How Would a Democratic Congress Change Social Security?
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Heading into 2016's general election, Democrats have an uphill battle. Even though Hillary Clinton is currently polling ahead of Donald Trump, there are seat deficits that need to be made up for in both houses of Congress.
In the Senate, there are 54 Republicans versus 44 Democrats, but statistical expert Nate Silver believes Democrats have a fighting chance to regain control. In the House, Republicans outnumber Democrats 247-188. Silver's colleague David Wasserman believes the best-case scenario is a gain of 20 seats, which still leaves Republicans in control.
That being said, one of the most important long-term goals of the next Congress will be to address the shortfall in Social Security funding. Having already looked at how a Republican Congress might attempt to fix Social Security, we'll be looking at popular Democratic options today, with help from the American Association of Actuaries (AAA).
Currently, the Old-Age and Survivors Insurance (OASI) Trust Fund for Social Security is scheduled to run out of money sometime in the mid-2030s. That does not mean Social Security will disappear -- as the government will still have funds from current workers paying into the system -- but because there are fewer workers per retiree than at any point in history, the money flowing into the fund will not be enough to cover all that is promised.
If nothing is done to remedy the situation, future retirees would be looking at a 23% cut in benefits.
Raising the payroll tax
Via FICA payroll taxes, the federal government takes a 6.2% slice from every American's paycheck, and it requires employers to pay an equivalent amount. If that percentage goes up -- for both employee and employer -- Social Security will raise more funds immediately.
But is it enough to make Social Security sustainable? Here's what the AAA has to say:
Effect of various FICA tax levels on Social Security shortfall. Click on a percentage to see the change in the pie chart. Data source: American Association of Actuaries.
Eliminating the maximum taxable earnings
How much would such a move help?
Prepare for an uncertain future
The article How Would a Democratic Congress Change Social Security? originally appeared on Fool.com.
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