Social Security Update: Republican Senator Outlines Proposed Changes
Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content.
Senator Bill Cassidy on Friday proposed significant changes to Social Security to prevent the agency's impending insolvency.
In an interview on CNBC's Squawk Box, he said the Social Security fund is currently invested in Treasury bonds, which are low yielding in nature. His new proposal would change that and establish a new fund to ensure that the Social Security Administration doesn't reach its insolvency date.
"We are losing money on those treasuries right now," said Cassidy, a Louisiana Republican. "What we propose is a separate fund from the Social Security trust fund, in which we would put $1.5 trillion into it over 10 years, invest it in the U.S. economy, hold it in escrow for 65 to 75 years and then use that return to offset any unfunded accrued liability in the Social Security trust fund."
Senator Bill Cassidy during a Senate Finance Committee hearing in the Dirksen Senate Office Building on March 14, 2025, in Washington.
Senator Bill Cassidy during a Senate Finance Committee hearing in the Dirksen Senate Office Building on March 14, 2025, in Washington.Why It Matters
Currently, the Social Security trust fund, which pays out the retirement benefits owed to Americans for the years they worked in the workforce, funding the agency, is facing a funding crisis.
Treasury estimates that by 2034, the fund will no longer be able to make full payments to beneficiaries, leading to a 23 percent cut in benefits.
Since many retirees depend on Social Security payments for the bulk of their everyday necessities, this could have dire consequences for seniors, pushing many to delay retirement or not be able to retire.
What To Know
During his interview Friday on CNBC, Cassidy stressed the importance of ensuring that the Social Security fund still has enough money for full benefits and said his solution would work no matter the state of the larger economy.
"We modeled this through the Great Financial Crisis, and the Great Financial Crisis, of course it dips down, but within a year, it's back up to where it was," Cassidy said. "The power of our economy is so great....Even if it only offsets 60 percent of our unfunded accrued liability, that's a lot better than we're doing now."
The comments came as Cassidy and Democratic Senator Tim Kaine of Virginia introduced bipartisan proposal aiming to address the looming insolvency of Social Security this week. Their plan, announced in a recent op-ed for The Washington Post, would establish a new fund parallel to the existing Social Security Trust Fund, investing in a diversified portfolio including stocks and bonds to achieve higher returns and supplement traditional funding methods.
The proposal would require an initial federal investment of $1.5 trillion and allow the fund a 75-year period to mature before it begins to directly support Social Security payouts. Its goal is to prevent benefit cuts or tax increases for future retirees by creating an additional stream of income to shore up the program's finances.
The urgency behind such reforms has grown in light of recent trustee reports showing the Social Security Old-Age and Survivors Insurance (OASI) Trust Fund could be depleted by 2034. If no legislative changes are made, beneficiaries could see payments reduced to roughly 77 percent to 81 percent of current rates starting in 2033 or 2034.
The fund has been drying out primarily because of demographic shifts such as lower fertility rates, slower wage growth and increased benefits following policy changes in recent years. Disability Insurance (DI) Trust Funds are projected to remain solvent until at least 2099, but retirees are at risk of having their promised Social Security payments diminished.
Cassidy and Kaine's new investment approach is intended to mirror successful strategies in existing state and private pension funds, as well as in countries overseas.
Current law restricts the Social Security Trust Fund to investing in low-yield Treasury bonds, limiting growth potential. By comparison, major equity indexes such as the S&P 500 have generated substantially higher returns over comparable timeframes.
Newsweek reached out to Cassidy and Kaine for comment via email.
What People Are Saying
Senators Bill Cassidy and Tim Kaine, in their op-ed for The Washington Post: "There is a nationwide appetite to implement a bipartisan, commonsense plan like ours."
Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: "Senator Cassidy's proposal is not the first of its kind, but it is thinking that Congress desperately needs to head off the coming shortfall in Social Security expected to hit over the next decade. The concept is pretty simple: taking the fund used for Social Security and investing it in a diversified portfolio of stocks, bonds, and other investments, similar to a 401k. Over time, the fund would grow and be able to provide for recipients without extensive tax increases."
Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek: "In theory, it makes sense. But theory needs to be backed by modeling—especially worst-case scenarios. We should compare the potential downside of investing in equities with the worst-case outcome under the current system, where the trust fund is invested in Treasuries.
"Right now, Treasuries are yielding more than they have in years, meaning the risk-free rate of return has increased. So, any shift to riskier assets like equities would need to deliver even higher returns to justify the added risk."
What Happens Next
While Cassidy and Kaine's proposal has not been officially submitted for congressional approval, they said waiting to act could lead to "difficult and preventable consequences."
Beene said past proposals of this nature have faced criticism over the concern that investments don't always necessarily go up.
"You're playing with the primary source of retirement income for millions of Americans," Beene said. "It's hard to envision this perfectly working or passing unless a case is made that investments would be secure and steady enough to not trigger significant losses to the fund."
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Insider
4 minutes ago
- Business Insider
America's next big land grab
There's a weird contradiction happening at the base level of America's real estate market. Faced with high borrowing costs and an uncertain economy, homebuilders — the engines of the country's housing supply — are cutting prices and tacking on freebies in an effort to keep sales moving. At the same time, they're also staking out huge swaths of land in anticipation of the next homebuilding boom. The land grab is a signal of faith in the long-term demand for housing, a bet that the sluggish market will turn around, and a recognition of the country's deep housing shortage. It could also end up paying huge dividends for regular homebuyers. Whether these bets pay off, and whether Americans see the benefits, will depend on a little-known breed of investor known as a "land banker." These companies scoop up construction-ready land on behalf of builders (for a fee, of course) and then hang tight, biding their time until their patron is ready to put shovels in the ground. The setup allows builders to "control" land for years before technically owning it, preserving a pipeline of new developments and freeing up cash to, you know, actually build more houses. In recent years, builders big and small have latched onto this maneuver. There's no clear data on the prevalence of this model since land bankers are, by and large, private companies, but investors are most likely setting aside tens of billions of dollars' worth of home lots at builders' behest. In the second quarter of this year alone, Lennar, one of the largest homebuilders in the country, bought nearly 22,000 lots from land bankers for a whopping $2.7 billion. The typical buyer doesn't know — or care — about these exchanges, which take place long before the foundation is poured. But the rise of land banking will play a significant role in the efforts to chip away at our nation's housing shortage. Real estate is cyclical, which means periods of strong homebuilding activity are often followed by a retreat when the economy takes a turn for the worse. Land banking could help builders quickly ramp up production after these soft periods, delivering homes the moment more Americans are ready to take the homeownership plunge. The result would be a more reliable homebuilding machine, and maybe even cheaper houses. For buyers in the near future, that's great news. At risk of stating the obvious, land is the most valuable commodity in real estate. As the aphorism, usually attributed to Mark Twain, goes: "Buy land, they're not making it anymore." Even with unsettled economic conditions and a weak spring selling season, competition for prime acreage remains stiff. It usually takes years to turn a vacant parcel into a single-family home, so builders need a steady pipeline of land to keep their businesses moving. Traditionally, they've taken on short-term loans to buy up lots and get them shovel-ready. But this method of grabbing land comes with some downsides. Money tied up paying for idle land could be put to better use. It's also risky: If the costs of readying that land for construction go up, or if the market slows down and it's not profitable to keep churning out homes, builders are left on the hook. The answer to this conundrum is what builders call a "land-light strategy." Instead of buying up land outright and holding it until they sell the finished homes, they bring in a land banker to purchase construction-ready lots and then pay