When the next Congress arrives in Washington, Members will need to get to work to reduce runaway government spending. One area that has been identified as a good place to start—especially as the National Commission on Fiscal Responsibility and Reform prepares to give its recommendations on deficit reduction next month—is Social Security.
Today’s Social Security will begin to run cash-flow deficits starting in 2015. Once they start, those deficits will never end. There is a trust fund that allows Social Security to receive general revenue money, but it will run out in 2037.
What happens then? A 22 percent benefit cut for all beneficiaries of the program, regardless of age or financial need. That includes lower income retirees who depend solely on Social Security to afford food and a roof over their heads. A 22 percent benefit cut will make their lives much harder.
Nevertheless, some Members of Congress continue to fight any effort to protect the benefits of lower income retirees. Peter Orszag, former director of the Office of Management and Budget, writes that “Social Security does face a long-term deficit, and a variety of reasonable reform plans … have been proposed to address that deficit. The left, though, seems adamantly opposed to restoring actuarial balance to Social Security now. I have trouble understanding this reluctance for several reasons.”
In a letter by Representative Raul Grijalva (D-AZ), a majority of the Democratic caucus claimed that “if any of the commission’s recommendations cut or diminish Social Security in any way, we will stand firmly against them.”
The Social Security Administration scored the effects of raising the eligibility age, slowing the rate of growth in benefits, and means-testing benefits so that low-income workers would receive more and those with less need would receive less.
The Washington Post’s Lori Montgomery reports, “A Republican plan to rein in the rising cost of Social Security would dramatically reduce retirement benefits for middle- and upper-income Americans, especially those now younger than 25, according to an analysis released Wednesday by the program’s chief actuary.”
This is misleading, as are the findings of the report itself. First, it does not take into account the looming 22 percent benefit cut if no action is taken.
Moreover, Charles Blahous, a recently confirmed trustee for Social Security and Medicare, writes in response to Mongomery’s claims:
There is no specific “GOP plan.” … There is a plan put forward individually by Congressman Paul Ryan [R–WI]. The provisions analyzed in the study do not correspond to that plan. The study, for example, analyzes a provision to change the calculation of the annual Social Security [cost-of-living adjustment] by using a chain-weighted Consumer Price Index. That provision, however, is not in the Ryan plan. The Ryan plan also contains a provision increasing minimum benefit payments for low-income seniors. … The study wholly ignores this provision.
Taking Social Security off the table—which is another way of saying doing nothing—would ensure that all Social Security recipients would face the real financial pain of sudden and irregular benefit cuts. … Instead of shrinking a previously $1,000 monthly check to $780, the agency would pay full benefits on months when it has received enough payroll taxes to do so and issue no checks at all in months when it lacks enough money to pay full benefits.
Congress has the means and ability to pass legislation that will ease retirement for generations to come. In the next Congress, the prospects for Social Security reform will be even brighter. But “doing nothing” will hurt the most.