The last time we made significant changes to Social Security – including adjustments to benefits – was the 1983 Social Security amendments. At the time, Social Security had less than a year’s worth of solvency, and a bipartisan agreement to put Social Security on sound financial footing was essential.
That legislation, negotiated by President Reagan and Democratic House Speaker Tip O’Neill, focused on what was needed protect Social Security for the long term. Reagan understood that Social Security is a separately funded program unrelated to problems in the rest of the budget, and he clearly stated that: “Social Security has nothing to do with the deficit.”
Indeed, today the Social Security trust funds hold $2.8 trillion in government bonds. These reserves have been built up with the contributions that workers and employers have paid into the system for the dedicated purpose of paying Social Security benefits. These funds are held in legally established trusts and cannot be used for any purpose other than paying benefits. According to the latest Trustees’ report, Social Security can pay full benefits through 2033, and roughly 75 percent of benefits beyond that time.
Since the 1983 amendments, and despite the numerous deficit reduction debates over that time period, Social Security cuts have never been part of any deficit reduction agreement. Congress has always understood – as Reagan observed – that Social Security has nothing to do with the federal budget deficit. Unfortunately, many policymakers today have forgotten that basic truth and have suggested cuts to Social Security as part of the end of year “fiscal cliff” budget package. The proposal – the so-called chained CPI – would change the formula for calculating the Social Security cost of living adjustment (COLA). This COLA cut would reduce benefits by over $100 billion dollars over the next 10 years and would result in thousands of dollars of lost benefits for current (and future) retirees.
Social Security has a long-term shortfall, but any changes to Social Security should be done – as President Reagan and Tip O’Neil achieved in 1983 – in a balanced and separate measure for the purpose of securing Social Security for the long term. Social Security should not be cut as part of a budget package to pay for a shortfall in the rest of the federal budget.
- Demystifying the Chained CPI
- Social Security, the Fiscal Cliff and Chained CPI
- Why Inflation Matters for Social Security
Photo: Universal History Archive/Getty Images