THE HOUSE Ways and Means Committee has completed its work on a Social Security reform package based on the recommendations of the bipartisan Social Security commission, and plans to bring the measure to the House floor next week. This swift action on an essentially sound compromise is good news for anyone who is drawing Social Security benefits or will be in the future--which is to say almost everyone.
The committee made several minor improvements in the commission's proposal. It corrected the provision for taxing part of the benefits of higher-income retirees so that the tax phases in gradually. It also provided a partial tax credit for the increased payroll taxes levied on the self-employed to compensate for the fact that they, unlike corporate employers, cannot deduct payroll taxes as a business expense on their income tax.
The committee also rejected a standby provision for a tap on general revenues if Social Security gets into unanticipated difficulties in the future. This was a concession to Republicans who were concerned that, even though Congress would still have to approve any Treasury borrowing, having the provision in law would encourage Congress to shirk its responsibility for keeping Social Security on a self-financing basis.
The only major addition to the compromise package was that now it would, as well, close Social Security's long-term deficit--a job the commission left unfinished. The Ways and Means bill provides for a small reduction in benefits for retirees after the turn of the century and a small increase in the payroll tax starting in 2015. Since Social Security has built- in benefit improvements for all future retirees, the average wage-earner would still retire with substantially higher purchasing power than is now the case.
Amendments to this provision are expected to be offered on the House floor. Rep. Claude Pepper favors relying completely on higher payroll taxes to solve the long-term deficit. But payroll taxes are already scheduled for substantial increases. Republicans, on the other hand, favor saving money by delaying the age at which full Social Security benefits could be drawn. That's not a good idea either. Many early retirees are covered by generous corporate plans--in which case their retirement decision will be unaffected. Another large group are people who have done hard manual work throughout their lives and have few alternatives to early retirement. Spreading benefit reductions among all new retirees is a much fairer way of saving money.
Ten or 20 years from now--when we will know much more about the health and expected longevity of those nearing retirement--Congress may want to change its decisions about how to keep Social Security on a sound basis. Given what we now know, however, the Ways and Means proposals--for both the short and long term--are sensible and fair. They deserve quick passage by the House.