The Center's work on 'Social Security' Issues


Just the Basics: Payroll Taxes

April 9, 2014 at 11:51 am

As Tax Day approaches, we’ve updated several backgrounders that explain how the federal government and states collect and spend tax dollars.  As policymakers and citizens weigh key decisions on how best to shape our future federal government, it’s helpful to examine where the dollars that comprise the budget come from and where they go.

The next in our series of revised “Policy Basics” backgrounders explains federal payroll taxes.

The federal government levies payroll taxes primarily on wages and self-employment income and uses most of the revenue to fund Social Security, Medicare, and other social insurance benefits.  In fiscal year 2013, federal payroll taxes generated $947 billion, or 34 percent of all federal revenues.  (When the Social Security tax was introduced in 1937, it accounted for 11 percent of federal revenues.)

Find out more about who pays payroll taxes and what they fund in our full paper.

Greenstein on the New Ryan Budget

April 1, 2014 at 5:09 pm

CBPP President Robert Greenstein just issued a statement on House Budget Committee Chairman Paul Ryan’s new budget plan.  Here’s the opening.

House Budget Committee Chairman Paul Ryan’s new “Path to Prosperity” is, sadly, anything but that for most Americans.  Affluent Americans would do quite well.  But for tens of millions of others, the Ryan plan is a path to more adversity.

The budget documents that Chairman Ryan issued today laud his budget for promoting “opportunity,” even as his budget slashes Pell Grants to help low- and moderate-income students afford college by more than $125 billion over ten years and cuts the part of the budget that funds education and job training (non-defense discretionary funding) far below the already low sequestration levels.  The budget documents also claim to help the poor, even as the Ryan budget shreds key parts of the safety net; for example, it resurrects the draconian benefit cuts in SNAP (food stamps) that the House passed last fall and adds $125 billion of SNAP cuts on top of them.

The budget also swells the ranks of the uninsured by at least 40 million people.  It repeals the Affordable Care Act (ACA), taking coverage away from the millions of people who have just attained it, and cuts Medicaid by $732 billion (by 26 percent by 2024) on top of the cuts from repealing the ACA’s Medicaid expansion.  Yet it offers no meaningful alternative to provide health coverage to the tens of millions of uninsured Americans.

That’s only a partial list of its cuts.  The budget cuts non-defense discretionary programs by $791 billion below the sequestration level, shrinking this part of the budget to less than half its share of the economy under President Reagan.  These cuts are entirely unspecified, as are more than $500 billion of cuts in entitlement programs.

Meanwhile, the budget aims to cut the top individual tax rate and the corporate income tax rate to 25 percent, eliminate the Alternative Minimum Tax, and repeal the ACA’s revenue-raising provisions.  These tax cuts would cost about $5 trillion over ten years, based on past analyses by the Urban-Brookings Tax Policy Center.  Yet the Ryan plan doesn’t identify a single tax break to close or narrow to cover the lost $5 trillion, even though his budget assumes no revenue losses overall.  And it ignores the hard fact that, in his recent tax reform plan, House Ways and Means Committee Chairman Dave Camp only lowered the top individual tax rate to 35 percent even after identifying scores of politically popular tax breaks to narrow or eliminate.

The Ryan budget is thus an exercise in obfuscation — failing to specify trillions of dollars that it would need in tax savings and budget cuts to make its numbers add up.  No one should take seriously its claim to balance the budget in ten years.

It’s also an exercise in hypocrisy — claiming to boost opportunity and reduce poverty while flagrantly doing the reverse.  Here’s just one example: Ryan has criticized some of the poor for not working enough and says that he wants to promote work and opportunity.  But his budget eliminates Pell Grants entirely for low-income students who have families to support, must work, and are attending school less than half time on top of their jobs.

Click here for the full statement.

SSI Should Be Strengthened, Not Cut

March 27, 2014 at 11:22 am

House Budget Committee Chairman Paul Ryan’s misleading review of the safety net attacks Supplemental Security Income (SSI) — an important program that provides cash income to seniors, the blind, and people with severe and long-lasting disabilities who have little income and few assets.  This vital program aids some of the poorest and most vulnerable Americans and, rather than attack it, policymakers should strengthen it.

In December 2013, 8.4 million people collected SSI:  2.1 million seniors age 65 or older, 4.9 million disabled adults age 18-64, and 1.3 million disabled children under age 18.  Until the deep recession caused a modest uptick, SSI participation had generally been flat or falling as a share of the population since at least the mid-1990s (see graph).

SSI benefits alone don’t lift recipients living independently out of poverty; the maximum benefits for individuals ($721 a month) and couples ($1,082, if both spouses qualify) are about three-fourths of the poverty level.  But SSI greatly reduces the number of people in extreme poverty and lessens the burden on other family members.  A Social Security Administration study found that, in 2010, the poverty rate (based on family income) of recipients would be 65 percent without counting SSI payments; the actual rate, including SSI, was 43 percent.  Most families with an SSI recipient remained below 150 percent of the poverty threshold.  SSI benefits fall when recipients have other income (or live in a Medicaid facility or with relatives who provide support), so the average payment is just $529 a month.

Because SSI participants are elderly or have severe disabilities, it’s no surprise that relatively few of them work, even though program rules allow and encourage them to do so.  Nevertheless, nearly one-third of SSI recipients age 18-64, and three-fifths of elderly beneficiaries 65 or older, have worked enough — at least one-fourth of their adult lives — to qualify for Social Security benefits.  And two-thirds of children with disabilities who receive SSI and live in two-parent families — and one-third of those in single-parent families — have a working parent.

