New GOP Congress Fires Shot At Social Security On Day One

With a little-noticed proposal, Republicans took aim at Social Security on the very first day of the 114th Congress.

The incoming GOP majority approved late Tuesday a new rule that experts say could provoke an unprecedented crisis that conservatives could use as leverage in upcoming debates over entitlement reform.

The largely overlooked change puts a new restriction on the routine transfer of tax revenues between the traditional Social Security retirement trust fund and the Social Security disability program. The transfers, known as reallocation, had historically been routine; the liberal Center for Budget and Policy Priorities said Tuesday that they had been made 11 times. The CBPP added that the disability insurance program “isn’t broken,” but the program has been strained by demographic trends that the reallocations are intended to address.

The House GOP’s rule change would still allow for a reallocation from the retirement fund to shore up the disability fund — but only if an accompanying proposal “improves the overall financial health of the combined Social Security Trust Funds,” per the rule, expected to be passed on Tuesday. While that language is vague, experts say it would likely mean any reallocation would have to be balanced by new revenues or benefit cuts.

House Democrats are sounding the alarm. In a memo circulated to their allies Tuesday, Democratic staffers said that that would mean “either new revenues or benefit cuts for current or future beneficiaries.” New revenues are highly unlikely to be approved by the deeply tax-averse Republican-led Congress, leaving benefit cuts as the obvious alternative.

The Social Security and Medicare Boards of Trustees estimated last year that the disability insurance program would run short of money to pay all benefits some time in late 2016. Without a new reallocation, disability insurance beneficiaries could face up to 20 percent cuts in their Social Security payments in late 2016 — a chit that would be of use to Republicans pushing for conservative entitlement reforms.

“The rule change would prohibit a simple reallocation! It will require more significant and complex changes to Social Security,” Social Security Works, an advocacy group, said in a statement Tuesday. “In other words, the Republican rule will allow Social Security to be held hostage.”

Policy wonks who follow Social Security saw the GOP rule change as a play for leverage.

“Everybody’s been talking about entitlement reform. Mr. Boehner and President Obama were pretty close to coming up with some kind of grand bargain, which ultimately fell apart,” Tom Hungerford, senior economist at the liberal Economic Policy Institute, told TPM. “Maybe this could be used as a hostage to try to get back to something like that.”

For their part, congressional Republicans were fairly transparent about their thinking. Rep. Tom Reed (R-NY), who has been outspoken on the disability program, co-sponsored the rule amendment. The disability program has been a favored target for the GOP; members were warning last month that the program could be vulnerable to fraud.

“My intention by doing this is to force us to look for a long term solution for SSDI rather than raiding Social Security to bail out a failing federal program,” Reed said in a statement. “Retired taxpayers who have paid into the system for years deserve no less.”

Liberal analysts counter, however, that the retirement fund, which pays out $672.1 billion in benefits per year versus $140.1 billion for the disability fund, is more than healthy enough to allow for a reallocation, as has historically been done. CBPP’s Kathy Ruffing wrote that, if a transfer was made before the 2016 deadline, both funds would be solvent until 2033.

The Republican angle in preventing that move then seems obvious.

“By barring the House from approving a ‘clean’ reallocation in 2016, the rule will strengthen the hand of lawmakers who seek to attach harsh conditions (such as sharp cuts in eligibility or benefit amounts) to such a measure,” Ruffing wrote.