Letter: Legislation by Sen. Hutchison Would Cut Social Security Benefits for Near-Retirees
|Written by Dean Baker|
|Friday, 14 October 2011 15:00|
The Honorable Kay Bailey Hutchison
Dear Senator Hutchison,
A recent opinion piece you authored argues that we must act immediately to save Social Security. In the column, you suggested a course of action based on the DSSS Act — legislation you introduced earlier this year — in order to avert the 23 percent cut in benefits that would happen in 2036 if nothing is done in the next quarter century and the Social Security Trustees projections prove correct. (The Congressional Budget Office (CBO) projections imply cuts of 18 percent in 2038.) The column also claims that the situation will get much worse after the projected date of depletion. In fact, both the Social Security trustees and CBO projections show that after initial depletion of the trust fund, the picture for payout of benefits actually gets slightly better over the following decades.
Also, you should realize that the cuts implied by DSSS Act are comparable in size to the cuts that would occur after the projected date of depletion if nothing is done. Specifically, the proposed 1.0 percentage point reduction in the annual cost-of-living adjustment translates into roughly a 10 percent cut in lifetime benefits for a person who collects benefits over a 20-year retirement. Raising the retirement age by an additional year amounts to roughly a 6 percent cut.
Taken together these policies would reduce benefits by roughly 16 percent for near-retirees, as opposed to the 18 percent reduction in benefits that CBO projects would occur in 2038 if Congress does nothing. I hope that you are aware of these numbers, but it is difficult to understand how you could view an 18 percent reduction in benefits for workers who will retire a quarter of century in the future to be unacceptable, while advocating a 16 percent cut in benefits for near-retirees.
I recognize your important role in being one of the leaders in the Senate on this issue. If I can provide you with further information or background on the program, I would be happy to do so.