Q: President Bush has promised that no one born before 1950 would be affected by Social Security Benefit cuts. What does he mean by that? Does he not consider taxes on benefits a benefit reduction? And what about COLA cuts?
A: In dozens of speeches around the country, and on the White House web site, President Bush says that "he will not change the Social Security system in any way for those born before 1950." If you are looking for specifics as to what he means by that, however, few details exist. As long as he has held office, President Bush tends to lay out major legislative priorities in very broad terms and then looks to Congress to supply the details. The White House web site says that "President Bush will listen to any good idea that does not include raising payroll taxes."
Earlier this year the Senate passed a tax and budget resolution that contained a provison to repeal the 1993 tax on Social Security benefits. The move was mostly symbolic because a budget resolution is not law and only serves as a guideline.
The 1993 tax applies to seniors whose "provisional income" (roughly your Adjusted Gross Income plus half of your Social Security benefit) exceeds $34,000 (individuals) or $44,000 (couples). Depending on income, more than 50%, and up to 85% of benefits are subject to tax. In addition, the income levels are not adjusted for inflation, so growing numbers of seniors are subjected to this tax every year.
The revenue from this tax is currently earmarked for the Medicare Part A Trust Fund, but even with the taxes on benefits flowing in, the government must borrow to cover Medicare Part A hospital benefits. This would make a repeal of this tax difficult without offsetting the loss in revenue.
As for COLA cuts, those who advocate lower COLAs, including Federal Reserve Chairman Alan Greenspan, tend to justify them on the basis that the government is overpaying COLA recipients and thus a correction is necessary. Chairman Greenspan and some other government economists contend that the CPI overstates inflation, despite numerous changes the government has made in the past ten years that have slowed the rate of growth in the CPI and COLAs.
For more specifics about President Bush's position on the taxes on Social Security benefits, or Cost-of-Living Adjustment (COLA) cuts, or other aspects of Social Security reform try writing to: The White House, 1600 Pennsylvania Ave., NW, Washington, DC 20500 or visit the White House web site: www.whitehouse.gov.
2005 Medicare Trustees Report, March 23, 2005, page 172. Testimony of Chairman Alan Greenspan on The Consumer Price Index, Before the Senate Committee on Finance January 30, 1997.
October 2005