that investor for the option to build on those lots at a later date. The builder will typically put down a nonrefundable deposit of between 10% and 20% of the land's value and work out a schedule for buying those lots from the land banker sometime in the future, usually two to four years down the road. Without a land banker, a typical land purchase might require a builder to put down, say, 35% of the total value and get a loan for the rest. They'd also have to keep up with pesky line items like taxes and maintenance on the lots. A 10% deposit, on the other hand, allows builders to claim more land with less risk and fewer dollars. That's an especially attractive option for big, publicly traded homebuilders whose financials are scrutinized every quarter by Wall Street. Publicly traded homebuilders have employed this strategy to dramatically expand their land holdings since the onset of the COVID-19 pandemic. In the first quarter of this year, they either owned or controlled nearly 2.4 million lots, up from roughly 1.4 million lots at the same point in 2020, an analysis by John Burns Research and Consulting found. Back in 2017, public builders owned about 64% of their lots and optioned the remaining 36%. Those figures have flipped in the years since. The most recent analysis shows that public builders owned just 26% of their lots and had options on the other three-quarters. Land bankers have been around for decades, but they've really only risen to prominence in the past four or five years. In the past, land bankers were a constellation of small companies or prospecting dreamers that would buy up land in far-flung locations, betting that it would grow more valuable as homebuilders continued to build deeper into the suburbs and exurbs. These days, land bankers are much more buttoned-up, and the industry is now dominated by huge organizations like Walton Global, which says it has $4.5 billion in real estate assets, including 89,000 acres that it plans to feed to builders. The land itself is different, too. Rather than a rocky scrabble or wooded mess that hasn't yet seen a bulldozer, the lots that builders buy from land bankers are typically all set for construction, with the land smoothed over and the roads paved. This leaves builders to focus on what they do best: managing the construction process and selling those homes to consumers. We like to joke about a seven-year cycle and a three-year memory. But I do think the GFC scars ran deep Greg Vogel, CEO of Land Advisors Organization It's not just land bankers who have evolved, though — the entire homebuilding industry has shifted over the past couple of decades. While the size of the current land-buying spree is substantial, it's still far less frenzied than in the years leading up to the global financial crisis in 2008, when builders were hoovering up land the old-fashioned way: using traditional debt to buy the properties outright. Builders absorbed a brutal lesson back then. First, they were stuck with too much land that was suddenly a lot less valuable when the bubble burst. A bunch of builders went belly-up or were forced to offload lots at low prices. Then the remaining builders were forced to play catch-up and seek out more land when housing demand rebounded. The mistakes of that era were a crystallization of the short-term thinking that so often screws over people in the real estate industry. "We like to joke about a seven-year cycle and a three-year memory," says Greg Vogel, the CEO of Land Advisors Organization, a land brokerage firm based in Scottsdale, Arizona. "But I do think the GFC scars ran deep." Land banking, on the other hand, offers a measure of safety and predictability for homebuilders, allowing them to lay claim to home lots without assuming all that risk. Even when the economy hits the skids and builders slow down production, they can rework deals with the land bankers rather than walk away from their land positions altogether. "They learned last time that they're in a much worse position having to go scramble and find land when the market did come back," Katie Hubbard, an executive at Walton Global, tells me. That kind of flexibility will come in handy as homebuilders weather another rough spot. The spring selling season, when builders typically move the bulk of their inventory, was "hugely disappointing," Jody Kahn, the senior vice president of research surveys at John Burns, tells me. Prices for new homes during the typical selling season would be up 4% to 6% from the previous year — John Burns' recent survey of builders indicates that prices dropped in June by about 1.5% year over year. Other data is similarly disheartening for developers: There haven't been