March 16, 2023

The Honorable Bill Cassidy, MD
455 Dirksen Senate Office Building
United States Senate
Washington, D.C.   20510

The Honorable Angus King
133 Hart Senate Office Building
United States Senate
Washington, D.C.   20510

Dear Senators Cassidy and King:

On behalf of the millions of members and supporters of the National Committee to Preserve Social Security and Medicare, I am writing to voice our concerns about your joint Social Security proposal under consideration by a group of your Senate colleagues.

Although the details of your proposal have not been made fully public, we believe any of your Senate and House colleagues who may be considering lending their support to this proposal need to fully understand two points:  first, the so-called “sovereign wealth fund” featured in the proposal is an illusion – a smokescreen to promote a deal that is “too good to be true”.  Second, workers who represent the heart of the middle class, along with some of the most vulnerable among us, will bear the brunt of benefit cuts.

Your proposal would have the federal government borrow $1.5 trillion to invest in stocks, real estate and other risky, high-yield financial products.  The funds would be given some time to grow, but eventually would need to accumulate enough earnings to pay back the loans, with interest, and still generate enough profits to shore up Social Security’s Trust Funds.  This scheme immediately raises the seeming contradiction between a Congress supposedly concerned about our current federal debt of $31.4 trillion while at the same time borrowing an additional $1.5 trillion to gamble on a constantly rising stock market.  If this scheme is such a great idea for Social Security, why not fund the entire federal government in this manner?  Or if scale is an issue, why not create a similar fund to replace the taxes that fund our military?  Or veteran’s health programs?

The reason no one is considering such a dramatic change in how our nation raises funds to pay for important programs is because it is a risky gamble.  Although it is true that over long periods of time, markets can produce higher rates of return than Treasury bonds, the amount of time it has taken the markets to recover from downturns in the past has stretched as long as thirty years.  In fact, the Dow has spent almost 70 out of the last 100 years recovering from downturns.  It took thirty years to recover from the Great Depression and twenty-nine years to recover to its peak level prior to 1966.  It even took six years for the market to recover from the relatively shallow decline it experienced in the recession of 2007-2008.

If Wall Street doesn’t come through, working Americans — not Wall Street — will pay the price.  Additionally, Social Security is the insurance ‘leg’ of the ‘three-legged stool’; it protects against loss of income due to retirement, disability or death. Even if Wall Street burns to the ground and retirees’ retirement accounts and personal savings dry up, Social Security will be there to support beneficiaries and their families. It makes little sense that one’s insurance policy would rely on the same investments as one’s primary and/or secondary assets.

Members of the National Committee, many of whom are intimately familiar with the decades of economic fallout from the Great Depression, do not believe in the fantasy of a stock market “free lunch”.  Because so many seniors are highly dependent on their earned benefits to pay their bills, they are unwilling to risk their monthly checks on the mirage of a Wall Street paved with gold.  More than half of seniors receive over one-half of their income from Social Security, and it provides at least 90 percent of income for more than one-in-five seniors.  Without Social Security, almost 40 percent of American seniors would live in poverty.  It is simply not an option for them to stop paying their bills for twenty or thirty years while waiting for a bear market to recover.

According to the most recent Social Security Trustees Report, the combined Old Age, Survivors and Disability Insurance (OASDI) Trust Funds will remain able to pay full benefits until 2035 – or 12 years into the future.  After that time, payroll taxes are projected to be sufficient to cover 80 percent of benefits, leaving a gap of 20 percent that must be filled.  Your plan to invest in the market could not confidently rely on stock market growth sufficient to pay back the amount borrowed, plus interest, and cover the 20 percent annual gap in Social Security’s finances after only twelve years of investment.  No amount of ‘wishful thinking’ can disguise the risk all Americans would face if the programs’ solvency depends on the volatility of the stock market.

It is inevitable that during the first two or three decades of this scheme the shortfall in Social Security will need to be filled by cutting benefits.  Although the National Committee does not have information on the specific benefit cuts within your plan, there are numerous proposals by conservative think-tanks which would likely be part of the mix.  Bad ideas for cutting Social Security seem to resurface periodically, like a bad penny, and we feel it is essential to remind American families how deeply their earned benefits would be slashed if similar proposals were adopted.

Proposals which have been promoted in the past include:

  • Raising the retirement age, which results in benefit cuts to all future retirees, no matter when they retire;
  • Changing the “bend points” in the calculation of Social Security’s benefits, which would weaken the link between earnings and benefits. Over time, most workers would end up receiving very similar levels of benefits, despite having paid much higher amounts in payroll taxes over their lifetimes.  The cuts would affect not only high income workers but those whose average lifetime incomes begin around $40,000 depending upon the proposals’ details; in other words, the heart of the middle class.
  • Switching to a “mini-primary insurance amount” (PIA) to calculate benefits, which would cut benefits for struggling workers with employment gaps or who may have worked steadily over the years but had uneven earnings. Low-wage workers, women with caregiving responsibilities and those who are self-employed often have uneven earnings histories, which would make this proposal especially harmful to younger workers in today’s gig economy.  Attempting to soften the blow of such a proposal by providing caregiver credits would not truly compensate for the economic harm a mini-PIA would cause.

There is also a cautionary lesson to be learned from previous proposals that pair “hold-harmless” provisions or “benefit enhancements” to protect the most vulnerable such as minimum benefit floors, benefit “bumps” for the oldest beneficiaries, or caregiver or other credits alongside benefit cuts:  such “enhancements” fail to compensate for the harsh cuts that would result if the benefit changes became law.  They are, after all, designed to shrink Social Security by cutting benefits, not to expand the program.

Although details of your proposal for Social Security have not been made fully public, the National Committee is very concerned that the appeal of “magic money” from a constantly rising stock market combined with characterizations that the benefit changes are not “cuts” but merely ways of making Social Security “even more progressive” might tempt some of your colleagues to endorse the proposal prematurely, before the public can fully understand the harsh reality of its impacts.

Stated simply:  there is no free lunch.  Borrowing money to bet on the stock market is no way to fund benefits that millions of American workers rely on when they can no longer work.  While Social Security does have a funding gap that needs to be addressed, your draft proposals accomplish that goal not by raising the revenue dedicated to the program, but by deep cuts and a “wish and a prayer” that Wall Street will fill the gap.

For more analysis on this topic, please see our viewpoint paper on the Cassidy-King plan for Social Security.


Max Richtman
President and CEO