86 years ago last month, President Franklin D. Roosevelt signed the Social Security Act. When he brought to life America’s most cherished safety net program, Roosevelt stated:
We can never insure one hundred percent of the population against one hundred percent of the dangers and vicissitudes of life, but we have tried to draft a law that will provide the average citizen and his family with some measure of protection against job loss and against poverty-stricken old age. … It is, in short, a law that will meet human needs while providing the United States with an economic structure of much greater solidity.
To better deliver on this decades-old promise, policymakers need to turn their attention to a related program: Supplemental Security Income (SSI). SSI aims to help low-income seniors and people with disabilities who receive little support from Social Security. While SSI is a critical poverty reduction program, its current benefits are inadequate and many of its eligibility provisions are outdated. To address these issues, President Joe Biden should call on Congress to pass the SSI Restoration Act during the upcoming budget reconciliation process.
President Joe Biden should call on Congress to pass the SSI Restoration Act during the upcoming budget reconciliation process.
This column highlights three changes included in the bill that would bring SSI closer to a true basic income program: increasing the maximum benefit level of the program, increasing the wealth cap, and updating the so-called ignore thresholds. These recommendations would lift millions of elderly and disabled Americans out of poverty and ensure that the US government provides real assistance to those who cannot support themselves through work.
SSI intervenes where social security falls short
While Social Security has not eradicated “poverty-ridden old age,” it nevertheless lifts more people out of poverty than any other government program, and reduces the level of poverty for millions more. Last year, Social Security helped more than 60 million Americans through the pandemic, distributing nearly $1.1 trillion to seniors, widows, widowers, orphans, semi-orphans and persons with disabilities.
But on its own, Social Security does little to help the most extremely marginalized members of society. That’s because it’s a form of social insurance — and as an insurance, it replaces a portion of people’s wages when they lose a spouse or become too old or disabled to support themselves. Measured as a share of people’s pre-disability or pre-retirement wages, Social Security is progressive, sending the highest replacement rates toward the lowest wages. (see figure 1)
But because the program pays out benefits as a portion of past wages, low-paid workers receive low benefits. This is true even when taking into account that these workers get the highest wage replacement rates. (see figure 2)
For an employee with an average lifetime income of $25,000, Social Security benefits are less than $15,000 per year; an employee who earned $150,000, on the other hand, receives $40,600. * Someone without a lifelong salary – and therefore without any possibility to save for retirement – receives nothing.
SSI alleviates poverty and brings millions of people above the poverty line.
This is where SSI steps in. When the authors first introduced the program in 1972, they explicitly described it as a poverty-reduction supplement to Social Security:
Building on the current Social Security program, [the 1972 Social Security Amendments] would create a new federal program, administered by the Social Security Administration, designed to provide a positive assurance that the nation’s elderly, blind and disabled people will no longer have to live on incomes below the poverty level.
As it stands, SSI guarantees that no senior or adult with severe disabilities will live on less than $794 a month.** (This amount increases each year with inflation.) Elderly and working-age beneficiaries with $20 or less receive the full $794 in monthly Social Security benefits and no other sources of income; every extra dollar in Social Security causes SSI payments to drop by $1. This interaction provides nearly $800 per month in income for the targeted populations. (see figure 3)
As a result, SSI alleviates poverty and brings millions of people above the poverty line. Without their monthly SSI payments, more than 63 percent of program beneficiaries would be living in poverty; with SSI, that percentage drops to 42 percent. Perhaps more importantly, the program is narrowing the poverty gap — a measure of how much extra money people would need to get above the poverty line — by more than two-thirds. Although SSI is a relatively small program, it plays an inordinate role in reducing poverty by targeting its benefits to the most deprived. About 60 percent of SSI spending goes to households in the bottom fifth of the income distribution, and more than 80 percent goes to those in the bottom two-fifths, according to Congressional Budget Office data. (see figure 4)
Congress Must Take Action to Improve SSI
In summary, SSI has two main strengths: 1) its benefits go to some of the most marginalized members of society, and 2) it fills serious gaps in the social security system. SSI and Social Security together are much more effective than either program on its own.
