democrats. “We’re putting that coalition back together,” Cassidy stated. As senators continue to “socialize” the idea, Cassidy said more than a handful of Republicans have said “they will openly support or look forward to supporting, but they just plan to learn a little bit more.”
“We really felt like we had to socialize the idea more before we get down to legislative draftsmanship,” Kaine added, noting that they had received feedback from some experts.
“I think that if I had to summarize feedback, it would be this can be a really important part of our solution,” The Hill reported that Kaine said. “It probably is not the entire solution, which we know.”
According to Kaine, turning around the program’s projected shortfall in the next decade will “take a bunch of different things,” but the plan “can be a really important ingredient that nobody was really thinking about.”
“And then that makes the path to solvency a little bit easier,” he added, implying that the “novel” idea being pursued by him and Cassidy may mean Congress does not have to consider more “painful” options to extend the program’s lifespan.
The criticisms
While the senators have received praise for their bipartisan effort and for bringing attention to the issue, some experts have expressed concerns about the pitch.
Last month, the Briefing Book published a collection of retirement experts’ reactions to the plan, including voices from prominent think tanks such as the American Enterprise Institute (AEI) and the Brookings Institution.
“Senators Bill Cassidy and Tim Kaine deserve credit for bringing public attention to Social Security’s funding shortfall,” Sita Nataraj Slavov, a nonresident senior fellow at the AEI who specializes in public finance and the economics of aging, said in the article. “Unfortunately, their proposal does not improve the program’s finances because it avoids imposing the tax increases or benefit reductions that are necessary to keep it solvent.”
Gopi Shah Goda, director of the Retirement Security Project and a senior fellow at Brookings, also stated in the article that borrowing funds as proposed by the senators “would likely raise interest rates and slow growth, and avoids the difficult but important work of modernizing the program so that it can continue to provide important protection to seniors in a sustainable manner.”
In an interview Tuesday, Andrew Biggs, a senior fellow at the AEI who focuses on Social Security reform, compared the concept to a “pension obligation fund” used in some states.
“The only thing that has to happen for this to lose money is for stocks to earn a lower return than bonds,” he pointed out.
“States that have tried these pension obligation bonds, some of them come out ahead, some have lost money,” he went on. “It’s a risky proposition.”
Social Security’s go-broke date
The combined trust funds for Social Security are expected to run out in 2034, according to an annual report released in June by the program’s trustees.
The report projected that the program’s Old-Age and Survivors Insurance (OASI) fund would be able to cover “100 percent of total scheduled benefits until 2033,” while the Disability Insurance (DI) trust fund is expected to pay “100 percent of total scheduled benefits through at least 2099.”
However, when the projections are combined, the resulting fund is expected to be able to cover “100 percent of total scheduled benefits until 2034,” one year earlier than reported last year. The report cited last year’s passage of legislation repealing two key tax rules as a major factor in the timeline shift, predicting that the law would result in higher benefit levels for some workers.
However, with the recent passage of Trump’s massive tax and spending bill, that timeline may become even tighter. The Trump administration’s chief actuary for the program issued an estimate this week predicting that the trust funds will see lower levels of tax revenue from Social Security benefits beginning this year.
With the recent tax changes, the Office of the Chief Actuary at the Social Security Administration projected that depletion of the combined OASI and DI trust funds would accelerate from “the third quarter of 2034” under the most recent board of trustees’ report baseline to “the first quarter of 2034 following implementation of the law.”
What are the chances of Social Security action this Congress?
While there is bipartisan support for ways to ensure the program’s solvency, changing the program or how it is funded is a difficult task in Congress.
Cassidy, who serves on the Senate Finance Committee, said he has spoken with the panel’s chair about holding a hearing on the legislation.
Others are hoping for more action on Social Security.
“We all want to do something about it before the deadline,” Sen. Angus King (I-Maine) said when asked about the plan, but added that it “would be ahistorical” to see action to help shore up the program’s solvency in this Congress.
“The last time Tip O’Neill and Ronald Reagan fixed it, I believe they were about six months from insolvency. So, maybe we’ll have to wait that long, but I hope not,” King said, noting, “The longer we wait, the more difficult it is to fix.”
“I hope we can. King, who previously led the bipartisan effort with Cassidy in 2023, acknowledged the ongoing discussions. While King stated that he is “not involved at this point,” he did add that he is “listening, and there are several groups that are talking about Social Security.”
“Everything is difficult in every Congress, but it seems especially difficult these days. And the closer we get to an election, the fewer results I believe we will get,” Sen. Jerry Moran (R-Kan.) stated last week. “But there is a certain demand for efforts to make sure that Social Security is solvent today and in the future.”
“But they will be hard to come by,” he added.
