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| Photo Credit: AP. |
WASHINGTON (AP) — Millions of Social Security recipients will learn soon just how high a boost they’ll get in their benefits next year.
The increase
to be announced Thursday, expected to be the largest in 40 years, is fueled by
record high inflation and is meant to help cover the higher cost of food, fuel
and other goods and services. How well it does that depends on inflation next
year.
The boost in
benefits will be coupled with a 3% drop in Medicare Part B premiums, meaning
retirees will get the full impact of the jump in Social Security benefits.
The
announcement comes just weeks before the midterm elections, and at a time when
Democrats and Republicans are sparring about high prices now and how best to
shore up the program financially in the future.
President
Joe Biden has pledged to protect both Social Security and Medicare. “I’ll make
them stronger,” he said last month. “And I’ll lower your cost to be able to
keep them.”
White House
press secretary Karine Jean-Pierre said in a statement Wednesday that the
combination of a Social Security benefit boost and a decline in Medicare
premiums will give seniors a chance to get ahead of inflation. “We will put
more money in their pockets and provide them with a little extra breathing
room,” she said.
About 70
million people — including retirees, disabled people and children — receive
Social Security benefits. This will be the biggest increase in benefits that
baby boomers, those born between the years 1946 and 1964, have ever seen.
Willie
Clark, 65, of Waukegan, Illinois, says his budget is “real tight” and the
increase in his Social Security disability benefits could give him some
breathing room to cover the cost of the household expenses he’s been holding
off on.
Still, he
doubts how much of the extra money will end up in his pocket. His rent in an
apartment building subsidized by the U.S. Department of Housing and Urban
Development is based on his income, so he expects that will rise, too.
Social
Security is financed by payroll taxes collected from workers and their
employers. Each pays 6.2% on wages up to a cap, which is adjusted each year for
inflation. The maximum amount of earnings subject to Social Security payroll
taxes for 2023 is $155,100.
The
financing setup dates to the 1930s, the brainchild of President Franklin D.
Roosevelt, who believed a payroll tax would foster among average Americans a
sense of ownership that would protect the program from political interference.
Next year’s
higher payout, without an accompanying increase in Social Security
contributions, could put additional pressure on a system that’s facing a severe
shortfall in coming years.
The annual
Social Security and Medicare trustees report released in June says the
program’s trust fund will be unable to pay full benefits beginning in 2035.
If the trust
fund is depleted, the government will be able to pay only 80% of scheduled
benefits, the report said. Medicare will be able to pay 90% of total scheduled
benefits if the fund is depleted.
In January,
a Pew Research Center poll showed 57% of U.S. adults saying that “taking steps
to make the Social Security system financially sound” was a top priority for
the president and Congress to address this year. Securing Social Security got
bipartisan support, with 56% of Democrats and 58% of Republicans calling it a
top priority.
Some
solutions for reforming Social Security have been proposed — but none has moved
forward in a sharply partisan Congress.
Earlier this
year, Sen. Rick Scott, R-Fla., issued a detailed plan that would require
Congress to come up with a proposal to adequately fund Social Security and
Medicare or potentially phase them out.
Senate
Minority Leader Mitch McConnell, R-Ky., publicly rebuked the plan and Biden has
used Scott’s proposal as a political bludgeon against Republicans ahead of
midterm elections.
“If
Republicans in Congress have their way, seniors will pay more for prescription
drugs and their Social Security benefits will never be secure,” Jean-Pierre
said.
Claire
Savage in Chicago contributed to this report.