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Senate to decide on Social Security boost for public-sector workers

The Social Security Fairness Act will head to a final vote where it's expected to pass after decades of WEP and GPO reform discussions.
AP
The Social Security Fairness Act will head to a final vote where it's expected to pass after decades of WEP and GPO reform discussions.

Carl Heckert first started working as a gas station attendant when he was 15 years old. Nearly 60 years later, he’s still gainfully employed, now as a manager for an auto parts store.

“There has never been a time in my life except for two semesters in college where I haven’t been working,” he said. “I like to spend money…you want to do some things for your grandchildren.”

After graduating from the University of New Orleans, a gig selling school supplies introduced Heckert to teaching. Over the next 40 years, he taught in four different school districts in Louisiana. During the summer months and at night, Heckert was nearly always working part-time jobs to supplement a low teacher’s salary.

“I did all sorts of different things,” he said. “Unfortunately, school teaching doesn’t always pay enough.”

When Heckert turned 67 and the time came to collect Social Security, he found his benefits reduced by 40% despite contributing to the system for 40 years. Because Louisiana is one of 12 states with public pension systems not covered by Social Security, a law called the Windfall Elimination Provision (WEP) determined Heckert couldn’t receive full benefits from both retirement income programs.

“That really messed me up,” said Hecker. “I’ve been getting 40% less than I'd have been entitled to if I hadn’t worked for the state.”

The federal law reduces benefits for thousands of teachers, police officers, firefighters, and other state and local employees in Louisiana who chose secondary careers in the private sector. A similar provision named the Government Pension Offset (GPO) shrinks spousal benefits for around 700,000 people who also receive non-covered pensions. Nationwide, around 2.8 million people are affected by both provisions.

Louisiana lawmakers have recently led the way in a decades-long bipartisan effort to repeal both provisions, expected to come to fruition by the end of the year. The Fairness Act, co-sponsored by Garret Graves (R-Baton Rouge), passed the House with broad support last month. In one of his final speeches as the 6th district House Rep, an impassioned Graves outlined what he described as a punishment to public servants.

“Mr. Speaker, this has been 40 years of treating people differently, discriminating against a certain set of workers,” he said. “You’ve stolen probably between six and seven hundred billion dollars in social security benefits.”

Meanwhile, in the other chamber, Louisiana Senator Bill Cassidy, a member of the Finance Committee and another champion of Social Security reform, has successfully pushed for a last-second Senate vote on the Fairness Act in the final days of the session. With 61 Senators signed on, the filibuster-proof bill is expected to pass this week, a crunch-time win for both lawmakers.


Is passing the Fairness Act fair?

Social Security, designed as a progressive system, replaces a higher percentage of preretirement earnings for lower-income workers than for higher-income ones. The structure means that part-time workers like Heckert might appear to earn less based on their Social Security contributions, even if they have additional full-time employment.

“In some ways, it's kind of double dipping,” said Chris Towner, policy director for the Committee for the Responsible Federal Budget. “It [was] replacing a larger share than it should.”

In 1983, Congress enacted WEP and GPO to eliminate unintended benefits for those with brief careers in Social Security-covered jobs, while also aiming to reduce costs in the financially strained program.

“The problem was when they did this there wasn’t good information sharing… it's a very blunt formula,” said Towner. “What you find is there are some edge cases where people should not get hit with WEP and GPO.”

“These are not people that are overpaid. These are not people that are underworked.” said Graves.

While most of the bill’s detractors acknowledge the issues with WEP and GPO, they’ve argued against repealing the programs with nothing to replace them. If the Fairness Act is enacted, it will increase social security benefits by $200 billion over the next decade, a win for Louisiana public school teachers and first responders, but another burden to a system on the brink of insolvency.

“If they're going to full-out repeal it, they ought to pay for it with some other change to the budget.” said Towner, “When Congress is generally talking about enacting a 200 billion deficit increase. Almost everyone says you ought to pay for that.”

Meanwhile, proponents of the bill argue that in the context of a system that spends $1.5 trillion a year, $200 billion over 10 years to pay public servants what they’re owed is a drop in the bucket.

