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SSI Reform Would Boost Incomes for Seniors and Disabled People

A volunteer does no-contact delivery for seniors at a residential complex in North Bethesda, Maryland, April 2020.

Eighty-six years ago last month, President Franklin D. Roosevelt signed the Social Security Act into law. Upon giving life to America’s most cherished safety net program, Roosevelt declared:

We can never insure one hundred percent of the population against one hundred percent of the hazards and vicissitudes of life, but we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age. … It is, in short, a law that will take care of human needs and at the same time provide the United States an economic structure of vastly greater soundness.

To better fulfill this decades-old promise, policymakers should turn their attention to a related program: Supplemental Security Income (SSI). SSI is meant to help low-income seniors and people with disabilities who receive little support from Social Security. Although SSI is a crucial anti-poverty program, its current benefits are inadequate, and many of its eligibility provisions are outdated. To address these problems, 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: raising the program’s maximum benefit level, increasing its asset limit, and updating its so-called disregard thresholds. These recommendations would lift millions of elderly and disabled Americans out of poverty, ensuring that the U.S. government provides genuine aid to those who can’t support themselves through work.

SSI steps in where Social Security falls short

Although Social Security has not eliminated “poverty-ridden old age,” it nonetheless pulls more people out of poverty than any other government program, and it lessens the degree 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, half-orphans, and individuals with disabilities.

But by itself, Social Security does little to help the most extremely marginalized members of society. That’s because it’s a type of social insurance—and as insurance, it replaces a share 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, directing the highest wage replacement rates to the lowest-wage workers. (see Figure 1)

Figure 1

But because the program distributes benefits as a share of former wages, low-wage workers receive low benefits. This is true even after accounting for the fact that these workers are given the highest wage replacement rates. (see Figure 2)

Figure 2

For a worker with average lifetime earnings of $25,000, Social Security benefits are less than $15,000 per year; by contrast, a worker who made $150,000 receives $40,600.* Someone without any lifetime wages—and thus without any ability to save for retirement—receives nothing.

This is where SSI steps in. When its framers first introduced the program in 1972, they described it explicitly as a poverty-fighting supplement to Social Security:

Building on the present social security program, it [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 aged, blind, and disabled people would no longer have to subsist on below-poverty-level incomes.

In its present form, SSI guarantees that no senior or adult with severe disabilities will live on less than $794 per month.** (This amount rises with inflation every year.) Elderly and working-age beneficiaries with $20 or less in monthly Social Security benefits and no other sources of income receive the full $794; every additional dollar of Social Security causes SSI payments to fall by $1. This interaction creates an income floor of nearly $800 per month for the targeted populations. (see Figure 3)

Figure 3

As a result, SSI alleviates destitution and brings millions of people above the poverty line. Without their monthly SSI payments, more than 63 percent of program beneficiaries would live in poverty; with SSI, that rate drops to 42 percent. Perhaps more importantly, the program reduces the poverty gap—a measure of how much additional money people would need to be pulled above the poverty line—by more than two-thirds. Although SSI is a relatively small program, it plays an outsize role in poverty reduction by targeting its benefits to those most in need. Roughly 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 data from the Congressional Budget Office. (see Figure 4)

Figure 4

Congress must take action to improve SSI

To summarize, SSI has two important strengths: 1) Its benefits go to some of the most marginalized members of society, and 2) it patches up serious holes in the Social Security system. SSI and Social Security are far more effective together than either program is by itself.

However, policymakers can still improve SSI in a number of ways. Although a more comprehensive set of reforms would include eliminating marriage penalties, removing limits on in-kind support, and modifying the program in other ways, this column recommends three concrete changes:

  1. Raise the maximum SSI benefit: Although SSI reduces poverty by 21.5 percentage points among its beneficiaries, the after-benefit poverty rate is still 42 percent—an exceptionally high figure. To fulfill SSI’s initial promise, Congress should raise the maximum SSI benefit from $794 to $1,073. This would lift all beneficiaries’ incomes just above the annual poverty line of $12,880 for a single person.***
  1. Increase SSI’s asset limits: After discounting the value of their home, their vehicle, and certain other items, SSI beneficiaries are kicked off the program if they have more than $2,000 of gross assets. So even as SSI gives its recipients an income floor, it also limits them to a wealth ceiling. SSI participants therefore find it difficult to accrue savings and weather financial storms such as the COVID-19 recession. As of 2017, 54 percent of SSI households had a net worth of less than $5,000, including 32 percent with zero or negative net worth.
  1. Update SSI’s disregard thresholds: After ignoring, or disregarding, SSI recipients’ first $65 in monthly labor income, benefits fall 50 cents for every additional dollar of earnings; similarly, after disregarding recipients’ first $20 in monthly nonlabor income, every additional dollar causes a one-for-one decrease in benefits. These unbelievably low thresholds haven’t been increased since 1974, despite the fact that both prices and incomes have risen substantially in the meantime.

The damaging impact of the gross asset limit

The $2,000 asset limit hasn’t been updated in 32 years, even though prices have risen 102 percent and mean family wealth has increased 294 percent in the interim. Moreover, because the asset threshold measures gross assets rather than net wealth, SSI recipients’ debts cannot offset their assets. 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 just $1,000. This is an extremely damaging provision given that approximately 60 percent of SSI households have some form of debt. According to 2017 census data, SSI households are most likely to have credit card debt (31 percent), medical debt (25 percent), vehicle debt (20 percent), home debt (19 percent), and student loan debt (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 boost the maximum benefit to 100 percent of the federal poverty level. The latter change would pull 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 increase the aforementioned disregard thresholds to $128 for monthly nonlabor income and to $416 for monthly labor income; this would allow SSI recipients to keep more of their benefits as they worked, saved, and otherwise tried to improve their living standards. Finally, these tremendous improvements would come at relatively little cost: According to estimates from the Social Security Administration, the bill would raise projected federal spending by less than 1 percent over the next nine years.

Conclusion

During the 2020 presidential campaign, then-candidate Biden announced his support for the principles espoused in the SSI Restoration Act. And as president, he has already guaranteed a minimum income floor for one group who can’t support themselves through work: children. He can make an equally historic dent in poverty by raising the income floor for seniors and disabled people as well. To accomplish that, he should call on Congress to include the SSI Restoration Act in the upcoming budget reconciliation package. As critical as they are, SSI payments aren’t currently sufficient to pull single Americans above the poverty line. If President Biden wishes to cement his legacy as a champion of the most vulnerable members of society—children, people with disabilities, and the elderly—he should fulfill the promise made by another president more than 86 years ago.

Nick Buffie is a policy analyst specializing in federal fiscal policy on the Economic Policy team at the Center for American Progress.

* Author’s note: Social Security beneficiaries with other substantial sources of income are taxed on a portion of their benefits, making the overall system somewhat more progressive.

** Author’s note: SSI benefits can be docked if beneficiaries receive “in-kind support” from other people. For example, if a family member buys groceries for an SSI recipient, that recipient’s monthly benefit can be decreased by the cost of the groceries.

*** Author’s note: For a single SSI beneficiary, the exact cutoff is $1,073.34. This column refers to single beneficiaries for the sake of simplicity. When two SSI recipients marry each other, their combined asset threshold is just $3,000, and their maximum joint benefit is $1,191 per month. These provisions form part of the broader SSI “marriage penalty,” which would be eliminated under the SSI Restoration Act.