The Truth About Social Security Cuts
It's hard to find a deficit or budget reduction plan in Washington that doesn't mention Social Security benefit cuts. But at least for now, the White House is not going to directly put the program on the negotiating table, according to the Washington Post.
Still, that doesn't mean Social Security won't continue to be a political football. For starters, Rep. Paul Ryan (R-Wis.), the new head of the House Budget Committee, will be delivering the official Republican response to the State of the Union. Ryan has been a vocal proponent of big cuts to Social Security. So you know this topic isn't going to just vanish from the ether.
With the debate and rhetoric over Social Security and its future likely to continue, here are some points to keep in mind:
- Social Security needs a tune-up, not an overhaul. It may make for a great sound bite, but Social Security is not going broke. Come 2037, if Washington were to do nothing, the program would be able to pay out about 75 percent or so of its current benefits. That's a long way from zero percent.
- The funding gap can be solved without draconian cuts to benefits. Tweaks such as raising the retirement age slightly and lifting the cap on earnings that are subject to Social Security taxes -- the 2011 cap is $106,800 -- would ensure Social Security stays on firm fiscal footing past 2037, and not in any way be a drain on the federal budget. That is, the payments into the system would cover the payout. In fact, in 2005, Peter Orszag, who went on to serve as President Obama's director of the Office of Management and Budget, and Peter Diamond, who went on to win the 2010 Nobel for economics, tackled the topic of how to save Social Security in a study for the Brookings Institute. Their conclusion? "Social Security's long-term financial health can be restored through modest adjustments. Major surgery is neither warranted nor desirable, in our view."
- Americans are pretty clear which Social Security fix they would stomach. Politicians espousing drastic cuts to Social Security benefits aren't exactly in sync with the electorate. A recent poll reports that 77 percent of Americans favor raising the wages that are taxed for Social Security as a way to shore up the program, while only 10 percent say they prefer benefit cuts to the program. Interestingly, even 67 percent of poll respondents who identify themselves as Tea Party members were for raising the wage limit on the Social Security payroll tax rather than cutting benefits. Just 20 percent of Tea Party respondents preferred cuts to Social Security benefits as a way to stabilize the program.
- None of the changes being proposed would impact current seniors. If you're interested in facts and not sound-bite hyperbole, tune out anyone who starts lamenting how cuts would unduly impact today's seniors. They won't. Just this past weekend, House majority leader Eric Cantor (R-Va) said any changes to Social Security would not impact individuals 55 and older. Moreover, deficit cutting proposals to raise the full retirement age for Social Security to 69 would be phased-in so they would only affect today's toddlers, not Baby Boomers, nor Gen X or Gen Y.
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