Democrats Spurn Social Security Revamp

Friday, 25 Feb 2011 03:25 PM

 

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Obama administration officials are rejecting the idea of making major changes to Social Security as part of a debate over reining in the national debt, a stance that’s drawing protests from deficit-cutting advocates.

White House Budget Director Jack Lew and Jason Furman, deputy director of President Barack Obama’s National Economic Council, both stressed this week that Social Security isn’t facing an immediate funding crisis and should be viewed separately from moves to reduce the federal budget deficit.

Their comments go further than Obama did in his Jan. 25 State of the Union address in erecting a fence around Social Security, signaling a desire to delay any action on the federal retirement program.

“They’ve dumped a big pot of ice cold water on any embers of Social Security reform,” said Chuck Blahous, a Social Security public trustee who headed a commission on the program impaneled by President George W. Bush.

The White House position may also jeopardize a broader bipartisan effort to tackle the national debt. The math for a Social Security fix, which would blend benefit cuts and tax increases for future retirees, could be relatively simple. That’s why some Republicans say it could be a starting point for a bipartisan consensus on a debt-reduction bill being negotiated by a group of six senators.

Shutdown Looms

With polls showing that public opposition to benefit reductions runs deep and cuts across parties, few Republicans or Democrats will want to attach their names to a bill that stands little chance of being signed by the president.

The debate over Social Security is taking place as Republicans and Democrats in Congress are deadlocked over spending cuts with a U.S. government shutdown looming. The Republican drive to lower spending will then turn to a debt-reduction package as the U.S. approaches its authorized debt ceiling of $14.3 trillion within a few months.

Separately, aides to the group of six senators working on a plan to address the deficit confirmed that talks are focused more on tackling the rate of growth in Medicare spending than Social Security’s long-range shortfall.

Adequate Resources

In a Feb. 22 editorial in USA Today, Lew said the retirement program’s trust fund will have adequate resources to pay full benefits to retirees for the next 26 years, that the nation’s debt “problem is not Social Security” and that strengthening the program should be handled separately.

Speaking to NDN, a Democratic-leaning advocacy group, Furman said talk of a Social Security overhaul “is not one you care about” if “you are worried about our long-run fiscal future.” He said the program is “the bedrock of retirement security” and solvent for another 26 years, until 2037.

The Lew editorial and Furman comments were buttressed by comments last weekend by the Senate’s No. 2 Democrat, Dick Durbin of Illinois, who served on Obama’s deficit commission.

“I was stunned, I really thought we were making progress across the board,” Senator Lindsey Graham, a South Carolina Republican, said of the comments. “It seems to me to be the one place where you could actually have a breakthrough. It’s so much easier to do than Medicare.”

Obama’s Call

Experts say ensuring Social Security’s solvency may be at least technically simpler than dealing with Medicare, the insurance program for the elderly. For instance, the Social Security Administration projects that 30 percent of the shortfall over the next 75 years could be prevented by raising the maximum earnings subject to payroll tax by 2 percent a year until 90 percent of all earnings are covered.

In his State of the Union speech, Obama called for a “bipartisan solution” to strengthen Social Security “without slashing benefits for future generations.”

Durbin, who last year called an increase in the retirement age hardly “radical” and voted for a plan that would also reduce annual cost-of-living gains for all recipients and trim benefits for the wealthy, took a different tack last weekend.

On NBC’s “Meet the Press” program on Feb. 20, Durbin said Social Security doesn’t add “one penny” to the deficit. He threw his support behind a proposal by former New Mexico Senator Pete Domenici, a Republican, and Alice Rivlin, a former budget director to President Bill Clinton, that relies more on tax increases to close the program’s 75-year shortfall.

Durbin is also part of the bipartisan working group of six senators. Obama and congressional Republicans, who’ve offered no specifics on how to handle entitlement spending, are looking to the recommendations of the group, Rivlin said.

Praise From AARP

Others, including the AARP retiree lobbying group, praised the White House for making its position clear.

“We are pleased to recently hear from a number of top- level officials in Washington that Social Security would be considered separate from the rest of the budget debate,” said Nancy LeaMond, AARP executive vice president.

In their 2010 report, Social Security’s trustees said the program will pay more in benefits than it collects in taxes for the first time since 1983. That’s led some overhaul advocates to say the program is adding to the deficit.

The report also says the program can pay full benefits through 2037 by drawing on trust fund assets in the form of Treasury bonds. At that point, tax income would cover only 75 percent of scheduled benefits.

‘Miscalculating’ Political Moment

Social Security, Medicare and Medicaid account for $1.4 trillion of the $3.7 trillion fiscal 2011 budget, almost 40 percent. That share will rise to $2.7 trillion in a decade and account for about 50 percent of the budget, according to the Congressional Budget Office. Including interest, entitlement spending will reach $3.7 trillion by 2021, or about 60 percent of the budget. With no changes, by 2025 entitlement spending could consume all tax revenue.

Overall, over the next 75 years, Social Security faces a $7 trillion unfunded liability and Medicare faces a $36 trillion unfunded liability.

Graham said there may still be a number of Senate bills in the next few weeks addressing Social Security. He plans to introduce a bill with Arizona Senator John McCain. Among the measures it could include are increasing the Social Security retirement age, means-testing benefits for the wealthy and increasing the percentage of wages subject to payroll taxes.

“They’re miscalculating the political moment,” Graham said of the administration. “I’m still standing and I worked with President Bush to try to do something.”

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