New Budget Deal Cuts Social Security, But How?

MSNBC, CNN, HLN and Fox News have all been reporting non-stop about the Spring Valley school officer caught on video slamming a South Carolina student to the ground during an arrest — but very few details are being reported by the media about the new budget deal, which will soon go to a vote. (BTW, the student wasn't even hurt, but that has been "breaking news" for hours now.)

So far, limited information provided to the public seems to indicate that, rather than expand Social Security (as Senators Bernie Sanders, Elizabeth Warren and many others have advocated), the new budget deal is a "bipartisan compromise" to cut benefits for the disabled and lower the "cap" for high income earners (that, according to other media sources).

And just like the TPP trade agreement, the new budget is also being negotiated behind closed doors (while we're being distracted by other sensational news).

According to a source familiar with the talks, House Speaker John Boehner (R-Ohio) and Senate Majority Leader Mitch McConnell (R-Ky.) are making “structural entitlement reforms” to Social Security disability a key piece of budget talks with the White House. Spokespersons for both Boehner and House Minority Leader Nancy Pelosi (D-Calif.) did not comment on which beneficiaries could see smaller benefits.

Here's what the Washington Post had to report:

"The agreement includes about $80 billion in additional spending over two years, divided equally between defense and domestic programs. Those spending increases would be offset by savings from changes to the Social Security disability insurance fund and Medicare payments to doctors and other health care providers ... New rules for the Social Security disability Insurance fund, which is expected to run out of funds by the end of 2016 are expected to deliver savings along with changes to Medicare provider payments and Medicaid generic drug costs."

The Huffington Post reports:

"The new agreement would prevent a 20 percent cut in benefits next year to the 11 million Americans enrolled in the Social Security Disability Insurance program. The cut would be avoided by diverting some of the incoming payroll tax money from Social Security's much bigger retirement insurance program for six years, something Republicans previously said they wouldn't do without cuts to benefits. One source said the deal would also set up demonstration projects in which some people who receive disability benefits could earn money from working with less fear of triggering a review that can result in benefits being cut off. Instead, people participating in the projects could see their benefits gradually curtailed as their income rises -- an idea Ryan seemed to favor at a hearing earlier this year." [More about this is in the last paragraph below, directly from the new budget proposal.]

The full text of the budget is (naturally) written in legalese, so only lawyers can understand — but one can scan the 144-page PDF document with a word search for "disability". But Jaime Dupree provided us with a section-by-section summary of the bill (as provided by the House GOP leadership) posted here in plain English for the rest of us.

The new budget proposal is being hailed in the media as a "bipartisan compromise". But it's not — that's total B.S. — it's just another collaboration of two major political parties who are (once again) screwing the average American worker to benefit themselves and others who are much more well off than the bottom 95% of all wage earners.

The Hill reports:

"Budgetary offsets used to pay for the increased spending include cuts to both Medicare and Social Security disability benefits. The deal would specifically extend the 2 percent payment cut to Medicare under the sequester and create a “flat benefit” for disability recipients, which would be tied to the federal poverty line rather than an individual’s own savings. Budget experts at the Heritage Foundation have championed the flat benefit."

CNN seems to confirm this when they report:

"The deal would spread out increases in Medicare premiums over time so beneficiaries don't feel them acutely. It would extend the 2% cuts scheduled for Medicare to extend an additional year. It would also overhaul the Social Security disability trust fund in an attempt to prevent a 20% reduction in cuts to benefits. The $5 billion in savings would come from redistributing payroll benefits, not cutting them, sources said."

I personally saw no reference in the text of the budget mentioning a change in the income cap for Social Security taxes, or flat benefits for Social Security recipients, so I'm not sure where the media reports originate from --- other than from ONE SOURCE, but which has since been redacted from an article at The Hill (more about that further below).

The Fiscal Times addresses what the media and our politicians claim is part of a "bipartisan compromise" in the budget regarding the recent "doc fix" that increases Medicare premiums for some Social Security beneficiaries, saying the new budget would...

