Health care overhaul is through Congress. Is Social Security next on the operating table?
The New York Times' Jackie Calmes predicts that "addressing Social Security's solvency could well become the next big thing for President Obama and Congressional Democrats." The reason: the administration has to demonstrate that it can act on the deficit, and with Medicare cuts and Medicaid expansion at the heart of health care reform, Social Security is the only entitlement left.
Social Security is not nearly the time bomb that Medicare is. But Americans' post-retirement longevity has doubled in the last 30 years, and the looming retirement of the baby boomer generation will strain the system. Social Security will start to pay out more benefits than it collects in payroll taxes in 2016, according to the the annual report of government trustees. By 2037, it projects that reserves will be exhausted.
It is generally acknowledged that there are three ways to fix Social Security without privatizing the program: raise the retirement age, raise taxes or means-test the program to preserve payouts to low-income recipients but scale back on benefits for the wealthy. I don't get the sense that the administration or the House is poised to do any of this. The Democratic House and Speaker Nancy Pelosi have just delivered to Obama a political miracle with health care reform. Can you see the administration expressing its thanks by forcing the liberal House caucus to draw up a plan to cut benefits to seniors in a fraught election year? Or raise payroll taxes on employers just weeks after passing a bill that cut payroll taxes to incentivize employers to hire? Or means-test Social Security after raising Medicare payroll taxes in the health care bill on households earning more than $250,000? The whole thing just screams non-starter.
Update: This is also an important point from Dean Baker: Slashing Social Security benefits too soon after the recession devastated the savings of so many Baby Boomers would be worse than bad politics, it would be bad policy.