With all the political wrangling over proposed cuts to the nation's social safety programs, one new report has found that younger Americans already face reduced Social Security benefits.
The National Academy of Social Insurance, a nonprofit that promotes social insurance programs, estimates Americans who turn 65 in 2025 will have 19 percent of their Social Security benefits cut through cost-of-living-adjustment (COLA) delays, taxes and increases in the retirement age. More cuts will come, the group insists, unless more revenues are raised, i.e. tax hikes.
"Social Security benefits are already being cut more than many people realize," said Virginia Reno, NASI's vice president for income security and a co-author of the report. "Cutting benefits further is not necessary to preserve Social Security for future generations. Other alternatives merit consideration by policymakers."
Americans born after 1959 won't be able to fully collect Social Security benefits until they are 67, an increase from 65, which constitutes a 13.3 percent hike. The 1983 Social Security Reform subjects some benefits to personal income tax, which amounts to a 5.1 percent cut; and the 1983 reform also delays COLA by six months, which equals a 1.4 percent reduction.
"The 1983 changers are often described as a balanced plan of benefit 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 recommends gradually lifting the cap on FICA payroll tax contributions to adopt a balanced long-term revenue plan that would cover the projected shortfall facing Social Security while making modest improvements for low-paid workers, the oldest beneficiaries and students who lose parental support due to death or disability.
Republicans have drawn criticism over a plan they passed in the House that would cut Medicare by turning it into a voucher program that helps elderly and disabled buy private insurance.
The plan was part of a larger debate on entitlement reforms and federal spending that has consumed Washington in recent months as an Aug. 2 deadline looms to raise the nation's debt ceiling. Republicans want to slash spending as the price for raising the ceiling while Democrats want raise taxes along with spending cuts.