▶ 0:12:09>> thank you all. We will beginning our witnesses here quickly. This hearing was requested by my democratic colleagues and formerly accepted by the republican colleagues and a time of political upheaval.
▶ 0:12:36The social security is one of the most back -- valuable programs to keep people out of poverty. It allows them to go into retirement years with a source of income. Very quickly when I was 201i think my mom passed away. We owned a restaurant. A pool room. And a liquor store.
▶ 0:13:06Neither one of my parents graduated high school but they worked hard, had those businesses. If you own your business, you owned it. Wake up early, go to bed late, you don't take many vacations. I remember that experience of growing up. My mom was 17 years younger than my dad. You always think she's going to be around. Life throws you a curveball. She passes away.
▶ 0:13:3915 months later my dad dies, I have a 13-year-old sister. People have worse stories than mine. We moved in with an aunt and uncle. There was a time in my life where that social security check really mattered.
▶ 0:14:00There's a time in my life where I could probably get by with less, that's what it takes to save social security, count me in. This program is under stress because of the demographics. We are looking for solutions. We have senator cassidy who has led and I know senator kaine, you have been talking about this.
▶ 0:14:27Senator johnson, it is all about entitlements when it comes to spending. I am glad we have the hearing. We will hear from senator cassidy. Senator whitehouse has stepped out. He is leading too. This is a good topic. I am glad we are having this. Sen.
▶ 0:15:00-- Sen. merkley:s -- Sen. merkley:h an important topic. What we knew is that as soon as you address the growing shortfall in the trust fund, the easier it is to address. Over a decade ago I was holding town hall meetings on the question of asking people how they wanted to address social security. I wish we had addressed it then.
▶ 0:15:28We didn't do it under democrats, republicans, now is a chance for us to focus and say it needs to be addressed now. It goes back to 1935 that president roosevelt told the nation, it protects us for the future. It has become such a foundation of ensuring that as americans age they aren't aging in dire poverty.
▶ 0:15:54At least half of our senior households rely on it for at least 50% or more of their income. Many americans have no personal savings at all. At least 20% rely on it for their entire income postretirement. It is protection against senior years lived in desperate poverty. The provisions for social security are in jeopardy.
▶ 0:16:29The congressional budget office finds that just six years from now the trust fund is empty. Six years from now. That is like tomorrow. It is right here. Any senator running for reelection in their term, we will be facing that the trust fund is out of money. That means essentially a quarter of the payments would have to be reduced by a quarter.
▶ 0:16:58That would be a huge impact for families. A lot of folks get social security of a rate of $1400 per month. How could you afford rent? It's not a huge amount of money to begin with. That is just not acceptable. 68 million americans get a check in the mail each month.
▶ 0:17:25In oregon, 940,000 get those checks and about 200,000 of them would be in dire poverty without social security. It is really important that we address this and not delay any longer. We do have some laws in conflict with each other. One says social security must pay the full benefits. The other says you only could out of the trust fund.
▶ 0:17:56You are either violating one law or another. If we don't raise more revenue or adjust to make sure payments could be made and we fund it out of the general revenues, we are adding massively to the debt of this country. We need to freeze debt but that is a story for another day that we could have visual conversations about.
▶ 0:18:24There's many ideas about how to strengthen social security. This is a chart. We make it available to everybody trying to lay out the main ideas on the table right now. There are many combinations that could be brought to bear. That whole set of ideas to wrestle with. A lot to be considered. We will hear that in the testimony from two of our senate colleagues.
▶ 0:18:54In addition to testimony from experts. Each year I hold a town hall in all 36 of my counties. This year I have 20 so far. I passed out a survey listing all of these sets of ideas and said what do people like, what do they not like? I thought I would share the results. Raising the cap, 95% support.
▶ 0:19:22That is the cap at 185,000 premiums. Reduced benefits for the wealthy, tax investment income, get their income really not from wages. They don't pay social security premiums. Raising the tax rate is the premium rate. Raising the retirement age. You see a host of responses to the set of ideas being represented.
▶ 0:19:49I think it's useful to get the feedback of the american people about what they feel is workable because we have to build political momentum if we want to tackle this challenge. The reason raising the cap at the top, a local firefighter and billionaire head fund manager, they both have the same cap right now. A fireman doesn't make that.
▶ 0:20:19He pays or she pays on every dollar they earn they pay a premium. Ordinary americans pay the premiums all year. The other 364 days, they don't pay it at all. It seems unfair this is the case.
▶ 0:20:44What we have seen over time is that the predictions when we passed the last big set of reforms was that we were going to have 75 years of solvency. That was because of the design to create premiums on 90% of collective earnings. We no longer collect premiums on 90%. It is a major factor.
▶ 0:21:10We are running out 20 years earlier than was predicted in the time those reforms were passed. Another route major response is making investment income subject to social security tax. That is a reflection of how wealth has moved. Folks are getting their income now from wages, they are getting it from investments. Doesn't it make sense that this be applied as well?
▶ 0:21:40Certainly folks in oregon said yes, that makes sense. Those factors alone could solve the challenge we are facing if we have the political will to act. The president also has a powerful role to play. He says we will always protect social security. I hope that budget includes his proposal for how we will address that.
▶ 0:22:07We could then incorporate that into discussions we are having here in congress. The big ugly betrayal of a bill last year, I will put it in less partisan terms. That also move down by six months insolvency date the social security date. My constituents team reports another challenge.
▶ 0:22:37That is with the cuts to the administrative personnel and social security, the wait times for actually signing up for social security have increased substantially. They have waited 1-6 hours. Field offices even after the appointment has been scheduled are arriving and waiting 2-4 hours. Applications that should be processed in 30 days are taking three months or longer.
▶ 0:23:13Thousands of employees were fired making this a bureaucratic nightmare for eligible americans even to just sign up. If we address the challenge of the social security shortfall, we will solve a significant piece of our structural deficit.
▶ 0:23:36It is the amount of shortfall that we have built into our budget each year. It would solve a percent and a half of that. We could then stabilize debt as a ratio to gdp, which is very important to the future of our nation. Important hearing, important topic, let's find a path forward together.
▶ 0:24:06Chair Graham: We will start with senator cassidy.
▶ 0:24:11Sen. Cassidy: Thank you for allowing me to participate. Your opening statements were right on. Everyone watching, everyone sitting here, the retirement age will be affected by social security. Senator graham's personal story puts a point that this is just not luxury income. This is what people need to live.
▶ 0:24:39Sen. Cassidy: According to the most recent social security trustees report, over the next 75 years, payroll tax revenue will fall short by more than 20 $5 trillion in today's dollars. If you factor in the inflation that means 600 $74 trillion. By law, there has to be a cut so you balance income with the payments being made.
▶ 0:25:05Sen. Cassidy: By law if this occurs there will be a 23% cut in benefits to seniors and those who otherwise receive these benefits. That is according to the actuaries. We have to act to prevent these cuts. The social security trust fund bridges the gap. The amount of money in the trust fund is making up the difference.
▶ 0:25:36Sen. Cassidy: That trust fund is rapidly depleting. It will be exhausted in 6-8 years. What are the options? This is a political issue as well as a policy issue. We've had the option one, to do nothing and have a benefit cut of 25% or borrow close to $700 trillion nominally which will put our debt to gdp ratio similar to venezuela.
▶ 0:26:04Sen. Cassidy: We've had the option before where we cut benefits and raise taxes. Politically, that died. There's just no way that was going to pass. Option three we think is a third option. It is what we will do when congress has already done elsewhere. Use a diversified investment fund.
▶ 0:26:30Sen. Cassidy: This new fund will be separate from the social security trust fund. It will be pre-funded with $1.5 trillion and invested in a way 401k is invested. The internal rate of return. As it does this, the balance and the escrow account could offset any borrowing required to pay scheduled benefits. We know the borrowing will most likely to occur.
▶ 0:27:01Sen. Cassidy: We have no plan to offset. Under this plan it will be an escrow account. It would partially offset. The good thing about what we are discussing, it has been done before. In 2001 the federal railroad retirement system was going insolvent because there were more retirees relative to workers.
▶ 0:27:25Sen. Cassidy: Congress in 2001 allowed their trust fund to be put into an investment vehicle, just like we are proposing. Since then they use this as grown and that fund is firmly in the black. Every democrat in congress then including those on this committee and those on senate finance voted for that bill. The opposition came from some of the republican party. It has worked out fantastic.
▶ 0:27:55Sen. Cassidy: We are modeling this after that. If you work for a corporation and they are planning to pay you benefits in the future, they have a pension investment fund that does this in the exact same way. We are modeling after best practices in the private sector. This is overwhelmingly popular with american people. They do want guardrails to keep congress from messing with it.
▶ 0:28:27Sen. Cassidy: We have strict guardrails that will require this money be managed in a way that will maximize return for our beneficiaries. Annual audits and full transparency. Social security deteriorating, if we had done this 10 years ago, it would be solvent. The more we wait, the harder it gets.
