President-elect Trump repeatedly said he would not touch Social Security, he would leave it alone.
December 16th 2016 Rep. Sam Johnson (R-TX) chairperson of the subcommittee on Social Security presented legislation called the “Social Security Reform Act of 2016”. Johnson says the act is to “improve” the financial stability of Social Security.
According to the Center for American Progress the Social Security Reform Act of 2016 will improve Social Security funding by cutting benefits to Social Security recipients in several ways. Here is how his proposal will impact American citizens:
Workers making around $50,000 would see checks shrink by between 11% and 35%.
The first year for receiving full benefits would climb to 67.
Nearly every income bracket would see a reduction, save for the very bottom.
People making around $12,280 in 2016 who have worked for 30 years would see an increase of around 20%.
But young people making the same amount would be hit hard by the changes. If they had 14 years of work experience by 2016, they would see their benefits cut in half.
The plan would also cut entirely cost of living adjustments (COLA) for retirees earning above $85,000.
Social Security is the only government retirement benefit that adjusts payments based on inflation. Part of the Johnson proposal is to change how the COLA is calculated for incomes below $85,000. The new math used in his plan would reduce COLA adjustments for retired and disabled persons.
Social Security is a fixed amount of money in the form of a monthly check. If at retirement you get $1,200.00 per month you will get that amount for the rest of your life plus any COLA increases. In 2015 there was no COLA adjustment.
A Look at the COLA
If you were born in 1960 and you make it to 65 and your a man, you can expect to live an additional 13.2 years and if you are a woman, you can expect to live an additional 17.4 years according to Social Security.
Looking back 13 years ago the price of gas was $1.60 and a loaf of bread was $1.00. In 2016 gas averaged $2.29 per gallon, in 2012-$3.60 per gallon. In 2016 a loaf of bread is $1.42.( I don’t know where, I pay significantly more for bread.).
What it will the next 13 or more years will be like with no Cost of Living Increase. Do you think the cost of living will be significantly higher?
How will you make ends meet if you are like the 40,960,000 people who depend on Social Security for at least half of their monthly income and the COLA is taken away?
Social Security is composed of two different funds, The Old-Age Survivors Insurance (OASI) and Disability Insurance (DI), collectively called Social Security. It is a “pay-as-you-go” system, money received in a given year is dispersed to Social Security recipients in benefit checks during that year.
In 1982 President Regan raised the Social Security payroll tax looking ahead to the upcoming “baby boomers” who’s retirements would outpace Social Security annual funding. The increase in payroll tax led to surpluses in Social Security funds which by law must be put into special interest bearing bonds held by the Treasury Department. Since 1982 Social Security has totaled surpluses that now exceeds 2.8 trillion dollars.
The DI trust fund faces exhaustion in 2023, and OASI fund in 2035 despite the 1983 payroll tax increase. Social Security must cash in some of its securities (the 2.8 trillion) to pay beneficiaries otherwise beneficiaries will receive less than 100% of their benefit check each month. By law Social Security can’t pay out more than it has so Congress must act before 2023.
Cashing in the some portion of the 2.8 trillion means the government will have to increase its borrowing from the public (increasing the deficit), raise taxes in some form, spend less, or cut discretionary spending (the only part of the federal budget Congress controls).
Americans pay into Social Security through payroll taxes that currently are evenly divided at 6.2% for the employer and 6.2% for the employee. The Medicare tax is also split evenly between employee and employer, 1.45% for employers and 1.45% for employees. The calculation on what is paid changes when a person hits the “Social Security Cap”. Hitting the cap currently means they earn more than the $118.500 in 2016 and $127,200 in 2017. Tax loopholes reduce the amount individuals pay at that upper income level. In 1983 the Social Security Cap was $110.100.00 and applied to 90% of all taxpayers, only 11% of taxpayers were in the top 1% of income earners. In 2015 the number of those top 1% earners increased to 20% and now only 80% of taxpayers contribute fully to Social Security. A net loss of 6% of those fully funding Social Security.
