Republicans planning major cuts to Social Security
Josh Marshall at Talking Points Memo:
…this bill is being introduced by Rep. Sam Johnson, Chairman of the House Ways and Means Committee’s Social Security Subcommittee, the committee with jurisdiction over Social Security….
Unlike the Bush-era plan to partially phase out Social Security and replace it with private investment accounts, this plan takes a different approach. Through a variety of mechanisms, this plan simply cuts benefits and introduces means testing. To look at specific cuts, changes in eligibility and so forth look at pages 2 and 3 on this official Social Security Administration scoring document analyzing the plan. The benefit cuts appear to hit everyone but are weighted toward more affluent recipients.
The big picture is that the current Social Security Trust Fund is predicted to be exhausted in the mid-late 2030s. So roughly in 20 years. People often refer to this as ‘bankruptcy’. But that’s not really accurate. At that point Social Security would only be able to pay 79% of benefits recipients will be entitled to in those years.
Now there are a number of ways to cover that shortfall – the most obvious is to remove or alter the so-called ‘cap’ on Social Security taxes. Once you get over $118,500 of income per year you stop paying Social Security taxes. So your Social Security tax rate is much higher if you make $50,000 a year than if you make $500,000 a year. Change that and most of the problem disappears. You could also combine ditching the ‘cap’ with much milder cuts than the one envisioned here. You could also rejigger the cap in ways that allowed you to increase benefits.