Finally, we are seeing some action going on in Congress right now with our Social Security beneficiaries in mind. SSI is a federal program “to help aged, blind, and disabled people, who have little or no income” and provides "cash to meet basic needs for food, clothing, and shelter.” While managed by the Social Security Administration, general tax revenues, and not Social Security payroll taxes, fund it. As the bill’s sponsors explain, there is currently a pretty significant problem: The current SSI program hasn’t been updated since the 1980s, and punishes these Americans for working, saving for the future, and getting married. Right now, individuals getting SSI are limited to $2,000 in assets; for married couples it’s $3,000. And the average current monthly benefit is $585 for individuals. For approximately 60% of recipients, SSI is their only source of income.
In one sense, this seems like an unnecessary limit. A Federal Reserve study from 2019 found that many people are far from rolling in assets: if faced with an unexpected $400 expense, 27% of people would borrow or sell something to cover it and 12% lacked the resources to pay it at all, for a total of 39%. Those in such a position know the anxiety and fear lack of savings can regularly create if anything goes wrong. But even reserve funds of $2,000 for an individual or $3,000 for a couple are low, probably because Congress set the limits in 1984. What if someone was disabled after years of work and had modest savings? They’d have to get rid of them, presumably, to be eligible for what might be their only income. There’s been no adjustment for inflation since the mid-1980s, let alone support. According to the Bureau of Labor Statistics, $2,000 in 1984 would be equivalent to about $5,500 today. Even that is a ridiculously low cap, as happens so often in relief plans that are almost universally drawn by wealthy people in Congress who frequently have never experienced anything like most of the population does. The Brown/Portman bill would raise the savings caps to $10,000 for a single and $20,000 for a couple and index them to inflation moving forward.
While this would help with the savings issue, it does nothing to mitigate a bigger problem. Start with the federal poverty levels for the continental U.S. (even higher in Alaska and Hawaii) that serve as the indication of when someone is officially considered quote unquote poor. For a family of four, that’s $27,750 a year, or $131.41 a week per person for housing, food, transportation, clothing, and other basics needs for living. For a single person, that’s $13,590 ($261.34 a week), or $18,310 ($176.06 per person) for a couple. The poverty levels are where you can first start the see the bigger issue facing SSI recipients: a benefits cliff. If someone’s income grows past a certain point, they can start losing benefits faster than they are able to earn to make up for the loss. Or, as the Federal Reserve Bank of Atlanta puts it: Due to the loss of these programs, career advancement opportunities can result in the family being financially worse off (also known as a “benefits cliff”) or no better off (or what’s known as a “benefits plateau”) than before the wage increase. This loss of means-tested public assistance is an effective marginal tax rate on income gains.
High effective marginal tax rates mean that some workers have a financial disincentive to invest in their own human capital and advance from lower-wage work to jobs that lead to economic self-sufficiency. The country should be working to see people establish themselves at a more sustainable and stable level. But instead, the design of programs kicks the financial legs out from underneath them. Whatever the original intent, the ongoing approach without modification causes poor-off people with more common sense and financial understanding than many of their representatives to avoid earning enough to sustain a reasonable living, especially with today’s crippling inflation rates.