The Wall Street Journal reports that in addition to raising the retirement age, which is now set to reach age 67 in 2027, specific cuts under consideration include lowering benefits for wealthier retires and trimming annual cost-of-living increases, perhaps only for wealthier retirees, people familiar with the talks said. Other proposals being considered include raising the portion of income subject to social security tax and raising the tax from the current 6.2% for employer and employee, according to the news report.
The 18-member National Commission on Fiscal Responsibility and Reform is charged with generating solutions to address medium- and long-term fiscal problems. To be endorsed by the panel, an idea must garner 14 votes.
The commission includes 12 members of Congress, six Democrats and six Republicans appointed by congressional leaders, plus four non-lawmakers chosen by the White House. The White House also appointed the co-chairmen, Democrat Erskine Bowles, a former White House chief of staff, and Alan Simpson, a retired GOP senator. The group is to issue its report by Dec. 1.
Social Security officials project that beginning in 2014, the program will routinely pay out more in benefits than it collects in taxes, requiring it to draw on reserves that have been funding the rest of the government. By 2037, the reserves would be depleted and the program would only be able to pay about 75% of promised benefits (see Fiscal Downturn Impacts Social Security Outlook).
The Journal said Liberal Democrats are already organizing to head off any proposal that cuts Social Security benefits, including any plan to raise the retirement age. They argue the program’s finances can be fixed with tax increases alone and that benefit cuts would harm low-income seniors who have little savings.
The news report also noted that Republicans generally oppose higher taxes. However, some commissioners are optimistic that both sides can agree.
“Are Republicans willing to sign onto a tax increase, and are Democrats ready to sign onto a benefit cut? I think the answer is probably yes in both cases if the other is willing to do it,” said Alice Rivlin, a Democrat and former White House budget director, according to the news report.When asked about Social Security, President Obama said: “We’re going to have to make some modest adjustments in order to strengthen it.”