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There’s been a lot of discussion on Daily Kos about whether President Obama is the first Democratic president to propose cuts to Social Security.  The answer is no, BUT....  Social Security has had numerous cuts imposed since 1977.  I was a policy specialist with SSA’s Central Office in Baltimore throughout the entire period I’ll be discussing, and I had the responsibility for analyzing and writing field office instructions to implement many of these cuts.  Please forgive me for not including links in this diary, since I’m new here and haven’t learned how to do it yet.  You can find most of the details discussed here at ssa.gov/history and can also google the legislative histories for the 1972 Social Security Amendments, 1977 Social Security Amendments, the Omnibus Budget Reconciliation Act (OBRA) of 1981, and the OBRA of 1983.  

More after the squiggly lines.

Problems began with the 1972 Social Security Amendments.  These amendments provided a 20% across-the-board benefit increase (imagine that today) and an automatic COLA to take effect each July.  But it was a flawed formula in that it increased benefits based on projections of increases in both prices and wages, what was called at the time, “double indexing for inflation.”  COLAs were increasing at an unsustainable rate.  As a result, President Carter proposed a correction to the COLA formula which decoupled the COLA formula from wage increases.  The 1977 amendments included the COLA formula cut; government pension offset, which cut or eliminated dependent and survivor benefits for workers who received a government pension based on earnings not covered by Social Security; and eliminated the historic 12-month retroactivity for applications for actuarially-reduced benefits (e.g., benefits received before the full retirement age of 65).  The amendments also contained some program liberalizations.  They created delayed retirement credits (increased benefits for those who delayed receiving benefits until after age 72), reduced the duration-of-marriage requirement for divorced spouses, and increased the tax base.  It should also be noted that President Carter proposed a three-step elimination of the tax cap, and that general revenues be used to make up for Social Security revenue losses attributable to unemployment rates above 6% from 1975-1978.  These proposals, of course, were not adopted in the final legislation.

The OBRA of 1981 was a reaction to adverse program projections, in part caused by the huge inflationary trends of the time.  Due to this inflation, Social Security COLAs were 9.9% in 1979, 14.3% in 1980, and 11.2% in 1981.  Large cuts to benefits were included in this legislation, and signed into law by President Reagan.  The minimum Social Security benefit was eliminated.  Payment of child’s benefits to full-time college students age 18-21 was eliminated.  Entitlement to benefits of a parent caring for a child receiving child’s benefits ended when the child reached age 16, rather than age 18 as before.  People who wished to receive reduced benefits at age 62 could no longer receive benefits for the month they attained age 62 unless they attained that age on the first day of the month.  Payment of the Lump Sum Death Payment of $255 to the funeral home or to people who paid the funeral expenses was eliminated; only spouses living in the same household at the time of death would continue to receive it.  Benefits were rounded down (instead of up, as before) to the next lower 10 cents at every step of the benefit calculation and then to the next lower dollar at the final step.  I remember this legislation well.  It was a huge piece of legislation, it was rushed through, and most Congressmen never had a chance to read it.  We had to keep responding to irate Congressmen asking why we stopped paying certain types of benefits which they, themselves, were responsible for cutting.

The next major cut was contained in the OBRA of 1983.  It was passed and signed into law on April 20, 1983. The legislation was in response to Greenspan Commission recommendations resulting from their findings that benefit payments had exceeded FICA and SECA tax income  every year since 1975 and that unless changes were made, it would be impossible to pay full benefits in a timely manner beginning in July 1983.  The 1983 COLA was postponed from July 1983 to January 1984 and the COLA increase date was permanently shifted to January.  FICA taxes were significantly increased so that the Boomer generation would pre-fund much of their future benefits through establishing a huge trust fund.  Under “windfall elimination,” no Social Security benefits were payable for workers who had pensions from employment not covered by Social Security unless they also had 30 years of employment coverage under Social Security.  A gradual increase in the full retirement age from 65 to 67 was implemented.  Taxation of benefits for beneficiaries who met certain income levels was legislated.  Payment of benefits to convicted felons while in prison was prohibited.  There were some liberalizations.  Delayed retirement credits were increased.  There was a gradual elimination of the retirement test for those 65 or over.  Of great importance, the legislation separated Social Security from the unified budget, ensuring that Social Security would not be part of any future deficit reduction concerns.

In1993, the Clinton administration proposed a change in the taxation provision.  It modified the 1983 taxation provision, but did not increase the number of beneficiaries subject to taxation.  Instead, it raised the potential tax liability for those with higher incomes.

Seems to me that Social Security has been cut enough.  To cut it unnecessarily is cruel, poor public policy, economically destabilizing, and politically stupid.  

Originally posted to Bill Channing on Fri Apr 12, 2013 at 11:39 AM PDT.

Also republished by Social Security Defenders and Community Spotlight.

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