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April 19, 2011

Obama Reaffirms Desire to Lift Social Security Payroll Cap

Posted in: Uncategorized

The President held a town hall meeting in Annandale, Virginia, and these are usually events that serve as a conduit for a message that the President wants to get out. Therefore, it’s worth paying attention to his entire answer about Social Security:

Q Hi, Mr. President. My name is Vinita Griffin (ph). I’m a late student here at Northern Virginia Community College. I’m in my second career now. My question is, in about 15 years I’ll be eligible for Social Security. And I’m part of the baby boomer generation, and I don’t know if there will be Social Security when I get ready to — and I probably won’t retire for another 25 years, I’m thinking.

THE PRESIDENT: No, you look pretty young. (Laughter.) You look like you’re — you look like you’ve got a lot of career left in you.

Q I’m about your age. But, yes, so I figure another 25 years I’ll be working. But I don’t know if it will be there when I need it, and I’m concerned about that.

THE PRESIDENT: Well, let me talk about Social Security. The big drivers of our deficit are health care costs. I mean, the thing that we’ve really got to get control of is Medicare and Medicaid. That’s what’s skyrocketing really fast. Because not only is the population getting older, but health care costs are just going up a lot faster than people’s wages and salaries — or tax revenues to the federal government.

Social Security is a problem but one that we can solve much more easily. So the first answer to your question is, Social Security will definitely be there when you retire. (Applause.) I’m absolutely confident about that. I am absolutely confident about that.

Now, here’s the thing. If we don’t do anything on Social Security, if we just don’t — if we don’t touch it at all, then what would happen is, by the time you retire, or maybe just a couple years after you retire, you might find that instead of getting every dollar that you were counting on, you’re only getting 75 cents out of that dollar. Because what’s happening is the population is getting older; there are more retirees per worker and more money starts going out than is coming in.

So we do have to stabilize Social Security’s finances, but we can do that with some relatively modest changes — unlike health care, where we’ve got to get in and work with providers and really get some much more substantial reforms. With Social Security, it’s just a matter of tweaking how it currently works.

Now, politically, it’s hard to do. Politically, it’s hard to do. For example — I’ll just give you one example of a change that would make a difference in Social Security. Right now you only pay a Social Security tax up to a certain point of your income. So a little bit over $100,000, your Social Security — you don’t pay Social Security tax.

Now, how many people are making less than $100,000 a year? Don’t be bashful. (Laughter.) The point is, for the vast majority of Americans, every dime you earn, you’re paying some in Social Security. But for Warren Buffett, he stops paying at a little bit over $100,000 and then the next $50 billion he’s not paying a dime in Social Security taxes.

So if we just made a little bit of an adjustment in terms of the cap on Social Security, that would do a significant amount to stabilize the system. And that’s just an example of the kinds of changes that we can make. (Applause.)

So we are going to have to make some changes in Social Security, but it’s not the major driver of our deficit. And what I’ve proposed is let’s work on Social Security, but let’s not confuse that with this major budget debate that we’re having about how we deal with both spending and revenues because that is the problem that is going to require some really hard work and some bipartisan cooperation. Okay?

So we have the President making bipartisan noises about Social Security reforms, but on the specifics, he only mentions lifting the payroll tax cap, and he rejects completely that it should become part of the budget debate since it’s not a driver of deficits.

This is an accurate, substantive take on the nature of Social Security and its relationship to this larger debate. It’s certainly more accurate than what Dick Durbin’s out there saying. So you have to reconcile this all, because Durbin is seen as at least close to the President if not a stalking horse for him in the Gang of Six negotiations.

I don’t want to get into the pop psychology of who’s making what statement for whom, or the difference between public statements and private statements. Honestly, you can make yourself nuts with all of that. I’ll only say this: the President is making a generally accurate assessment of Social Security, and offering a progressive reform that happens to be extremely popular with the public. If he breaks with that course, every single person who collects Social Security benefits now or in the future will remember. In other words, everyone.

Same goes for Durbin and his constituents.


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