The latest House Republican budget plan asks low-income and middle-class Americans to shoulder the entire burden of deficit reduction while simultaneously delivering massive tax breaks to the richest 1 percent and preserving huge giveaways to Big Oil. It’s a recipe for repeating the mistakes of the Bush administration, during which middle-class incomes stagnated and only the privileged few enjoyed enormous gains.
Each component of the new House Republican budget threatens the middle class while doing nothing to add jobs or grow our economy. It ends the guarantee of decent insurance for senior citizens, breaking Medicare’s bedrock promise. It slashes investments in education, infrastructure, and basic research, all of which are key drivers of economic growth and mobility. And it cuts taxes for those at the top, asking the middle class to pick up the tab. It’s a budget designed to benefit the top 1 percent at everyone else’s expense.
The Social Security reforms in the House Republican budget proposal released today by Rep. Paul Ryan (R-WI) are so vague as to pass unnoticed by many observers. But a close look at what the 2013 budget proposal says (and leaves unsaid) indicates that Rep. Ryan’s proposal would almost certainly cut Social Security benefits for most recipients.
Indeed, the House plan would harm the middle class while providing a windfall for the wealthy. At a time when Americans’ fears about being able to retire are at record highs, as middle-class families struggle with massive wealth losses and high unemployment, the House budget plan would cut benefits for the middle class while providing additional tax breaks to the wealthy.
On first glance, the House plan may not seem harmful to Social Security. It doesn’t provide much detail and mentions a “bipartisan path forward” by calling for President Barack Obama and Congress to submit legislation on Social Security. This soothing language is really a punt by the House Republican leadership to avoid talking about Rep. Ryan’s disastrous plan for Social Security that he released as part of his “Roadmap for America’s Future” in 2010. What’s more, hidden in plain sight is Rep. Ryan’s plan to reform Social Security solely through benefit cuts.
Let’s first explore what Rep. Ryan definitely doesn’t want to talk about. According to the Congressional Budget Office, his Social Security plan presented in 2010 would cut benefits and partially privatize the intergenerational retirement program by diverting money intended to pay for benefits into private accounts. As CBO wrote in a 2010 analysis, “Traditional retirement benefits would be reduced below those scheduled under current law for many workers who are age 55 or younger in 2011. A system of individual accounts would be established in 2012.”
Because privatization diverts money intended for the core Social Security program into private accounts, Rep. Ryan’s original Social Security plan actually worsened the Social Security shortfall. That plan increased the Social Security shortfall all the way until 2060, with government outlays on the program estimated to rise from 5.4 percent of gross domestic product—the largest measure of economic growth—in 2020 (just slightly above the current path at the time of the estimates of 5.3 percent) to 6.3 percent of GDP in 2040 (well above the current estimated path of 5.9 percent). A difference of just 0.1 percent of GDP, while seemingly small, would translate into an extra $230 billion in 2020, for example, and much more in later years.
To be clear, this means that Rep. Ryan’s original plan cuts Social Security benefits at the same time it weakens the program’s finances. Maybe that’s why he isn’t presenting such details in the House Republican budget plan released today.
But what is in that budget plan released today is the clear implication that Social Security should be brought into balance entirely through benefit cuts. Raising the cap above which earnings are not taxed—which today stands at $110,100—seems to be off the table in the latest House budget plan. In one of the very few mentions of any specific reforms, Rep. Ryan argues that lifting the cap would “have limited direct impact on the solvency of the program,” yet “impose adverse consequences to retirement security programs by weakening their most critical source of funding: a growing, prosperous economy.”
The Social Security Administration estimates that lifting the cap would address half of the Social Security shortfall, a fact Rep. Ryan seems keen on ignoring. He also seems keen on ignoring the evidence that raising taxes on the wealthy has a minimal impact on the economy because economic growth depends far more upon the strength of the middle class than it does the actions of rich “job creators.”
Perhaps to justify dramatic cuts to Social Security, in several instances the House budget attempts to paint a far more dire economic picture of the program’s finances than is true by lumping it together with Medicare. The budget proposal argues that “left unaddressed, the spending pressures in these programs don’t just put the solvency of the federal government at risk and future economic growth in doubt—they also threaten the government’s ability to protect the promise of health and retirement security for millions of seniors today, as well as for generations to come.”
Social Security has relatively little to do with our debt problems and could be modernized and brought into balance with modest adjustments—a point that most analysts agree upon and the Republican proposal occasionally acknowledges, such as in a graph on page 50 of the budget resolution.
At a time when the middle class is struggling and income inequality is at record levels, the House Republican budget would weaken retirement security for the middle class because of an ideological vision that rejects any tax increases on the wealthy and refuses to acknowledge the benefits of preserving Social Security as a social insurance program. In short, it looks like House Republicans are once again trying to cut Social Security benefits while cutting taxes for the rich.
David Madland is Director of the American Worker Project at the Center for American Progress, and Christian E. Weller is a Senior Fellow at the Center.
- The 6 Key Failures of the House Republican Budget Plan by Michael Linden
- New Ryan Plan Is Austerity on Steroids by Heather Boushey
- Latest House Republican Budget Threatens Medicare and Shreds the Safety Net by Topher Spiro
- New Ryan Plan Would Harm Our Most Vulnerable Citizens by Melissa Boteach and Katie Wright (CAP Action)
- New Ryan Budget Disinvests in America by Adam Hersh and Sarah Ayres
- Ryan Budget Pads Big Oil’s Pockets with Senseless Subsidies by Daniel J. Weiss
- Ryan’s Secret Plan to Shift the Tax Burden Onto the Middle Class by Seth Hanlon