“I've heard people say the solvency of the Social Security trust fund is going to move six months because of this bill. Mr. Speaker, the solvency has been delayed for years because you’ve stolen from these people,” said Graves.

Some conservative lawmakers, led by Rand Paul proposed gradually raising the retirement age to 70 to help offset the $200 billion price tag during closed-door senate deliberations. 

“If you’re going to add to its mandate by expanding it, you should pay for it,” he said.


What is SS insolvency and how did we get here?

Social Security's New Deal Era pay-as-you-go system initially thrived in a country with soaring birth rates. In the 1950s, for every retiree receiving benefits, about 8.5 contemporary workers contributed through payroll taxes.

As birth rates declined, however, Social Security faced increasing financial challenges. Since the 1980s, it has paid out more in benefits than it receives in taxes, currently exceeding income by about $41 billion annually.

The Social Security Trust Fund, which holds surplus contributions invested in government securities, has long made up those deficits. Yet without major reforms, the Congressional Budget Office (CBO) projects it will deplete to zero by 2033 – possibly 2032 if WEP and GPO are repealed.

That insolvency will reduce benefits for everyone by about 24% according to the CBO, meaning seniors living on fixed incomes of $1,000 a month would see their payments dwindle to $760, straining welfare programs and reducing household spending nationwide.

“In the context of larger Social Security reform, this [WEP and GPO] is a very small part of our solvency challenges.” said Towner, “But that's all the more reason why we should be looking at the full program.”

Proposals to address the issue—such as raising payroll taxes, cutting benefits, or a combination of both—are often viewed as a “third rail issue,” self-sabotage for any politician serious about seeking reelection. In fact, since the enactment of WEP and GPO, there have been no major reforms to Social Security. The Biden administration has upheld its promise not to cut Social Security benefits, while the incoming Trump Administration has made a similar pledge, though some of its proposals could potentially widen the deficit.

The policy procrastination has led to a situation where once viable reforms to sustain Social Security would have drastic ripple effects. For instance, raising payroll taxes by 3.44% to maintain solvency over 75 years could reduce GDP by at least 1%, according to the Tax Foundation. Alternatively, borrowing to continue benefits is widely viewed by economists as catastrophic to a ballooning national debt.

“We had 50 years to make changes to social security,” said Towner. “The closer we get to that insolvency date, the larger the changes have to be.”


Sen. Bill Cassidy’s 'big idea'

Rather than cutting benefits or raising taxes, Sen. Cassidy believes a third option exists. He and Maine Sen.r Angus King (I) are advocating for the creation of a separate fund to invest in private markets, dubbed the “Big Idea.”

Currently, the Social Security Trust Fund invests in treasury bonds, which yield between 1% and 2%—a strategy Cassidy has criticized as “the absolute worst investment,” especially during periods of high inflation, which hovered around 7% last year.

Often compared to a sovereign wealth fund, Cassidy's proposal would invest $1.5 trillion in private markets, generating returns he claims could cover three-fourths of Social Security costs over the next 75 years. He's pointed to successful models in private pensions and the Canada Pension Plan, which became solvent in 2000, three years after adopting market-based strategies.

Cassidy says the $1.5 trillion fund would be entirely separate from the Trust Fund, avoiding direct use of taxpayer dollars and distinguishing it from privatization efforts.

As for where that money would come from, Cassidy has maintained “plenty of options” exist, including selling government-owned assets like land and buildings, though experts believe this would likely fall short of raising $1.5 trillion. More realistically, the funds would need to be borrowed.

“The money would be invested, not spent. It’s going to grow over 75 years,” said Cassidy's spokesman.

Skeptics worry that the size of federal investment could crowd out private investors in equities markets, while also creating conflicts of interests between regulatory bodies and industries receiving substantial public investments.

By Friday, the Fairness Act will head to a final vote where it's expected to pass after decades of WEP and GPO reform discussions. The two provisions will impact about 5% of the American population. Around 76% of the country either contributes to, or receives Social Security benefits.

Aidan McCahill is general assignment reporter for WRKF and WWNO. He covers a wide range of stories in South Louisiana, often finding himself down bizarre rabbit holes.