There are whispers on Capitol Hill about a rare bipartisan effort to overhaul Social Security as the program is set to go bust in less than 10 years

Senator Mitt Romney (L), President Joe Biden (R).

President Joe Biden has previously said he is open to ideas to avoid the looming Social Security bankruptcy. A group of bipartisan lawmakers, including Senator Mitt Romney, are reportedly considering a federal sovereign wealth fund as one proposal.Anna Moneymaker/Getty Images, Carolyn Kaster/AP

  • A group of senators is considering a sovereign wealth fund (SWF) to prevent a Social Security bankruptcy, Semafor reported.

  • A SWF is a government-sponsored investment fund whose profits are used to pay Social Security benefits.

  • When such a SWF fails to make a profit, the bipartisan group of senators stands ready to tweak payroll taxes.

Congress and President Joe Biden have made efforts to address Social Security impending bankruptcy.

But a group of bipartisan lawmakers may have found a compromise in the form of a sovereign wealth fund (SWF) — something the United States currently doesn’t have at the federal level. Sovereign wealth funds are typically government-owned mutual funds federal reserve. In this case, such investments would be used to fund Social Security payments.

So says Joseph Zeballos-Roig from Semafor reported this week that a group of senators led by Senator Angus King, a Maine independent, and Senator Bill Cassidy, a Republican from Louisiana, are considering a SWF to fund Social Security. Add to this reports that the group is eventually looking to raise the retirement age to 70 – or close to it – which could effectively cut benefits for future retirees.

Given that such a fund’s potential depends on its IPO success, Zeballos-Roig reports that senators are open to increasing the payroll tax rate and the amount of income subject to those taxes if the fund’s returns fall short of expectations .

The goal, members of the group told Semafor, is for Social Security to remain solvent for at least 75 years.

Senator Mitt Romney, who attended the bipartisan talks, told The Hill’s Aris Folley said this week that an SWF would allow the US “to borrow at low interest rates and invest in the growth of our economy and perhaps the economies of other nations.”

“It’s what other pension funds are doing around the world, in corporates and in the railroad world, and it creates a sizeable revenue stream,” he said, adding that if the investments “didn’t do particularly well, we would get others.” sources and make sure we are not in any way compromising the benefits of the recipients.”

Semafor reported that a state SWF would potentially receive an initial investment of US$1.5 trillion or more; If that initial cash inflow doesn’t yield at least an 8% return, the plan would allow for an increase in maximum taxable income and payroll tax rate caps. The current system taxes the first $160,200 of workers’ earnings, and many Democrats have called for changing that cap. Sens. Bernie Sanders, Elizabeth Warren and other Democrats have championed Removal of the cap, with income over $250,000 subject to payroll tax. Warren and Sanders reintroduced this legislation this month.

“This is an example of two leaders trying to find a solution to a clear and foreseeable threat,” spokespeople for Cassidy and King told Semafor. “Although the final framework is still taking shape, there are no cuts in our plan for Americans currently receiving Social Security benefits. In fact, many additional benefits will be received.”

There is evidence that sovereign investment funds can be successful. In a state SWF in Alaska, for example, residents receive an annual payout from the government, which operates as a guaranteed income program funded by Alaska-owned oil companies. Residents typically get up to $2,000 a year, and only $800 in years when gas prices are lower. A Study 2016 from the University of Alaska showed that the fund reduced poverty by up to 20%.

Continue reading the original article Business Insider There are whispers on Capitol Hill about a rare bipartisan effort to overhaul Social Security as the program is set to go bust in less than 10 years

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