"...cap a threatened 50 percent increase in Medicare Part B Premiums. Nearly a third of the 50 million elderly Americans who have Medicare Part D are facing a 50 percent premium increase because of the law that drives up premiums for wealthier Americans and many poor people with chronic medical problems when the Social Security Administration doesn’t approve a cost of living adjustment for Social Security beneficiaries."

This is what might be considered part of the "bipartisan compromise". Because no COLA was approved for Social Security recipients, Forbes reports 7 million people who are not covered under the “hold harmless” law will have to pay the entire Medicare Part B increase in 2016. Those who will pay higher premiums in 2016 fall into one of these four groups: 1) those who enroll in Medicare for the first time in 2016; 2) those who don’t receive a Social Security benefit at age 65; 3) those who pay their Medicare premiums directly, rather than having them deducted from their monthly Social Security payment; and 4) those who are already paying a higher premium because of their higher income. (The increase in premium may affect singles whose modified adjusted gross income is more than $85,000/year or those who are married with modified adjusted gross income more than $170,000 per year. AARP provides a good analysis of who will have to pay the higher premiums.)

But rather than increase or eliminate the cap on income that is subject to Social Security payroll taxes (to make the old age and disability trusts funds solvent — and/or to increase monthly benefits), the Republicans in the House have proposed a plan to "reform" Social Security based on a report from the conservative think tank, the Heritage Foundation — that, according to the Hill.

The original article from The Hill posted the reference to the Heritage Foundation; but the article has since been edited that excludes any reference to the Heritage Foundation (which can be confusing when writers link to the source for verification). But a Google search still shows part of what was redacted from the Hill's original article (screenshot below). And the Hill's title for the post was also changed from "GOP eyeing Social Security reforms in budget deal" to "Budget deal includes Social Security, Medicare reforms".

Google search screenshot

No mention was ever made at the Hill about any "correction" or changes to their post, only that the post had been "updated" at 9:02 a.m.

The Heritage plan to "reform" disability is to pay all those who become disabled the same monthly benefit, no matter what their life-long earnings; and that a flat benefit would result in lower benefits for some, and higher benefits for others.

The Heritage plan also says individuals who currently receive disability benefits would continue to receive their same benefit checks; but that a flat benefit could be implemented relatively quickly for all new SSDI applicants and beneficiaries.

The Heritage plan states:

"Over time, as a flat benefit and other SSDI reforms improve the solvency of the program, any savings should be used to reduce the payroll tax cap at its current level of $118,500 to something closer to between one and two times the median wage. If individuals receive nothing in return for higher SSDI taxes, there should be a lower limit on effective premiums."

Data from Social Security shows that the Heritage/GOP plan would reduce the current maximum earnings cap from $118,500 to between $28,031 (the median wage) and $56,062. This would be a big savings for members of Congress, who with an annual wage of $174,000 a year, only pays this tax on 68.1% of their earnings. If the cap is lowered to $56,062 they would only pay this tax on 32.2% of their earnings. Whereas, 94.5% of all other wage earners currently pays Social Security taxes on 100% of their wages.

And this would also be a big savings for employers too. The current tax rate for Social Security is 6.2% for employees and 6.2% for the employer (or 12.4% total). So naturally, if the cap is lower, the amount they would be obligated to pay would be much less.

But it saves very few workers anything at all in the cap reduction. Even if the cap were lowered from $118,000 to $28,031 --- 50% of all wage earners make $28,031 a year or less, so they will continue to pay Social Security taxes on 100% of their earnings --- while those at the top will pay less.

Rep. Paul Ryan (R-Wis.), who is the chairman of the House Ways and Means Committee, deliberately took a low profile and refused to weigh in on the new budget deal, declining to comment to reporters and not saying a word about it during a private meeting with fellow House Republicans (Maybe he called the Hill to have that mention of the Heritage plan redacted.)

But as usual, Republican budgets are ALWAYS about cutting benefits for the 99% to cut taxes for the 1% ---- P.E.R.I.O.D. ---- and claims that doing anything differently would be "Socialism". But now (if what the Hill first reported is true) we also have Democrats doing the same thing — cutting benefits for the 99% to cut taxes for the 1% — and then calling it a "bipartisan compromise".

