By Adam Bitely — I’m surprised that this information hasn’t been all over the news. Then again, it is an election year, so the appetites of most in Congress and across town at the White House are probably not interested at all in dealing with Social Security–or any entitlements for that matter.
None the less, according to Congressional testimony given on Feb. 28, 2012, the Chief Actuaries for the Centers for Medicare and Medicaid Services, Social Security Administration declared that if the government does nothing, senior citizens will see a 23% cut due to the government doing nothing.
That’s probably not something that members of Congress want in the newspapers leading up to election day. Nor is it an issue that they want to touch between now and November.
See the admission for yourself (H/T to The Seniors Coalition for finding the video):
RYAN: I’ve heard people advance, here in Congress, that the [Social Security] Trust Fund is fine until 2036, and we don’t have to do anything until then — so why worry about it now? I want to get at the nature of that. Correct me if I’m wrong, but if we do that then we have an across-the-board cut of about 23% that occurs in benefits — is that correct?
GOSS: Exactly.
RYAN: And does that hit everybody equally? Meaning, does a 23% cut hit a low-income worker just as much as it hits a high-income individual?
GOSS: As we understand it — our General Counsel at Social Security across several administrations — has indicated that the law actually does not speak explicitly to this. The Commissioner standing at that time would simply have 77 cents available for every dollar of scheduled benefits, and would not be permitted to spend more that that — we do not have borrowing authority. So a decision would have to be made about how would get the money. We could have an across-the-board 23% cut immediately, or a Commissioner could say, ‘well we’re not going to pay the March benefits in March — we’ll wait until April — wait until more revenues come in to allow full payment a month late.’ After a few months we would perhaps then have to start paying benefits two months late. So this would be a way that it could be handled.
Of course, if people have to pay rent on time, that would be a difficulty. There’s no easy way out on this. One could channel this towards having bigger reductions for people with higher benefits –
RYAN: That would be a decision up to Congress at the time, right?
GOSS: We hope and pray that Congress would indeed act well before we ever hit the Trust Fund reserve exhaustion.
RYAN: Given that we have this abrupt 23% cut that occurs in law — current law — is it not wise so start reforming now, sooner, so that the distribution of the change is spread more broadly and evenly across income cohorts? Let me ask it this way: does that abrupt 23% cut hit current senior cohorts? A person who’s turning 62, or 65 today — that effects them as well, correct?
GOSS: It certainly would. They would be at an older age at that time but clearly it would affect them. That is assuming that we wait and do absolutely nothing until that point.
RYAN: So if one provides reforms soon, could you not prevent these kinds of effects from hitting those current cohorts? Could you not phase reforms in gradually that prevent that 23% cut from happening so it doesn’t affect people who are currently in or near retirement? Could you structure reforms that prevent that from happening if you act sooner?
GOSS: Absolutely. We have a number of proposals — including yours Chairman Ryan — and many other proposals that would take exactly that approach. Our trustees and everybody who speaks on this has opined extensively about the value of acting sooner rather than later, so that we can have gradual changes phased in and we have more options if we act relatively soon.
Adam Bitely is the Editor-in-Chief of NetRightDaily.com. You can follow him on Twitter at @AdamBitely.
