America can end poverty among its elderly citizens

Hidden in the background of the debate over the social infrastructure legislation is something remarkable: America has a chance to end poverty among its elderly citizens.

Given the political clout of the elderly, the Democrats desire to do something historic, and the 90-year policy effort (beginning with the New Deal) to end hardship among older Americans, one might think the possibility of ending elderly poverty would be the most discussed feature of the social infrastructure legislation. Unfortunately, that has not been the case.

Internally, Democrats are talking about whether the social infrastructure legislation should include features of a bill that would change the Supplemental Security Income (SSI) program. The SSI bill includes changes President Biden promised to make (during his campaign) and has the vocal backing of key senators including Ron Wyden (D-Ore.), Sherrod Brown (D-Ohio), Bernie Sanders (I-Vt.), and Elizabeth Warren (D-Mass.).

SSI pays benefits to persons 65 or older and to persons with severe disabilities. Individuals must have low income and limited resources to qualify and are generally U.S. citizens (95 percent of SSI recipients are citizens). However, the current program provides below-poverty benefits, with a maximum monthly benefit of only $794 for an individual. The program also sets unusually strict resource limits to screen for eligibility. 

The main feature of the SSI bill would be to increase maximum monthly benefits for individuals to the official poverty line in America (currently, $1,073 per month). Eligible married couples could receive twice the amount.

Advocates for disabled persons deserve credit for being champions of the SSI bill, but the bill’s effects on the elderly would be outsized, and the bill should draw active support from groups such as AARP.

The importance to the elderly can be seen in the cost estimates for the SSI bill. About 41 percent of the increased benefits under the bill would accrue to the elderly — even though they currently receive only 22 percent of SSI expenditures in a typical month.

The cost of the SSI bill is low given the affluence of America. The GDP of the United States is projected to be $256.39 trillion over the 2022-2030 period. Increasing the SSI monthly benefit would have a cost over the 2022-2030 period of $0.35 trillion — or less than one-seventh of 1 percent of GDP.

Sen. Brown recently said the social infrastructure legislation will “at least” include changes to the resource limits in SSI. Raising the resource limits is a very good idea and would cost less than $900 million per year.

However, Congress needs to increase the monthly benefit amount in conjunction with an increase in resource limits to end poverty.

If the costs over the budget window need to be trimmed, Congress has several partial-step options. These options might be messy, but Congress typically builds out income support programs over time. For example, in the decades-long effort to lower poverty rates among widows, Congress initially provided widows a 75 percent Social Security benefit, then an 82.5 percent benefit, and finally a 100 percent benefit.

Congress could phase-in the poverty-line SSI amounts over the budget window by, in effect, increasing the SSI cost-of-living adjustment (COLA) above inflation. For example, if inflation is 2.4 percent per year, setting the COLA to 5.6 percent each year (inflation plus 3.2 percent) would bring the current SSI benefit for an individual to the inflation-adjusted poverty line after 10 years.

Alternatively, Congress could initially limit the SSI monthly benefit increases to the population 65 or older or to the “oldest old” (persons 85 or older). Surprisingly, it turns out this would still help a number of disabled individuals because 51 percent of elderly SSI recipients initially came onto the SSI rolls based on a disability.

The “oldest old,” a group of substantial concern to policymakers, are about 3.2 percent of the SSI population, according to tabulations from Census data. The cost of a poverty-line benefit to this group would only be about $1.2 billion a year.

As another alternative, Congress could set the maximum SSI amount to the maximum amount of Social Security’s Special Minimum Benefit (currently about $900 per month or about 85 percent of poverty) and then adjust for inflation thereafter.

Phasing-in an increase to target 85 percent of poverty at the end of the 10-year budget window would be inexpensive, establish progress in increasing benefits, and have a policy rationale (both SSI and the Special Minimum Benefit were established, in part, to lower poverty). 

The most important point is that policymakers must use some political imagination and employ a long-run political strategy to substantially raise the SSI monthly benefit. That would begin the process of ending poverty among elderly and disabled citizens.

Making SSI benefit increases part of the social infrastructure legislation would sharply improve the lasting policy contributions of the legislation. SSI is a politically-tested and politically-durable program. Future congresses are unlikely to roll back benefits for disabled and elderly Americans.

Finally, the administration and leaders on the Hill have struggled to communicate policy themes in the social infrastructure legislation. An increase in the SSI benefit, however, is naturally suited to a policy theme that can be communicated to the public: ending poverty and addressing social problems, such as inequality by income, health, and race, that are in the plain view of Americans.

President Biden promised to work with Congress to raise the SSI benefit. Attention on his part to this promise may yet yield legislation worthy of the label historic.

David A. Weaver, Ph.D., is an economist and retired federal employee who has authored a number of studies on the Social Security program. The views in this article do not reflect the views of any federal agency.