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House GOP majority could target Social Security, Medicare

House GOP majority could target Social Security, Medicare

The life story of Hendersonville resident Marge Cullen isn’t much different than that of many other retirement-aged Americans.

Born and raised in New York, Cullen retired to Western North Carolina 12 years ago. After 40-odd years in the workforce she now relies on Social Security payments that could be in jeopardy if Republicans regain control of the House in November. 

“It’s crucial, because right now I’m almost living on it,” she said. “When you’re my age, you have no earning power anymore. Physically, I really can’t work. I mean, I volunteer and things like that but I just can’t work and nobody wants to hire an old person.”

Recent statements by Republican leaders have some voters on edge, concerned about the future of entitlement programs like Social Security and Medicare. 

Now, the Hendersonville Republican who wants to represent Cullen in Congress is contradicting members of his own party, downplaying the possibility that entitlement programs will end up as bargaining chips during an impending debt ceiling showdown that could once again shut down the federal government amid an economic downturn. 

A traitor to his class 

Enacted in 1935, the federal Old Age, Survivors and Disability Insurance (OASDI) program is better known by its common name, Social Security. It is primarily funded by payroll taxes paid into the system by employees, some throughout their entire working lives. 

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The current payroll tax rate is 6.2%, which is matched by employers and capped at the first $147,000 of income. Self-employed workers pay the full 12.4%. Medicare adds another 1.45% to each of those rates for a total of 15.3%. 

Benefits are calculated based on a worker’s average monthly earnings and are indexed to reflect general changes in wages over time. Most workers are first entitled to benefits at age 62, although at a rate 30% lower than the amount available for those who reach the maximum program age, currently defined as 70. 

The U.S. Social Security Administration, the independent federal agency that administers the program, says that in August 2022, more than 70 million Americans were receiving benefits, with 52 million age 65 or older. The average benefit check that month was about $1,547. 

According to the 2022 annual report of the OASDI Board of Trustees, the total cost for the program in 2021 was $1.15 trillion — a substantial chunk of the U.S. annual gross domestic product of $25 trillion. 

When President Franklin Delano Roosevelt first presented the plan, which also included the underpinnings of the modern unemployment insurance system, the United States was in the midst of the Great Depression. 

The recent, rapid industrialization of American society had made the traditional agrarian way of life less and less common, meaning more and more people depended on cash wages for survival in the only developed nation in the world without some sort of social safety net. 

When the Depression set in, 25% of Americans found themselves unemployed. At that time, various public officials had called for immediate, direct payments to the elderly and impoverished, for which the federal government would have had to come out-of-pocket in an unsustainable manner. 

Roosevelt’s solution was not to issue direct payments, but instead to create a perpetual trust fund that would promise future benefits by taxing current workers. 

“Today a hope of many years’ standing is in large part fulfilled,” Roosevelt said upon signing the Social Security Act in August 1935. “The civilization of the past hundred years, with its startling industrial changes, has tended more and more to make life insecure. Young people have come to wonder what would be their lot when they came to old age. The man with a job has wondered how long the job would last. This social security measure gives at least some protection to fifty millions of our citizens who will reap direct benefits through unemployment compensation, through old-age pensions and through increased services for the protection of children and the prevention of ill health.”

Not everyone cheered the New Deal-era program. However, Roosevelt had anticipated the blowback. In one of his famous “fireside chats,” he mocked detractors. 

“A few timid people who fear progress will try to give you new and strange names for what we are doing. Sometimes they will call it ‘Fascism,’ sometimes ‘Communism,’ sometimes ‘Regimentation,’ sometimes ‘Socialism,” he said in June 1934. “But in so doing, they are trying to make very complex and theoretical something that is really very simple and very practical. I believe in practical explanations and in practical policies.”

Still, New Deal programs including Social Security earned Roosevelt, a wealthy, privileged New York Democrat, the sobriquet “a traitor to his class.”

Contemporary political criticism of the massive federal entitlement program manifests itself in two main ways, every few years. 

