December 13, 2016
Rep. Sam Johnson Wants to Cut Our Social Security Drastically
U.S. Rep. Sam Johnson, R-Texas, chair of the Social Security subcommittee of the House Ways and Means Committee, has filed a bill that would cut Social Security drastically. Analysts say it could mean a 35% cut from current levels for some retirees.
The Social Security Reform Act of 2016, H.R. 6489, gradually raises the retirement age from 67 to 69 for Americans who are currently 49 or younger. It would change the formula that determines the size of a retiree’s initial payments and it would switch the program to a less generous formula for calculating cost of living increases.
“Now is when we find out if the president-elect will keep his promise not to cut Social Security,” said Robert Roach, Jr., President of the Alliance. “We know the voters certainly didn’t elect him hoping that cuts would happen.”
“This plan’s approach is a non-starter,” he continued. “It does not raise any revenues for the Social Security Trust Fund – it only cuts benefits.”
The Johnson plan would gradually turn Social Security into a program that produces essentially one flat benefit, regardless of how much a worker contributed.
The proposal would reduce Social Security’s cost of living increases (COLAs) for everyone and eliminate them entirely for some retirees, even though COLAs are already too low. The extreme plan would even reduce benefits for spouses and children of seriously disabled workers.
Johnson’s initial cuts come in the form of the two-year retirement age increase, which according to Paul Van de Water, a senior fellow at the Center on Budget and Policy Priorities, amounts to a seven percent cut each year.
The changes to the formula to determine the initial benefit — known as the Primary Insurance Amount (PIA) — are more complicated. In general, they negatively impact higher earners the most.
Almost all beneficiaries, however, would see reductions as time goes on when compared to current law, due to the legislation’s use of a less generous inflation measure.
Under the plan, a 65-year-old middle-income earner, someone who earned an average of $49,121 after 44 years in the workforce, would see a reduction in his benefits of 11 percent when he retires in 2030, compared to the current law. The amount of reduction would increase the longer he stays on the rolls: when he is 75 years old, the reduction would be 14 percent compared to current law, and 16 percent when he reaches 85 years old.
Worse, the cuts get more severe for a middle-income earner as the year of retirement gets further out. If a 65-year-old at the $49,121 earning level retired in 2050, her benefits would be 17 percent less than current law.