this many new homes sitting on the market since the summer of 2009, data from the Department of Housing and Urban Development shows. Roughly 119,000 new homes were available for sale in May, more than triple the number at the same point in 2022. That glut of new homes may help consumers to some degree. Builders are tossing in a bunch of deal sweeteners to get buyers through the door, and some are finally starting to cut prices (typically the option of last resort). But the fact they're even having to do that points to a bigger issue: Many would-be buyers can't afford a new place, and the ones who can are wary of making the leap. The typical mortgage rate is stuck near 7%, up dramatically from the sub-3% rates seen early in the COVID-19 pandemic, which means homebuyers these days are most likely shelling out hundreds, or even thousands, of dollars extra each month on interest payments alone. Many homeowners, who either bought homes or refinanced during the pandemic, don't want to move and give up their cushy low rates. Home prices in most places haven't fallen enough to make a meaningful difference in the affordability picture. Other prospective buyers, having scanned the headlines about tariffs and a wobbly job market, may decide to wait until the economic outlook is less cloudy. When builders can't get rid of homes they've already completed, they're typically forced to pump the brakes on new construction. In the decade after the housing bubble burst, builders delivered about half as many homes as they had in the three decades prior. That's an extreme example, but we're already starting to see builders pull back given the softness in the market. The number of single-family homes going into construction in June dropped about 10% from a year prior. Permits for new single-family homes — the step before construction begins, and an indicator of builders' plans for the future — were down by about 8%. It's not an easy machine to turn on and off. Will Frank, land-banking expert at John Burns Research and Consulting A boom-and-bust cycle isn't good for anyone. Builders felt the pain after the housing market collapsed in 2008, but so did millennials, who were starting to reach their prime homebuying years right as home construction waned in the aftermath of the Great Recession. That case of bad timing has plagued them throughout their adult lives. In the 2010s, builders started work on just 21,000 single-family homes per 1 million people, compared with a rate of more than 41,000 homes in each of the three decades prior. With fewer homes reaching completion and more people trying to climb onto the housing ladder, price spikes were inevitable. While home prices rose about 46% in the 2010s, compared with about 31% in the 1990s, the problem really came into focus during the pandemic frenzy. Home prices jumped more than 50% between the spring of 2020 and the same point this year, even as builders played catch-up to try to meet the wave of demand from millennials. "It's not an easy machine to turn on and off," says Will Frank, a land-banking expert at John Burns. The true benefits of land bankers in this housing cycle are, admittedly, still a bit theoretical. This is the first time that builders and the current crop of land-banking partners are wading through a slowdown in the market, and it could still be a while before we see construction roar back. There's also the open question of just how big a discount could end up in the final sale price thanks to land bankers. After all, these investors are just one piece of the chain that transforms raw land into homes, since they're usually not the ones navigating the red tape of local permitting or doing the early legwork to get the lots ready for construction. The land developers who handle that part of the process play a vital role in shaping the housing supply years into the future. But land bankers have already aided builders in vastly expanding their land holdings to get ready for demand that may arrive years in the future. "There are deals that just wouldn't get done without a land banker," says Chase Emmerson, a partner at a land-investment firm in Arizona. And while they may not be the cure-all for the cyclical nature of the housing market, they will most likely help builders get their shovels into the ground more quickly when housing demand ramps up. In soft markets, builders can kick the can down the road and work out deals with these investors to delay some of the land purchases until sunnier times. Neither the builders nor the land bankers want those deals to fall through entirely. And when demand inevitably comes back, builders will be poised to respond with the land in their back pockets.
