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Social Security: Middle Class in Bulls-Eye of Targeted Benefit Cuts
Middle-class workers would suffer dramatic cuts in guaranteed retirement benefits under President Bush's latest scheme to dismantle Social Security, and economists say the irony is that they'd lose more than they would if nothing is done to shore up the Social Security Trust Fund.
Despite White House claims that the system will be "bankrupt" if the trust fund runs out—a possibility that is 40 to 50 years off—payroll taxes would continue to cover about 74 percent of retirees' benefits.
"For workers who now make about $55,000 or more, Social Security benefits would be cut more deeply under the benefit-reduction proposal the president has now endorsed than if nothing were done to restore Social Security solvency," Jason Furman of the Center on Budget and Policy Priorities wrote in a May analysis.
In addition to continuing to demand private accounts for a third of workers' Social Security funds, the White House now is calling for a change in the way benefits keep pace with inflation. For workers retiring in 2055 at age 65 that would mean cuts of 66 percent to 87 percent of the Social Security benefits they are now guaranteed, economists at the CBPP project.
For example, workers earning $36,000 a year would see their promised benefits cut—in 2005 dollars—from $22,100 a year to $7,510. Workers earning $59,000 a year would drop from $29,300 in annual benefits to just $3,750.
The private accounts Bush continues to demand, despite huge public opposition, are expected to make up some of the gap. But even under relatively optimistic forecasts, economists say retirees' overall benefits would fall.
The new proposal would cut the benefits of everyone who earns above $20,000 a year. Proponents claim it would protect low-wage workers and affect only the affluent, with no mention of the damage to the middle class.
"In the twisted logic of this White House, as long as you make $20,000 a year, you're wealthy enough to survive without your full Social Security benefit—but not nearly wealthy enough to qualify for a huge tax cut," CWA President Morton Bahr said.
The Economic Policy Institute said Bush's scheme would destroy Social Security as Americans know it now, changing it from what has been a hugely successful public pension plan to "simply an anti-poverty program."
"This erosion will weaken the widespread support for the program over time, with most workers receiving less and less for the taxes that they contribute," EPI said. "The intention seems to be to fundamentally change Social Security from a dependable, guaranteed retirement benefit to a bare-bones safety net program."
Even if Bush takes private accounts off the table, price-indexing of benefits—a change from the current wage-based system—means retirees will lose a substantial amount of money. Over the next 40 years, economists at the CBPP say annual benefits for middle-class workers (described as those earning $58,560 a year in today's dollars) would drop by $6,444.
Even many low-income beneficiaries the White House claims it's protecting, specifically those receiving survivor's benefits, are at risk of losing Social Security funds, the CBPP's Furman wrote in a follow-up analysis based on White House documents. Impoverished elderly widows, divorced elderly spouses and the 2 million children of deceased parents each stand to lose more than $40 a month from checks that are already less than $900.
The White House continues to call Social Security's long-term fiscal situation a "crisis," a characterization disputed by economists and even some Republicans. Far from solving what problems do exist, the CBPP says the combination of sliding-scale benefit reductions and private accounts—which would require trillions in borrowing to set up—would add $5 trillion to the national debt over the first 20 years.
Economist and New York Times columnist Paul Krugman said that while a case could be made for small sacrifices to avoid possible—but not certain—problems 40 to 50 years down the road, that's not what the White House is proposing.
"Mr. Bush isn't calling for small sacrifices now," Krugman wrote. "He's calling for zero sacrifice now, but big benefit cuts decades from now - which is exactly what he says will happen if we do nothing. Let me repeat that: to avert the danger of future cuts in benefits, Mr. Bush wants us to commit now to, um, future cuts in benefits."
Such a scheme accomplishes nothing except "to ensure that benefit cuts take place even if they aren't necessary," Krugman said.
Among editorials slamming the scheme, the New York Times said the president "had saved the worst for last," in proposing benefit cuts as he neared the end of his sham town hall meetings across the country—taxpayer-funded events to which only loyal Republicans were allowed entry.
