Updated Wednesday, July 23, 2014 as of 4:27 PM ET
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Don’t Bet On Social Security Benefits Being Cut
Financial Planning
Wednesday, September 29, 2010
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One of the bigger stories coming out of our nation’s capital—besides the November elections—is a political battle over Social Security. This is not, of course, a new battle. It’s a decades-old battle. It has been covered plenty in this space. Is the government program broken? Is it running out of money? Should younger workers be allowed to invest a portion of their payroll taxes in private accounts?

Now a bipartisan commission assigned by President Obama in February to look at ways the government can reduce the estimated $1.3-to-$1.5-trillion deficit is thought to be considering some sort of adjustments to Social Security. What these adjustments might entail is hard to say. The commission doesn’t issue its final report until December 1 so right now it’s all vague conjecture. House Minority Leader John Boehner (R-Ohio) suggested in June that the retirement age for the government insurance program be raised to 70. Fearing a cut in benefits, a progressive group called Campaign for America’s Future has started a crusade behind the message, “Hands Off Social Security.” As of press time, 105 members of Congress and 13 candidates for office have signed a pledge to oppose benefit cuts.

If one had to make a really safe bet, it would be that Social Security is going to be left alone. Anti-government sentiment is obviously high right now. And for the time-being politicians have decided to care about cutting the deficit. (Sorry, but Republicans are as guilty of over-spending as Democrats. This interest in cutting the deficit will not last.) But if Americans had a list of things they believe the government owes them, Social Security benefits would no doubt be near the top.

In fact, a poll commissioned by AARP back in August to commemorate the government insurance program’s 75th Anniversary found intergenerational support for Social Security. Over 90% of those between the ages of 18 to 29 said Social Security remains an important program. Nearly 80% of respondents over the age of 65 said it is “one of the very most important government programs.” An overwhelming majority of younger respondents oppose a cut in benefits to help reduce the deficit. Interestingly, more than 80% of younger people also said that Social Security contributed to “the common good,” regardless of whether or not they felt the could invest their money better.

The program has become especially important for baby boomers after the collapse of the housing and stock markets. Many boomers cannot wait until they are 70 to collect Social Security because many did not save enough during the bubble years. They simply don’t have the savings (like home equity) to carry them very far once they retire.

“People are talking about raising the retirement age which is a big cut in benefits,” economist Dean Baker, co-founder of the Washington, D.C.-based Center for Economic and Policy Research, said in an interview with us earlier this year. “These [boomers] are people who aren’t going to have very much. People are talking about cutting benefits as though they haven’t noticed the collapse of the housing market.”

Even the argument for allowing younger workers to invest a portion of their payroll taxes into private accounts (once a centerpiece of George W. Bush’s domestic priorities in the early days of his presidency) will likely lose steam. Marco Rubio, a Republican Senate nominee from Florida (whose candidacy was bolstered by support from the Tea Party) has changed his stance on privatization. After once endorsing the plan, he now says it won’t work.

"The problem with that, after I studied it, was that it takes payers out of the system,” Rubio told reporters in Tallahassee this week. “It doesn't work, because it actually makes it in the short term harder to balance it.”

If Social Security is in fact broken, it will be fixed. If it needs more funding, it will (eventually) get that funding. But there is little chance that benefits will get cut. The simple fact of the matter is that it’s just not a politically feasible option for Congress to take. Americans hate Socialism, unless they’ve grown used to it. Once that happens, the government better think twice about messing with a beloved government program.

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