House OKs Repeal of Earnings Limit on Social Security

The House passed legislation Wednesday that would repeal the long-standing earnings limit on Social Security, enabling Americans 65 to 69 years old to earn as much money as they want each year without losing any federal retirement benefits.

The measure, passed on a 422-0 vote, would affect about 800,000 Americans and would take effect retroactively to Jan. 1. Under current law, seniors 65 to 69 who earn more than $17,000 a year lose $1 in benefits for each additional $3 earned. Those 70 and older have no earnings limit.

“Why in the world would we want to discourage any American, whether they’re 17 or 67, from working?” said Rep. Bill Archer (R-Texas), chairman of the House Ways and Means Committee. “Americans are living longer now and older Americans can work, they want to work. And they shouldn’t be punished by an outdated law.”

Republicans made the bill a major element in their tax program this year after failing to push a broad tax-cut bill into law in 1999. But Democrats, sensing a sure-fire political issue, quickly signed on. The Senate is expected to approve a similar measure promptly.

President Clinton, who earlier had opposed eliminating the earnings limit, also has come to see it as an election-year bonanza. Two weeks ago he surprised reporters by saying that he would be “thrilled” to sign the legislation if it is not encumbered by additions he could not accept.

“We should reward every American who wants to and can stay active and productive,” Clinton said.

Although the legislation is popular with lawmakers and senior citizens alike, analysts cautioned that it could complicate efforts to shore up the Social Security trust fund, which is facing a projected shortfall, with expenses expected to exceed revenue beginning in 2014 as baby boomers start to retire.

“This [legislation] is good. This is great. But it is really only the beginning of what we have to do” to ensure Social Security’s future, said Rep. Robert Menendez (D-N.J.).

Proponents of the plan argued that the penalty on earnings for retirees has become unrealistic as Americans live longer and that it has exacerbated the nation’s labor shortage by discouraging seniors from working at a time when many businesses are unable to fill jobs.

The measure would cost the Social Security trust fund an estimated $22.7 billion over the next 10 years, the Social Security Administration estimated, but it said that the fiscal impact of the measure would be negligible in the long run because the loss would be offset by increased revenue from payroll taxes.

It would also increase the available national labor pool by an estimated 5%, not including those seniors who now lose government benefits because they work, sponsors said, and save up to $150 million in administrative costs.

Passage of the bill was the latest effort in a new Republican strategy to send major elements of the GOP’s tax package to the floor in piecemeal fashion, thus avoiding a Clinton veto of a more costly omnibus tax-cut measure, as occurred in 1999.

So far, that strategy has been working. Besides the earnings-limit bill, Republicans have also pushed through legislation to reduce the marriage penalty, the quirk in the tax code that often forces couples to pay more in taxes than if they had filed as single taxpayers.

Last month, 48 Democrats joined Republicans to pass the marriage penalty legislation. On Wednesday, 205 Democrats and both independents in the House voted to end the earnings limit for Social Security.

But Clinton has vowed to veto the marriage penalty measure. While he and the House Democratic leadership support reducing the penalty, they oppose the Republican-drafted bill as too expensive and too favorable to affluent taxpayers.

Ending the Social Security earnings limit has long been favored by the GOP but until recently Democrats had opposed the idea, fearing that it would force cuts in other spending programs. However, the booming economy, the worker shortage and projected budget surpluses have changed that.

The measure’s popularity in this election year was evident Wednesday. The House considered the bill under a special fast-track procedure that prohibited floor amendments and lawmakers all but stumbled over one another to tout the bill’s merits.

In a rare show of bipartisanship, House Speaker J. Dennis Hastert (R-Ill.) and Minority Leader Richard A. Gephardt (D-Mo.) both took the floor to support the legislation. “Thank heavens this is here,” Hastert said, calling the measure “a time of salvation for our seniors.”

Both Democrats and Republicans sought to claim credit for passage of the measure. Floor action on the legislation, which had been scheduled for today, was moved up so House members could go back to their districts for a four-day weekend with the measure passed.

The earnings limit was imposed during the Great Depression as a means of encouraging older persons to leave the work force at age 65. The idea was to open up more jobs for younger workers who had families to support. The unemployment rate then was 25%.

The maximum that a Social Security recipient may earn without losing benefits has been increasing in recent years to offset inflation. Under current law, it would rise to $30,000 by 2002. Despite these changes, the penalty still discourages some seniors from taking good jobs, proponents of the legislation said.

Some fiscal experts had recommended effectively increasing the earnings limit--by denying Social Security benefits to high-income seniors--as a way of shoring up the program for the long term. Wednesday’s measure goes in the opposite direction.

Some lawmakers lamented the fact that Congress would not be addressing the Social Security program’s longer-range problems--such as the projected shortfall in the trust fund in coming years--but they expressed hope that the issue might be considered after the election.

As expected, the AARP, the chief lobby group for elderly Americans, hailed the House action Wednesday. Horace Deets, the group’s executive director, called the bill “good labor, social and economic policy.”

All but four members of the California congressional delegation voted for the bill to repeal the earnings limit. Not voting were Republicans Tom Campbell of San Jose and Stephen Horn of Long Beach and Democrats Juanita Millender-McDonald of Carson and Maxine Waters of Los Angeles.