On Jan. 5, President Joe Biden signed a law that is a giveaway to retirees who already have generous state-provided retirement benefits.
While union leaders are hailing the bill as a victory for their members, it’s a bad deal for the rest of us. It will undermine the progressive nature of the Social Security program, cost taxpayers billions and force painful budget cuts.
The new bill itself is short and simple, less than 300 words. In a clever piece of marketing, the sponsors called it the Social Security Fairness Act. But the bill is not about “fairness”; it’s about giving a relatively small group of people a windfall, at the expense of taxpayers.
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That’s because the new law repeals two provisions that affect certain state and local government employees who divide their careers between jobs that are exempt from Social Security and jobs that require them to pay into the system. One, literally called the Windfall Elimination Provision, affected the employees themselves, while the second, called the Government Pension Compensation, affected the spouses of those employees.
Repealing these provisions, Sylvester Schieber, former chairman of the Social Security Advisory Council, told Newsweek, “gives workers who earn salaries not covered by Social Security disproportionately generous benefits compared to workers who are covered by the system for all of their earnings.” traps.”
In fact, Andrew Biggs of the American Enterprise Institute did the calculations and found that a hypothetical teacher who worked a full career in a state where educators are exempt from Social Security could receive $283,300 more in federal retirement benefits than the exact same teacher who worked social security paid. Security for her entire career.
Why Congress Should Expand Social Security to All Teachers
This was exactly the kind of inequality the provisions were intended to prevent. Now Congress has not only opened the door to such windfalls; it has created winners and losers in all states. Teachers who pay into Social Security their entire working lives, in places like New York, Florida and 33 other states, will subsidize those who do not in Illinois, Massachusetts, California, 13 other states and the District of Columbia. The Congressional Budget Office estimates that the cost of these additional payments — which retirees will receive in addition to their state pensions — will reach $196 billion over the next decade.
But it’s even worse than that. The money will come from the Social Security trust fund, which was already expected to run out of money sometime around 2033. With higher monthly Social Security payments going to these special beneficiaries, Congress has only sped up the clock.
Once the money runs out, the sitting president will be forced to immediately cut Social Security benefits by 21%. Those cuts will be painful no matter when they happen. But by allowing this windfall, Congress has made it more likely to happen. That’s not smart or rational policymaking, let alone fair or just.