Washington Social Security taxes would rise and benefits would fall under proposals from the co-chairmen of the special deficit-reduction panel that’s due to report to Congress by Dec. 1.
The draft from the co-chairmen of the National Commission on Fiscal Responsibility and Reform would apply Social Security payroll taxes to much higher earnings than current law does. It would also create new higher benefits for poorer workers who’ve had low-wage careers.
“We’re solving Social Security for its own self, not for deficit reduction. And we had two goals, protect the truly disadvantaged and get (Social Security) solvency out to 75 years,” co-chairman Erskine Bowles told reporters on Nov. 19.
Their panel must issue its report by Dec. 1. Nothing in it will become law unless Congress and President Barack Obama go along. Still, their proposals have ignited a vigorous debate.
Bowles was President Bill Clinton’s White House chief of staff and now is the president of the University of North Carolina system. He and his co-chairman, former Sen. Alan Simpson, R-Wyo., laid out their proposed deficit-reduction plan earlier this month. It called for painful tradeoffs as the best way to rein in rising debt.
None of their proposals command more public attention than those to change Social Security, perhaps the nation’s most revered federal program.
They say the ratio of their proposed Social Security benefit changes to revenue increases is 57 to 43 — meaning they’d cut more in spending than they’d raise in taxes.
Critics, including House Speaker Nancy Pelosi, D-Calif., say that today’s 20-year-old worker would see a 36 percent reduction in Social Security benefits compared with what today’s beneficiaries get, and want benefits to stay on schedule.
Bowles scoffs at the comparison.
“Scheduled is a joke. It’s scheduled, but it’s like my daddy said, ‘Don’t make promises you can’t keep.’ We can’t meet the schedule. In 2037, this thing runs out of money. All of the (Social Security) trust fund and interest earned in the trust fund is gone,” he said. “In 2037, benefits will be cut by 22 percent” unless changes are made before then.
The full-benefit retirement age will rise to 67 in 2037 under current law.
Bowles and Simpson propose to index Social Security’s retirement age to average U.S. longevity; the longer Americans live, the later they’d reach retirement age for full Social Security benefits. They anticipate a full retirement age of 68 in 2050 and 69 in 2075. Critics complain this would be a back-door 7 percent cut in benefits each time the age is raised.
Recognizing that people are living longer, the Bowles-Simpson plan also would allow retirees to collect half of their benefits early and the other half at a later age. Currently, if a recipient collects Social Security benefits early, they get a smaller monthly payment for the rest of their life.