▶ 0:28:56Sen. Cassidy: The question, will we fulfill our obligations to the american people in a way that is politically and by policy viable to fix social not just now but for future generations. This is a way we could do it on a bipartisan basis.
▶ 0:29:16Chair Graham: Doing nothing is not a very good outcome. Thank you very much for being willing to lead on this. Sen. whitehous. -- senator whitehouse let me thank you for holding this hearing. You are definitely not a senator who's afraid of big ideas. We have a big problem that will require some big ideas. Fortunately they are pretty simple ideas.
▶ 0:29:47Chair Graham: It has only grown more urgent since our last hearing two years ago. According to the nonpartisan congressional office the trust fund will be exhausted a year earlier them previously predicted in part due to the republican beautiful for billionaires bill last year. 2032 is that year. It is not social security's only threat. They shrink the workforce by thousands.
▶ 0:30:18Chair Graham: Reassigned technical experts to the phone lines with minimal training. Close regional offices made the website more reliable and made it harder to access services. That is why senator merkley and others are hearing from constituents. The washington post reported that one of the little muskrats allegedly plan to take the personal information of millions of americans from social security to use at his new employer.
▶ 0:30:46Chair Graham: Unfettered access to these characters would lead to this and now we need to get to get to the bottom of it. Social security is the bedrock of america's retirement security. It is our most effective poverty program. A lifeline of millions of seniors, their children, people with disabilities. It reaches 20% of the U.S. population every month.
▶ 0:31:11Chair Graham: Almost every senior in this country will receive payments from social security, benefits they earned but let them retire in dignity. It is pretty simple. Social security will not be able to benefit in 2032. It will cover 72% of benefits after that.
▶ 0:31:36Chair Graham: I think we all remember president biden's estate of the union address when republicans and democrats jumped up together on the floor and gave a standing ovation to the notion that cutting social security and medicare was off the table. The only way to extend solvency without cutting benefits or borrowing money which would also be very dangerous is to raise more revenue. Pretty simple.
▶ 0:32:06Chair Graham: If we agree on that there are win-win conversations that extend solvency indefinitely without benefit cuts and make our corrupted tax system fairer. The cap on social security means a tech exact making $1 million effectively stops paying into social security in march. A schoolteacher continues to make contributions from her paycheck through every single paycheck all year long.
▶ 0:32:39Chair Graham: My medicare and social security fair share act would fix that by requiring contributions on wages above $400,000. We could debate the gap between 184 and 400. That represents the biden administration's pledge. People living off of income from their wealth make no social security contributions.
▶ 0:33:03Chair Graham: It would make those making more than $400,000 in investment income to contribute just like those who are working for their income. Right now wealthy owners could avoid paying medicare taxes entirely. Some programs are designed to do just that. My bill would close that loophole as well.
▶ 0:33:29Chair Graham: Those reforms ref -- raised enough revenue to make social security solvent for the 75 year actuarial window according to the social security actuary. That is the -- as far as the actuarial eye could see. It is also medicare solvency. We could protect social security for all. We also get to end unfair tax.
▶ 0:34:00Chair Graham: Dodges. Two chairman graham, we could do this. It is big but it is actually not all that hard or complicated. The sooner we do it, the better off everyone will be. Thank you very much.
▶ 0:34:18Chair Graham: Our next panel. Thank you. Would you please come forward? As they come forward, it includes Dr. molly dahl. Is that right? Ok. She is the chief of long-term analysis at the congressional budget office where she served since 2004. Ms.
▶ 0:34:47Chair Graham: Karen glenn is the chief actuary of the social security administration. A position she has held since january, 2025. Prior to that she served as deputy chief actuary. Mr. barry huston is a specialist in social policy at the congressional research service where he served eight years. Thank you very much.
▶ 0:35:16Chair Graham: Why don't we start with miss g lenn, floor is yours.
▶ 0:35:24Ms. Glenn: Thank you everyone. My name is karen glenn, I'm the chief actuary of the social security administration. Thank you for inviting me to speak with you. Thank you for inviting me to speak with you about the financial status of the social security program. We will cover three main topics today.
▶ 0:35:54Ms. Glenn: Experience since the last comprehensive reforms in 1983 and how congress and the administration could help. My written testimony includes details on these topics including a discussion on critical factors for progressions into the future.
▶ 0:36:10Ms. Glenn: My team provides expert input to the annual trustees report process including making recommendations for assumptions, developing projections and preparing the report itself. We work closely with the trustees and representatives on all aspects. The 2025 report was released on june 18, 2025. The 2020 six report is well underway.
▶ 0:36:41Ms. Glenn: It is on target to be released this spring. I will share some results to provide a sense of the current financial status of the program. Note the 2026 report will incorporate updates to policies, data, methods over the past year. Under the intermediate, best measured assumptions program income is projected to be less than program cost in all future years.
▶ 0:37:13Ms. Glenn: So the combined social security trust fund reserves are projected to become depleted in 2034. At that time, 81% of benefits would still be payable. The trust fund by itself is projected to deplete its reserves in 2033 with 77% of scheduled benefits.
▶ 0:37:38Ms. Glenn: The disability insurance alone is projected to be fully financed throughout the 75 year projection period ending in 2099. The cost is projected to continue to rise through 2080. This is driven by the changing age distribution of the U.S.
▶ 0:38:02Ms. Glenn: Population with an increasing number of beneficiaries receiving benefits relative to the number of workers in the program. In 1980 two the trust fund reserves were on the brink of being depleted requiring temporary borrowing from the trust fund and the medicare hospital trust fund to maintain payments to beneficiaries.
▶ 0:38:27Ms. Glenn: The amendments were enacted the following year making the changes needed to address shortfalls. The trustees report indicated the combined trust funds would remain solvent through the next 75 years until roughly the early 20 60's. We do now project the combined trust fund reserves will become depleted in 2034, almost 30 years sooner than expected in 1983. There are two main reasons for this shift.
▶ 0:39:03Ms. Glenn: From 1983 through 2000, meaning that a smaller share of earnings were subject to social security payroll taxes. Over that time average earnings rose by about 62% more than cvi while average earnings for the other 94% of earners rose by only 17% more. The economy performed worse than expected since 1983.
▶ 0:39:34Ms. Glenn: Particularly during the deep recession of 2007 through 2009 and the slow and incomplete recovery. The type of further changes now much sooner than expected. To ensure social security remain solvent, they need to act as you always have in the past. The math is simple.
▶ 0:39:59Ms. Glenn: Lawmakers need to take action, reduce scheduled benefits by about one fourth, some combination of these. Changes will need to be implemented before the trust funds become depleted. We are happy to assist you and your staff to develop any potential solutions to those problems. Thank you again for the opportunity to speak to you today.
▶ 0:40:29Ms. Glenn: Happy to answer any questions that you have.
▶ 0:40:36Dr. Dahl: Thank you for the opportunity to testify today. Social security faces a significant financial challenge. It projects in fiscal year 2032, six years from now the balance of the trust fund will be exhausted. The disability trust fund is projected to remain solvent for more than 30 years.
▶ 0:41:01Dr. Dahl: The program would not have sufficient resources to pay the benefit amount in a timely manner. Legislative action would be needed. In the first year after the trust fund is exhausted it would be about one quarter less than the amount of scheduled benefits they project. That gap would widen over time. About 72 million people, roughly 1/5 of the population are projected to receive benefits in 2033.
▶ 0:41:31Dr. Dahl: For many of them, social security represents shared income. The reduction in benefits, transfer of resources from the general fund. The design changes to apply differently across beneficiaries including by income level. With only six more years, changes would be significant.
▶ 0:41:54Dr. Dahl: As required by law, the baseline projections reflect the assumption that they are scheduled under current law regardless of the program trust funds. Earlier this year they analyzed a scenario in which benefits were from amount payable beginning in 2032. Before accounting for economic effects, the reduction of benefits in that scenario would total $2.7 trillion.
▶ 0:42:23Dr. Dahl: The budgetary and economic effects would depend on the specifics of the changes and are highly uncertain. This scenario incorporates the assumption that benefits paid to all beneficiaries would be reduced by the same percentages each year. Under the payable benefit scenario, the primary deficit which excludes interest would be smaller than the baseline projections.
▶ 0:42:50Dr. Dahl: That combined with lower net for interest would reduce the total deficit to 4.6% of gdp. Federal debt would equal 112% of gdp. 8.1 percentage points of the agency's baseline projections. Limiting benefits would also affect the economy. They would reduce demand for goods answer.
▶ 0:43:23Dr. Dahl: It would increase labor supply and savings and offset that official decline. The effects of those changes would not be evenly distributed. If benefits were reduced by the same for beneficiaries, it expects that lower income households would reduce their spending by more in percentage terms. In closing, it projects the trust fund would be exhausted in 2032. I'm happy to answer questions.
