SAVE SOCIAL SECURITY
By Greg Sargent
On Wednesday morning, the GOP-controlled Senate Budget Committee is set to hold a hearing entitled: “The coming crisis: Social Security Disability Trust Fund Insolvency.” The dry bureaucratic language masks the drama inherent in what could prove the first high-profile skirmish in a series of battles that could go a long way towards defining the new GOP Congress: Battles over the future of the safety net.
To hear Democrats tell it, the hearing represents the first shot from Republicans in what is shaping up as a stealth attack on Social Security. And the ranking Democrat on the Budget Committee, Senator Bernie Sanders, tells me he intends to use the hearing to frame the stakes in a battle over the program’s future that is only just beginning.
“Republicans have made it clear that they intend to pursue ‘entitlement reform,’ which is code for cutting Social Security and Medicare,” Sanders said in an interview today. “This is their first step forward. Whether they will focus on disability, or cuts in the retirement program, I don’t know. But there’s no question that they intend to push forward and try to cut Social Security.”
The basis for this suggestion is a recent House GOP rules change that would greatly restrict the ability to fund the Social Security Disability Insurance program through a simple reallocation of funds from Social Security’s larger overall retirement fund. The disability fund’s reserves are set to run low in 2016, potentially leading to a steep cut to millions of disabled beneficiaries, sparking a debate over how to replenish it. Republicans have claimed restricting a fund transfer is all about forcing a necessary discussion on how to improve Social Security’s long term finances, rather than merely “kicking the can down the road,” as one GOP lawmaker put it.
But Democrats believe Republicans are exaggerating the sense of crisis to realize one of two political goals. Either they want to force immediate, and unnecessary, cuts to the disability fund — targeting an aspect of the program, after having failed in the past to achieve broader cuts — or they want to hold the disability fund hostage, in order to have another run at cuts to the broader program.
“Republicans are creating a phony crisis,” Sanders says. “They are saying the disability insurance program will be running out of money, and therefore one of two things has to happen: Either we cut disability or we have to look at the solvency of the whole program, to protect disability benefits, which means we’re going to have to cut benefits either through Chained CPI, or raising the retirement age, or through privatization.” Chained CPI is a way of rejiggering indexing to inflation that amounts to a benefits cut.
In other words, Republicans might argue that we mustn’t simply transfer money from the broader program to the disability program, because that might weaken the program for seniors. A recent analysis from the liberal-leaning Center on Budget and Policy Priorities concluded that such transfers are routine, have happened 11 times in the past, and that another one right now would be easy to do. “Another reallocation to replenish the DI trust fund wouldn’t threaten seniors, contrary to the rule’s implicit attempt to pit retirement and disability beneficiaries against each other,” the analysis concluded.
Similarly, Senator Sherrod Brown has suggested that Republicans are pursuing a kind of divide-and-conquer strategy against the program: “They want to separate ‘good’ Social Security (retirement security) from ‘bad’ Social Security (disability insurance), to win support for structural reform.”
Fueling such suspicions of an effort to pit seniors against undeserving recipients, Senator Rand Paul stirred controversy when he recently seemed to disparage disability beneficiaries, opining that “over half of the people on disability are either anxious or their back hurts.” Politico reported recently that Democrats were further alarmed when discussion at a recent Congressional hearing turned to raising the Social Security retirement age.
But Obama’s new budget includes a simple reallocation of funds, and Democrats are signaling that they are prepared to fight for it. Sanders tells me he will use the coming hearing to try to draw out the factual details of Social Security’s finances and the true motive of Republicans in opposing such a reallocation. Sanders also suggested the politics of the disability fund could get tangled up in the coming effort to negotiate a budget. “What I would like to hear them say is that they will support what has been done on 11 occasions, and that we should be working together to find a long term solution,” said Sanders. “I’m going to make it as clear as I can what the Republican agenda really is.”
When it comes to Social Security’s broader solvency, Sanders favors raising the cap on maximum income hit by the payroll tax to fund the program. The Center on Budget and Policy Priorities has similarly concluded that its long term finances can be fixed mostly through such reforms.
It’s always possible, of course, that a handful of moderate Democratic Senators could side with Republicans when it comes to efforts to “reform” Disability Insurance (by cutting it), and might oppose efforts to raise taxes on the well-off to preserve the broader program. Pressed on this possibility, Sanders said: “I think it’s fair to say the vast majority of the Democratic caucus will support the president and reallocation.”
Obviously, given GOP control of Congress, the chances of getting long term reforms that involve more revenues are remote to nonexistent. Indeed, more broadly, Republicans are set to propose a budget that purports to achieve balance in 10 years with no new revenues from the wealthy, which would likely require extraordinarily deep cuts to programs that help lower income Americans. Thus, many battles over the safety net lie ahead, and they will be fought mostly on GOP turf. This week’s disability hearing offers a dress rehearsal of sorts.
Greg Sargent writes The Plum Line blog, a reported opinion blog with a liberal slant -- what you might call “opinionated reporting” from the left.
The concepts of solvency, sustainability, and budget impact are common in discussions of Social Security, but are not well understood. Currently, the Social Security Board of Trustees projects program cost to rise by 2035 so that taxes will be enough to pay for only 75 percent of scheduled benefits. This increase in cost results from population aging, not because we are living longer, but because birth rates dropped from three to two children per woman. Importantly, this shortfall is basically stable after 2035; adjustments to taxes or benefits that offset the effects of the lower birth rate may restore solvency for the Social Security program on a sustainable basis for the foreseeable future. Finally, as Treasury debt securities (trust fund assets) are redeemed in the future, they will just be replaced with public debt. If trust fund assets are exhausted without reform, benefits will necessarily be lowered with no effect on budget deficits.
The author is the Chief Actuary of the Social Security Administration.
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