The talk in Washington and among opinion leaders around the country's budget issues today centers on "balance" and "responsibility." Many conservatives declare that these terms mean that there should be no new revenue, only spending cuts to programs such as Social Security and Medicare. They also propose to reduc cost of living adjustments for all Social Security recipients, a group of Americans who have seen traditional pensions eliminated and savings devastated by the Great Recession — and who rely more and more on our Social Security system, into which they paid during their entire working lives.
Although many in the Democratic Party oppose cuts to these core programs and favor new sources of revenue, President Barack Obama proposed reducing the cost of living adjustment for all Social Security recipients. How responsible and balanced are these arguments and the assumptions underlying calls for "reform"? Let's examine some of these key assumptions:
•Seniors are living in luxury and cheating future generations. The median income for individual seniors is $22,000 a year, about twice the official poverty level; older women's median income is $15,072. Some 16 million older Americans, one-third of Social Security retirees, rely on the program for 90 percent of their income; 40 million rely on it for at least 50 percent of their income.
The average Social Security benefit is about $1,200 a month. Although budget cutters such as former Republican Sen. Alan Simpson (of the Simpson-Bowles Commission) rail about greedy geezers depriving younger Americans, a 2012 survey by the nonpartisan National Academy of Social Insurance found that 82 percent of Americans, including 77 percent of those under age 32, would pay more to maintain current benefits.
It is extremely important to note that Social Security does not contribute to the deficit and is not going bankrupt. Thanks to the 1983 bipartisan reforms, Social Security has built up a $2.7 trillion surplus. It is fully funded through 2033 and, with no changes, will pay 75 percent of benefits indefinitely. Those earning more than $113,700 pay no Social Security payroll taxes on wages above that level. Eliminating this loophole would finance full Social Security benefits through 2075.
•Changes in Social Security will not affect anyone over age 55. The proposed modification of the Social Security cost-of-living adjustment, known as the "chained CPI" for its different way of calculating the consumer price index, would cut benefits immediately. This seemingly minor accounting change would have significant impact, especially for women, who generally live longer and earn less during their working lives. Over 10 years, the chained CPI would cost the average recipient who is now 65 years old $675 a year, based on the Social Security actuary's figures. After 20 years, the cut would be nearly $1,000 a year, the equivalent to 16 weeks of food for an 85-year-old woman with an average benefit.
The rationale for this change? When prices rise, consumers switch from more expensive to less expensive products. However, supporters of the chained CPI don't explain how seniors facing such common (and expensive) medical procedures as bypass or cancer surgery will make the switch.
•Seniors are bankrupting the health care system. Although older Americans are the heaviest users of health care, they also pay the highest percentage of their income, about 20 percent, for health services. Early results from implementing the Affordable Care and Patient Protection Act (ACA) have significantly reduced health care costs for those both over and under age 65. The law will not be fully implemented until at least 2014. The ACA includes pilot projects to coordinate care among groups such as seniors suffering from multiple chronic health problems — a task now often left to patients alone.
According to the Medicare trustees, Medicare is financially sound until 2024. And federal spending on Medicare and Medicaid has been 15 percent under projections since the ACA began to take effect in 2010. The nonpartisan Congressional Budget Office estimates that by allowing Medicare to negotiate drug prices as Medicaid and the Veterans Affairs Department do, the program would save over $200 billion more over the next 10 years.
Under the House Republican budget, Medicare would be replaced by a voucher system, with increases based on general rather than health care inflation. In eight years under that plan, Medicare recipients would pay 68 percent of their health care costs, versus today's 25 percent, according to the CBO. The House budget raises the Medicare eligibility age to 67, shifting costs to individuals, employers and the states. If these proposals become law, many seniors will forgo or delay treatment. Isn't it wise to see how effectively the health care reform law controls costs and improves outcomes before proposing major changes?
As Congress debates and the drumbeat for cuts continues, lawmakers should remember what Social Security and Medicare have accomplished for the tens of millions of Americans who have relied on them for 50 years or more. Forty million seniors and 270 million Americans under 65, who someday hope to retire, will be watching closely.
Frank Stella is president of the 80,000-member Maryland/DC Alliance for Retired Americans, an advocacy group for seniors and working families. His email is email@example.com.