▶ 0:44:03Mr. Huston: Thank you for inviting me to testify at today's hearing. I am an analyst with the congressional research service. Social security is the federal government's largest program in terms of the people affected and its finances. Social security will pay almost one point $6 trillion in benefits to 70 million beneficiaries and collect $1.3 trillion in payroll taxes.
▶ 0:44:32Mr. Huston: Most of these workers will become beneficiaries. The ability to pay full schedule benefits on time is determined by the status of the social security trust funds. They necessitate the relationship between cost and holdings in the social security trust funds. Program costs have exceeded program income since 2021 making the redemption of reserves necessary to help pay full schedule benefits.
▶ 0:45:02Mr. Huston: The board of trustees estimates that the combined trust funds will be completed some -- depleted sometime in 2034. The old-age age and survivors insurance trust fund that finances benefits to retired workers is projected to be depleted sooner, in 2033 or 2032. Continuing tax revenues are estimated to support only about 75% of scheduled benefits.
▶ 0:45:30Mr. Huston: The program would be able -- unable to pay 100% of scheduled benefits. They may choose from a wide menu of changes to help eliminate the shortfall. They are categorized as revenue increasing our cost reducing. They include eliminating earnings subject to the payroll tax. Expanding coverage or excluding -- including other portions of revenue.
▶ 0:46:01Mr. Huston: Cost reducing provisions include annual cost-of-living adjustments, reducing growth in initial benefits by changing the formula or increasing the full retirement package. No one provision is likely to eliminate all the projected financial shortfall. Many proposals include both types of measures. Commonly referred to as the program's last major changes.
▶ 0:46:27Mr. Huston: Looking ahead, the timing, degree, nature of any changes will reflect the policy objectives of lawmakers. With regard to the timing of any changes, they will determine when and if any changes are enacted and the speed that they are implemented. They were phased in gradually along with -- allowing workers and beneficiaries more time to adjust.
▶ 0:46:59Mr. Huston: Changes would be less effective when facing trust fund depletion in the near term. Regardless, changes implemented sooner rather than later would make this larger in magnitude. Lawmakers may choose to address the entirety of the shortfall by choosing legislation that would result in long-term solvency or may address a portion of the shortfall.
▶ 0:47:28Mr. Huston: In 1983 reform proposals were exclusively on problems. They eliminated financial shortfall by increasing revenues and reducing cost. This approach may or may not reflect the policy objectives of lawmakers today. Lawmakers may want to address the size, scope, goals of social security.
▶ 0:47:51Mr. Huston: Or they may want to include social security reform as one part of a broader package of governmentwide policy initiatives. Prior reform efforts have involved commissions many of which include members. Some commissions including the president commission to strengthen social security focused solely on program financing while others such as the commission on fiscal responsibility reform included social security reforms as a part of larger governmentwide
▶ 0:48:22Mr. Huston: Efforts to reduce the federal budget. None of the commission legislative proposals on social security that were actively considered by congress. Thank you.
▶ 0:48:32Chair Graham: Thank you all, that was very informative. I have to run to judiciary. Let me start out, in 1955, the year I was born there were 8.6 workers for every social security recipient. Today there is 2.7 for every recipient. In 2040 there will be 2.3.
▶ 0:49:02Chair Graham: I don't have any kids. I'm one of the reasons it is screwed up. It seems to be demographics matter. Is that right? >> they are the biggest driver of the changes in social security.
▶ 0:49:18Chair Graham: Unless we have a major baby boom it seems like we will have less workers per recipient over time?
▶ 0:49:27Ms. Glenn: Absolutely.
▶ 0:49:30Chair Graham: Are people living longer?
▶ 0:49:37Ms. Glenn: People are living longer but not significantly longer.
▶ 0:49:42Chair Graham: Don't say that, the answer is yes. We are having a lot less kids, that is the big factor. Living longer and less kids. How do you close the gap? Isn't that what we are all here talking about?
▶ 0:50:00Ms. Glenn: That is exactly the problem.
▶ 0:50:03Chair Graham: We have senator whitehouse idea, senator cassidy's idea. We had them -- we need ideas that go from idea to law. In 1983 they bought some time, is that correct?
▶ 0:50:18Ms. Glenn: At the time they thought they bought about 75 years.
▶ 0:50:22Chair Graham: They wound up buying how much?
▶ 0:50:25Ms. Glenn: More like 50.
▶ 0:50:28Chair Graham: At least they tried. Back then, did they extend the age of retirement or not?
▶ 0:50:36Mr. Huston: In the 1980 three amendment, absolutely. They gradually increase the retirement age from 65 to 67. That helped the trust fund. Did they do any means testing?
▶ 0:50:52Mr. Huston: There's an argument to be made that they did in the form of taxation of benefits.
▶ 0:50:59Chair Graham: No direct means testing.
▶ 0:51:02Mr. Huston: That is correct.
▶ 0:51:05Chair Graham: I'm 70, I have military retirement. Whatever we make. I'm doing good. I get social security check. When I was 202i needed every penny. If you need to means test me, count me in. I will speak for myself. I'm asking people to consider taking a little bit less if they could afford it.
▶ 0:51:37Chair Graham: A lot of people can't. Isn't that right? There are some people where social security is their tea form of retirement?
▶ 0:51:44Ms. Glenn: That's right.
▶ 0:51:46Chair Graham: What percentage do you think would be in poverty without social security?
▶ 0:51:51Ms. Glenn: That would be a significant number. I don't have the value off the top of my head.
▶ 0:51:58Chair Graham: It was reduced by 20%, would that put more people in poverty?
▶ 0:52:04Ms. Glenn: Yes.
▶ 0:52:06Chair Graham: We don't want to do that. Rather than doing nothing, which puts people in poverty, asking people like everybody here to take a little bit less seems to be a pretty good idea. In terms of revenue, what is the income cap?
▶ 0:52:27Ms. Glenn: Right now it is about 180 $5,000.
▶ 0:52:33Chair Graham: What is the doughnut hole, do you know what I am talking about there?
▶ 0:52:39Mr. Huston: It is provision in several legislative proposals that would institute another threshold. There would continue to be payroll taxation below the current law threshold and then a donor hold where earnings are not subject to attacks and earnings above this threshold would be taxed. Over time, that would eventually close the current law.
▶ 0:53:09Chair Graham: If you took the entire wealth of the top 1%, what it the gap?
▶ 0:53:15Mr. Huston: You said wealth, not earnings.
▶ 0:53:21Chair Graham: Their cats, dogs, house. Would that do it?
▶ 0:53:28Ms. Glenn: Just taxing more income of the wealthy would not. Potentially wealth, there is a way to do that.
▶ 0:53:39Chair Graham: How much would you have to take? Go figure that out. We have to get a product that works here. My belief is you cannot tax your way out of this but you need more revenue. Means testing time has arrived. My belief is maybe one more time we will talk about it. I like senator cassidy's idea. The bottom line is you will have to do sort of all of the above approach.
▶ 0:54:11Chair Graham: Tell me in for anything that gets us to where we need to go. I would like to have this committee lead by example and all I could say is this program means a lot to people. I know that because I lived it. If we do nothing then shame on us all because nothing has a very severe consequence.
▶ 0:54:36Sen. Merkley: Thank you very much. I wanted to begin with the work at cdo. The chairman started asking his questions. If we turn the dial on different solutions, how much could we raise?
▶ 0:55:02Sen. Merkley: Cdo generally has models in order to estimate given all of the demographics. Have you all gone through and experimented with turning the dial? Let me explain. In 2033 is estimated the shortfall will be about $500 billion. Then it goes up from there.
▶ 0:55:27Sen. Merkley: The question is for each idea we need to understand not just how much we will raise over a 10 year period, have you all taken individual ideas if you raise the cap and a certain amount. How much it will generate per year.
▶ 0:55:52Dr. Dahl: We talked about a variety of proposals in 2024. The options for reducing the deficit. We released a study in december, 2024. We look systematically at multiple different social security proposals that are commonly discussed.
▶ 0:56:18Sen. Merkley: I want to follow up and see, we need to be able to get that information sooner rather than later so that we could look at these questions and wrestle with how do we address that $500 billion in 2033 and also the years that follow with the different ideas. Just like raising the cap, there has been multiple ideas put forward.
▶ 0:56:46Sen. Merkley: Those ideas include raising it to where it is now, raising it to $250,000, as senator whitehouse was referring to. Let me also ask if we are turning to our other experts, have you all put together models to be able to do similar calculations on how each idea produces income in specific to the future?
▶ 0:57:16Ms. Glenn: We have a list of 100 and 40 different options on our website.
▶ 0:57:24Sen. Merkley: Do you have it as per year impact going forward?
▶ 0:57:30Ms. Glenn: We do.
▶ 0:57:33Sen. Merkley: We will have to get into the nitty-gritty of these options. I don't think any of you, we talked about the policy side and the political side. The following is more scanned on how public response to ideas then I would have anticipated.
