(By Mark McCutchan)
The Republicans are just getting started on their quest to maximize damage to the federal budget and the American economy. Despite polls showing nearly 82% of Americans oppose cuts in Social Security to reduce the deficit, Republicans continue to state that the program needs to see changes like raising the retirement age to 70, and cuts in future payments. Why? Polls also show cuts to Social Security would hurt the President’s and Democratic Party’s prospects in 2012.
The Social Security program is not going bankrupt, is more fiscally stable than the rest of the federal budget, and will stay in the black for a long time.
* Social Security is funded through a 6.2% withholding tax imposed on your gross wages below a $106,800 ceiling for 2011 (it’s listed as “FICA” on your paycheck stub). Your employer also pays 6.2% of your gross income towards Social Security, for a total of 12.4% of gross income paid to the Social Security trust fund
* Starting at age 65, retirees are provided a guaranteed benefit that is based on the amount they earned when they were employed.
* Social Security retirement benefits went to 36 million retired workers in 2009, and represented more than half of the annual income of 52% of married beneficiaries and 72% of unmarried beneficiaries.
* Social Security lifts approximately 13 million seniors out of poverty.
* Social Security also provided benefits to 6 million survivors of deceased workers, and 10 million disabled workers and their families.
Social Security is part of the class of budget expenditures called entitlements, which include Social Security, Medicare, and Medicaid. The federal budget is almost equally divided in fifths, with the categories of Discretionary, Defense, Social Security, Medicare & Medicaid, and Other each taking about 20% of the revenues. This makes it appear as though each of these items is equally responsible for inflating our budget debt, but Social Security has contributed not one dime towards the federal debt.
How is that possible?
When the Social Security program was started in 1935, the budget of the program was separate from the rest of the general revenue budget, or “off-budget”. After going back on-budget and then off-budget, the Graham-Rudman-Hollings bill of 1985 muddied the program’s status by counting Social Security surpluses (but not deficits) in the federal calculations of budget deficit. Nevertheless, insincere politicians still display the federal budget as including Social Security when they are looking for budget cut targets.
The Social Security program revenues were expected to be exhausted around 2037; that means that pay-ins from workers equals payouts to retirees, and any increase in payouts would have to come from FICA tax increases, or from the general tax fund. That’s better than the state of the rest of the federal budget, which has run a debt for over 100 years This rosy forecast for Social Security was dented last December, when the “revenue reduction” bill signed by President Obama included a reduction in employee FICA contributions from 6.2% to 4.2%. It provided a small immediate stimulus for the economy, but a blow to the future of Social Security. If this contribution does not return to 6.2% in 2012 (which the Republicans would label a “tax hike”), the Social Security trust fund will be exhausted by about 2032, five years earlier. Republicans will use this fear of accelerated bankruptcy to demand cuts in Social Security benefits and a hike in the retirement age for Social Security benefits.
Social Security will be there for us forever if we make any of these adjustments:
* eliminating the income cap for making contributions; it is currently a regressive tax, as millionaires pay the same dollar amount as a worker making $106,800/year
* making small increases in the FICA withholding tax (from 6.2% to 6.7% for employee and employer contributions)
* encouraging naturalization and legalization of immigrants currently in the country, so that they can contribute to the Social Security program.
President Obama has been very clear about keeping Social Security benefits off the chopping block. White House advisor David Plouffe said last Monday, “[I]f there are [Social Security] proposals out there that are acceptable, that don’t reduce benefits, don’t slash benefits, that don’t affect current retirees, the President is open to proposals that would shore the system up in the long term.”
That sounds like an unwavering statement from the White House, but we have seen the president compromise before on issues that are very important to progressives, like his faltering support of the public option during the health care reform debate.
Please contact President Obama, call your representatives, and write a letter to your local newspapers to support Social Security, and tell the budget-cutters to keep their mitts off our retirement income.
Here are links for submitting letters to the editor for national papers, and to newspapers in Colorado, Connecticut, Delaware, Illinois, Iowa, Maine, Massachusetts, Michigan, Minnesota, Missouri, New Hampshire, Ohio, Pennsylvania, Rhode Island, Vermont, and Wisconsin.
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