In the 1980, Congress enacted a retirement age increase for workers born in 1960 and later. Those cuts, a new study from the National Academy of Social Insurance finds, will cut retirement benefits for those workers by as much as 19 percent.
As policymakers consider calls for further retirement benefit cuts, the NASI report (PDF) said it is important to remember that the Social Security amendments passed by Congress in 1983 relied far more on benefit cuts than new revenue to balance the system’s long-term finances. Those amendments changed Social Security by:
- Gradually raising the full-benefit retirement age from 65 to 67, a change that results in a 13.3 percent reduction in benefits.
- Taxing part of benefit income, which results in a 5.1 percent benefit cut.
- Delaying the cost-of-living adjustment by six months, resulting in a permanent 1.4 percent cut.
“The first two cuts are phasing in gradually,” the report stated. “The 13.3 percent cut affects new retirees born in 1960 and later; they will begin reaching age 65 in 2025 and age 90 in 2050. By then, almost all of the elderly will have experienced the full 19 percent reduction in Social Security.
“The 1983 changes are often described as a balanced plan of benefits cuts and contribution increases,” the report noted. “But that is not the case for the long run: the benefit cuts taking place in this century were not balanced by any new contributions.”
....
The report (PDF) finds that by adopting a balanced long-term revenue plan it is possible to cover the projected shortfall facing Social Security while making modest improvements in the program for three vulnerable groups—low-paid workers, the oldest beneficiaries and students who lose parental support due to death or disability. The revenue plan could include gradually lifting the cap on FICA payroll tax contributions to again cover 90 percent of earnings as Congress intended and scheduling small FICA rate increases over 20 years starting in 2015.
"Saving" Social Security does not require further reducing benefits, and it certainly doesn't require the radical privatization scheme House Republicans introduced this week. Making life even harder for future retirees by either cutting benefits further or raising the retirement age are unnecessary and unnecessarily punitive against future retirees who have been paying into the system their entire working lives.