The first is much the same as anticipated by Roosevelt, that it’s a form of socialism, or a handout. Author, philosopher and conservative icon Ayn Rand says in her 1966 essay collection Capitalism, the Unknown Ideal that such “handouts” are an immoral redistribution of wealth and that Social Security “… merely seizes income from working Americans and dispenses it to its retirees with a vague but legally unenforceable assurance that younger Americans will someday get to reach into the pockets of their kids and grandkids.” After Rand died in 1982, it was revealed that she’d collected more than $11,000 in Social Security payments before her death. 

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President Franklin Delano Roosevelt (center) signed the Social Security Act in 1935. Wikimedia photo

The second, more actuarial form of criticism of Social Security comes as scrutiny over the solvency of the trust fund itself. Once the program was enacted, Social Security benefits weren’t immediately disbursed, allowing the fund to build up enough reserves through taxation to sustain payments to those who were eligible. 

Ida May Fuller, a legal secretary from Vermont born in 1874, received the first old-age Social Security check on Jan. 31, 1940, in the amount of $22.54. Since then, the system has benefitted from a demographic bubble, the post-World War II Baby Boom, with millions of workers paying into the trust fund but far smaller numbers of retirees receiving benefits. 

When yearly trust fund revenues exceed expenditures, the excess revenue is, by law, invested into U.S. Treasury bonds. The federal government can legally borrow the proceeds from these sales. However they’re obligated to pay the trust fund back, with interest. 

But that Baby Boom’s impact on Social Security didn’t truly kick in until the early 1980s, at which point the trust fund itself was running precariously low on reserves due to a variety of demographic and economic factors, including discretionary cost-of-living adjustments not based on sustainability. 

By 1983, the trust fund was taking in just $89 million more than the $171 billion it was disbursing each year — a precariously thin margin. Reserves that year were calculated to be just $24 billion, or less than two months of operations. 

Republican Ronald Reagan, president at the time, saved Social Security by increasing the payroll tax rate, taxing the benefit payments and raising the retirement age in phases that are still occurring today. 

Those same measures, however, also diminished the purchasing power of the payments for many retirees. 

Almost immediately after Reagan’s reforms the trust fund began to grow again, with yearly net fund increases rising and reserves doubling in three years. From 1983 through 2009, this pattern continued until in 2010 yearly net fund increases began to drop precipitously. 

Revenues still exceeded disbursements from 2010 through 2020, but reserves weren’t growing as fast as they had been. 

The fund has disbursed around $1 trillion a year since 2015, with total assets that are currently just under $3 trillion, good for nearly three years of operations. 

In 2021, the fund spent more than it took in for the first time since 1981. 

When Social Security revenues fall short of disbursements, the fund makes up the difference by calling in some of those reserve assets to make up the revenue shortfall. 

The same demographic bubble that left the system flush with cash and assets is now in the process of bursting, slowly but surely. Retired Baby Boomers who no longer contribute to the trust fund receive benefits, while subsequent generations pay into the system. 

Although Millennials are now the largest generation in the United States, the average life expectancy of Boomers has risen substantially during their lifetimes, meaning they’ll be around to collect more payments than anticipated when the first Boomers were born in 1946. 

Right now, there are 2.8 workers per Social Security recipient, but by 2035, SSA trustees anticipate there will only be 2.3. 

Current SSA projections say that by 2037, the trust fund’s reserves will be exhausted, although that could come sooner with economic downturns that depress the personal income from which payroll tax revenues are generated. 

After that, the benefits retirees are entitled to won’t be disbursed as promised but instead as funded by whatever income the fund can collect — unless something is done before then. 

The safety net 

“I had my first job when I was 16,” said Cullen, now 78. “This is what we did, especially in New York, because we didn’t have a lot of money.”

Cullen and her husband both worked during the day. At night, he attended St. John’s University, and she attended Fordham but left before completing her degree. 

“We couldn’t afford both because we started having children so at that point, in the 1960s, it was more important that my husband finished college than me,” she said. 

Cullen ended up working in clerical roles for many years, the last 16 of them in corporate marketing for Panasonic. 

In 1992, Cullen’s husband tragically passed away; he was just 50 years old. 

A few years later, Cullen was downsized and took an early retirement package at the age of 57, leaving her without a pension. 

“I took that package knowing full well that at 60 as a widow I could collect his Social Security,” she said. “It was very important. Even though I still had earning power, I knew I could not go back to work making what I did because I worked my way up in that company. But it was important to me because he paid into it. I guess he had worked since he was 17 or so.”