▶ 0:57:54Sen. Merkley: I am assuming none of you get into that world and estimate how citizens respond to different ideas so we could find a viable policy.
▶ 0:58:06Ms. Glenn: I would say we try to score the ideas that are brought to us. We believe it is really on others to find out what is palatable.
▶ 0:58:21Sen. Merkley: I assume the same?
▶ 0:58:24Mr. Huston: We read the same polling data you receive.
▶ 0:58:28Sen. Merkley: Sometimes when we do things here that aren't part of the social security discussion they still have an impact, what impact did the big beautiful bill have on solvency of the trust fund?
▶ 0:58:46Dr. Dahl: The 2025 reconciliation act move forward, closer in time the exhaustion of the portion of the trust fund in part due to a taxation on benefits and changes on income rates in that legislation.
▶ 0:59:06Sen. Merkley: If we are looking at legislation in other areas we will turn to you all to try to understand the impact on social security. We want to solve this issue. We are going to have to start wrestling with it. One of the things that I have seen put forward, our 6% structural gap. We raised about 17% of revenue of gdp.
▶ 0:59:37Sen. Merkley: We spent about 23%. If we solved the shortfall in social security we will address 1.5% of that 6% structural deficit. Is that the ballpark?
▶ 0:59:52Dr. Dahl: That is about right.
▶ 0:59:55Sen. Merkley: That would get us halfway towards actually stabilizing debt as a portion of gdp. In 20 years there is no discretionary income for health care, housing, etc. That is my time. Thank you very much.
▶ 1:00:23Sen. Jones: And I think you've
▶ 1:00:27All Laid Out -- Sen. Jones: And I think you have all laid out the grim tax. I want to establish the facts of basic intent. Any solutions moving forward will definitely be contrary to the basic intent of social security. We will start off with it is initially designed to be a forced retirement plan. We will extract wages from workers.
▶ 1:00:57All Laid Out -- Sen. Jones: Put them in savings available for those when they retire, is that correct?
▶ 1:01:02Mr. Huston: That is correct.
▶ 1:01:06Sen. Johnson: Back then life expectancy was a little under 62 years. Retirement was set at 65, correct? That is basically the plan was set up as an insurance policy in case you were lucky enough to exceed life expectancy. Correct? By large.
▶ 1:01:31Mr. Huston: I think life expectancy was life expectancy at birth.
▶ 1:01:37Sen. Johnson: Anyway, the retirement age was set pretty close to life expectancy. People were living much past 65. I think 1945, there were about 42 workers for every retiree. Senator graham said back in 1955 is eight point six. We are now below 3-1. These are structural problems.
▶ 1:02:12Sen. Johnson: Had we actually taken those savings, the money we extract from wages and put them into something that was an asset to the federal government. I would argue a U.S. government bond is not an asset to the U.S. government. If you took out a piece of paper and said I have $20, you just have a note.
▶ 1:02:39Mr. Huston: It is intergovernmental debt.
▶ 1:02:44Sen. Johnson: When the trust fund that redeems those bonds to pay out benefits, the treasury has to immediately issue another bond. If you are in the private sector , you have the investors give you $1000.
▶ 1:03:08Sen. Johnson: You spent that $1000 I would owe myself $1000. That would be a ponzi scheme, that would be illegal, correct?
▶ 1:03:22Mr. Huston: Sooner or later it would be.
▶ 1:03:26Sen. Johnson: Have you ever had anybody do a calculation had we taken those surpluses all those years and invested them like senator cassidy is proposing now into something like an index fund, if you do the calculation, anybody have any idea how much money we actually have in the trust fund with assets that we could actually call upon to pay benefits?
▶ 1:03:54Mr. Huston: Previous points we looked at times when there was a lot more money coming into the system.
▶ 1:04:01Sen. Johnson: What number did you come up with?
▶ 1:04:05Mr. Huston: More or less input the program and a much better financial position.
▶ 1:04:10Sen. Johnson: Trillions and trillions of dollars. A few years ago it was seven or $8 trillion. Bottom line, it's important to understand how grossly mismanaged it has been. How the american people were basically lied to and put set aside for savings. It is gone.
▶ 1:04:37Sen. Johnson: Your social security, your agency publish something called money ratios. I hear it all the time. The vast majority of people get more out of social security than they ever put in, correct?
▶ 1:04:57Ms. Glenn: That is correct. They get more than they pay in.
▶ 1:05:01Sen. Johnson: It is important for people to understand that. I've got five different categories. Medium, one earner couples, to earner couples.
▶ 1:05:18Ms. Glenn: It varies by earnings.
▶ 1:05:21Sen. Johnson: The vast majority, some get a lot more. 3.8 six dollars per one dollar paid in.
▶ 1:05:31Ms. Glenn: Some of them do, that is by design.
▶ 1:05:34Sen. Johnson: We are moving forward to tax the wealthy, decreased benefits. We are moving from what is supposed to be a savings plan. We are getting back what you put into a more -- more well generalized. We better have the wherewithal to pay for it out of the general fund. Like everybody, we want to make sure those people get benefits.
▶ 1:06:07Sen. Johnson: It has been so grossly mismanaged. We have to be honest with the american people in terms of what is going to happen. I'm open to compromise but you have to start with facts.
▶ 1:06:24Sen. Wyden: I could ask one question. Then I will let my colleagues who have been so gracious. I wanted to ask about something in the finance committee all the time. That is the question of fairness and how we will bring fairness to this debate. You have two major groups.
▶ 1:06:50Sen. Wyden: You have the working person, firefighter, teacher, they get a wage and pay fica taxes. Wealthy people who are smart call of their lawyer and accountant and say make sure I don't take a wage this year. I can live off my borrowing. I could do different things.
▶ 1:07:16Sen. Wyden: A lot of the big challenges, senator kaine for example has been enormous amounts of time working on this. It's going to be how does I put my arm around something that is fair? I introduce the billionaire income tax. Other colleagues will have other ways to go. I will not ask you about any bills. How do we get a sense of fairness as we go into this debate? I'm looking at my colleagues that spends a lot of time on it.
▶ 1:07:46Sen. Wyden: That's what we do in the finance committee. We tackle this hugely important issue.
▶ 1:07:59Ms. Glenn: Let me jump in. None of us on this panel is a policy person per se. We are here to score the ideas you come up with. We are here to give you the information you need to make those policy decisions.
▶ 1:08:17Sen. Wyden: What would you do to have a policy that would allow us to say democrats and republicans, this is fundamentally fair.
▶ 1:08:26Ms. Glenn: It's a great question. We need to look out workers and beneficiaries.
▶ 1:08:36Mr. Huston: When they were working on their consensus package, there's a commitment to what they deemed fair in terms of balancing with cost reductions. At the time they seemingly achieve that.
▶ 1:08:55Sen. Wyden: I know you will be a part of it. Talking about the real issues.
▶ 1:09:05Sen. Moreno: Let's start there. Brought up a good point of fairness. It is optional to pay more money in taxes, you could do that, somebody who is worth a lot of money.
▶ 1:09:27Sen. Moreno: I would say when it comes to fairness, why don't we withhold our paychecks while we are withholding the paychecks of 200 60,000 dhs employees? That seems fair. Doesn't seem fair that we get paid 170 $5,000 per year and you walk by with an escort skipping the lines. >> nobody does that. >> do you want videos?
▶ 1:09:58Sen. Moreno: You drive home. I fly. >> good for you, talk to your colleagues. They do that all the time. >> don't say that all of us skip lines. >> are you holding your paycheck? >> no because you are not paying tsa agents. >> you are not willing to hold your check? >> reclaiming time.
▶ 1:10:29Sen. Moreno: Let the record show the answer is he's not willing to hold his paycheck. The democrats want that. >> you guys are blocking it. >> you announced on tsa all the time. Get your facts straight.
▶ 1:10:46Sen. Moreno: I will see you at 6:00 on the floor and we can have that discussion in front of the american people at 6:00. I look forward to that debate at 6:00. In the meantime, I know you are not about following rules, like people coming to this country illegally. Hopefully people here follow the rules and asked senators to ask the question. >> please proceed.
▶ 1:11:14Sen. Moreno: >> make your appointment to do this on the floor. Two more minutes back on senator moreno's time.
▶ 1:11:22Sen. Moreno: Sorry that if
▶ 1:11:27Sen. Moreno: Sorry that you had to see that but there is a double standard of fairness, people making hundreds of millions of dollars in inherited wealth. Let me be crystal clear on a couple things. There is no scenario where I would increase the age for social security. People spend their days and offices are the one to think that.
▶ 1:11:46Sen. Moreno: People who work all day in manufacturing environments where their body says no, their mind may say yes, is why we would absolutely never see an increase in our social security retirement age. I want to make that clear. Number two, what would be the impact, Ms. glenn, of not having a cap at all social security wages?
▶ 1:12:09Ms. Glenn: That would solve about 60% of the shortfall.
