Lummis Bill Tackles Entitlement Reform
“Alex’s Law is a responsible step to address Social Security’s serious insolvency challenges so that all Americans can continue to count on the benefits they have worked all of their lives to earn.”
U.S. Representative Cynthia Lummis (R-Wyo.) has introduced H.R. 867, Alex’s Law. Alex’s Law, named after a four-year-old child of a member of Representative Lummis’ staff, helps ensure Social Security remains viable for all generations of Americans by slowly raising the retirement age starting in 2024.
“America’s debt has surpassed an astounding $14 trillion – and continues to rise with no end in sight. This level of borrowing poses the greatest threat to the future of our country. America’s debt crisis is largely due to entitlement programs, which along with other mandatory spending consumes roughly 60% of the federal budget. Social Security in particular is at risk due to the program’s growing unsustainability. For the first time since its reform in 1980, the Congressional Budget Office announced in January that the program is now permanently in the red. The Social Security trust fund goes broke in 2037, which means Americans will see a 22 percent cut in benefits, and the cuts will get worse if Washington continues to look the other way.
“I have introduced Alex’s Law to strengthen Social Security’s future. H.R. 867 would close nearly 20 percent of Social Security’s long-term funding gap and help ensure the solvency of this vital program for future generations of Americans.
“It is important to note that Alex’s Law will not affect those in their 50s, 60s, 70s, 80s, 90s or 100s.
“Although all sides acknowledge that our budget challenges cannot be solved unless entitlement programs are addressed, it seems Washington would rather dance around the issue. Some of my colleagues fear having an adult conversation with the American people about Social Security. Ironically, the only people who are affected by this bill – those from age four to 49 – are ready for this conversation. They already doubt they will have a reliable Social Security benefit. They are right. My 25-year-old daughter won’t have the same benefit my father receives, or what my husband and I will receive.
“This is not only a fiscal issue; it is a moral issue. Congress can no longer jeopardize our children’s future economic security because we fear the truth. The choice is clear: either reform Social Security or let it go bankrupt.
“Alex’s Law takes the issues that threaten Americans’ economic security head-on. This legislation is a responsible step to address Social Security’s serious insolvency challenges so that all Americans can continue to count on the benefits they have worked all of their lives to earn.”
Social Security benefits are funded by payroll taxes on workers. The program formerly had a surplus of funds because it collected more in payroll taxes than it paid out in benefits. This dynamic has changed dramatically over time. In 1940, there were 42 workers per Social Security-eligible retiree. There were 16 workers per retiree in 1950. Today, with baby boomers only beginning to retire, there are approximately three workers per retiree.
In 2010, payroll taxes fell $37 billion short of what was required to pay out benefits. The Congressional Budget Office projects permanent Social Security deficits until the Social Security trust fund is exhausted in 2037. At that point, the Social Security Administration trustees estimate that Social Security payroll tax revenues will only be able to support 78 percent of benefits, leading to a 22 percent cut in benefits for all retirees.
Under H.R. 867, the retirement age increase would phase-in slowly over time:
Today’s 50-year-olds and those older: NO CHANGE FROM CURRENT LAW
Today’s 49-year-olds – Retirement age increase: 1 month
Today’s 35-year-olds – Retirement age increase: 1 year
Today’s 19-year-olds – Retirement age increase: 2 years
Today’s 4-year-olds – Retirement age increase: 3 years
Click here to see a detailed graph on the legislation.
Click here for a visualization of the President’s FY2012 budget which includes Social Security’s share of taxpayer funding.