Amid all the hand-wringing over Republican plans to eviscerate Medicare and Medicaid and repeal the Affordable Care Act, it shouldn’t be overlooked that the GOP has the knives out for Social Security too.
The latest reminder comes from Rep. Sam Johnson, R-Tex., chairman of the Ways and Means Social Security subcommittee. Johnson on Thursday uncorked what he termed a “plan to permanently save Social Security.”
Followers of GOP habits won’t be surprised to learn that it achieves this goal entirely through benefit cuts, without a dime of new revenues such as higher payroll taxes on the wealthy. In fact, Johnson’s plan reduces the resources coming into the program by eliminating a key tax --another way that he absolves richer Americans of paying their fair share, while increasing the burdens of retirement for almost everyone else.
Predictably, this plan has already been hailed by the Committee for a Responsible Federal Budget, a billionaire’s front group that likes to portray itself as a neutral budget watchdog. (The foundation of hedge fund billionaire Peter G. Peterson, whose hostility to Social Security is well-documented, provided $3.3 million in funding for the committee in 2015; that’s the equivalent of about half the group’s revenue of $7.1 million in 2014)
The group calls Johnson’s proposal “a thoughtful plan” and the product of “true leadership.” But it also says that “revenue and benefit changes both need to be on the table.” Johnson’s plan doesn’t meet that standard at all.
Typically, Social Security “reform” proposals at least pay lip service to the fact that the payroll tax has been giving the wealthy a larger and larger pass, by covering an ever-shrinking percentage of their wages and exempting the capital gains and dividends that make up a larger share of high-end income.
Johnson’s plan doesn’t mention that at all. It does, however, give higher-income beneficiaries a tax cut by eliminating income tax on benefits starting in 2045. The tax affects about 30% of retirees by treating at least half of the benefits of those earning more than $32,000 as taxable income.
By law, the tax must be credited to the Social Security system. It’s scheduled to bring in as much as $78 billion in 2025. Johnson’s rationale here is murky. If Social Security is in such bad shape that he sees the need to slash benefits, why cut its revenue, too?
Social Security’s actuaries, who analyzed the plan at Johnson’s request, agreed that it would improve the program’s finances, but noted that virtually every provision involved a benefit cut.
Let’s take a look.
Johnson’s “Social Security Reform Act” changes the program’s benefit formula to provide modest benefit increases for the lowest-earning workers in the system— those who earned up to an annual average of about $22,105 over their lifetimes in inflation-indexed pay — with cuts for everyone else ranging from 17% to as much as 43%, compared with currently scheduled benefits, by 2080.
The act would cut way back on cost-of-living increases for retirees. It would do this by cutting out cost-of-living raises entirely for retirees earning adjusted gross income of more than $85,000 ($170,000 for couples) starting in December 2018, and using the chained consumer price index to calculate the COLA for all others. (The income threshold would be adjusted for inflation.)
Johnson asserts that the chained CPI is “a more accurate measure of inflation,” but he’s blowing smoke. There are no grounds to say the index, which was heavily promoted a few years ago by yet another gang associated with Peter G. Peterson, is more accurate than the index used today. If anything, it understates price increases in housing and healthcare, which have especially pronounced impacts on the household budgets of seniors. Conservatives like it for one reason: It grows more slowly than the regular CPI, so it’s cheaper. As we explained a few years ago, using the chained CPI is a benefit cut, and one that gets larger year by year. Period.
Johnson would also cut benefits for the spouses and children of retired and disabled workers by pegging them to average wages, rather than to the wages actually earned by the worker. This pares the benefits for families earning more than the average.
Finally, the measure also raises the full retirement age, which is now pegged to reach 67 by 2022, to 69 by 2030. this means that workers taking early retirement, which is permitted as soon as age 62, would face a steeper cut in annual benefits for starting early. Johnson would increase the age up to which delayed retirement credits may be earned to 72, from 70. Workers who can afford to put off claiming Social Security will reap the great rewards from this maneuver; by their nature, they tend to be wealthier people who have the resources to live on while deferring Social Security.
Conservatives often argue that raising the retirement age is innocuous because Americans are living longer. Their lengthier retirements, it’s argued, put an unexpected strain on Social Security’s finances, and they don’t need all that money anyway.
But this change is unfair and short-sighted for several reasons. One is that life expectancy is closely tied to income, education and careers. Well-heeled persons who spend much of their lives behind a desk — congressmen from Texas and analysts at billionaire-funded think tanks, say — are more likely to live longer and can stay in their careers well into their 60s and 70s. That’s not so for workers who spent their careers in menial or physically challenging work.
Raising the retirement age is also predicated on life expectancies rising indefinitely. Just as trees don’t grow into the stratosphere, there’s no guarantee this trend isn’t finite. Indeed, just this week the Centers for Disease Control and Prevention reported that U.S. life expectancies actually declined last year for the first time since 1993, falling to 78.8 years at birth from 78.9 in 2014, statistically a major decline.
It may be unwise to draw too sweeping a conclusion from a single year’s figures, but this statistic is a reminder that life expectancy is a dynamic phenomenon, and we may merely have been living through a two-decade bump. Nature may have its own ideas about the appropriate average lifespan for members of the human race.
The bottom line is that Johnson’s plan is one of the most cynical and dishonest Social Security “fixes” to come down the Republican chute in years. It “fixes” Social Security in the same sense that one “fixes” a cat, and makes the program less relevant for millions of Americans facing retirement with ever shrinking resources.
Is this a serious policy prescription? Social Security advocates are properly aghast. As Nancy Altman, co-founder of Social Security Works, put it Friday, in the last election “no one voted for massive cuts to Social Security, nor to end the program as we know it.” Donald Trump even campaigned on a hands-off pledge.
“Trump needs to immediately reassure the American people that he will keep his campaign promise and veto this awful bill,” Altman said. “He should tweet that immediately.”