* * * * * * *

Sec. 823. Promoting opportunity demonstration project: Requires the Social Security Administration to test the effect on beneficiary earnings of changing how earnings are treated for purpose of ongoing benefit eligibility. Under the demonstration, the existing “cash cliff” would be replaced with a benefit offset, under which the DI benefit would be reduced by $1 for every $2 of earnings in excess of a threshold. The SSA could test multiple thresholds at or below the current level of earnings that constitute a trial work month ($780 in 2015). Under the demonstration, there would be no trial work period and no extended period of eligibility, but beneficiaries could receive partial benefits if their earnings in a month exceeded the substantial gainful activity amount ($1,090 a month in 2015). In addition, the threshold amount could be adjusted upward to reflect an individual’s itemized Impairment Related Work Expenses. Once an individual’s benefit is fully offset, entitlement to benefits would end, but Medicare coverage would continue for 93 months.



Update on Disability (LA Times)

(Finally, a new report)

One widely-reported proposal aimed at saving money in disability by taking it away from disabled people would have changed the formula for benefits from one based on the recipients pre-disability wages to a "flat benefit" tied to the federal poverty level.

This would have meant lower benefits for more than half of new disability recipients. (Existing recipients wouldn't be affected.) According to the Heritage Foundation, its chief promoter, the change would cut benefits for newly-filing disabled workers to $981 a month, the federal poverty level for a single person. That compares to the average benefit today of $1,165.

Heritage said that based on the existing demographics of the disabled population, 47% of new applicants would receive higher benefits than they would under the existing formula, and the rest would get less. It estimated the savings at $168 billion over 10 years.

The "flat benefit" didn't make it into the final bill. Curiously, however, the savings it was expected to provide was still being cited by some Republicans as a point in favor of the deal.

* One has to always sleep with one eye open whenever a member of Congress is burning the midnight oil, because when no one is looking, they will slip an amendment into a bill -- to do just this.


My Dad had a couple of sayings, probably quotes of someone else, which are appropriate in this sort of discussion.

The first was:
Whenever the congress is in session, fear. Because they meet with no purpose other than to pass laws which will restrict the liberty of citizens in some way, and whether their restriction affects you immediately or not depends principally only on your situation.

The second was:
Politics is the business of bribing people with their own money.

Good sleuthing. The

Good sleuthing. The reduction in cap for Social Security contributions is really troubling. That's the opposite direction from where it needs to go. And I've had a salary of $250K and enjoyed having my SS deductions cap out halfway through the year, but there is no reason to give that kind of break to high earners on the backs of the elderly and disabled. I've also had a mother trying to live on $1000 a month from Social Security, when her assisted living facility was $4000 a month. This shifts costs back onto the middle class families of seniors who will have to support them. And it's just greedy, stupid and unfair.

Social Security Cap

Thank you, Brennan! Wonderful commentary! Honest, practical, generous, and appropriate. We need to speak like this as a nation! (Running for anything?? - probably are unfortunately too smart to do that!)

that's outrageous, will decimate the disabled

They have to be kidding, last I heard it was $711 to live on. What a joke. There is no way to live on that little and they want to cut it by 20%? That's just a crime.

The disabled aren't gaming the system....

It's not the disabled who are gaming the system, it's those who cash their checks after they die:

One of the biggest problems involves the payment of monthly Social Security benefits to people who have died, with relatives or others continuing to collect and cash the checks. According to the IG’s report issued in March, investigators identified about 6.5 million individuals in the Social Security’s active database who would be age 112 or older – without any indication of whether they are still alive or dead. With an average U.S. life expectancy of 78.8 years, there’s more than a reasonable chance that most of those beneficiaries are deceased.

It's not the disabled who are gaming the system, it's illegal immigrants:

The inspector general’s report said that between 2006 and 2011, individuals using nearly 67,000 Social Security numbers generated $3.1 billion in tips, wages and self-employment income. Yet the employees' or self-employed individuals' names didn't match the Social Security number account-holders' names.