▶ 1:12:15Sen. Moreno: I think that is something we should do. There should be no reason why we should have a cap on social security wages. If you make income like anybody else, you should have to pay social security like any other working american. That solves 60% of the problem. The next one would be means testing, meaning if you have a certain amount of assets or certain amount of income, you are disqualified from receiving social security because you are doing fine.
▶ 1:12:45Sen. Moreno: You don't need this extra supplement. To me, this seems like a program helping working americans retire with dignity. Would you agree?
▶ 1:12:53Ms. Glenn: Depending on the level of that means test, it would certainly have an effect.
▶ 1:12:58Sen. Moreno: Qualified multimillionaires, like my colleagues on the other side. The last one is why don't we look at a cost savings from eliminating waste, fraud, and abuse? He didn't answer my question on the second. Means testing. 60% of the problem is solved by not having an income cap. Let's say we set it at a million dollars a year on income, $10 million in assets.
▶ 1:13:26Ms. Glenn: I don't have that number of the top of my head. Let's say 20%.
▶ 1:13:29Sen. Moreno: 80% of the way there. How about waste, fraud, abuse?
▶ 1:13:35Ms. Glenn: As far as I'm aware, no significant effects in the trust fund from waste, fraud, abuse.
▶ 1:13:42Sen. Moreno: How about noncitizens receiving social security?
▶ 1:13:45Ms. Glenn: Noncitizens do not receive social security.
▶ 1:13:49Sen. Moreno: There is not a single noncitizens receiving social security? The law says we cannot speak.
▶ 1:13:55Ms. Glenn: I certainly can speak to the individuals.
▶ 1:13:59Sen. Moreno: Thank you, Mr. chairman.
▶ 1:14:02Sen. Johnson: Senator kaine.
▶ 1:14:07Sen. Kaine: Thank you for holding the hearings with senator merkley and senator graham. This is really important. It is easy to fall into partisan corners on a lot of issues including this one, but we have to be talking in an open and bipartisan way about solving the problem that you all have laid out in such very clear detail.
▶ 1:14:25Sen. Kaine: Just as in 1983 where the solution was with a bipartisan republican president, democratic house, republican senate majority, there is no solution if we cannot find a bipartisan solution. I'm a supporter of the cassidy proposal. I think he described an innovative solution that I think can be an ingredient. I don't think it is the full solution but it can be an ingredient to the solvency crisis.
▶ 1:14:50Sen. Kaine: He described the policy concept itself so I don't need to repeat it, but I want to describe I I think it should be part of a bipartisan solution. Let's be candid about the scale of the problem you have laid out, other colleagues have as well. Cbo estimate between 2027 and 2036 the gap between social security payroll taxes and benefits will total $4.2 trillion. That is a big number.
▶ 1:15:20Sen. Kaine: Just for comparison, when we passed the democratic build back better bill, that was $2 trillion of revenue increases, a lot of money. When the republican did the reconciliation bill, that was about $1.4 trillion in spending cuts, a lot of money. It was hard to get to those numbers, so to get to 4.2 to cover this deficit will be even harder.
▶ 1:15:45Sen. Kaine: That is why the proposal that senator cassidy has put forth and has my support, I believe can be a positive ingredient in the solution for three reasons. First, it can be scaled up or down. The amount of borrowing or revenue that we use to fund this investment fund, the proceeds of which go into backstop social security can be scaled up or down to help us solve the solvency gap. Likely in combination with other proposals that are on the table.
▶ 1:16:16Sen. Kaine: The cassidy proposal is in addition to not a substitute for any of the current elements of the way we fund the social security. That an addition element that produces additional revenue for earnings is very, very important. Second, the proposal can protect benefits. Senator moreno, senator johnson and others have said, we don't want to see that 19% benefit cut in 2033.
▶ 1:16:46Sen. Kaine: We have to figure out a way to avoid that. It does not condition the benefits on the investment returns in the fund. Its main focus is using that fund to ensure a smooth path forward for current and future beneficiaries. Finally, it builds on other successful examples. The national railway investment trust fund that senator cassidy described provides the supplemental revenue stream that helps enhance the railway worker payroll taxes.
▶ 1:17:17Sen. Kaine: Most nations fund their retirement systems the way that senator cassidy is proposing. Using an investment fund with their earnings from that fund going into backstop retirement. Most private retirement funds use this concept. States use this concept. In fact, if we were in 1935 right now, thinking about doing social security, we would do this as part of a retirement fund.
▶ 1:17:46Sen. Kaine: We would do an investment fund and use the earnings of it to backstop the difference between what comes in from payroll taxes and what goes out for beneficiaries. It is interesting, if we were designing it from scratch, I don't think any reasonable person would not include this as an element. There are legitimate concerns about it, how do you maintain the integrity of the fund? How do you make sure congress does not mess it up? This to gail of the borrowing can be bad. But these are not super bowl obstacles.
▶ 1:18:17Sen. Kaine: If they were, you wouldn't have state pension funds operating this way, other nations' pension funds operating this way, federal really operating this way. My hope is, to all of my colleagues, that we can address this soon. I guess the question I want to ask you -- you have given a good answer and I don't have much time. Waiting makes this harder, for the reasons you describe, but it makes it harder for another reason.
▶ 1:18:48Sen. Kaine: People get nervous. We are dealing with a critical component. It is the most significant component for most people's retirement. When they hear that it will be insolvent in five years, one year, they get nervous. We often praise what was done in 1983, but let's be honest, they waited until their backs were up against the wall. Benefits were going to be cut. They got real bipartisan when they had to.
▶ 1:19:18Sen. Kaine: It is just my hope, given everything you said, the challenges of delay, will get bipartisan before we have to. Let's not wait until our backs are against the wall to solve this. I think there are good elements of a solution on the table. I yield back.
▶ 1:19:34Sen. Johnson: I was talking about we should have invested all of the surplus in hard assets that had value in the federal government. We didn't do that. My concern about the cassidy proposal is he wants to borrow $1.5 trillion. If it is such a good idea and if we are willing to take the risk on investment, we should have done it a long time ago, why not take the entire trust fund to do that?
▶ 1:20:03Sen. Johnson: More money there with a chance of greater return. The interest rate we are paying to ourselves as opposed to a real return. Why wouldn't we take the entire trust fund, rather than borrow $1.5 trillion, take the trust on investment?
▶ 1:20:19Sen. Kaine: To my colleague, I haven't really thought that through, but what I like about the cassidy proposal, it's an ingredient that you add to an existing system. I don't view the existing system as a legal ponzi scheme. I view it differently than you do. I view it as us workers, we are chipping in out of our pay to help the retirement of the person who taught our sunday school class.
▶ 1:20:45Sen. Johnson: I understand that is a pay-as-you-go system. The money wasn't invested. My concern is we borrow $1.5 trillion. There is a cost of doing that. If you have a pot of money there, you wouldn't have to borrow. If you think the rate of return will be greater.
▶ 1:21:04Sen. Kaine: The $1.5 trillion, as I pointed out, is scalable, can go up or down, or there can be other revenues to put into reduce the borrowing.
▶ 1:21:14Sen. Johnson: Assumption is a higher rate of return. Those borrowing costs are going to go up.
▶ 1:21:21Sen. Kaine: And the railway retirement system shows that rate of return is something that's possible.
▶ 1:21:27Sen. Johnson: Over the years, past results are not a reflection of returns? I appreciate you engaging with me. Senator scott.
▶ 1:21:37Sen. Scott: Thanks for holding this hearing. I am from florida so we have a lot of people that depend on medicare, a lot of people depend on social security. Making sure these are fully funded is really important to a lot of people in my state. What's been frustrating, I have been here seven years, we had about $18 trillion worth of debt when I got here, now $39 trillion, interest expenses over $1 trillion a year.
▶ 1:22:07Sen. Scott: $1.9 trillion deficits. It doesn't look like any of that will change. If I was a family, I would say I am hurting my ability to prepare for anything, any emergency including retirement or anything like that. Senator kaine is right, most of this will be resolved. A few years down the road, pretty big crisis. I would focus on it now.
▶ 1:22:35Sen. Scott: One thing I've never understood, why we actually have a penalty for people who want to keep working. I have introduced the senior citizens freedom to work act, repeals the earnings test and removes outdated punishments to americans in their 60's who want to keep working. We ought to try to keep working. When they started this, it was put in place when they wanted people to retire.
▶ 1:23:00Sen. Scott: Now we want people to keep working, we want labor participation to go up because we don't have the number of workers for the retirees that we do now. Hopefully everyone has good ideas but we had to figure out how to fix this. Dr. dahl, the nation's budget continues to spiral out of control led by years of inflation causing government overspending.
▶ 1:23:22Sen. Scott: Can you explain how high deficit spending coupled with high interest payments make it hard to solve future emergencies like the potential insolvency of social security and medicare?
▶ 1:23:32Dr. Dahl: Net spending increases over time for a given amount of total spending, given amount of revenue, then that constrains the ability of other funds. Lawmakers may feel constrained in their options available to them to address any issues that may arise.