Between price-indexing and personal accounts, the paper said, "In the end, Social Security checks would be minimal—or nonexistent—for millions of Americans."
Despite White House claims that the system will be "bankrupt" if the trust fund runs out—a possibility that is 40 to 50 years off—payroll taxes would continue to cover about 74 percent of retirees' benefits.
"For workers who now make about $55,000 or more, Social Security benefits would be cut more deeply under the benefit-reduction proposal the president has now endorsed than if nothing were done to restore Social Security solvency," Jason Furman of the Center on Budget and Policy Priorities wrote in a May analysis.
In addition to continuing to demand private accounts for a third of workers' Social Security funds, the White House now is calling for a change in the way benefits keep pace with inflation. For workers retiring in 2055 at age 65 that would mean cuts of 66 percent to 87 percent of the Social Security benefits they are now guaranteed, economists at the CBPP project.
For example, workers earning $36,000 a year would see their promised benefits cut—in 2005 dollars—from $22,100 a year to $7,510. Workers earning $59,000 a year would drop from $29,300 in annual benefits to just $3,750.
The private accounts Bush continues to demand, despite huge public opposition, are expected to make up some of the gap. But even under relatively optimistic forecasts, economists say retirees' overall benefits would fall.
The new proposal would cut the benefits of everyone who earns above $20,000 a year. Proponents claim it would protect low-wage workers and affect only the affluent, with no mention of the damage to the middle class.
"In the twisted logic of this White House, as long as you make $20,000 a year, you're wealthy enough to survive without your full Social Security benefit—but not nearly wealthy enough to qualify for a huge tax cut," CWA President Morton Bahr said.
The Economic Policy Institute said Bush's scheme would destroy Social Security as Americans know it now, changing it from what has been a hugely successful public pension plan to "simply an anti-poverty program."
"This erosion will weaken the widespread support for the program over time, with most workers receiving less and less for the taxes that they contribute," EPI said. "The intention seems to be to fundamentally change Social Security from a dependable, guaranteed retirement benefit to a bare-bones safety net program."
Even if Bush takes private accounts off the table, price-indexing of benefits—a change from the current wage-based system—means retirees will lose a substantial amount of money. Over the next 40 years, economists at the CBPP say annual benefits for middle-class workers (described as those earning $58,560 a year in today's dollars) would drop by $6,444.
Even many low-income beneficiaries the White House claims it's protecting, specifically those receiving survivor's benefits, are at risk of losing Social Security funds, the CBPP's Furman wrote in a follow-up analysis based on White House documents. Impoverished elderly widows, divorced elderly spouses and the 2 million children of deceased parents each stand to lose more than $40 a month from checks that are already less than $900.
The White House continues to call Social Security's long-term fiscal situation a "crisis," a characterization disputed by economists and even some Republicans. Far from solving what problems do exist, the CBPP says the combination of sliding-scale benefit reductions and private accounts—which would require trillions in borrowing to set up—would add $5 trillion to the national debt over the first 20 years.
Economist and New York Times columnist Paul Krugman said that while a case could be made for small sacrifices to avoid possible—but not certain—problems 40 to 50 years down the road, that's not what the White House is proposing.
"Mr. Bush isn't calling for small sacrifices now," Krugman wrote. "He's calling for zero sacrifice now, but big benefit cuts decades from now - which is exactly what he says will happen if we do nothing. Let me repeat that: to avert the danger of future cuts in benefits, Mr. Bush wants us to commit now to, um, future cuts in benefits."
Such a scheme accomplishes nothing except "to ensure that benefit cuts take place even if they aren't necessary," Krugman said.
Among editorials slamming the scheme, the New York Times said the president "had saved the worst for last," in proposing benefit cuts as he neared the end of his sham town hall meetings across the country—taxpayer-funded events to which only loyal Republicans were allowed entry.
Between price-indexing and personal accounts, the paper said, "In the end, Social Security checks would be minimal—or nonexistent—for millions of Americans."