It's not the disabled who are gaming the system, it's doctors and hospitals:

The Government Accountability Office in early October confirmed that Medicare and Medicaid fraud and overpayments were spinning out of control and posed a serious long-term budget challenge. In fiscal 2014 alone, 22 agencies approved improper Medicare, Medicaid and Earned Income Tax Credit payments totaling $124.7 billion — an increase of $18.9 billion or 15 percent from the previous year, according to the report. 

It's not the disabled (in the U.S.) who are gaming the system, it's people in Puerto Rico:

A federal grand jury in Puerto Rico returned 39 separate indictments charging one doctor, Luis Escabi-Pérez, and 39 others of fraud in the application process for Social Security Administration (SSA) disability insurance benefits in Puerto Rico, according to Puerto Ricco’s U.S. attorney’s office.


The Truth Is

We need to realize that Reagan increased Social Security taxes 33 years ago in anticipation of today. There is a 2.7 trillion dollar surplus owed Social Security by the Federal Government. The National Debt is a direct result of Republican tax cuts for the ultra-wealthy and, under Bush II, the middle class as well. Social Security revenues are down because job killing trade treaties are reducing both employment and wages. Corporate America and the uber wealthy have benefited from both. Further the Boskin Commission under Clinton recalculated the way inflation and Social Security adjustments were measured resulting in lower rates that are bogus.

The truth is that both Social Security and Medicare are funded separately from the Federal Government. They were included in the overall Federal budget under Johnson to hide the true cost of the Vietnam War. Virtually the entire deficit is due to everything except Social Security and Medicare. The truth is Republicans are against Social Security because they are deadbeats. The Government shutdowns prove they simply don’t want to pay the bills they themselves have run up. The Social Security income cap must be eliminated and unearned income (rents, dividends, interest, royalties and capital gains going mostly to the wealthy) must be made subject to the Employee portion of both Social Security and Medicare. Social Security payments should be adjusted upward and the inflation calculation returned to reality. In short the truth is the exact opposite of what the Republicans say and the only way that today’s young people will not receive their Social Security is if they allow the Republicans to take it away from them.


A higher percentage of American children live in poverty today than did at the start of the Great Recession. The CBO's June 2015 report said that money transfers to the poor act as implicit taxes, reducing the labor force participation rate and depressing the economy further. The labor force participation rate in Greece is 52 percent and in Puerto Rico 43 percent. Entirely to many people are being allowed to go on government "disability" program rolls, not good for many of them in the long run and not financially sustainable to the remaining working population either. “Work” and “purpose” are intimately connected according to researchers at the University of Michigan who, for example, found that welfare payments make one unhappier than a modest income honestly earned and used to provide for one’s family.

Don't know the metrics for qualifying for Disability Benefits

in Greece or Puerto Rico, but they are very stringent in the US.

That's the reason for the huge proliferation of SSDI legal advocates (here).


"The power of accurate observation is commonly called cynicism by those who have not got it."
--George Bernard Shaw, Irish Dramatist & Socialist
"We [corporations] are the government!"--Actor John Colicos (1978)

Update on Medicare premium increase

Washington Post on the new budget deal:

"Under the agreement, Medicare’s Part B premiums for a group of roughly 15 million people will increase from the current rate of $104.90 per month to $120 per month next year, plus a $3 surcharge."

Those include:

1) Those whose insurance premiums are not automatically subtracted from a Social Security check.
2) Those who do not yet collect Social Security, but are enrolled in Medicare.
3) Those who enroll in Medicare Part B next year for the very first time.
4) Those who have incomes great enough that they are charged higher premiums.
5) Those who are poor enough that they also qualify for Medicaid.