▶ 1:23:50Sen. Scott: One of the proposals out there is to increase taxes on labor income to try to extend social security solvency. Would a tax increase on labor actually make the state of social security better or worse by this incentivizing work?
▶ 1:24:05Dr. Dahl: A tax increase on labor income would this by work. How it works but differ across different people, probably have effects that we would need to consider on how people take their compensation and how compensation is structured.
▶ 1:24:21Sen. Scott: Ms. glenn, it's important we remove barriers to work, support active participation in the labor market for older americans who want to work. Can you talk about how an increase in labor market participation supports the health and longevity of programs like social security?
▶ 1:24:38Ms. Glenn: Any increase in labor participation would translate directly into increased employment which is a good thing for the trust funds. Increased employment, increased earnings means more revenue into the trust funds.
▶ 1:24:53Sen. Scott: I think we have all talked about the amount of fraud there is in different programs. Seems like every federal program is full of people abusing the program, full of fraud. I don't know if any of you address this, but how does waste affect these trust funds and their solvency?
▶ 1:25:17Mr. Huston: The most recent report which I'm aware of was an oig report in august 2024. Their calculations show from fy 15 to 22, she billeted of $70 billion in improper payments. This can be underpayments and overpayments. Most of which were overpayments in this sense. That $70 billion total equated to 0.8% of total payments were improper.
▶ 1:25:47Mr. Huston: That would generally put the trust funds in better financial position, but as my fellow panelists said earlier, how much that would move the needle is a little suspect.
▶ 1:25:56Sen. Scott: As senator moreno said, if you are telling people that worked thereabouts off, in a hard job, raising the retirement age would be pretty devastating to them. A lot of people in those jobs, their life expectancy is lower, so I think would be very difficult for people like that. Thank you.
▶ 1:26:23Sen. Johnson: Senator lujan, who voted for the shutdown fairness act. Appreciate that.
▶ 1:26:32Sen. Lujan: You should pay everyone, appreciate that. To everyone here today, thank you for coming to this important discussion. To our chair and ranking member for having this hearing today. Coming from new mexico, like many states across the country, social security is a critical lifeline for seniors, people, brothers and sisters with disability, survivors.
▶ 1:27:01Sen. Lujan: Hard-working americans there to spend their lives in dignity with financial security. That was the promise once upon a time. I just don't know that we in the united states prioritize our seniors the way that we should, or that we emphasize the importance of living with dignity. According to the U.S. census, 23 point 5 million people were lifted out of poverty in 2024 due to social security, including 133,000 new mexicans.
▶ 1:27:33Sen. Lujan: This administration has made life a little tougher on beneficiaries. They decided to shut her field offices, reassign staff, and over personally identifiable information to doge. My question to the panelists come into these changes, shuddering field offices, reassigning staff, do these changes negatively impact social security beneficiaries? Dr. dahl.
▶ 1:28:02Dr. Dahl: Not really cbo's purview but my expectation would be yes.
▶ 1:28:07Ms. Glenn: Similarly, work done in the field offices is not really my purview, but it may be affecting individuals.
▶ 1:28:16Mr. Huston: I would suspect that since there would be if fewer number of employees needed to accomplish the same level of work.
▶ 1:28:25Sen. Lujan: Thank you all for being honest and logical. Turning to the issue of solvency in social security trust fund, Ms. glenn, yes or no, did you state in an august 25 letter to a ranking member wyden that the republican one beautiful bill act would accelerate social security insolvency?
▶ 1:28:45Ms. Glenn: Yes.
▶ 1:28:47Sen. Lujan: To what extent does is move up the insolvency date of the trust fund?
▶ 1:28:52Ms. Glenn: It moves it up by about six months.
▶ 1:28:56Sen. Lujan: If congress were to address social security insolvency, how much would that cost as a percent of the gross domestic product?
▶ 1:29:03Ms. Glenn: I know it's about 0.16 percent of taxable payrolls, so slightly smaller gdp.
▶ 1:29:11Sen. Lujan: In the room my staff gave me was 1.3% of gdp. Let's just put it into that range. I will stick to 0.6. Do you know how much the republican big beautiful bill, which went after health care, food assistance, increase the federal deficit as a percent of gdp?
▶ 1:29:31Ms. Glenn: I do not know that. My analysis was focused on the income tax effects of the bill. Cbo may have a better sense of that.
▶ 1:29:41Dr. Dahl: I'm sorry, I don't have an estimate in front of me.
▶ 1:29:45Sen. Lujan: The analysis I was given was the same that it would cost on the social security side, 1.3 percent. The way that I look at it, logically, if my republican colleagues' big beautiful bill spent money to give tax breaks to people that do very well in the country, and not to adjust social security insolvency, 1.3%, it is kind of a wash.
▶ 1:30:12Sen. Lujan: Republicans through the big beautiful bill gave tax breaks to people that I would argue didn't need them in america, folks making more money than most of us will ever see in a lifetime like elon, jeff, and others. >> jeff bezos, let me clarify.
▶ 1:30:32Sen. Lujan: Appreciate that, senator merkley. Just to be clear. With congressional action, -- without congressional action, the social security trust fund is six years away from insolvency. Is that correct?
▶ 1:30:49Ms. Glenn: That's about right.
▶ 1:30:52Sen. Lujan: The republican big beautiful bill exacerbated this crisis, depleting the social security trust fund, putting millions of social security recipients and risk. Dr. dahl, if congress maintains the status quo, how will social security insolvency impact people across the nation who rely on social security to pay their bills?
▶ 1:31:13Ms. Glenn: Any cut in benefits -- benefits would be restricted to the resources available to the program so that we need to be a reduction in benefits if no changes were made. How does benefit changes would occur is unknown at the time. Any change in benefits would clearly directly affect those who had their benefits cut. For those at the bottom of the earnings distribution, benefit cuts would likely be more harmful on a percentage basis than if they were to cut for those at the top.
▶ 1:31:42Sen. Lujan: The analysis I was given suggest beneficiaries would see an average cut of 23%.
▶ 1:31:48Dr. Dahl: That's right.
▶ 1:31:50Sen. Lujan: How would cuts to social security benefits disproportionately impact seniors who rely on this program as their primary source of retirement income?
▶ 1:31:59Dr. Dahl: It would be sensitive. Total benefits we need to be cut by about a quarter. If some of that total reduction was ascribed to those at the lower end of the distribution, that relied on social security for the entirety of their income, that would be substantive.
▶ 1:32:18Sen. Lujan: My republican colleagues, everyone is talking about a budget reconciliation bill again. If you care about social security, fix it. Republicans say they have the votes to pass a budget reconciliation out of the house and senate. We will see if they can, because these are all about choices. The first time they missed it. Let's see if the second time they put some money behind social security.
▶ 1:32:43Sen. Johnson: Let's clarify why did the one big beautiful bill impact social security, specifically one in that bill?
▶ 1:32:54Ms. Glenn: It was directly related to the income tax provisions affecting seniors. Because they were paying less -- more money in their pockets, less of the taxation of social security benefits income flowed in as revenue to the trust funds.
▶ 1:33:14Sen. Johnson: What was termed as no tax on social security. Really, we increased the standard deduction for seniors. So the impact was, we actually made it easier for seniors to live because we decreased seniors' income taxes. I was not in favor of it, that provision. I think we've done an awful lot of transferring from young to old. We held a hearing in finance.
▶ 1:33:46Sen. Johnson: For every dollar spent on youth, we spend six dollars on seniors. There has been an enormous shift in terms of people in poverty over the past many decades. Seniors in poverty versus children, now reversed. We need to get the facts out there. Senator whitehouse.
▶ 1:34:08Sen. Whitehouse: Thanks very much. There are a few ways to try to resolve social security's fiscal dilemma. One would be to cut benefits or reduce eligibility, so less payment goes out, is that correct? >> that's correct.
▶ 1:34:30Sen. Whitehouse: And it seems that in the episode I described in my earlier comments, republicans and democrats agreed with president biden during his state of the union address that that was off the table.
▶ 1:34:51Sen. Whitehouse: So if cutting benefits and reducing eligibility is off the table, that leaves other ways of solving the problem. One would be to borrow a lot of money and use that to shore up social security. Anyone have an evaluation of how much money that would take, what it would mean for our national debt?
▶ 1:35:17Dr. Dahl: In cbo's projections, to close the shortfall through 2036, over the 10-year budget horizon, $2.7 trillion. By statute, our baseline incorporates basically federal borrowing to pay benefits as scheduled. You would end up back in our baseline, so debt to gdp in 2036 would be about 120%.
▶ 1:35:46Sen. Whitehouse: Not great. Any of you recommend that strategy for solving the social security problem? No.
▶ 1:35:54Mr. Huston: Crs will not make any recommendations.
▶ 1:35:57Ms. Glenn: No recommendation from me.
