New Coalition Aims To Head Off Talks Of Benefit Cuts

Published Jul 30, 2010. By Peter Cohn.

A new coalition came out firing Thursday against any discussion of trimming Social Security benefits. Members of "Strengthen Social Security" include the AFL-CIO,, National Organization for Women and National Association for the Advancement of Colored People, among the 60 groups involved.

The coalition was formed to pepper lawmakers during the August recess with pro-Social Security talking points, in advance of the next meeting of President Obama's fiscal commission in September. The panel is mulling options to put Social Security on a sounder financial footing, including raising the age at which beneficiaries are eligible and a progressive price indexing formula that would gradually reduce benefits for higher-income earners.

Some of the commission members in the past have also advocated some form of individual accounts giving younger workers the option to invest funds on their own, akin to former President George W. Bush's plan that many alleged would "privatize" Social Security. That plan sputtered in 2005 amid heavy public opposition.

"Now some of the same crowd ... want to bring back the Bush plan. Are they for real?" asked American Federation of State, County and Municipal Employees President Gerald McEntee. He took aim at former Sen. Alan Simpson, R-Wyo., a commission co-chair; Blackstone Group co-founder Peter G. Peterson, who has devoted $1 billion to a debt-focused foundation; and House Minority Leader Boehner, who recently suggested raising the Social Security retirement age to 70 and limiting benefits for more well-to-do retirees.

"Here's my plan. It's a new reality TV show. It stars John Boehner, Alan Simpson and Peter G. Peterson, the Wall Street billionaire. We give each of these guys an average Social Security benefit of $14,000 and tell them to live on it for a year," McEntee said. "When do you think they'll stop calling for benefit cuts? Probably in the first episode." Executive Director Justin Ruben said his group would deploy its 5 million members during the August break to let lawmakers know they will be called on to renounce Social Security cuts or face consequences in the voting booth.

"It really is the height of arrogance" that benefit cuts would be considered, Ruben said, especially when some lawmakers want to "cut taxes for the rich and balance the budget on the backs of our parents and grandparents." He said members in House Majority Leader Hoyer's district voiced their displeasure when Hoyer recently suggested raising the retirement age.

"We are pleased that the Strengthen Social Security coalition cares so deeply about this issue," a commission spokesman responded. "The commission does, too, and we want to make it solvent for the next 75 years and keep it strong."

Peter G. Peterson Foundation President & CEO David Walker said his group is focused on preserving Social Security for future generations. "We must work together and build consensus to address our growing fiscal challenges so we can introduce reforms in a timely, fair, gradual, and compassionate manner," he said.

The new coalition is arguing that Social Security has a surplus of about $2.6 trillion and rising, and thus is not responsible for the massive deficit and should not be targeted. Any changes should come from the revenue side, they argue, such as raising the cap on wages subject to Social Security taxes from the current $106,800 to something like $172,000. That equals about 90 percent of all earnings subject to payroll taxes, which Congress originally intended but has fallen to about 83 percent due to rising wages.

Peterson and others have said raising the wage cap should be on the table, but supplemented with benefit reductions; that's because if benefits stay the same but more earnings are subject to taxes, the program will have to pay out higher benefits down the road.

"The thing I have against the approach they take is it's got blinders," said Concord Coalition Executive Director Robert Bixby. "[Social Security] hasn't contributed to the deficit in the past, all of that is true. And yet it doesn't address the problem, which is that the program is going to grow much more rapidly in the coming two decades and that's going to put a big strain on the budget."

Noticeably absent from the coalition is AARP, the powerful seniors' advocacy group. An AARP spokesman said although not an "official" member of the coalition, AARP shares its goals. "We agree with the coalition that Social Security has not contributed a dime to the national deficit, so it would be unfair and wrong to cut the benefits Americans have earned to reduce the deficit," he said.

According to CBO, Social Security this year will pay out more than it takes in from payroll tax receipts. After 2039, it will have to cut benefits by 20 percent, CBO said; the Social Security Administration's chief actuary has said as much as 25 percent in benefit cuts are foreseen as early as 2037. The program spent $678 billion in FY09, and will cost $9.2 trillion over the next decade, or 20 percent of all federal spending during that time, according to CBO.