The new Social Security Fairness Act benefits some retirees at the expense of taxpayers, raising concerns about its fairness and long-term impact.
Washington, D.C.: On January 5, President Biden signed a new law that many are calling a gift to retirees who already enjoy generous state pensions.
While union leaders are celebrating this as a win, it’s not great news for everyone else. This law could hurt the Social Security program, cost taxpayers a ton, and lead to some tough cuts in the future.
The bill is pretty short, under 300 words, and it’s been marketed as the Social Security Fairness Act. But honestly, it’s not about fairness at all. It’s more about giving a big bonus to a small group of people, leaving taxpayers to foot the bill.
This new act gets rid of two rules that affected certain state and local workers who split their careers between jobs that don’t require Social Security and those that do. One rule, called the Windfall Elimination Provision, impacted the workers directly, while the other, the Government Pension Offset, affected their spouses.
By getting rid of these rules, former Social Security Advisory Board chair Sylvester Schieber told Newsweek that it gives workers with salaries not covered by Social Security way better benefits compared to those who paid into the system.
For example, Andrew Biggs from the American Enterprise Institute crunched the numbers and found that a teacher who worked their whole career in a state where educators don’t pay into Social Security could end up with $283,300 more in federal retirement benefits than a teacher who paid into it their entire career.
This is exactly the kind of unfairness those rules were meant to prevent. Now, Congress has not only allowed these windfalls but has also created a situation where some states benefit more than others. Teachers who contribute to Social Security in states like New York and Florida will end up subsidizing those in states like Illinois and California. The Congressional Budget Office estimates that these extra payments will cost about $196 billion over the next decade.
But it gets worse. This money will come from the Social Security trust fund, which is already expected to run out around 2033. With these higher payments going out to certain retirees, Congress has just sped up that timeline.
When the money runs out, the sitting president will have to cut Social Security benefits by 21%. Those cuts will hurt, no matter when they happen. But by giving out this windfall, Congress has made sure they’ll happen sooner. That’s not smart or fair policymaking at all.