New York Post
an hour ago
- New York Post
Billionaire LA Times owner announces he's taking the newspaper public
Billionaire Los Angeles Times owner Dr. Patrick Soon-Shiong announced on Monday that he would be taking the newspaper public sometime in the next year, calling it a move to democratize the paper. 'It's important for the paper to have the voices of all, and that's what I wanted to do, right?' he said on 'The Daily Show.' 'Whether you're right, left, Democrat, Republican, you're an American, so the opportunity for us to provide a paper that is the voices of the people, truly the voices of the people, so I'm going to announce something to you tonight… we're literally going to take the LA Times public and allow it to be democratized.' Soon-Shiong bought the newspaper for $500 million in 2018. He said the offering would allow the public to have ownership of the newspaper and a say on the board. He didn't delve into specifics as to how that would look in practice. 'I'm working with an organization that's putting that together right now,' Soon-Shiong told host Jon Stewart of the process of taking the newspaper public. 4 LA Times owner Dr. Patrick Soon-Shiong appears on 'The Daily Show' on July 21, 2025. The Daily Show/YouTube 4 The Los Angeles Times building in downtown Los Angeles, Calif. on Feb. 7, 2018. AP 'Ethics get cloudy if, in fact, the truth is not told,' Soon-Shiong said on Monday. 'Our institutions today, there's so much distrust. Unless you have truth and trust, those two words, I think we're not going to have any healing in the country… I live this American dream. I'm an immigrant here, right? So to me, this is really a wonderful opportunity for us to have the privilege of being an American.' The interview with Stewart mainly delved into Soon-Shiong's efforts to cure cancer. In addition to holding the Times, Soon-Shiong is a surgeon, medical researcher and biotech entrepreneur who's seeking to develop a cancer vaccine. The decision to go public comes amid news of the Los Angeles Times' financial struggles. In April, AdWeek reported the paper had lost $50 million in 2024, the same year it laid off 115 staffers. 4 Soon-Shiong shakes hands with President Donald Trump at the Lusail Palace in Doha on May 14, 2025. AFP via Getty Images 4 The decision to go public comes amid news of the Los Angeles Times' financial struggles. AFP via Getty Images Soon-Shiong's tenure has also been marked by discontent on the staff, particularly over his recent efforts to moderate its content. He defended his moves to reform the paper's left-leaning opinion pages in an interview with Fox News Digital earlier this year. 'I really wanted to make sure that we are a trusted source for all Americans,' Soon-Shiong said in January. 'Clearly, California is blue, very blue. When our opinion pages were so one-sided, and these are just opinions, I wanted to make sure that everybody had a chance to voice their own opinion. And more importantly, opinion based on facts, not on speculation.' He also incensed liberal media observers when, like Washington Post owner Jeff Bezos, he yanked a planned endorsement of Kamala Harris in the 2024 election. Soon-Shiong has expressed past willingness to work with the Trump administration on his cancer moonshot and disappointment at a lack of partnership from the Biden administration. Fox News Digital has reached out to the LA Times for additional comment.
UPI
an hour ago
- UPI
U.S. sanctions Houthi petroleum smuggling network
The U.S. Treasury under Secretary Scott Bessent sanctioned two people and five companies on Tuesday on accusations of being a Houthi petroleum smuggling network. File Photo by Yuri Gripas/UPI | License Photo July 23 (UPI) -- The United States has blacklisted two Yemeni nationals and five companies on accusations of laundering money and importing petroleum products for the Houthi rebels. The Houthis, also known as Ansarallah, work with privately owned companies to ensure continued shipments of petroleum products into areas of Yemen under their control. On Tuesday, the U.S. Treasury sanctioned Muhammad Al-Sunaydar, 38, and three companies his connected to, as well as Yahya Mohammed Al Wazir, 44, and two of his companies, for facilitating those petroleum product transactions. "The Houthis collaborate with opportunistic businessmen to reap enormous profits from the importation of petroleum products and to enable the group's access to the international financial system," Deputy Secretary of the Treasury Michael Faulkender said in a statement. "These networks of shady businesses underpin the Houthis' terrorist machine, and Treasury will use all tools at its disposal to disrupt these schemes." The long proxy war between Iran and Israel exploded into the open on Oct. 7, 2023, when Hamas, another Iran-backed militia, attacked Israel. Israel responded by devastating the Palestinian enclave of Gaza. Since November 2023, the Houthis have enforced a maritime blockade of the Red Sea and the Gulf of Aden, attacking vessels, including U.S. military ships that transit the important trade route, in solidarity with the Palestinians, nearly 60,000 of whom have been killed by Israel. The United States, under both the Biden and Trump administrations, has been hammering the Houthis with sanctions, seeking to corrode their ability to make war, with President Donald Trump re-designating the Iran-proxy militia as a foreign terrorist organization in January. "The United States is committed to disrupting the Houthis' illicit revenue generation by maintaining pressure on the financial facilitators that fuel the Houthi enterprise," State Department spokesperson Tammy Bruce said in a statement. "Today's action builds on a series of measures targeting Houthi revenue generation and weapons procurement, reaffirming our resolve to counter terrorism, promote regional security and uphold freedom of navigation."
