[Nancy Pelosi’s office is blocking Social Security expansion,
while Congress prepares to pass a windfall for rich retirees,
insurance companies, and large asset managers like Vanguard and
Fidelity. ]
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HOUSE LEADERSHIP DELAYS SOCIAL SECURITY EXPANSION  
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Lee Harris
August 24, 2022
American Prospect
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_ Nancy Pelosi’s office is blocking Social Security expansion,
while Congress prepares to pass a windfall for rich retirees,
insurance companies, and large asset managers like Vanguard and
Fidelity. _

Even President Biden has called to expand Social Security, leaving
House Speaker Nancy Pelosi as the key Democratic holdout., Michael
Brochstein/Sipa USA via AP Images

 

As Democrats barreled toward a surprisingly productive legislative
session in July, House leadership quietly killed a vote on whether to
expand Social Security.

Social Security 2100, the first expansion to the New Deal program in
50 years, would increase all checks by about 2 percent of the average
benefit, offset through a payroll tax on wages above $400,000. The
bill, long championed by Rep. John Larson (D-CT) and introduced with
nearly 200 co-sponsors
[[link removed]],
was set for a markup by the Ways and Means Committee in late July,
before House Speaker Nancy Pelosi’s office axed it.

In an interview, Larson said that the bill faced opposition from
Wendell Primus, Pelosi’s lead staffer on a variety of domestic
policy issues. Pelosi was focused on passing the Inflation Reduction
Act, he added, and cited concerns over the bill from Democrat
frontliners, the representatives most vulnerable to a challenge in
November elections. “Nancy Pelosi said, ‘Just keep working the
bill,’” Larson said. “And that’s what we’ve continued to
do.”

But the bill already has the support of a majority of Democratic
frontliners, such as Sanford Bishop (D-GA) and Matt Cartwright (D-PA),
who represents a district Trump won by several points. It is the
culmination of a two-decade push
[[link removed]]
to move from a defensive to offensive position on Social
Security—not only protecting the program from Republican threats of
privatization, but adding to it. Even President Joe Biden has called
to expand [[link removed]] the
program, leaving Pelosi as the key holdout.

While the bill faced long odds against a Senate filibuster, it could
have been a powerful counterweight against Republicans who have lately
been letting slip their beliefs that Social Security was “set up
improperly
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and that it should be subject to annual budget appropriations
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rather than remain as a mandatory benefit. Indeed, in a statement,
Pelosi spokesperson Henry Connelly said, “There is absolutely no
question of Democrats’ commitment to the strength of Social Security
and Medicare, nor sadly is there any doubt about extreme MAGA
Republicans’ commitment to destroying these vital pillars of
financial security for our seniors, with House and Senate Republicans
constantly calling for them to be slashed or even terminated.”

But without the vote on expansion, Democrats can’t make as strong a
case about their commitment to the program. More confoundingly, at the
same time as Social Security expansion is being sunk, Democrats are
set to move ahead, after Congress returns from recess, with a
retirement reform bill that creates new tax breaks for top earners,
benefitting asset managers and retirement-plan service providers.

SUPPORTERS OF SOCIAL SECURITY 2100, which was first introduced in
2019, finally received word in late July that Speaker Pelosi would
move it to the House Ways and Means Committee for a markup. On
Wednesday, July 20, Larson gathered members of Congress to give
speeches of support. Several said they planned on a markup the
following week.

“John, you understand better than most the impact of this program,
and to just, consistently year in and year out, get this on the radar
screen, and now we’re going to have a markup next week on this,”
Rep. Tim Ryan (D-OH), now running in a competitive Senate race in a
red state, said at the session.

But the following Monday, instead of getting a formal notice of the
markup, House Majority Leader Rep. Steny Hoyer (D-MD), joined by
Pelosi staff, informed Larson that it wouldn’t happen. That might be
the end of it for this session.

There have been false starts for Social Security reform before. Every
time the expansion coalition seems close to a breakthrough, Primus,
Pelosi’s brain on policy matters and a longtime, strident expansion
opponent, stands in the way. Primus’s philosophy is in line with an
older generation’s belief
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that Democrats should fight only to maintain the last scraps of the
social safety net rather than do anything that might broaden it.

“Wendell’s argument to groups has been, listen, there are only a
limited amount of resources, etc., and we have to make difficult
decisions at times,” Larson told the _Prospect_ in an interview.
“There’s more than a shred of truth to the fact that children are
in great need, but there certainly is an equally strong argument that
both are in need.”

Larson pointed out that Social Security is one of the top programs
responsible for reducing childhood poverty—second only to the Child
Tax Credit. Rep. Ro Khanna (D-CA), a co-sponsor of the legislation,
said that it is urgent to pass Social Security 2100 in order to draw a
contrast with Republicans.

“Someone should tell Wendell that if he really wants to exert this
kind of leadership, he ought to try to run for Congress, or at least
get elected dogcatcher first,” Khanna told the _Prospect_.