In addition health insurance costs aren’t currently considered taxable income by Social Security. Most employees have had to forgo raises in pay to cover the cost of employer financed health insurance. The lack of pay raises has also contributed to the Social Security funding gap.
The Social Security funding gap is the result of both a drop in the percent of taxpayers that fully pay into Social Security and the exemption of health insurance costs from Social Security taxation.
Republican Rep. Tom Price (R-GA) who currently chairs the House of Representatives Budget Committee (President-elect Trump has nominated Price to be the next Secretary of Health and Human Services) has also proposed a plan of a different sort. Price’s plan includes long term debt limits enforced by automatic cuts.
According to the Center for American Progress Price’s plan would:
Slash key social programs without requiring Congress or the president to take responsibility for the result. If Congress enacts President-elect Trump’s proposed tax plan —which mostly benefits the wealthiest Americans—then Rep. Price’s automatic cuts would slash Social Security by $1.7 trillion and Medicare by $1.1 trillion over 10 years. Rep. Price’s automatic cuts provide a way for members of Congress to vote for both tax cuts and debt reduction—and for President-elect Trump to sign these measures into law—while falsely claiming to uphold his campaign promises to protect Social Security and Medicare.
Johnson, Price and Bowles-Simpson (2011) all have the same solution for Social Security-cut benefits. The good news is there are many ways to make Social Security solvent that don’t involve reducing benefits.
The Center on Budget and Policy Priorities provides 3 ways
- By increasing or eliminating the cap on Social Security – The funding gap could be closed by 25% to 90% depending on how the cap was structured.
- By expanding compensation subject to Social Security payroll tax – to include fringe benefits such as employer-sponsored health insurance and flexible spending accounts. By including fringe benefits in Social Security’s tax base would eliminate the discrepancy between those who receive fringe benefits and those who don’t and could result in closing the gap by 33%.
- By increasing payroll tax rates – By increasing payroll tax rates could close the funding gap completely. A modest increase of .3% , less than 3 dollars a week for the average wage earner could close about 20% of the funding gap.
A report commissioned by the Pentagon exposing $125 billion annually in administrative waste was intentionally hidden from Congress came to light on December 5th due to reporting by Bob Woodward (yes, the same reporter that broke Watergate and Craig Whitlock) that appeared in the Washington Post.
According to the National Priorities Project a Nobel Peace Prize nominee in 2014 the US spends 54% of all discretionary spending or 598 billion dollars annually on the Military. In Contrast the US spends 29.1 billion on Social Security, Labor and Unemployment annually.
The US Military annual budget is seven times larger than the next closest seven governments combined (this includes China and Russia). The US Military Budget is 37% of the world’s 1.6 trillion dollars in annual military spending as of 2015.
We agree a strong military is needed and we believe a strong citizenry is needed. This isn’t an either or calculation. The military budget can still provide for our troops, cut administrative waste and have more than enough to fund Social Security for the foreseeable future. Congress must have the will to act!
All of these options should be explored before any proposal involving cuts to Social Security, Medicare, and Medicaid are considered.
Why is Congress failing to examine these options as well as accessing some of the money wasted in the Pentagon’s own report before proposing cuts to Social Security beneficiaries?
Will our President-elect and Congress stand up for those of us that make up the 99% of America or will they continue to stand with the 20% at the top that benefit from the proposed legislation?
Will Congress and the White House look at the Pentagon’s own report and consider allocating a small portion of the wasted funds to make Social Security solvent in the future?
Democrats Senators Sanders and Schumer and Representative Pelosi have asked citizens to rally on January 15th to let our voices be heard that we won’t stand for cuts in Social Security, Medicare, and Medicaid.
We ask you to contact your legislators and fellow citizens to not only rally on January 15, but to stay vigilant, write or call the leaders of Congress and our President-elect not once but over and over and let them know how you feel about proposed cuts to Social Security, Medicare, and Medicaid.
If we remain passive we run the risk of seeing Social Security, Medicare, and Medicaid gutted by the proposals reported here.
To find contact information for your legislators click Find My Legislator
Stay vigilant and get active!