Those not included:

Because their was no COLA for next year, Social Security benefits will not increase at all in 2016. This means that roughly seven in 10 Medicare beneficiaries were “held harmless” because their Part B premiums are automatically withdrawn from their Social Security checks --- so therefore, their premiums will not go up.

thanks for a great article

I'm a bit staggered that they are lowering the cap, it reminds me of when Greenspan was espousing ARMs before the mortgage crisis and I realized he wasn't this grandfatherly figure with my best interest at heart, its clear neither is the government, or either political party.

Not lowering the SS cap

Thanks Greg, but if you notice in the comments since I posted this, The LA Times reported that the Heritage's plan to create a "flat benefit" and lower the cap wasn't included in the last budget deal. When I first posted this article, the media wasn't talking much about this proposal, so I've been trying to follow it. But it doesn't mean the GOP won't stop trying. They have been relentless in trying to cut Social Security, and in a number of different ways. They keep coming at it in many angles. Their talking points might change, but their end game is always the same ... end or privatize Social Security. Now with Rep. Paul Ryan as the Chairman of the Ways and Means Committee AND the Speaker of the House, all the more reason to worry...and especially if a Republican is elected president in 2016 with a majority of Republicans in Congress. If that happens, you can bet for sure cuts will come.

Budget cuts "file and suspend" for Social Security

The "file and Suspend" rule for Social Security ends in the new budget deal...

Slate: People weren’t just using the "file and suspend" strategy out of greed. They were using it to boost what are often less than adequate income replacement levels in retirement. It came about as part of legislation designed to encourage people in their 60s to remain part of the paid workforce by eliminating caps on what seniors could earn and still claim Social Security. The "file and suspend" strategy allows one member of a married couple to file for his or her Social Security benefits on reaching the full retirement age but then suspend them. This allowed the lower-earning partner—usually the wife—to take her spousal benefits when she turned 66, while the other member of the marital team—usually the husband—continued to work. When the file-and-suspend spouse turned 70, he would once again claim his benefits, this time for good. At that point, the other partner forgoes Social Security’s spousal benefit in favor of her now-larger personal monthly stipend.

[* The new budget deal now disallows this; and that might be bad news for divorced women heading toward retirement.]

TIME: The "file and suspend" strategy calls for the higher-earning spouse to file for Social Security benefits at his or her full retirement age, but then suspend that filing while the benefit grows, until as late as 70. The lower-earning spouse can then claim spousal benefits at his or her own full retirement age, and later shift to their own full benefit, if it is larger. (A spousal benefit is half of the primary earner’s benefit.)
The Center for Retirement Research has estimated that file-and-suspend adds $9.5 billion in annual benefit costs to the program. The White House targeted it for elimination in the budget plan issued last year, calling it an “aggressive” move used by high-income households to “manipulate” benefits. The budget deal approved by the House this week would clamp down on the practice for anyone who turns age 62 after calendar year 2015.

ANGRY BEAR: "File and suspend" allows someone to get Social Security benefits prior to retiring, while not having to accept the lower benefits one gets if one retires at 62 or 66. One can get the higher benefits later. This will now not be allowed, so one must accept the lower benefits if one starts getting benefits early. This has only been possible for married couples with this involving one getting spousal benefits and then their own through some semi-complicated maneuvers that have been allowed since 2001."

[*The article says something about Paul Ryan too.]

something nasty

There is something nasty about an economic populist complaining about a flat disability benefit, instead of one that gives more to the well off than to the poor. If a flat benefit is insufficient for those people tgen they will demand and get a more generous benefit, and then the poor and middle class will be beneficiaries of this generosity.

You missed the whole point...

The Heritage's reason for a flat benefit was to lower the Social Security cap for richer people, not to "means test" richer people from getting higher benefits to help poorer people.

Those on Disability cause drug addiction

Republican Arkansas Senator Tom Cotton (born May 13, 1977) has been serving in the Senate since January 3, 2015. He recently spoke at the conservative think tank Heritage Foundation about Social Security disability. In his 8 minute speech he tells us about proposed legislation he introduced because the country is on it’s way to a "Disability Tipping Point".

He says: "Population continues to fall, and a downward spiral kicks in, driving once thriving communities into further decline. Not only that, but once this kind of spiral begins, communities could begin to suffer other social of plagues as well, such as heroin or meth addiction and associated crime."

