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Social Security Part I: Stealth Cuts

Posted Mar 07 2011 8:31am

category_bug_politics.gif On Friday, the Wall Street Journal reported that Republican House Speaker John Boehner had this to say about Social Security in an interview with that newspaper:

”[H]e's determined to offer a budget this spring that curbs Social Security and Medicare, despite the political risks, and that Republicans will try to persuade voters that sacrifices are needed.”

Curbs.

Sacrifices.

As though Republicans haven't forced those on us already – with the consent of President Obama.

The media does not report it this way and government spokespersons from the president on down won't say it, but Social Security has been cut twice in the past three months:

ONE: REVENUE
Social Security revenue was cut by 15 percent due to the two percent cut in the FICA payroll tax that Congress agreed to in December when they extended the Bush tax cuts for the wealthy.

The White House administration got away with passing off this drastic reduction in revenue by referring to it as a one-year, workers' tax holiday and the media, as ever, dutifully reported that white-washed definition without mentioning the consequences to Social Security.

They probably thought two percent doesn't sound like much, but it is one-third of the total employee contribution of 6.2 percent of wages up to $106,800. Employers pay another 6.2 percent which was not cut thus creating the 15 percent shortfall in revenue.

This is one of the reasons that the Congressional Budget Office announced that the Social Security Administration will need to dip into the trust fund this year to pay current benefits. The other reason, as with 2010, is that due to high unemployment, Social Security revenue is already down without the tax holiday.

TWO: ADMINISTRATIVE COSTS
An item in the stop-gap continuing resolution passed by Congress last week that averted a government shutdown for two weeks, continues the freeze on Social Security administrative costs at 2010 levels.

In addition to whatever those “curbs” and “sacrifices” are than Boehner is planning, the Republicans want to continue these cuts for the remainder of Fiscal Year 2011 as Congress tries to come up with a final budget for the year before midnight 18 March when, if there is no new FY2011 budget, the government will shut down.

Noting that the Social Security Administration, due to the spending freeze, has officially warned its employees of coming furloughs, the National Committee to Preserve Social Security and Medicare (NCPSSM) provided a sampling of what these administrative cuts are:

$981 million – Current budget shortfall in SSA (due to the freeze at 2010 funding)

$125 million – Additional reduction to budget

$500 million – Internet Technology reduction

$118 million – Computer Center reduction

That is a total of $1.724 billion in SSA operations and systems reductions. Here is what that means, according to the NCPSSM, for Social Security recipients for every week SSA employees are furloughed:

• 100,000 people, including new retirees, survivors and Medicare applicants to wait longer for their benefits

• 73,000 disability applicants will wait 30 days longer than the current wait period of almost four months

• 18,000 disability applicants making an appeal will wait until 2012 to present their appeals to a judge

• 115,000 new and 231,000 replacement Social Security numbers will not be issued, leaving workers without the documentation they need to start a new job or open a bank account

So the attack on Social Security is in full swing, these two stealth cuts have been made and Boehner along with tea party and other Republicans want more.

During the 2010 primary and election campaigns, Obama waffled around on Social Security. He rejected privatization, called for a small increase in the salary cap and never explicitly said he opposes cuts to the program.

Since then, he has signed two reduction bills – the tax holiday and the continuing resolution that freezes administrative costs. And none of the media reports this.

On Friday evening, the chairman of the president's Council of Economic Advisers, Austan Goolsbee, spoke with Larry O'Donnell, host of MSNBC's The Last Word. (O'Donnell's reference to reductions in increases refers to cost-of-living (COLA) adjustments.) Watch Goolsbee's waffle: (about 1:35)

There you have it – all sorts of wiggle room as the White House refuses to say it will oppose cuts to Social Security.

To make it worse, here is what else John Boehner said in his Wall Street Journal interview [emphasis is mine]:

”...Mr. Boehner, an Ohio Republican, said he told President Barack Obama that he would take the political plunge alongside him if the president announced his own willingness to tackle changes to those programs.

"'I offered to the president we could lock arms and walk out and begin the conversation about the size of the problem,'" Mr. Boehner said, adding that Mr. Obama responded 'positively.'

To reiterate what has been stated many times: Social Security does not contribute one penny to the deficit. It is self-funded by those FICA deductions from workers' paychecks.

And, even with reduced revenue from that tax holiday and higher unemployment, the Social Security trust fund, which will continue to grow until 2025, will have the resources to pay full benefits until 2037. Only minor tweaks are needed to secure Social Security far beyond that date.

The president and Mr. Goolsbee are not stupid men. So what don't they understand about how Social Security works and its fiscal condition? The only conclusion I can draw is that they, like Republicans, want to cut Social Security.

Social Security Part II: The Trust Fund will be published here on Wednesday


At The Elder Storytelling Place today, Terry Hamburg: The Greed Cure

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