In a perhaps not-so-shocking but interesting turn of events, President Biden has pulled out of the presidential race and endorsed Kamala Harris in his place. And if Harris is elected, it could have a huge impact on Social Security.
Of course, since it's barely been a week since President Biden announced that he wouldn't be seeking reelection, Harris hasn't had much time to formulate a detailed action plan. So it's hard to say exactly what she’s thinking with regard to Social Security.
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However, Harris has stood behind President Biden in his quest to strengthen Social Security, so it's fair to assume that some of his plans for the programs are ones she'll adopt, at least in some shape or form. And that's where Harris has the potential to make a big impact.
We could see larger COLAs for Social Security recipients in the future
Each year, seniors on Social Security eagerly await news of an upcoming cost-of-living adjustment, or COLA. And unfortunately, those COLAs often disappoint. In fact, 2025's Social Security COLA is already estimated to come in lower than 2024's, which itself was a sharp decline from 2023's.
A big part of the reason Social Security COLAs tend to let seniors down is that they're not based on inflation as it relates to senior-specific expenses. Rather, the program's COLAs are calculated based on third quarter data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). But the CPI-W is far from representative of the costs retirees commonly face.
Biden had talked about boosting Social Security COLAs by using a more appropriate index to measure them -- the Consumer Price Index for the Elderly (CPI-E). It's likely that Harris will push toward the CPI-E in an effort to increase Social Security COLAs and give retirees a greater sense of financial stability in the face of rising costs.
On the other hand, given the program's impending financial crisis, it's going to take some stealth fiscal maneuvering to figure out a way to increase benefits, let alone prevent them from being cut. So while Harris may have the best of intentions, boosting COLAs may be a bit too lofty.
We could see more revenue pumped into Social Security as the wealthy are forced to pay up
One of President Biden's most broadly publicized Social Security proposals was to change the way wages are taxed to fund the program. Currently, there's an annual wage cap that limits the amount of earnings the rich have to pay taxes on. That cap sits at $168,600 for 2024.
Biden made it clear that he wanted to impose Social Security taxes on earnings above $400,000. Harris, on the other hand, has previously backed legislation that would subject all income above $250,000 to Social Security taxes. The hope is that this added revenue would do the trick of avoiding Social Security cuts, which the program's Trustees say may become necessary in about a decade's time.
Of course, whether lawmakers go for this proposal is another story. Biden's plan to impose taxes on incomes over $400,000 didn't exactly have lawmakers' full support, with Republicans seeking out other methods to keep benefit cuts from happening. Even some members of Harris's own party may be hesitant to reinstate Social Security taxes at the $250,000 threshold.
We'll need to wait and see
Harris has long pledged support for Social Security, so it's likely that she'll do what she can to shore up its finances. What exactly that looks like, however, is still to be determined. Workers and retirees alike should keep tabs on the Harris campaign and pay attention to the details of her official Social Security plan once it's released.
