The 12-member congressional committee charged with trimming the federal budget over the next 10 years has a new advocate for putting entitlement programs on the chopping block: President Barack Obama.
Obama, on a Midwest bus tour this week, said Democrats have to be “flexible” when it comes to spending on Social Security and Medicare.
But if the committee did want to take on Social Security, what would need to happen?
Craig Jennings, a federal fiscal policy director at OMB Watch, a nonprofit that monitors federal spending, said there are two ways to close the gap between Social Security’s expenditures and its revenues: increase the payroll tax or lower current benefits.
How do you cut benefits? Raising the retirement age is one way, Jennings said. Changing the way inflation is measured for automatic annual Social Security cost-of-living adjustments is another. Both methods would allow Congress to preserve much of the existing program.
David John, a senior research fellow at the Heritage Foundation, a conservative think tank, said he could see the committee agreeing to both of those changes. (RELATED: Gingrich: Scrap super committee and extend payroll tax holiday)
“I don’t anticipate that the super committee is going to do a wholesale change in the program,” John said. “I expect … if anything, small changes around the edges.”
The Congressional Budget Office projects that in fiscal year 2011, Social Security’s outlays will total $733 billion, or one-fifth of the federal budget.
But Jennings argued that at this point cutting Social Security makes no sense from a deficit-reduction standpoint.
“Social Security doesn’t have an impact on the broader budget deficit, certainly not in the near term,” Jennings added.
Calling the talking about cutting Social Security to balance the budget in Washington “the wrong conversation,” the powerful nonprofit senior advocacy group AARP shared Jennings’s view. (RELATED: Democrat wastes no time taking advantage of his super committee appointment)
“Social Security is self-financed by payroll tax contributions, which are separate from the rest of the budget, and has not created the current fiscal mess,” the group said in a statement. “It shouldn’t be used to fix a deficit it didn’t cause.”
On one hand, AARP is right. Social Security was running in cash surpluses up until last year, John said, so it is true that the program did not cause federal deficits.
On the other hand, though, filling the gap between Social Security’s expenditures and revenues in coming years will make current spending problems worse, since paying full benefits from this point forward will require additional uses of other types of tax dollars, John cautioned.
Republicans have said they are open to changes in entitlement programs. Democratic leaders in Congress, however, do not share that view. They say they worked hard to protect Medicare, Medicaid and Social Security in the debt ceiling deal.
Social Security expenditures exceeded the program’s revenues in 2010, excluding interest credited to the trust funds, for the first time since 1983, according to a Congressional Budget Office report released this month. The CBO also projects the gap will continue: Over the next five years, expenditures will be about five percent greater than revenues.