Facing Republican attack: Social Security turns 80
_House Republicans could force 19% benefit cut to Disability Insurance _
San José, CA – On August 14, Social Security will be 80 years old. President Franklin D. Roosevelt signed the Social Security Act into law during the Great Depression to curtail mass poverty among older Americans. Today the Social Security benefits go to 39 million retirees, 11 million disabled people, and 9 million dependents or survivors of the retired or disabled. Social Security has brought down the poverty rate for the elderly so the poverty rate for elders is actually lower than working age adults or children.
But House Republicans have passed a rule that prevents the government from maintaining benefits for those collecting disability insurance. With disability tax revenues coming in at only 81% of benefits next year and the disability trust fund to be exhausted, benefits will either be cut or funds must be raised to maintain the benefits.
The Obama administration has proposed shifting $330 billion from the $2800 billion Social Security trust fund, or about 12% of the balance, which would maintain disability payments at least through 2033. This shift has been made before. But House Republicans have responded with a rule to prevent this and have called for a short-term loan which would be paid back. While this would prevent the 19% cut next year, it could lead to even greater benefit cuts further in the future.
Today the FICA (Federal Insurance Contribution Act) payroll tax allocates 0.9% of our paychecks to Social Security Disability Insurance and 5.3% to the Old Age and Survivors Insurance fund. An increase of 0.2%, or $2 for every $1,000 of earnings, would bring the disability insurance program back into balance.
A better approach to helping Social Security would be raise the limit on Social Security taxes. Right now only the first $118,500 of earned income is taxed, and dividend, interest, and capital gain income are not taxed at all. As more and more income goes to the rich, less and less income is taxed by Social Security. If the income cap on Social Security were lifted, like the Medicare portion of the FICA tax, the revenue shortfall could be avoided. This would only hit the top 5% of the population by income, but this option is never seen in the corporate media or among politicians in Washington, DC, who are controlled by the wealthy and Wall Street.
What the Republicans hope to do is to use the Disability Insurance funding shortfall to re-open the debate on cutting Social Security. Wall Street billionaire Peter G. Peterson has contributed a billion dollars to his foundation that is pushing for cuts in Social Security benefits by trying to promote a climate of ‘crisis.’
In fact, Social Security did run short of funds in 1982 and had to borrow from the U.S. government. Then Congress raised the FICA tax rate on workers from 5.4% to the current 6.2% (a 15% increase, or $80 for every $1000 of income). This was enough to cover benefits, pay back what was borrowed, and build up a trust fund for the retirement of baby boomers. This trust fund is now $2800 and should maintain the balance for Social Security until 2033. Another small increase in the FICA rate, or even better, removing the income ceiling on FICA, can maintain the program for the foreseeable future.