Proposals for major cuts in Social Security, floated by deficit commission co-chairs Alan Simpson and Erskine Bowles last week, are an attempt to “bully” seniors “while Wall Street millionaires once again just skate on through scot-free.”
That reaction by Edward Coyle, executive director of the Alliance for Retired Americans, was part of a flood of condemnation for the Bowles-Simpson proposals targeting Social Security.
One of the proposals is to cut Social Security benefits by changing the cost-of-living adjustment formula. That would start in 2012, so it would hit current as well as future beneficiaries.
“This will lower seniors’ benefits by about 3 percent after they have been retired for 10 years, and by about 6 percent after 20 years,” Coyle said.
“Today’s 20-year-old workers who retire at age 65 would see their benefits cut by 17 percent if their wages average $43,000 over their working lives,” he said, calling the plan “an attack on the middle class.”
The Simpson-Bowles proposals would raise the retirement age for full benefits, currently 67 for those born after 1959, to 68 by 2050 and 69 by 2075. That amounts to a lifetime benefit cut.
The proposals would also change the way benefits are calculated – leading to another reduction in benefits.
Keep in mind that currently, the average retiree’s annual Social Security benefit is $14,000, which is lower than the minimum wage, the Economic Policy Institute reports. “Three and a half million seniors are living below the poverty level, even with Social Security,” says Ross Eisenbrey of the EPI.
The National Council to Preserve Social Security and Medicare said the Simpson-Bowles proposals would mean huge benefit cuts. “Workers who earned $37,400 annually (that’s about half of Social Security recipients) would actually take a 35-41 percent cut!” the council said.
“While Simpson/Bowles promise these benefit cuts will only impact high income earners, there’s a catch,” the group said in a statement. “Anyone who made $38,000 a year during their working years is considered a ‘high income’ earner. Yes, that’s right.”
People’s World economics commentator Art Perlo says the Simpson-Bowles proposals would lower benefits for 80 percent of Social Security recipients – those who earned above about $25,000 a year – “on the excuse that they are ‘high income’.” And this is at a time when retirees’ other income, if any, from employer or private-savings pensions are all being cut, notes Perlo, who chairs the Communist Party USA economics commission. It’s odd that the deficit commission co-chairs “claim that the biggest cuts are to the ‘highest’ incomes – mainly in the $75,000-$150,000 range,” Perlo said, yet incomes up to $250,000 are considered “middle class” when talking about tax cuts.
Currently, working class people shoulder the primary burden for paying into the Social Security fund – only the “first” $106,800 of income is subject to the Social Security payroll tax. The Simpson-Bowles proposals include raising the “cap” but only slightly. Critics say it lets the “really rich” off the hook.
“While the biggest negative impact of the proposals would be on low-income workers, there is something bad for everyone below the millionaire level,” said Perlo. “Some of the proposals seem designed to give credence to the idea that the moderately well off are being penalized to help the poor. For example: the proposal to raise the minimum benefit while slightly lifting the Social Security cap (affecting those making between $106,80000 and about $125,000), but not touching significantly the income of the really rich.”
“How about lifting the payroll tax cap entirely?” asks the National Council to Preserve Social Security and Medicare.
It’s not only seniors who rely on Social Security, but also the disabled and surviving spouses and children of deceased workers.
The AARP called the deficit commission co-chairs’ proposals “contrary to the best interest of American families.”
“During these tough economic times, the last thing we should be considering is targeting the guaranteed, inflation-protected Social Security benefits that millions of Americans count on every day,” said Nancy LeaMond, AARP executive vice president.
“Social Security can pay full benefits for at least 25 years,” Perlo said. “The whole discussion is a diversion from the urgent need to provide useful, productive jobs for 30 million unemployed and underemployed Americans.”
Photo: Alliance for Retired Americans/Henry Lowendorf CC 2.0