Cutting Social Security benefits for millions of Americans by adopting a stingier cost of living formula is anything but the administrative “tweak” many claim. The proposed chained CPI would cut benefits for millions of seniors, veterans, federal retirees, and people with disabilities. Cutting the cost of living allowance by 3% for workers retired for ten years and 6% for workers retired for twenty years translates to a benefit cut of $130 per year in Social Security benefits for a typical 65 year-old. By the time that senior reaches 95, the annual benefit cut will be almost $1,400. That may seem like no big deal to the well-funded anti-deficit lobby and corporate CEO’s who want middle-class Americans to pay down the debt but those dollars mean a lot to seniors living on the average Social Security income of just $14,000 per year. That’s why the vast majority of Americans and more than 50 of the nation’s leading military, veterans, seniors, disability, and federal employees’ organizations joined the National Committee to Preserve Social Security & Medicare in opposing adoption of the chained CPI.
When the president and Congress promised the Social Security payroll tax “holiday” was only temporary two years ago, I said “who’s kidding whom?” There is no such thing as a temporary tax cut in Washington and Congress is proving that fact yet again. Diverting money from Social Security was a bad idea when it was first enacted in 2010, it was a bad idea when extended last year, and is still a bad idea now that this alleged “temporary holiday” has lasted two years.
Providing tax relief to middle class Americans has been important to our continued economic recovery. However, extending the payroll tax cut is not the only or even best way to accomplish this goal. Instead, we believe the “Making Work Pay” tax credit would do more to boost the economy. The payroll tax cut, coupled with general fund transfers to replace the lost revenue, leaves Social Security increasingly dependent on both general revenue and Congress for its funding. This is a dramatic and dangerous departure from relying on workers' contributions, which have so successfully funded the program since its inception in 1935. Extending the payroll tax cut another year threatens Social Security's financial integrity and makes it even more vulnerable to benefit cuts or privatization if Congress puts Social Security back on the table in 2013.
Between plans to divert revenue from Social Security and proposals to cut Social Security benefits it’s no wonder the middle-class has so little faith in Washington. Not only is diverting billions in Social Security contributions for a seemingly endless “tax holiday” not the best stimulus for middle-class workers; it’s also bad business for the program that current and future generations of middle-class Americans desperately need. Cutting middle-class benefits under the guise of a formula “tweak” hurts millions of veterans, seniors, people with disabilities and federal retirees. The American people understand this. Hopefully, Washington may also be coming around.
Richtman is president and CEO of The National Committee to Preserve Social Security & Medicare.