OZAUKEE PRESS EDITORIAL: Retirees could be hit by shrapnel as debt explodes

What do the tax cuts enacted last year by Congress have to do with Social Security? Nothing . . . right now. But in a few years, those tax reductions for individuals and corporations could be seen as the indirect cause of painful reductions in Social Security benefits. Here is the connection: The loss of revenue from the tax cuts is a major cause of what economists are calling America’s debt crisis. According to the nonpartisan Congressional Budget Office (CBO), the national debt is on course to rise to 100% of the gross national product with interest payments reaching $1 trillion per year. The debt continues to grow because massive borrowing is needed to cover trillion-dollar budget deficits. Even the architects of the tax cuts are alarmed. One of them recently suggested a remedy—cut Social Security benefits. Larry Kudlow, President Trump’s top economic adviser, said the administration had to get tough on spending, including “the larger entitlements, probably next year.” By “larger entitlements” he meant Social Security and Medicare. Social Security currently has no effect on deficits or debt. Benefits are paid from a trust fund supplied by revenue from the payroll taxes paid by employees and employers. But the fund will be depleted by 2034 and money for mandatory Social Security funding will have to come from other government sources unless benefits are reduced. For the fund to break even, every Social Security beneficiary would face a 21% benefit cut. The likes of Kudlow and Republican members of Congress who have been angling for years to cut back the benefits they dismiss as overly generous entitlements for American workers see an opening to get their wish in the looming Social Security shortfall. That door needs be closed by members of Congress of both parties acting to keep Social Security’s promise of a secure future for workers. That means not cutting benefits to make the fund solvent, but instead increasing revenue to meet its obligations. The obvious place to start is the cap on the amount of income subject to the payroll tax. There is no justification for exempting salaries and wages over the current cap of $128,400 from Social Security taxes. Eliminating the cap and subjecting all employment income to the payroll tax would go a long way toward closing the funding gap. A small increase in the 6.2% payroll tax paid by workers and employers should also be part of the fix if needed. It’s easy for Kudlow, a veteran of Wall Street whose estimated net worth puts him in the lofty vicinity of the top 1%, to be glib about cutting benefits. It is possible he doesn’t understand what it is like to depend on Social Security to help support a modestly comfortable retirement or even, as is the case for many retirees, to meet basic human needs. The average monthly check for the 43 million retirees now receiving benefits is $1,413. For one-third of all Social Security recipients, that amount—equal to $16,952 a year— accounts for 90% of their income. As a reference, poverty levels in 2018, according to the U.S. Department of Health and human services, are $12,140 for a single-person and $16,460 for a family of two people. Even for most better-off retirees, Social Security benefits are essential for a decent standard of living. For 61% of retirees, Social Security is half of their income. The nation’s exploding debt, fueled in large part by tax cuts passed with no offsetting revenue, is a legitimate threat to America’s prosperity. The CBO predicts it will hurt the economy by forcing up interest costs (for individual borrowers such as home mortgage payers as well as the government) and increase the likelihood of a financial crisis. Debt that is predicted to be equal in size to the entire economy by the end of the next decade must be dealt with. Using it as an excuse to cut Social Security benefits is no way to start.

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Wisconsin’s largest paid circulation community weekly newspaper. Serving Port Washington, Saukville, Grafton, Fredonia, Belgium, as well as Ozaukee County government. Locally owned and printed in Port Washington, Wisconsin.

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