▶ 1:36:00Dr. Dahl: Similarly, no recommendation from me.
▶ 1:36:04Sen. Whitehouse: That kind of leaves us with revenue, doesn't it?
▶ 1:36:09Mr. Huston: If I accept the premise and you are taking benefit reductions.
▶ 1:36:14Sen. Whitehouse: That is kind of it. This is matt at this point. So we need to start looking at revenue. Do any of you believe that the tax code is so fair and honest that there is no room for congress to generate revenue without being unfair?
▶ 1:36:45Mr. Huston: I don't think I can comment one way or the other on the tax code, whether it is fair. That is for congress.
▶ 1:36:53Sen. Whitehouse: Ms. glenn, Dr. dahl?
▶ 1:36:56Dr. Dahl: I agree with that sentiment.
▶ 1:36:59Sen. Whitehouse: You don't want to talk about it, ok. Well, I think the tax code is corrupt, I think the tax code is rotten. I think the tax code has been torqued by big corporations and billionaires for years to give them favored tax status over regular working americans who don't have the same lobbyists and influence access to congress that they do.
▶ 1:37:28Sen. Whitehouse: So in my view, getting the revenue necessary to restore social security actually confers a benefit if we get it from the tax code in ways that make the tax code less corrupt, less unfair, and less the product of improper influence by wealthy people who could well afford to pay their taxes but prefer to
▶ 1:38:00Sen. Whitehouse: Take the excess money they get from not paying taxes at the rate of a nurse or schoolteacher, and deploy that in congress to be able to push their tax rates down even further. One of the great human examples of selfishness and greed. So we have a chance to actually cure two problems at once, two birds with one stone.
▶ 1:38:25Sen. Whitehouse: Social security for regular americans on sound footing, and fix some of the rot in our corrupted tax code. I really look forward to working to get this done because I think it would be a double big win for the american people if we do this. Thanks very much, chairman.
▶ 1:38:43Sen. Johnson: Here is bipartisan agreement. I think our tax code is awful. I would love to work with you to supply and rationalize. First thing we have to do is supply and rationalize. Grotesquely complex, anytime you want to start working on simplifying and rationalizing, I'm happy to. Follow up with Dr. dahl come in the cbo's projection come you included $2.7 trillion transferred from general revenue to the social security benefits.
▶ 1:39:15Sen. Johnson: That is within your $24.4 trillion projection of deficits over the next 10 years. 24.4 trillion dollars. Social security is a little more than 10% of that massive shortfall which also has to be addressed. Senator padilla.
▶ 1:39:33Sen. Padilla: Thank you, Mr. chairman. Appreciate -- acting chairman, ranking member, discussion on this. Several of my colleagues have recognized the context for this conversation, a projected six years until insolvency unless there is some sort of congressional action.
▶ 1:39:57Sen. Padilla: Absent congressional action, the forces that we have acknowledged here is the impact of an aging population and a shrinking workforce that threatens social security' s solvency. I'm sure there are other factors but that is the key here.
▶ 1:40:19Sen. Padilla: I just feel a duty, we cannot talk about the future of the united states labor market without talking about, yes, birthrates, but also about immigrants and their contributions to the workforce to our economy and to social security. Mr. chairman, I want to enter into the record a report from 2024 from the immigration policy institute that shows that without immigrants, and U.S.
▶ 1:40:51Sen. Padilla: Born children, citizens here as well, the crime working age population would have shrunk by more than 8 million people between 2000 and 2025.
▶ 1:41:01Sen. Johnson: Without objection.
▶ 1:41:03Sen. Padilla: Thank you. It also shows immigrants arriving in the united states are on average younger than the nativeborn population and have a higher rate of labor force participation. And they pay into a system that many will never become eligible to benefit from. I think that is important document to have as part of this record in the conversation. Question for Ms. glenn.
▶ 1:41:32Sen. Padilla: Social security actuaries, and their estimate of the impact of immigration over 25, 50, even 75 years, have found that more immigration always correlates with a decrease in the trust fund deficits, and vice versa. Would you care to comment any further?
▶ 1:41:49Ms. Glenn: That is absolutely correct. All the factors you mention, immigrants paying into the system, many of them will never receive benefits, and they also have U.S.-born children.
▶ 1:42:00Sen. Padilla: Ms. dahl, the 2025 search report makes similar findings. Care to at any comment?
▶ 1:42:07Dr. Dahl: In that report you are referring to, we looked at the effect on what we were calling the immigration search, increasing immigration that you referenced earlier on the federal budget, particularly in terms of social security. Immigrants come in, more likely to be of working age, many work, pay payroll taxes. That's a benefit to the program.
▶ 1:42:32Dr. Dahl: For a variety of reasons, many will not ultimately claim, certainly will not be eligible to claim, will not have the coverage within the 10-year window.
▶ 1:42:41Sen. Padilla: Is their impact to the solvency of social security program being felt by this administration's mass deportation agenda? I would not even say all immigrants are detained and deported, but let's say half.
▶ 1:43:05Sen. Padilla: We have cases in the part that it is not just undocumented immigrants that are being detained or deported, but legal immigrants with work permits that are being deported, at a minimum, detain with these arbitrary goals not just for daily detentions and arrests, but the building out of significant detention center capacity across the country. Does that help or hurt our social security solvency?
▶ 1:43:31Ms. Glenn: It would hurt. We do some sensitivity analysis at the trustee board every year, speaking to the effect more or less of immigration.
▶ 1:43:42Sen. Padilla: Thank you. One other issue I wanted to raise or today's hearing, not a question for you all because I assume that you are not in the position to comment on this, but is important to know, colleagues, similar to the irs' legally dubious data sharing agreement, the administration's abuse of social security data also threatens americans privacy and also risks different franchising eligible voters.
▶ 1:44:14Sen. Padilla: We know, thanks to a lawsuit that reveal the details of this previously undisclosed data sharing agreement, that the trump administration gave dhs access to sensitive personal data from the social security administration nearly every united states resident including full name, social security numbers, addresses, birth dates, and more.
▶ 1:44:44Sen. Padilla: Dhs is not encouraging states to use this data to reverify the citizenship of voters, something that we were talking about on the floor as part of the safe act conversation. This agreement raises significant legal and policy concerns but unsurprisingly contains alarmingly few safeguards to ensure accuracy and privacy. Why is that important? Multiple audits and analyses have shown the social security administration's citizenship information is outdated and incomplete.
▶ 1:45:16Sen. Padilla: These records have never been fully up-to-date. Dhs acknowledged using data to validate citizens status may produce inaccurate results. It is obvious that relying on social security citizenship data for purposes of election administration will invariably result in errors, potentially disenfranchising eligible united states citizens. Thank you, Mr. chairman.
▶ 1:45:44Sen. Johnson: Senator murray.
▶ 1:45:49A Sen. Murphy: Thank you, Mr. chairman. We absolutely need to talk about how we protect social security, but in addition to the long-term solvency that people are focusing on here, I don't think we can ignore the immediate threat to social security, and that really is president trump. Seniors right now today are having a very hard time getting their benefits. Why? Social security has pushed out without any kind of plan 7700 workers since trump took office.
▶ 1:46:19A Sen. Murphy: We now have just one field office representative for 4000 social security beneficiaries, and there are at least 400 field offices that lost more than 25% of their staff. That is just the beginning. The trump administration wants to cut field office visits and have. That would mean over 15 million people who are able to go to a desk and speak to a person last year would be out of luck this year.
▶ 1:46:48A Sen. Murphy: This is really a slow moving train wreck. Last summer, the social security administration moved 1000 field office employees to the phone lines. At the end of the year, it moved 500 more. In january, it moved nearly 800 more employees from the processing centers and the field office support and workload support to phone duty, often with very little training.
▶ 1:47:12A Sen. Murphy: That is trying to fix one problem they created, worsening telephone service to him by creating new problems and backlogs everywhere. This is really hurting seniors who can no longer get an ssa meeting close to home when they need it, it is hurting people with disabilities as people who could be processing their claims are now answering phones, and it is burning up the hard-working staff trump has not pushed out. But this is all the tip of the iceberg when it comes to trump's social security sabotage.
▶ 1:47:44A Sen. Murphy: There was the attempt to punish a state by revoking contracts to report person debts, and there was a proposal to end many of the phone services, and idea that was quickly reversed because it was so bad. Then there was the doge purge which wrongly kicked seniors off of social security including a constituent of mine they indirectly -- incorrectly declared as dead. That is just the sabotage in the light of day.
▶ 1:48:11A Sen. Murphy: But thanks to a whistleblower report and ongoing internal investigation, so we know there was more damage happening in the shadows. Like when trump left elon and doge muck around with highly sensitive social security data that is private, personally identifiable information on hundreds of millions of americans.
▶ 1:48:32A Sen. Murphy: We are talking about potentially unprecedented data breaches here, blatantly unqualified people getting practically unfettered access, even after court orders, private data copied onto unauthorized third-party servers, or according to reports, even copied onto a thumb drive. Believe me, I want everyone to know, I'm watching this investigation closely and demanding accountability.