Social Security served as an important safety net for Cullen during that time. The ability to collect her husband’s survivor benefits allowed Cullen to hold off on collecting her own Social Security benefits for a decade until she turned 70 and thus had maxed out her available monthly benefit of about $2,300. 

“We both worked our whole lives, and so I felt good that I could collect something from him, that he paid into, and so that’s what I did,” she said. “Now I’m collecting my own.”

Mistaken or unaware 

When Donald Trump won the 2016 election, the national debt stood at more than $19.5 trillion. When Donald Trump lost the 2020 election, that figure had grown to more than $27.7 trillion. 

Since then, President Joe Biden has pushed the national debt up another $3.1 trillion to $30.8 trillion, an amount equal to 123% of the U.S. annual GDP. 

That’s equivalent to a median income worker in Henderson County earning $32,306 a year while trying to service total debts of $39,736. 

The Congressional Budget Office projects that by 2032, the annual service on the national debt will grow to $1.2 trillion, gobbling up 3.3% of the U.S. annual GDP — both larger than current yearly Social Security spending. 

Republicans, including the 157 House members of the Republican Study Committee, appear to be targeting Social Security, Medicare and other entitlement programs — rather than the runaway federal spending of the Trump administration— to get things under control. 

According to a budget floated by the RSC several months ago, raising payroll taxes to prop up the program like Reagan did is “fundamentally immoral,” but removing mandated funding guarantees is not. 

On Aug. 3, Wisconsin Republican Sen. Ron Johnson said he’d like to change Medicaid and Social Security from entitlement programs to discretionary programs authorized on a yearly basis. That, of course, would open up the possibility of cuts to benefit payments, or the same discretionary cost-of-living increases that plagued the program in the 1970s. 

Either choice would be made based only upon the whims of partisan political majorities in Congress, every single year. 

On Sept. 22, House Speaker Nancy Pelosi issued a statement warning of the potential for impending cuts to Medicare and Social Security. 

On Oct. 11, Bloomberg News reported that Republicans will try to “extract concessions” from Democrats if they take control of the House next year, holding entitlement programs hostage while threatening another federal government shutdown over the debt limit. 

On Oct. 14, during an interview with The Smoky Mountain News, Republican nominee for North Carolina’s 11th Congressional District Sen. Chuck Edwards (R-Henderson) was asked if he would support cuts to Medicare and Social Security. He didn’t say no. 

Instead, Edwards made comments contradicting Bloomberg, Pelosi and Johnson, and denied even the possibility of cuts. 

“I’ve talked many times with members of the Republican caucus in Washington and there is absolutely no interest from Republicans to cut Medicare or Social Security,” Edwards said. “To the contrary, we believe that we need to run a more fiscally responsible government in Washington D.C. so that we can keep the promises that we’ve made to those folks that have worked hard all their life to then count on Social Security and Medicare. There’s absolutely no appetite for Republicans to make any cuts to those programs.”

Four days after Edwards made his statement on Social Security, House Minority Leader Kevin McCarthy (R-CA) addressed the forthcoming fight over the nation’s statutory debt limit. 

When asked if he’d attempt to reform entitlement programs like Social Security, McCarthy didn’t say no. Instead, he said he wouldn’t “predetermine” anything. 

Edwards’ assertion that “there is absolutely no interest from Republicans to cut Medicare or Social Security” suggests he’s either mistaken about, or unaware of, his own party’s positions. 

Edwards’ Democratic opponent, Buncombe County Commissioner Jasmine Beach-Ferrara, is skeptical of Edwards’ statements. 

“I don’t believe him, because of his track record,” Beach-Ferrara said. “It’s a reality that on issue after issue after issue, he’s had the opportunity to champion direct support that will bring relief to working families in Western North Carolina and he has instead turned his back on them.”

Indeed, Edwards has yet to appear at a legitimate General Election forum featuring all three candidates (Libertarian small business owner David Coatney is also on the ballot) after showing up to nearly a dozen in the Primary Election while calling out current Rep. Madison Cawthorn (R-Henderson) for his absences; he also took more than $1 million in PPP loans that were forgiven and then carved out a tax break for himself on the loan proceeds; and, he opposed student debt relief while failing to give that same state tax break to recipients of loan forgiveness. 

