Deficit Hawk Hypocrisy: Proposed Social Security "Reform" Would Devastate the Poorest

If you thought you were done hearing about Washington’s favorite budget hawk duo, think again. The Bowles-Simpson saga continues. A few months ago, when Fiscal Commission Co-Chairs Erskine Bowles and Alan Simpson released their Social Security proposal, even their worst critics conceded that the plan would improve benefits for the very poorest. At the time, however, many of us were skeptical that benefits could be significantly improved at such a low cost. Sadly, our worst fears have been confirmed: the Bowles-Simpson proposal’s so-called benefit increases for the poorest are merely window dressing for massive benefit cuts. According to a new analysis by the Chief Actuary of the Social Security Administration, the Bowles-Simpson proposal would reduce benefits by as much as $1,107 (16%) for 60% of “Very Low” earners, those workers with average annual earnings of around $10,800. Click here to see a graph of the benefit cuts prepared by Social Security Works, or check it out below.

The findings contradict the claims of Fiscal Commission Co-Chairs, Erskine Bowles and Alan Simpson that their plan would do more to “reduce poverty among the very poorest.” (The Moment of Truth, p. 43) In fact, it was a central component of their public-relations campaign. They were using our own principles against us by goading us to oppose changes in Social Security that would help the poor. They tried to “out-progressive” progressives, claiming we cared less about the poor than they did.

And for a while their strategy seemed to be working. Never mind that making the program more redistributive would radically transform Social Security from a wage-insurance program to a welfare plan, ultimately hurting the poor the most by pitting the middle class against them. Making the minimum benefit more adequate has been a longtime goal of advocates with the low-income community. Some liberals were privately asking, If the Bowles-Simpson proposal, or something like it, were to be shoved down our throats come hell-or-high water, would “sweeteners” like the enhanced special minimum benefit make it more palatable?

Now we can safely put those doubts to rest. The facts have come to the rescue. There is nothing redeeming left in the Bowles-Simpson plan. It is all pain and no gain.

Contrary to previous estimates, the Bowles-Simpson proposal would reduce benefits by as much as $1,107 (16%) for 60% of “Very Low” earners, those workers with average annual earnings of around $10,800, the SSA analysis reveals. The benefit cuts result from the strict work history requirements of two key provisions in the Bowles-Simpson proposal: the Hardship Exemption and the enhanced special minimum benefit. Because 60% of $10,800 earners have fewer than 25 years of “covered” earnings, they would be ineligible for both.

The Hardship Exemption would exempt low-wage workers earning up to 250% of the poverty level from the proposed increase in the retirement ages. But workers would need at least 25 years of earnings covered under Social Security to qualify for it. And it is precisely the poorest workers who are least likely to have those kinds of long work histories in the formal economy. Many of these workers have childcare responsibilities, suffer from poor health and long-term unemployment, or work in off-the-books jobs, so it is much harder for them to accumulate 25 years in “covered earnings.” The condition would fall particularly hard on single mothers and disabled workers. Those 60% of $10,800 earners who fail to make the cut would have to work longer for less in return. What is especially egregious in forcing them to retire later is that the poorest workers often work in physically demanding jobs, and live significantly shorter than the rest of the population.

The enhanced special minimum benefit would provide workers’ whose benefits leave them below the poverty line with benefits that amount to 125% of the federal poverty level. But workers would need 30 years of “covered” earnings to qualify for the full special minimum benefit. For every year less than 30 that a worker has in “covered” earnings, the benefit would be reduced by 5%. If the regular benefit is higher than the special minimum, the worker would get whichever is higher. The special minimum stops being more generous at about 25 years of earnings, leaving 60% of $10,800 earners back at a poverty-level benefit. Worse still, the old benefit would be reduced by the Bowles-Simpson proposal’s cuts to the COLA, and increases in the retirement age.

The moral of the story is simple. Be wary of deficit hawks that try to hide behind progressive rhetoric. We can and should fight for improvements in the adequacy of Social Security benefits for the poorest and most vulnerable. But we should do it for its own sake, not in the context of looking for ways to cut the program. When squeezing Social Security for budget savings is your primary goal and improving its adequacy is secondary at best, there is a built-in incentive to use watered-down and ineffective policies to make across-the-board cuts seem smaller and less harmful than they really are.

Views expressed on this page are those of the authors and not necessarily those of Campaign for America's Future or Institute for America's Future