Are Cuts The Only Way to Reduce the Deficit?
After passing new tax legislation that’s projected to increase the federal deficit by more than $1.5 trillion over the next ten years, Senate Majority leader Mitch McConnell (KY) recently blamed Social Security, Medicare and Medicaid for the rapidly increasing deficit. McConnell said the only way to lower the deficit would be to cut Social Security, Medicare, and Medicaid.
Senator McConnell’s comments came a day after the U.S. Treasury Department released an analysis that revealed the corporate tax cuts under the new tax law had a significant impact on the deficit in 2018. Supporters of the 2017 tax legislation sold the bill saying that the tax cuts would spur economic growth so much that it would pay for itself. But the Treasury Department recently reported that the U.S. budget deficit grew to $779 billion in Trump’s first full fiscal year as president, as a result of the tax cuts, spending increases, and rising interest payments for the national debt.
The debate over cutting entitlement spending, however, isn’t new. For years, proposals to cut Social Security and Medicare benefits have been put forth from both sides of the aisle. Consider:
- President Barak Obama included a proposal in his fiscal year 2014 budget that would have reduced Social Security benefits by using the more slowly-growing chained consumer price index to calculate the Social Security cost-of-living adjustment (COLA). An estimate produced for TSCL projects that “chaining the COLA” would cut Social Security benefits by about 9% over a 30-year retirement. Although the proposal has been under discussion for several years, it has not passed, primarily due to fierce resistance from older voters.
- President George W. Bush proposed overhauling Social Security into a system of private accounts that would be invested in the stock market. The proposal never was passed into law, due to its unpopularity with the public. Before the proposal could gain traction, the Great Recession pounded the stock market, bringing a temporary end to the idea of investing Social Security payroll taxes into private individual retirement accounts. Between the peak of the stock market on October 9, 2007 and the low in March 2009, equity prices fell 50 percent, proving to many that the fixed benefit structure of Social Security is still desirable.
- House speaker Paul Ryan’s proposal to overhaul Medicare by providing beneficiaries a subsidy or voucher to shop for private insurance on a federal health exchange has been included in House budget blue prints numerous times, but voters are overwhelmingly opposed to the idea. The plan would give private insurance plans a greater role in Medicare, and beneficiaries would be given a subsidy to shop for insurance coverage. The Congressional Budget Office has estimated that the plan would shift a growing share of the costs to beneficiaries.
Tell us what you think! It’s time for the TSCL’s 2019 Senior Survey. This is your opportunity to let us know what you think about major proposals affecting your benefits. Tell us how rising costs are affecting you. The answers to these questions help us inform journalists, the public, and Members of Congress on how older Americans are faring in retirement today. Your participation is helping to change the national dialogue on the adequacy of Social Security benefits, and throwing a spotlight on the growing problem of the ability of COLAs to maintain the buying power of your benefits.