This week on Facing the Future we begin with Social Security’s annual cost of living increase, announced by the Social Security Administration (SSA) on October 10. Then we looked at seven key findings from the 1994 bipartisan Kerrey-Danforth commission that are sadly still valid and still in need of solutions. Concord Coalition chief economist Steve Robinson, a former senior advisor at the SSA, joined me for the discussion.
Social Security recipients receive an annual cost of living adjustment (COLA). In 2025, that adjustment will be a 2.5 percent increase. Robinson explained that, “the average beneficiary receives a monthly check of about $1,800. So if you increase that by 2.5 percent, that’s about a $45 per month increase, which doesn’t sound like a lot but when you consider there are tens of millions of beneficiaries we’re spending about $120 billion a month on Social Security and 2.5 percent of that is $3 billion a month, or roughly $36 billion a year. So essentially, last week’s announcement means that next year we’ll be spending an extra $36 billion on Social Security.”
When Social Security was enacted, there were no COLAs. Instead, lawmakers would raise benefits on an ad hoc basis. “Oddly enough,” Robinson quipped, “they tended to vote to increase benefits in even-numbered years, which corresponded with election years. Congress would periodically get into a bidding war, depending on who controlled the Congress and who controlled the White House. They would argue as to how big of an increase they could afford, and they would sometimes go overboard and offer more than they really probably should have. The idea behind the COLA was that we would stop Congress from trying to outbid the White House and offering higher benefits by putting it on autopilot.”
While it might seem impossible in today’s partisan environment, back in 1994 the bipartisan Kerrey-Danforth commission on entitlement and tax reform appointed by President Bill Clinton actually agreed on seven findings that defined the main fiscal problems for policymakers to solve. They did not, however, agree on specific solutions. And that is pretty much where we’ve remained ever since. Robinson and I walked through the seven findings, which focused on healthcare costs, demographics, national savings, and Social Security solvency.
The first finding of the Kerrey-Danforth Commission is even more urgent than it was in 1994 because there has been so little action to find sustainable solutions. That finding stated: “To ensure that today’s debt and spending commitments do not unfairly burden America’s children, the government must act now. A bipartisan coalition of Congress, led by the President, must resolve the long-term imbalance between the government’s entitlement promises and the funds it will have available to pay for them.”
Hear more on Facing the Future. Concord Coalition Executive Director Bob Bixby hosts the program each week on WKXL in Concord N.H., and it is also available via podcast. Join us as The Concord Coalition team discusses issues relating to national fiscal policy with budget experts, industry leaders, and elected officials. Past broadcasts are available here. You can subscribe to the podcast on Spotify, Pandora, iTunes, Google Podcasts, Stitcher, or with an RSS feed. Follow Facing the Future on Facebook, and watch videos from past episodes on The Concord Coalition YouTube channel.
