The Koch brothers, Pete Peterson and other billionaires are spending huge amounts of money trying to cut Social Security and other vitally important federal programs. As part of this campaign, an enormous amount of misinformation is floating around. Let me try to set the record straight by answering a few of the questions that people are asking my office.
Is Social Security "going broke?" No! Social Security is not going broke. According to the Social Security Administration, the Social Security Trust Fund has a surplus today of $2.8 trillion. This sum, plus revenue that comes in every day, can pay out every benefit owed to every eligible American for the next 20 years. In 2033, unless Congress acts, Social Security will be able to pay out only 75 percent of benefits owed. Congress must act and make Social Security strong for the next 50 to 75 years.
Is the Social Security Trust Fund "real," or is it just a pile of IOUs? The Social Security Trust Fund is very real. Social Security invests the surplus money it receives from workers and employers into U.S.government bonds, the same bonds that China, other foreign countries and wealthy investors have purchased. These bonds are backed by the full faith and credit of the U.S.government. Here is what the Social Security Trust Fund government bond says: "This bond is incontestable in the hands of the Old Age and Survivors Insurance Trust Fund. The bond is supported by the full faith and credit of the United States. And the United States is pledged to the payment of the bond with respect to both principal and interest."
Is Social Security an "entitlement program?" Has it contributed to our deficit? Social Security is not an "entitlement program." It is an earned income benefit. The revenue from Social Security comes from FICA payroll taxes, payments made by workers and their employers. Currently, workers contribute 6.2 percent of their income in FICA taxes -- up to $113,700. Their employers match their payment. By law, Social Security cannot contribute to the federal deficit. Social Security has its own independent source of funding separate from the Treasury's general fund.
Has the Social Security program been successful? Social Security has been the most successful and reliable federal program in modern American history. For 78 years, Social Security has succeeded in keeping millions of senior citizens, widows, and the disabled out of poverty. Throughout its history, in good economic times and bad, Social Security has never failed to provide 100 percent of the benefits owed to eligible Americans. Before Social Security, about half of our senior citizens lived in poverty. Today, while still too high, fewer than 10 percent of seniors live in poverty, and more than 57 million Americans receive Social Security benefits.
What is the "chained CPI?" The "chained" consumer price index is a new approach to formulating cost-of-living-adjustments (COLAs) - the annual increases that Social Security beneficiaries are supposed to receive each year based on inflation. Believe it or not, the "chained CPI" is based on the theory that COLAs are "too generous" -- despite the fact that, in recent years, COLAs have been negligible or even non-existent. A chained-CPI means that the average Social Security recipient who retires at age 65 would get $658 less a year at age 75 and would get over $1,100 less a year at age 85 than under current law. Further, not only would enacting a chained-CPI be harmful to senior citizens, it would also make substantial cuts to the VA benefits of more than 3.2 million veterans. Veterans who started receiving VA disability benefits at age 30 would have their benefits reduced by $1,425 at age 45, $2,341 at age 55 and $3,231 at age 65.
What is a fair and sensible long-term funding solution to Social Security? The fairest approach to making Social Security fully solvent for the next 50 years is to lift the cap on taxable income, now at $113,700, and apply the Social Security payroll tax on income above $250,000. Right now, someone who earns $113,700 a year pays the same amount in Social Security taxes as a billionaire. This makes no sense. Applying the Social Security payroll tax on income above $250,000 would only impact the wealthiest 1.3 percent of wage earners. In other words, 98.7 percent of wage earners in the United States would not see their taxes go up by one dime under this plan.
Why is there so much talk about cutting Social Security? Despite the fact that poll after poll shows that the American people -- Democrats, Republicans and Independents -- overwhelmingly do not want to cut Social Security, Medicare or Medicaid, very powerful Big Money interests and campaign contributors are pushing Congress and the President to do just that. People like the Koch brothers, a family worth $71 billion, believe in a very different kind of America than we currently have. To a significant degree, they want Congress to end or drastically reduce government involvement in retirement programs (Social Security) and health care (Medicare and Medicaid) while, at the same time, giving more tax breaks to the rich and large corporations. The Koch brothers and other ultra-conservative individuals have contributed hundreds of millions into the political process.
As a member of a Senate and House committee that meets for the first time on Wednesday to begin work on a new long-term budget, my job is to represent the needs of ordinary Americans, not powerful special interests.