New ‘Big Idea’ Fix to Social Security Could Gain Bipartisan Support — How It Would Prevent Benefits Cuts

Social Security cards with cash and benefit amount numbers.
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Ever since the Social Security Board of Trustees first announced the combined assets of the Old-Age, Survivors, and Disability Insurance (OASDI) Trust Funds are expected to be depleted in just over a decade, lawmakers have been scrambling to come up with solutions. Solutions run the gamut from across-the-board policy changes to taxing incomes for higher earners.

Now, GOP Sen. Bill Cassidy (R-La.) is proposing a “big idea” that would be based on a private pension fund approach instead of what Cassidy refers to as “the worst investment strategy you could have right now” and “the Silicon Valley Bank of pension funds.”

Cassidy is partnering with Sen. Angus King, a political independent from Maine who caucuses with Democrats, in the hope to build a new bipartisan plan for Social Security. Said plan would create a “sovereign wealth fund” that relies upon investing borrowed funds in the market rather than have them earning their current sluggish rates as Treasury investments and cash.

Discussing a fix to the current Social Security benefit program on the Bipartisan Policy Center webcast on April 25, Cassidy hoped that stronger market investment returns of 8% could help replace up to 75% of the forthcoming Social Security funding shortage. He argued that this would be much better than the 1% to 3% returns typical of Treasury funds, especially with inflation still at a high level.

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“We think it’s a really good start on a solution,” said Cassidy. “Now we need leading presidential candidates to step to the plate, be honest with the American people and help us find the additional 25%.”

The plan is not without precedence. As CNBC noted, two current pension plans north of the border — the federal Canada Pension Plan and the provincial Ontario Teachers’ Pension Plan — used market-based investment strategies to help improve financial stability.

The “big idea” will attract opponents to wealth taxing, which includes Republicans, but whether it will catch on with Democrats is questionable. Details of the Cassidy-King proposal haven’t been made public yet, but as Cassidy admitted, covering the last 25% of the impending shortfall is “going to take a give and take on both sides.”

Regardless of speculative support, moving to privatize Social Security will be seen as dangerous to many stakeholders. As Max Richtman, president & CEO of the National Committee to Preserve Social Security and Medicare, stated, this investment approach can easily lead to benefits being slashed as everyone waits for the market to recover from its current downturn.

“The so-called ‘sovereign wealth fund’ in the Cassidy-King proposal is an illusion — a smokescreen to promote a deal that is too good to be true. Workers who represent the heart of the middle class, along with some of the most vulnerable among us, will bear the brunt of the inevitable benefit cuts from this plan.”

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