Personal Finance
House just voted yes to increase Social Security for some beneficiaries
A bipartisan bill to change Social Security benefit rules for pensioners passed in the House of Representatives on Tuesday, with 327 lawmakers voting to support the measure.
Now, the proposal heads to the Senate, where the chamber’s version of the bill has 62 co-sponsors, “surpassing the majority needed to pass the bill on the U.S. Senate floor and send it to the president’s desk to be signed into law,” Reps. Abigail Spanberger, D-Virginia, and Garret Graves, R-Louisiana, co-leaders of the bill, said in a joint statement.
The proposal — called the Social Security Fairness Act — would repeal rules that reduce Social Security benefits for individuals who receive pension benefits from state or local governments.
It would eliminate the windfall elimination provision, or WEP, that reduces Social Security benefits for individuals who worked in jobs where they did not pay Social Security payroll taxes and now receive pension or disability benefits from those employers. About 3% of all Social Security beneficiaries — about 2.1 million people — were affected by the WEP as of December 2023, according to the Congressional Research Service.
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The bill would also eliminate the government pension offset, or GPO, which reduces Social Security benefits for spouses, widows and widowers who also receive pension checks. As of last December, about 1% of all Social Security beneficiaries — or 745,679 individuals — were affected by the GPO, according to the Congressional Research Service.
These rules, which have been in effect for decades, reduce the incomes of certain retired police officers, teachers, firefighters and other public servants, Graves said during a Tuesday speech on the House floor.
“This has been 40 years of treating people differently, discriminating against a certain set of workers,” Graves said.
“They’re not people that are overpaid; they’re not people that are underworked,” he said.
Supporters call bill a ‘step in the right direction’
The National Committee to Preserve Social Security and Medicare said the House vote on the Social Security Fairness Act is a “step in the right direction” and a “bipartisan victory for public sector employees and their families.”
“We have long advocated for the repeal of the WEP and GPO provisions, though we would have preferred that Congress take up the more comprehensive improvements in Rep. John Larson’s Social Security 2100 Act,” Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare, said in a statement.
Larson’s proposal, which has 188 House co-sponsors, would also repeal the WEP and GPO, while also implementing other temporary benefit increases. To help pay for those changes, it would require people with more than $400,000 in income to pay more Social Security payroll taxes.
On Tuesday, Larson voted against the Social Security Fairness Act, as well as another bill, the Equal Treatment of Public Servants Act. The latter bill would use a new formula for Social Security retirement and disability benefits for pensioners rather than eliminate the WEP. It would not change the GPO.
The bill, which was proposed by Rep. Jodey Arrington, R-Texas, failed when it was brought up for a vote.
“I could not vote for the bills on the floor tonight because they are not paid for and therefore put Americans’ hard-earned benefits at risk,” Larson said in a statement. “It would hurt most deeply the five million of our fellow Americans who receive below poverty checks, and almost half of all Social Security recipients who rely on their earned benefits for the majority of their income.”
Critics say the bill will weaken Social Security
The Social Security Fairness Act would add an estimated $196 billion to deficits over the next decade, the Congressional Budget Office has estimated. It would also move Social Security’s trust fund depletion dates closer by an estimated six months, according to the Committee for a Responsible Federal Budget.
“The long-term solvency of Social Security is an issue that Congress must address,” Spanberger said on the House floor on Tuesday.
“But that is a separate issue from allowing Americans who did their part, who contributed their earnings, for them to retire with dignity,” she said.
However, critics say Social Security’s funding woes should be a priority for Congress now. The program’s actuaries project the trust fund used to pay retirement benefits may be depleted in 2033, at which point 79% of benefits will be payable.
“This is not the right policy,” said Romina Boccia, director of budget and entitlement policy at the Cato Institute. “It’s what special interests were pushing, and politicians are responsive to their demands.”
Though the alternative bill proposed by Arrington would not address the GPO, it would provide a “fairer formula” for the WEP, Boccia said. However, broader changes are needed to shore up the program’s finances.
“We should reform Social Security so that it provides basic income security to the most vulnerable Americans in old age without adding to the debt or tax burden that younger workers face,” Boccia said.
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The U.S. job market has undergone a dramatic transformation in recent years, from one characterized by record levels of employee turnover to one in which there is little churn.
In short, the “great resignation” of 2021 and 2022 has morphed into what some labor economists call the “great stay,” a job market with low levels of hiring, quits and layoffs.
“The turbulence of the pandemic-era labor market is increasingly in the rearview mirror,” said Julia Pollak, chief economist at ZipRecruiter.
How the job market has changed
Employers clamored to hire as the U.S. economy reopened from its Covid-fueled lull. Job openings rose to historic levels, unemployment fell to its lowest point since the late 1960s and wages grew at their fastest pace in decades as businesses competed for talent.
More than 50 million workers quit their jobs in 2022, breaking a record set just the year prior, attracted by better and ample job opportunities elsewhere.
The labor market has gradually cooled, however.
The quits rate is “below what it was prior to the start of the pandemic, after reaching a feverish peak in 2022,” said Allison Shrivastava, an economist at job site Indeed.
Hiring has slowed to its lowest rate since 2013, excluding the early days of the pandemic. Yet, layoffs are still low by historical standards.
This dynamic — more people stay in their jobs amid low layoffs and unemployment — “point to employers holding on to their workforce along with more employees staying in their current jobs,” Shrivastava said.
Big causes for the great stay
Employer “scarring” is a primary driver of the so-called great stay, ZipRecruiter’s Pollak said.
Businesses are loath to lay off workers now after struggling to hire and retain workers just a few years ago.
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But job openings have declined, reducing the number of quits, which is a barometer of worker confidence in being able to find a new gig. This dynamic is largely due to another factor: the U.S. Federal Reserve’s campaign between early 2022 and mid-2023 to raise interest rates to tame high inflation, Pollak said.
It became more expensive to borrow, leading businesses to pull back on expansion and new ventures, and in turn, reduce hiring, she said. The Fed started cutting interest rates in September, but signaled after its latest rate cut on Wednesday that it would move slower to reduce rates than previously forecast.
Overall, dynamics suggest a “stabilizing labor market, though one still shaped by the lessons of recent shocks,” said Indeed’s Shrivastava.
The great stay means Americans with a job have “unprecedented job security,” Pollak said.
But those looking for a job — including new college graduates and workers dissatisfied with their current role — will likely have a tough time finding a gig, Pollak said. She recommends they widen their search and perhaps try to learn new skills.
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