“What we’ve been getting from folks like Sen. Edwards and his political allies instead is an approach that is all in favor of government spending when it benefits them, like what he did with the PPP loan, but also that prioritizes supporting oil and gas companies with record earnings during a time when they could instead be working to reduce prices for families,” Beach-Ferrara said. 

‘They make a mistake’

As a longtime registered Republican, Cullen votes regularly. 

“Always,” she said. “It’s my privilege.”

Cullen also relies on Medicare, which comes out of her monthly Social Security checks. An increase in Medicare’s cost, or a decrease in Medicare’s services, would have an impact on her household finances above and beyond the cuts to Social Security. 

“I’d have to make adjustments, because especially now with inflation the way it is, food the way it is, my electric bill is going up; I notice every month it’s like $10 more, everything is just going up,” she said. 

Beginning this coming January, 70 million Americans will see an 8.7% cost-of-living increase in Social Security payments, which is small consolation after 7% inflation in 2021 and 8.2% in 2022. 

“You work your whole life to have some kind of a lifestyle so that you can enjoy it, or that you’re not afraid to go to the doctor and get medicine and things like that,” she said. “I mean, Medicare is important to older people. It’s ours. Medicare is for older people and just as they give free lunches to the younger people, you take care of the young ones and you take care of the old ones.”

Cullen has her own opinions about the entitlement program comments made by McCarthy and Johnson — fellow Republicans that she might have been inclined to support. 

“What McCarthy said, first of all, I don’t think he should have said it,” she said. “But I know that other senators, Ron Johnson and all those, they’re all talking about fixing programs and this and that and I think they make a mistake when they hit the seniors.”

When asked if she’d be willing to vote in the upcoming Nov. 8 General Election for a Republican candidate that’s willing to cut Social Security and Medicare, Cullen was blunt. 

“I really don’t think so,” she said. “Because that’s a part of my life.” 

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  • Here we go again. You can tell it's election time when the "unbiased" local newspaper publishes an article about the Republicans wanting to cut Social Security and Medicare apparently to convince the elderly to vote for Democratic candidates. This article contains a few misleading statements about the subject and even adds a bonus section restating parts of a prior story run in the SMN condemning Chuck Edwards (Republican running for the U. S. Congress) for accepting a PPP loan and voting in the House to exempt the expenses on which the loan proceeds were spent. Note this vote was 111 - 2 so just about ALL the members of the house thought it was the correct action to take. BUT what does this have to do with the Social Security / Medicare issue? The answer is nothing.
    This article like others from the biased media blatantly misrepresents the Republicans' position on these two programs. If you READ the comments of most of the party's leadership it is apparent their primary concern is not cutting benefits. NONE of them state they are in favor of cutting benefits. Their concern is with the dismal forecast of revenues falling short of disbursements unless changes are made. They want to make changes to strengthen the programs. Does Social Security need to be reformed? Perhaps. One example: consider the following groups who are eligible to receive what are called "survivor benefits" meaning they can get SS payments because of their relationship to a person who paid in to Social Security: widows and widowers, divorced widows and widowers, unmarried children, stepchildren, grandchildren, step-grandchildren and adopted children, and dependent parents. There are qualifications of course (see the SSA website for details) but perhaps a review of the entire program would lead to reasonable reforms without cutting benefits.
    So thanks SMN for another example of media bias. Fortunately here in Western North Carolina the folks are far more inclined to disregard articles like this one and vote for conservative candidates than for liberal Democrats.

    posted by John Johnson

    Monday, 10/31/2022

  • "Edwards’ assertion that 'there is absolutely no interest from Republicans to cut Medicare or Social Security' suggests he’s either mistaken about, or unaware of, his own party’s positions." Both options are disturbing for a legislative candidate. A third possibility is that Edwards will say anything -- including lying -- to gain political power. We have seen this from GOP. Vote for a candidate whom you can trust. Vote for Jasmine.

    posted by Susan supports Jasmine Beach-Ferrara

    Friday, 10/28/2022

  • Thank you for this reporting.

    posted by Phillip Gibson

    Friday, 10/28/2022

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