A Republican senator says he has a way to save Social Security. Will it work?

Social Security is facing a financial crisis which if not addressed within the next six years could result in cuts to benefits across the board. The Board of Trustees said in their annual report released in June that the Old-Age and Survivors Insurance, or OASI, trust fund, which helps pay for retirement benefits, could run out of money as soon as the fourth quarter of 2032.

Congress knows that it must act in order to shore up the financing of the popular government program that has helped reduce poverty among the elder since its creation in 1935. A bipartisan group of Senators acknowledged as much in a joint statement in June.

“It’s clear now that Congress shouldn’t delay any longer. Several of us have been coming together to talk about how we can strengthen Social Security for current and future generations of retirees,” said Senators Dick Durbin (D-IL), Bill Cassidy (R-LA), Tim Kaine (D-VA), and Thom Tillis (R-NC). “We say to our colleagues: join us in doing what we were elected to do—legislate on hard issues and protect this lifeline program for our kids and grandkids.”

“Congress has no shortage of ideas, we just need to actually debate them and vote,” they added.

The “big idea” to reform Social Security

Proposals have already been released by both parties with House Republicans suggesting that the retirement age be bumped up to 69 from 67, which is basically a cut to benefits, and Democrats suggesting a combination of increased taxes on the wealthiest and increased benefits. Putting in their own two cents, “retiring” Senator Cassidy, he lost his primary this spring to a Trump-backed GOP challenger, and Senator Kaine, whose current term expires in January 2031, have proposed a “big idea” to partially shore up funding for Social Security.

The plan would avoid increasing taxes and cuts to benefits by investing $1.5 trillion in stocks over five years placed in a separate fund from the program’s trust fund. This would eventually cover up to 65% of Social Security’s unfunded accrued liability over 65 to 70 years, according to the GOP senator from Louisiana. Although the money would be borrowed, because it would be held in an escrow account it wouldn’t add to the U.S. debt he says.

An analysis of the Cassidy-Kaine plan by the Center for Retirement Research at Boston College found that it is “unlikely to work.”

“Our analysis shows that the most common outcome would leave the taxpayers with a large debt, even under optimistic return assumptions,” the authors stated. However, they did find that “equity investments could help Social Security’s finances if paired with a tax increase or benefit cut that restores solvency.”

But lawmakers will need to act fast if they want to use investments in the stock market to avoid insolvency of the trust funds. Even if the OASI trust fund is combined with disability trust fund, they will only be able to cover full scheduled benefits until 2034.

“The window of opportunity is closing; waiting until 2034 to introduce equities would be too late to offer a permanent fix,” the report warned.

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