The immediate frenzy over the fiscal cliff may have subsided, but the drama is far from over: Next on the agenda is a debate over spending cuts – a debate that promises to be as rancorous as the one we’ve just seen.
Already, budget-cutters are taking aim at Social Security. Yes, the way to calculate cost-of-living adjustments – the chained CPI, unfriendly in name and in its impact on retirees – is already back in the picture (see related video).
But it’s just plain wrong to blame this particular program for our budget deficit – a fact that has been understood by political leaders from Ronald Reagan to Tip O’NeilI.
Of course, we all want to reduce deficits and help keep our nation’s fiscal house in order. But here are some important things to keep in mind, as Congress and the White House hunker down for a new battle over spending:
- Social Security is not the cause of America’s budget deficit. In fact, it’s a self-financed program that’s separate from the federal budget. Workers and employers finance the Social Security program by paying a 6.2% payroll tax.
- Social Security still has a large surplus. Its trust funds hold $2.8 trillion in special-issue Treasury bonds. These assets are backed by the full faith and credit of the United States.
- The trust funds can only be used to pay Social Security benefits.
Social Security does face a long-term shortfall, but that fact should not be exaggerated or distorted. According to its trustees, Social Security can pay all benefits through about 2033 – and 75 percent after that.
So, we do need a debate on Social Security. But we need the right kind of debate.
It should focus on retirement security for older Americans today and young people who will need retirement security in the future.
It should be about keeping Social Security financially stable for the 21st century. But it should also recognize the critical importance of Social Security at a time when employer pensions have become scarce and millions face financial uncertainty in old age.
A political deal to meet numerical targets is not the way to conduct this debate – something that our political leaders have always understood. As Ronald Reagan put it: “Social Security has nothing to do with the deficit.”
In the weeks ahead, this reality is likely to be glossed over by politicians who will try to pin at least part of the blame for our budget woes on the program that’s the lifeline for nearly two-thirds of older households.
Don’t let ‘em fool you.