However, policymakers can improve SSI in a number of ways. While a more comprehensive set of reforms would include abolishing marriage penalties, removing restrictions on in-kind support, and changing the program in other ways, this column recommends three concrete changes:
- Increase the maximum SSI benefit: While SSI reduces beneficiaries poverty by 21.5 percentage points, the post-distribution poverty rate is still 42 percent — an exceptionally high figure. To fulfill SSI’s initial promise, Congress would need to increase the maximum SSI benefit from $794 to $1,073. This would increase the income of all beneficiaries just above the annual poverty line of $12,880 for a single person.***
- Increase SSI’s asset limits: After discounting the value of their home, vehicle, and certain other items, SSI beneficiaries are evicted from the program if they have more than $2,000 in gross assets. So even if SSI gives its recipients an income cap, it also limits them to an asset cap. SSI participants therefore find it difficult to build savings and weather financial storms such as the COVID-19 recession. As of 2017, 54 percent of SSI households had net worth less than $5,000, including 32 percent with zero or negative equity.
- Update SSI’s ignore thresholds: After ignoring or ignoring the first $65 in monthly employment income of SSI recipients, benefits drop by 50 cents for every additional dollar of income; likewise, after ignoring the recipients’ first $20 in monthly non-employment income, each additional dollar causes a one-to-one drop in benefits. These incredibly low thresholds have not been raised since 1974, while both prices and incomes have risen sharply in the meantime.
The Harmful Impact of the Gross Asset Limit
The $2,000 asset limit hasn’t updated in 32 years, even though prices have risen 102 percent and average household wealth has risen 294 percent in the meantime. In addition, because the wealth threshold measures gross wealth rather than net wealth, the debts of SSI recipients cannot offset their wealth. For example, someone with $10,000 in countable assets and $9,000 in debt would be considered above the $2,000 asset threshold, even though their net worth is only $1,000. This is an extremely damaging provision, as approximately 60 percent of SSI households have some form of debt. According to the 2017 census data, SSI households are most likely to have credit card debt (31 percent), medical debt (25 percent), car debt (20 percent), home loan debt (19 percent), and student loans (14 percent).
Fortunately, a promising reform proposal is now on the table. The SSI Restoration Act, sponsored by Sen. Sherrod Brown (D-OH) and Rep. Raúl Grijalva (D-AZ), would raise the SSI asset limit to $10,000 and increase the maximum benefit to 100 percent of the federal poverty level. The latter amendment would lift 3 million Americans out of poverty, and the former would make it easier for beneficiaries to save for a rainy day. In addition, Brown and Grijalva would raise the above-mentioned neglect thresholds to $128 for monthly non-labor income and to $416 for monthly labor income; this would allow SSI recipients to keep more of their benefits while working, saving and otherwise trying to improve their standard of living. Finally, these massive improvements would come at relatively little cost: According to Social Security Administration estimates, the bill would increase projected federal spending by less than 1 percent over the next nine years.
During the 2020 presidential campaign, then-candidate Biden announced his support for the principles enshrined in the SSI Restoration Act. And as president, he has already guaranteed a minimum income for one group that cannot support themselves with work: children. He can make an equally historic dent in poverty by also raising the income floor for seniors and the disabled. To do that, he would need to call on Congress to include the SSI Restoration Act in the upcoming budget alignment package. As important as they are, SSI payments are currently not enough to lift single Americans above the poverty line. If President Biden is to strengthen his legacy as a champion of society’s most vulnerable — children, the disabled and the elderly — he must keep the promise made by another president more than 86 years ago.
Nick Buffie is a policy analyst specializing in federal tax policy on the Center for American Progress’s Economic Policy team.
*Author’s Note: Social Security Beneficiaries with other substantial sources of income are taxed on a portion of their distributions, making the overall system a bit more progressive.
**Author’s Note: SSI benefits may be linked if beneficiaries receive “in-kind support” from other people. For example, if a family member runs errands for an SSI recipient, that recipient’s monthly allowance may be reduced by the cost of the groceries.
***Author’s Note: For a single SSI beneficiary, the exact limit is $1,073.34. This column refers to individual beneficiaries for simplicity. When two SSI recipients marry, their combined asset threshold is only $3,000, and their maximum joint benefit is $1,191 per month. These provisions are part of the broader SSI “marriage punishment”, which would be eliminated under the SSI Restoration Act.