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WSJ Leaks Cat Food Commission’s Social Security Deliberations

Despite distrusting Mike Allen’s version of events at all times, there’s no question that the Administration resurrected a deficit panel that the Senate killed, and the President staffed it with a number of people who would be open to Social Security benefit cuts. And that set of decisions is bearing fruit on the panel, according to the Wall Street Journal. This one deserves a close reading.

A White House-created commission is considering proposals to raise the retirement age and take other steps to shore up the finances of Social Security, prompting key players to prepare for a major battle over the program’s future.

The panel is looking for a mix of ideas that could win support from both parties, including concessions from liberals who traditionally oppose benefit cuts and from Republicans who generally oppose higher taxes, according to one member of the commission and several people familiar with its deliberations.

In addition to raising the retirement age, which is now set to reach age 67 in 2027, specific cuts under consideration include lowering benefits for wealthier retires and trimming annual cost-of-living increases, perhaps only for wealthier retirees, people familiar with the talks said.

On the tax side, the leading idea is to increase the share of earned income that is subject to Social Security taxes, officials said. Under current law, income beyond $106,000 is exempt. Another idea is to increase the tax rate itself, said a Democrat on the commission.

Four of these five ideas hit the middle class and the working poor directly. The retirement age increase is a benefit cut. Means-testing will, as has been said for years, turn the program from social insurance into welfare, subjecting it to more and more cuts as only the vulnerable will be impacted in future years (and I like the “perhaps only for wealthier retirees” regarding the COLA cuts; I’ll believe that when I see it). Increasing the payroll tax rate without increases to the cap would fall squarely on the middle class and below.

The only idea in there that makes any sense is to capture the amount of payroll originally envisioned by the plan. The incredible stratification between rich and poor has dropped the payroll tax well beyond the expected 90% level of income. You could lift it completely – or put a donut hole from $106,000-$250,000 and tax the upper incomes thereafter – and basically solve the entire problem.

But this is a panel requiring consensus, and given its makeup the consensus will fall under cuts. Republicans on the panel are playing it coy, with Rep. Jeb Hensarling (R-TX) saying he wouldn’t rule anything out at this stage because then “the thing blows up before it has a chance to work,” but saying expressly that he opposes tax increases. Like that’s not already known. If the commission releases recommendations at all, they’re going to be cuts only. Bank on it.

Alice Rivlin, who’s been going after Social Security for two decades, thinks that both sides will sign on to tax increases and benefit cuts “if the other is willing to do it.” I don’t think there’s a chance of that in the world; she obviously hasn’t noticed the modern Republican Party.

The story also painted the White House and, horrors, AARP as open to a deal. They back up Allen’s reading that an agreement on Social Security would “build confidence”; I’m not sure to whom. Here’s the AARP quote:

“We’re prepared to be quite supportive of a real engagement on the issue,” said John Rother, director of public policy for AARP. Acting sooner allows for changes to be made gradually, he said, and will reassure younger workers that the program will be there for them. He dismisses those who said they can never support benefit cuts. “I know all these people personally and they’ll say we have to be hard line now to influence the debate…I kind of take it with a grain of salt, these emphatic statements.”

I love this notion that, the system is in “crisis” and faces benefit cuts in 30 years, so let’s cut benefits now. Brilliant! Adequacy of the program to keep seniors out of poverty hasn’t occurred to the nation’s largest senior advocacy group, I guess.

Interestingly, nobody on the commission is talking about privatization, the soccer ball that Democrats have liked to kick around on the campaign trail. That’s simply not the threat right now.

Jan Schakowsky offers the wishful thinking argument:

“People would rather pay more or have revenue raised than cut the benefits,” said Rep. Jan Schakowsky (D., Ill.), a commission member. She said she was fairly confident a proposal that included benefit cuts would not garner the needed 14 votes.

I’m not.

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David Dayen

David Dayen