▶ 1:48:57A Sen. Murphy: If we want to protect social security for decades to come, yes, when you talk about solvency, but we also need to talk about a president who is gutting the social security administration right now, today, and callously putting our seniors benefits and their personal data at risk. With that, Dr. dahl, I have a few questions, particularly about who is and who isn't paying their fair share into social security. I want to make sure I have a few numbers right.
▶ 1:49:29A Sen. Murphy: Is it right that those making under $184,500, their effective tax rate is 24%?
▶ 1:49:37Dr. Dahl: That's right, the statutory rate is 6.2%. If the employee pays basically the employer cost is passed on to the employee, so the employee faces a rate of 12 .4%.
▶ 1:49:51Sen. Murray: What is the effective payroll tax for someone making a million dollars a year?
▶ 1:49:57Dr. Dahl: They would pay the 12.4 percent on that first 185 thousand dollars roughly and then would not pay additional tax on the labor and income above that amount. That would work out to about 2.2%.
▶ 1:50:12Sen. Murray: Ok, so 12.4 percent for somebody under $184,500. A millionaire would be about 2.2. What if you are a billionaire, like trump or musk? Your social security tax would be?
▶ 1:50:28Dr. Dahl: Very much smaller.
▶ 1:50:31Sen. Murray: 0.0002. That doesn't make sense to me. When the richest people in the country have the smallest effective tax rate, that doesn't seem like a very fair system, especially when we are now six years away from retired workers facing this 24% cut in their social security benefits. I hope we all understand that and focus on that. Thank you, Mr. chair.
▶ 1:50:57Sen. Johnson: Before I turned to senator merkley, the reason it was set up that way, it was for savings for a defined benefit. Once you have saved that amount, your benefit doesn't rise. That was the original intent of social security, was not set up as a welfare system where everyone's taxes pay for benefits for other people. It was a for savings plan.
▶ 1:51:24Sen. Murray: I don't think it is a welfare system. It's a system to make sure that we have social security for people.
▶ 1:51:32Sen. Johnson: If you want on them to taxes on income, it's no longer a for savings program, it is something else. We have to be honest about what we are talking about. Senator merkley.
▶ 1:51:43Sen. Merkley: I have a little different view. Over time, it's had elements of both an insurance program and elements of a savings program. That been part of the challenge of analyzing social security, deciding how we modify it, one element one really emphasizes. I want to go back to the idea of borrowing and investing. Just from my perspective, a cautionary note.
▶ 1:52:15Sen. Merkley: 1.5 trillion, if you borrowed at 4% because you forgo the 4% earnings roughly that the cbo estimate, about 4% going forward, and you get a return of 8%, you have a net improvement of 4%. 4% on $1.5 trillion would be $60 billion.
▶ 1:52:37Sen. Merkley: $60 billion is only a fraction of the roughly $500 billion deficit we will have in 2033, even smaller component of the deficits we will have going forward by 2036. Over 600 billion dollars in deficits estimated. We are talking about that plan, even under a positive scenario, addressing only 1/10 of the shortfall. But then there is the risk factor.
▶ 1:53:06Sen. Merkley: The risk factor is significant, and that is, if we have a 10-year period where the stock market doesn't go up, and we had that from 2001 to 2011, basically we are talking about zero earnings, and because 4% compounded is 8% over a 10-year period, and therefore we are forgoing 40% income on that trillion and a half and getting zero income over the stock
▶ 1:53:36Sen. Merkley: Investment. If you have a complete collapse of the stock market, and many analysts will now note the price per share compared to earnings is at a historic high, and there is a lot of fretting about whether we are at the high point of a massive bubble.
▶ 1:53:56Sen. Merkley: If we gamble american's social security program and we end up, in fact, seeing the top of the bubble burst, then we are really in the hole. I would just ask anyone of you, but I will turn to Dr.
▶ 1:54:16Sen. Merkley: Dahl first, is my math right on the 4% net gain on 1.5 trillion dollars, $60 billion per year?
▶ 1:54:27Dr. Dahl: That sounds about right, yes.
▶ 1:54:31Sen. Murray: $60 billion is only a 10th of what our projected deficit would be in 2030 six.
▶ 1:54:36Dr. Dahl: That's right.
▶ 1:54:38Sen. Merkley: Therefore, even that idea would be a contributor perhaps to a broader plan, but it would take many other elements put together in a package if we are going to address the entire deficit.
▶ 1:54:51Dr. Dahl: That would be correct.
▶ 1:54:54Sen. Merkley: If you put the money into the stock market, you are accepting a higher risk profile. We never know whether we are going to be at the bottom point of an historic search or the top point of a bubble, but if we are at the top point of a bubble, we can end up in a worse position than if we had simply taken the 4% return on putting it into bonds.
▶ 1:55:18Dr. Dahl: That's also correct.
▶ 1:55:21Sen. Merkley: If, in fact, we borrow an additional amount, that generally drives up to some degree the interest rate you have to pay to borrow, not just on the margin rate, marginal around that you borrowed but the entire amount you borrow as a nation.
▶ 1:55:42Sen. Merkley: Also if you have maxed out what americans are willing to essentially lend to the government, we are talking about borrowing more from foreign countries.
▶ 1:55:52Dr. Dahl: That's correct.
▶ 1:55:53Sen. Merkley: I will try this back over to senator johnson. I just want to conclude with, it will really take bipartisan work. We come to this conversation with different frameworks for what social security is, insurance plan, savings plan, different concepts of fairness. We will have to really work to merge our different frameworks into a solution. The moment demands it.
▶ 1:56:23Sen. Merkley: We succeeded in doing so because we needed fix this. Thank you, Mr. chairman.
▶ 1:56:28Sen. Johnson: First of all, we have to agree on the facts, all the facts. I agree with your analysis. There is no guarantee to get an 8% return. Most americans look at the current stock market and say are we at a low point or high point? Probably closer to a bubble than anything else. The investment and some of them has value for the government like stocks, that would have to be over a long period of time.
▶ 1:56:56Sen. Johnson: You cannot expect to make those returns in a short period of time. That would be folly. I want a couple of questions. Again, these are more facts. It is called the money's worth ratios. It seemed like a one earner couple, they really come out ahead of anybody else, single male, single female, two earner couple.
▶ 1:57:26Ms. Glenn: That's right. If the spouse has not been working over their career, they get a benefit as well.
▶ 1:57:32Sen. Johnson: They are not paying tax. Here is a low earner, gets $3.86 for every dollar they put in. That is not a for savings plan, that is something else. It's a savings plan plus. I know people don't want to call it welfare, I don't either, but it is something other than a for savings plan. A low income earner gets $2.70 for every dollar. People say that's my money.
▶ 1:58:02Sen. Johnson: A dollar of it is, but in that case, $1.70 is somebody else's money. A medium earner gets $1.88 for every dollar. A high income earner gets $1.55 for every dollar. If you are a single male and you are a high income, you get $.83 for every dollar.
▶ 1:58:24Sen. Johnson: It is all over the board, but the question I have for you, because part of the solution is, if not take off the cap come increase the cap. The impact of that would be, but now the top marginal tax rate is 37%, plus you have medicare which has no cap.
▶ 1:58:48Sen. Johnson: I will use the 37% and then I will use the entire payroll tax which is 15.3%, correct, total amount. If we take the cap off or increase it, we take the 37 for seven top margin rate and increase that to 52.3%. That is a correct analysis, correct? The 60% of the problem solved, what was that? Eliminating the cap entirely?
▶ 1:59:18Sen. Johnson: >> that's right.
▶ 1:59:20Sen. Johnson: In your analysis, did you take into effect what would be the impact from work, economic growth? I would think if you are a high productive individual, you want to make money, all of a sudden it having 37% you are facing 52.3.
▶ 1:59:49Sen. Johnson: If I would have to pay more than $.50 on a dollar for every dollar I earn, I'm not interested in earning that much money.
▶ 1:59:55Ms. Glenn: You make a good point, that is certainly relevant to individuals. We try to take those sorts of effects into account.
▶ 2:00:03Sen. Johnson: But impossible to predict that. Laying out those facts, my point, we have to first start on agreeing on the facts. I think we have come a long way today. Excellent testimony. Nothing is disputable about what you talked about. We have an enormous problem. The sooner you address it, the better off, but I think we have waited too long. We have a big mess on our hands. Talking to senator merkley, I agree, we need a working group.
▶ 2:00:35Sen. Johnson: We can do this I guess behind closed doors, but I would like to see the type of exchange I had with yourself, senator kaine, let's flush this out. Let's get the facts right, that we can start arguing about whether different components are for a solution. It needs to be multifaceted. Excellent testimony. Indisputable facts. We have a big problem on our hands. Thank you to the witnesses were appearing before the committee today. The hearing record is open until noon tomorrow. The healing is adjourned.