Social Security 2016: Huge Benefits Cuts To Hit During Election Year, Fund Trustees Warn


Social Security cuts — the exact issue no politician wants to talk about — will become a major issue in the 2016 presidential election unless Congress does something about it right now, according to a report issued Wednesday by the Social Security fund’s trustees.

The cuts, which will kick in automatically and shave off a whopping 19 percent from monthly benefits, will not affect everyone who receives Social Security payments. But the 11 million Americans who receive benefits from the Social Security disability fund — in many cases the most vulnerable of all Social Security recipients — will feel the bite.

Those 11 million disabled Social Security recipients receive an average benefit of $1,017 per month. That number will suddenly drop to $824 if the automatic cuts take effect.

The reason, according to the Social Security trustees, is that the pool of cash that funds the disability payments is about to dry up. That fund is separate from the Social Security retirement fund.

In fact, the last dollars from the disability fund will be sent out to recipients late next year — at exactly the moment that the presidential race will be at its peak.

On the other hand, according to the trustees, the fund for Social Security retirement benefits is getting healthier. They now project that full benefits can be funded through 2035, compared to 2034 in last year’s trustee report. Even after 2035, without any tweaks to the program, retirement benefits will still be funded at a 75 percent level.

That’s why, the trustees say, all Congress has to do is transfer some of that retirement cash into the disability fund, which would keep people who rely on the disability payments from losing almost a full dollar out of every five dollars they now receive — but would also leave the retirement fund fully solvent until 2034.

While President Barack Obama supports the trustees’ plan, Republicans in Congress say no. Instead, they say, disabled people should be forced back to work, taking them off the benefit rolls. The Republicans also demand new enforcement measures to prevent fraud.

At the same time, many of those same Republicans in Congress now propose eliminating thousands from the Social Security retirement rolls and using the cash to repair and build highways.

But supporters of shifting cash from the larger pool to the smaller one say that the 2034 deadline is plenty of time to make the relatively small changes that will allow Social Security to stay in business, and even expand to cover more Americans, well beyond the 2034 deadline.

One of those tweaks, according to experts, is to simply remove the “cap” that allows all income over $110,000 to go free of the payroll tax that funds the program. The cap makes 17 percent of all earnings by Americans exempt from Social Security tax — compared to just 10 percent in 1980.

Eliminating that cap, combined with a small increase in payroll tax, of barely one percentage point, across the board would eliminate the gap between what Social Security takes in and what it pays out, keeping the program healthy, essentially, forever — and taking the issue off the table in 2016 altogether.

[Image: Scott Olson / Getty Images]

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