As Larson’s bill was being sidelined, another Social Security bill
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sponsored by Republican Rep. Rodney Davis (R-IL), earned enough
bipartisan support to bypass markup and be fast-tracked for a vote.
Davis’s bill, the Social Security Fairness Act, would repeal the
Windfall Elimination Provision (WEP) and the Government Pension Offset
(GPO), which prevent public servants in states with special pension
plans from getting Social Security benefits. Repealing WEP and GPO is
widely supported by public-sector unions, including teachers and
policemen.

Under House rules adopted in 2019
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House leadership could not block a bill with over 290 co-sponsors for
25 legislative days from coming to the floor. Anticipating that,
Pelosi’s office attempted to craft a procedural rule that would have
made Davis’s bill ineligible this session, said two sources familiar
with the maneuver. The rule would have stipulated that pro forma days
did not count as “days in session” for the Consensus Calendar.
This would have pushed the Davis bill out at least after the
elections, since there aren’t many legislative days left. But the
maneuver failed, and Davis’s bill, which is currently on the
Consensus Calendar [[link removed]],
could come up for a vote next month.

Aside from potentially providing Republicans a bipartisan and popular
win on Social Security prior to November, there are substantive
concerns with Davis’s bill. It is not paid for, so the addition of
public-sector pensioners could cost the Social Security Trust Fund as
much as $147 billion, according to Larson. Ironically, he said, that
could over time decrease benefits across the board for Social Security
recipients.

SOCIAL SECURITY IS THE MAIN SOURCE of retirement income for most
Americans. About one-quarter of elderly Americans live in households
that rely on Social Security benefits for at least 90 percent
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income. Roughly half of all Americans have no retirement account
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at all. Yet, as the House punts legislation that would fund the public
component of the U.S. retirement system, Congress is quietly allowing
top earners to park more tax-shielded cash in private retirement
funds.

In May, the House passed the “SECURE Act 2.0
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a bill led by House Ways and Means Committee Chair Richard Neal. The
legislation expands tax breaks made in his earlier bill, the SECURE
Act of 2019
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with a few additional elements. The Senate version, the Enhancing
American Retirement Now (EARN) Act, is likely to move in the lame-duck
session.

Neal promotes the legislation as a response to the “retirement
crisis,”
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an effort to address the racial wealth gap, and a timely effort to
improve economic resiliency in the wake of the pandemic. And on its
face, SECURE Act 2.0 is a relatively innocuous revision
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retirement law, expanding automatic enrollment in 401(k) plans and
easing restrictions on money that can be stocked there.

But only the richest earners would actually make use of Neal’s
reform. SECURE Act 2.0 raises contribution limits to tax-shielded
retirement accounts, but most workers are nowhere near hitting those
limits. Last year, the annual limit to contribute to a 401(k) was
$22,000. A majority of employees making above $150,000 per year were
putting that much into savings, while just 2 percent of people making
the median American income were putting away the maximum contribution,
according to an analysis by economists at Bloomberg Intelligence, a
business analytics service.

In addition to raising contribution limits, the bill also raises the
age at which federal law requires savers to take a distribution from
their accounts, from 72 to 75. (The first SECURE Act just raised it to
72 in 2019.) A provision in the Senate version
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allows retirement savings to be more easily put into long-term care
insurance, by eliminating the penalty fee for withdrawing funds for
that purpose. Long-term care, which is unaffordable to the average
American, is often sold by the same advisers who manage retirement
plans, and this would give them an additional sales pitch.

The contribution limits would steer more money toward asset managers
like Fidelity and BlackRock. The Bloomberg analysis calls this nothing
less than a “big bang” for mutual funds, which should anticipate a
“decades-long boost” in assets under management and higher
fee-based revenue. (A single household can pay as much as $277,969 in
retirement account fees
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over a 40-year span, according to calculations by the progressive
think tank Demos.)

Advocacy groups for mutual funds, including the Investment Company
Institute and the National Association of Plan Advisors, have praised
the act [[link removed]]. Many of these
groups are longtime significant donors
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to Neal’s campaigns.

The bill continues a long trend detailed by University of Virginia law
professor Michael Doran, who served in the Clinton and Bush Treasury
Departments, in a recent paper, “The Great American Retirement Fraud
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Tax breaks for the richest retirees also mean considerable revenue
loss for the federal government. Annual revenue loss from retirement
plans in 1996 was about $145 billion in 2020 dollars, according to
Doran’s calculations. This year, it is just under $380 billion.

“This is deeply cynical legislation,” said Daniel Hemel, a law
professor at New York University. “It’s an attempt to give just
enough to low- and middle-income savers that members of Congress can
point to some retirement improvement, while also lavishing benefits on
the donor class, and then layering on budgetary gimmicks to hide the
cost.”

* Social Security
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