Social Security has no place in ‘fiscal cliff’ negotiations

If reports are correct, Congress and President Obama are currently considering resolving the fiscal showdown by, among other things, cutting Social Security benefits through changing the cost of living adjustment. It is ridiculous. It is outrageous.

Historically, Social Security, defined-benefit (DB) pensions, and private savings successfully formed the foundation of middle-class retirement security. But DB pensions have declined in the private sector: only 18 percent of workers are covered, compared to nearly 40 percent in 1980. And since the early 80s, stagnant wages have caused the net worth of the bottom 60 percent of households to decline; the typical household approaching retirement age has less than the equivalent of two years’ worth of income saved in a retirement account—if they have retirement savings at all. Social Security remains the most reliable and effective part of the nation’s provision of retirement security, and for many households, retiree benefits averaging less than $15,000 a year are their sole source of income.

Our current deficits largely stem from the economic downturn, the Bush tax cuts, overseas wars, an unpaid-for expansion of prescription drug benefits, and a failure to control the excesses and abuses of the financial industry. In fact, over the last few decades, Social Security was running a surplus, providing cover for ill-advised revenue and spending decisions that Republicans now refuse to rescind. And over the long run, Social Security is legally prohibited from adding to the deficit.

So why are Republicans insisting that resolving the fiscal showdown include Social Security benefit cuts? Perhaps they don’t understand the extent to which the middle class has already suffered. After decades of outsourcing and offshoring of jobs, tax cuts for the rich, and allowing corporations to undermine worker rights (and after nearly five years of a horrific economic downturn), it makes little sense to now force the middle class to give up even more.

It may also be pure political strategy and self-interest. Republicans know that eventually, Social Security’s own solvency problems will have to be addressed, and the rich will have to contribute to the solution, preferably by “scrapping the cap” that limits Social Security taxes to the first $110,100 of salary. Cutting Social Security benefits means a smaller solvency gap, thus reducing how much the rich will be expected to contribute to close the gap. It’s a zero-sum game, and the middle class once again draws the short straw. This is why most Democrats rightly oppose any cuts to Social Security, insisting that the program be dealt with separately.

The concept of “shared sacrifice” is a cruel joke for the middle class. The rich have escaped their fair share of taxes for too long, even as they have taken a bigger and bigger share of national income. As Thomas Piketty and Emmanuel Saez have shown, the top 1 percent has doubled its share of national income over the past 30-plus years, while the top 400 taxpayers in terms of adjusted gross income saw their average federal income tax rate fall from 29.9 percent to 16.6 percent between 1995 and 2007. The leaders of corporate America have done especially well for themselves, while wages and benefits for average working Americans stagnated or fell. From 1978–2011, CEO compensation grew more than 725 percent, substantially more than the stock market and remarkably more than the annual compensation of a typical private-sector worker, which grew a meager 5.7 percent.

The super-rich have gotten richer even as they have paid lower and lower tax rates. Meanwhile, many middle-class households have seen their wages stagnate even during economic expansions, and the current recession has put them so far back that they likely won’t even see their income recover to 2000 levels until 2018, a full two decades of lost growth.

The takeaway from all of this should be clear. For decades, the middle class has been sacrificing to make room for outsized profits captured by the very few. President Obama campaigned on creating an economy that once again works for the middle class, and he was reelected to do just that. He should have the fortitude to stand up for the middle class and say no to the chained consumer price index (CPI) and any other cuts in Social Security benefits.

  • This is an excellent and timely post. It’s outrageous that Obama would consider cutting Social Security or Medicare. It’s way past time we took an axe to the dangerously bloated military budget, instead of again expecting poor and middle-class Americans to take a cut.

  • I dont think cutting the military budget alone will work.
    When social security was first started, the average life expectacy was actually lower then the eligibility age of social security.
    When they first created it, they didnt intend to be covering people for 30+ years.
    And there used to be 5 workers for everyone on social security, and now there’s only 3. Soon there will only be 2.3.

    The truth is, the government is spending way more than they take in.
    I am 1000% against republicans, they have disgusted me time and time again, and I’m a liberal.

    But you can only spend what you take in! that shouldn’t be a left/right issue.
    The republicans in this case, I think are being reasonable.
    “if you want these tax increases Mr. president, which you yourself have said in the past will hurt the economy, then ill give you them, but lets just make sure that it’s for a good reason..that it’s actually going to help balance the budget, otherwise, what’s the point”

    We don’t know 100% where the negotiations are at. Boehner should probably put the proposed cuts on the table, since he’s the one screaming loudest about cutting.

    But the truth is, we could be building schools with the interest were paying on this debt..

    • It’s not as simple as balancing the budget (spend only what you take in) every time. As we saw with FDR after the Great Depression and WW II, it is very effective to cut back on spending when the economy is good, and make productive investments in social services, infrastructure, education and research when the economy is down. That is what every president since FDR has done with the exceptions of Reagan, Bush I and Bush II, and it has worked very, very well. What has screwed us up here is the actions of Reagan, Bush I and Bush II.

      The point is not to lay blame, but to recognize that those policies created the problem SO WE CAN STOP DOING THEM!

    • F Michael Addams

      Hello….Hello..”…Social Security is legally prohibited from adding to the deficit.” How many ways can you say the SAME THING….Social Security HAS NOTHING to do with any deficit….anywhere…anytime….!

  • redastcyr

    I still hold out the hope he wont do it I don’t know how he’s going to get it done but I sure hope he wont go this route

  • F Michael Addams

    Despite the election and the most recent promise (a month old) not to put Social Security on the table, a promise is broken… yet unremarked by a facile media. There it is: the center piece in a feast of the 1% on the dying carcass of middle class America! The president and his advisers simply have no core, they are “trimmers”, they tack to and fro in the winds thinking to make headway but in the process losing sight of their destination. He has the best intentions, but his weakness condemns him to mediocrity. Despair and disillusionment has become his legacy.