Cotton revealed that he planned to introduce legislation that would single out non-permanent disability recipients and set a timeline for them to return to work. Disabled people who are not ready to return to work would be forced to reapply for disability benefits.


His speech at YouTube:

* Tom Cotton once worked at the consulting firm McKinsey & Company, where Chelsea Clinton and Mitt Romney and other elites have worked.

Read The Mystique of McKinsey & Co.

Excellent post--thanks! Still gathering material,

but appears that the corporatist neoliberals have once again pulled a fast one on the American People.

It's mindboggling to me that the AARP and the NCPSSM would applaud a 'fix' that mostly amounts to a transference of wealth upward. From what I've read, other than the 10 plus million poor/low income folks who would not have even paid the Medicare premium increase, aside from the 3 plus million 'wealthy' Americans-- who arguably could have afforded to pay more--it was only 1 million plus 'Average Joes' who would have been affected by the premium increase.

And, I read that many, if not most of those 1 million plus non-wealthy Medicare beneficiaries had 'workarounds' available to them to avoid the increase. Unfortunately, it didn't spell out 'what' those workarounds are. So, my task is to attempt to get more information on this topic.

(Please, if anyone has info on these 'workarounds,' I'd love to see it.)

Obviously, a 'fix' could have been put in place only for those non-wealthy folks to get relief, if a workaround was not feasible, or available to them.

Of course, considering the wealth of our typical lawmakers, that solution apparently went right out the window.


Postscript: I am concerned that the SSDI Fix and/or other 'entitlement' cuts could be affixed to upcoming bills.

Remember, Barbara Boxer and James Inhofe proposed to discontinue Old Age and SSDI Benefits for beneficiaries who had 'warrants outstanding,' as a 'pay-for' in one version of the Transportation Bill.

Needless to say, that would have also encompassed folks who were innocent of any offense. I posted the pertinent Thursday Press Availability with Pelosi as a comment, several months ago. To my knowledge, the video may still be available on C-Span. Pelosi appeared to be stunned by that proposal, and said that she was in opposition to it. But, I didn't follow up on the proposal, so I'm not sure if it was nixed, or not.

IMO, even if it was projected to affect only approximately one quarter million beneficiaries, I thought it was a hideous idea to use the withholding of Social Security benefits to 'punish' folks.

"The power of accurate observation is commonly called cynicism by those who have not got it."
--George Bernard Shaw, Irish Dramatist & Socialist
"We [corporations] are the government!"--Actor John Colicos (1978)

Excerpt of Pelosi's Remarks On "Warrant" Social Security Cuts .


Press Releases 07.23.15
Transcript of Pelosi Press Conference Today

Q: So it sounds like you are against the Senate bill. And this is not just the McConnell bill, it’s the McConnell‑Boxer bill.

Leader Pelosi. I didn’t say I was opposed to it. I’m just saying it’s not going to be done by the end of next week. So let’s deal with it. I am not opposed. We don’t know what it is. They’re in the process of amendment today. So we’ll see what comes out of it.

I commend Senator Boxer, she has many good things in the legislation that I’ve seen so far, but they are going through the process of amendment.

I don’t like several of the pay‑fors in the bill, starting with using Social Security to pay for roads. We cannot…

Q: Apparently they pulled that out last night.

Leader Pelosi. Well, we’ll see. We’ll see. That was the rumor, that it was going to be pulled out. I hope that that is the case.

But they will pass a bill, and we will pass a bill, and then we’ll go to conference. Perhaps we can go to conference with our – I think we would want to go to conference with something stronger than our five month bill. So this is going to take some time. And that’s why we’re just saying let’s take the time, let’s get the job done, but in the meantime don’t let the Trust Fund run out and don’t let the Ex‑Im Bank [remain expired]. . . .


"The power of accurate observation is commonly called cynicism by those who have not got it."
--George Bernard Shaw, Irish Dramatist & Socialist
"We [corporations] are the government!"--Actor John Colicos (1978)