Severe disability in childhood — exacerbated by poverty — hampers adult outcomes (see here, here, and here), and about two-thirds of child beneficiaries reaching age 18 continue to qualify for SSI based on disability.  It’s not appropriate, as Ryan’s report implicitly does, to compare statistics like high school graduation rates and job-holding for young people who received SSI as children with statistics for those who didn’t.  The two groups differ in fundamental ways.  Similarly, there’s no basis for calling the adult struggles of those who received SSI as children an “effect” of their benefit receipt, as Ryan does.  Their underlying health problems coupled with their low incomes play an important role in their academic achievement and adult employment prospects, and at least one study suggests that childhood SSI benefits improve adult outcomes.

Special SSI program rules — like the Student Earned Income Exclusion — are designed to encourage a successful transition to adulthood for child beneficiaries, and the agency is rigorously testing even more targeted efforts.  Early results are mixed, but if the pilots are successful, such interventions would require more funding, not less, for this special group of young adults.

Just the Facts on Disability Insurance

March 17, 2014 at 2:29 pm

We’ve updated our primer on the Social Security Disability Insurance (DI) program, an integral part of Social Security that provides modest but vital benefits to workers who can no longer support themselves due to a severe and long-lasting medical impairment.  For an estimated 150 million insured workers, DI stands ready to protect them from destitution if a health catastrophe strikes and they meet DI’s stringent eligibility criteria.

Some highlights from our piece:

  • Some 8.9 million people received disabled-worker benefits from Social Security in December 2013, averaging $1,146 a month.
  • The typical beneficiary is in his or her late 50s or early 60s, with limited education and poor health.  Recipients’ death rates are at least three times as high as the general population’s.
  • Most recipients depend heavily on their DI benefits as their main source of income.  Beneficiaries are much likelier to be poor or near-poor than people who don’t collect DI.

DI rolls have risen steeply over the last few decades, chiefly because of demographic factors — overall population growth, the aging of the baby boomers into their 50s and 60s (the peak ages for DI receipt), the rise in women’s labor force participation (which means more women now qualify for DI benefits), and the rise in Social Security’s full retirement age from 65 to 66 (which delays by a year the reclassification of DI beneficiaries as retired workers).  Once you adjust for those factors, DI’s rate of receipt has grown modestly (see graph).

Find our primer here and check out our other posts on this important topic.

Greenstein on President Obama’s New Budget

March 4, 2014 at 1:47 pm

CBPP President Robert Greenstein has issued a statement on the President’s fiscal year 2015 budget:

President Obama’s new budget is a solid blueprint that would reduce deficits, alleviate poverty, and boost investment in areas needed for future economic growth, such as infrastructure, education, and research.

On the deficit front, the budget confounds the recent predictions of some pundits by including, rather than eschewing, deficit reduction.  While offsetting the costs of its new investment initiatives by cutting spending and scaling back tax breaks, the budget goes further by reducing deficits enough to put federal debt as a share of gross domestic product (GDP) on a declining path.  With about $1.7 trillion in deficit reduction over the next ten years (excluding the savings from winding down operations in Afghanistan), the budget would reduce the debt-to-GDP ratio to 69 percent in 2024.

As previously announced, the budget doesn’t include the proposal in the President’s budget last year to switch to the “chained Consumer Price Index” in calculating annual cost-of-living adjustments in Social Security and other programs.  It does, however, retain the $400 billion in Medicare savings in last year’s budget, including about $60 billion in Medicare beneficiary reductions (through increases in premiums for affluent beneficiaries, increases in some co-payments, and changes affecting Medigap coverage).

On the poverty-fighting front, the budget features an important proposal to boost the Earned Income Tax Credit (EITC) for low-income workers who are not living with minor children — a measure many analysts across the political spectrum believe holds considerable promise for reducing poverty and also increasing labor-force participation, including among young minority men.  Single low-wage men and women are the one group of Americans whom the federal tax code literally taxes into — or deeper into — poverty.  The Obama proposal, which builds on a long bipartisan tradition of support for the EITC, would substantially address that problem.

No one should declare this budget “dead on arrival,” for two reasons.  First, under the Murray-Ryan agreement of last year, both parties have agreed on the total amount available for appropriated programs this year, and the Obama budget includes program-by-program requests that hit that total.  Consequently, the budget’s appropriations requests will likely play an important role as the Appropriations Committees craft the annual funding bills this year.

Second, with no big budget showdowns or deadlines looming this year, 2014 likely won’t be a year of significant budgetary action beyond the appropriations bills.  But 2015 may well be.  Policymakers likely will seek to negotiate another budget deal to ease the scheduled sequestration budget cuts for 2016 and beyond and also may consider tax reform and other measures.  Both the new Obama budget and the budget proposal that House Budget Committee Chair Paul Ryan will unveil in a few weeks will offer dueling frameworks for a year-long debate on where fiscal and program policy should go, in advance of larger decisions next year.

The vision reflected in the Obama budget will provide a much sounder course than the one we’ll likely see in the Ryan budget.  That’s because the Obama budget curbs lower-priority spending and unproductive special-interest tax breaks in order to make investments that the nation needs for future prosperity, reduce poverty and better reward low-paid work, and give many young children a better chance of success, while reducing mid-term and long-term deficits at the same time.