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Social Security Gets Reprieve as Obama Weighs Deficit

Jan. 27 (Bloomberg) -- Of all the big government programs primed for scrutiny in a deficit-reduction agenda, Social Security is the most obvious. President Barack Obama, however, mentioned the pension program only fleetingly in his Jan. 25 State of the Union address.

“To put us on solid ground,” Obama said, lawmakers should “find a bipartisan solution to strengthen Social Security for future generations.” He stopped short of proposing benefit cuts, signaling that while he wants to fix a long-term funding shortfall, he won’t be doing so this year.

That’s some relief for defenders of the retirement program, who had been bracing for a fight with Obama over an increase in the retirement age or other steps aimed at assuring Social Security’s solvency, Bloomberg Businessweek reports in its Jan. 31 issue.

The struggle over the New Deal-era program probably isn’t over. While Obama didn’t call for sacrifice, nor did he repeat his 2008 campaign rhetoric that it is neither “necessary or fair to hardworking seniors to raise the retirement age.” That omission has activists girding for a clash as Obama’s re-election campaign shifts into high gear.

“There’s a battle going on for his heart and soul,” says Nancy J. Altman, an advocate for preserving Social Security who served as a senior aide on President Ronald Reagan’s Social Security Commission. “You have to say, ‘This is a sacred trust, and we can’t break it.’”

Tax-Cut Compromise

Advocates for entitlement programs went on alert after Obama forged a tax-cut compromise in December that included a $110 billion, one-year holiday on payroll taxes that fund Social Security.

Altman and other defenders of the current system say that Social Security doesn’t contribute to the nation’s current budget deficit and that it is being targeted by opponents seeking to tie it to a deficit-reduction debate. Any shortfalls in Social Security are covered by its trust fund.

The groups include core Democratic constituencies, and they aren’t standing down, says Eric Kingson, co-director of the Washington-based Social Security Works and of the Strengthen Social Security campaign. More than 250 organizations, including the AFL-CIO and the Service Employees International Union, stand ready to fight any benefits cut, Kingson said.

Barbara B. Kennelly, president of the National Committee to Preserve Social Security and Medicare, says her group gathered 780,000 petition signatures against shrinking benefits.

Stronger Hand

Such fears stem from the realization that Obama has a stronger hand to overhaul the program than either of his predecessors. He has surrounded himself with veterans of President Bill Clinton’s overhaul effort, including Gene Sperling, Obama’s new chief economic adviser, and budget director Jack Lew.

A bipartisan commission Obama empaneled has recommended raising the retirement age to 69 by 2075. Obama also has a receptive Congress after midterm elections in November brought dozens of new Republican lawmakers to Washington with a mandate to cut spending. Polls show addressing the nation’s $14 trillion debt ranks just below jobs as the top priority for Americans.

For all that, Obama is battling the same headwinds that forced Clinton and President George W. Bush to forgo overhaul attempts until their second term. While the public may deplore the ballooning deficit, polls also show that most Americans reject the changes Obama’s commission said would be required to fix Social Security.

55 Percent Opposition

A survey released Jan. 18 by Greenberg Quinlan Roser Research, a Washington-based Democratic polling firm, found that 55 percent of respondents oppose raising the retirement age to 69, a proposal that the Senate’s second-ranking Democrat, Dick Durbin of Illinois, said was “hardly radical.”

An additional hurdle: Unlike the last time Congress cut benefits and raised taxes, in 1983 under Reagan, Obama can’t argue that the program faces an immediate funding crisis. While Social Security faces a long-term shortfall, the trust fund doesn’t run out until 2037, according to a 2010 trustees report.

Still, the Congressional Budget Office reported yesterday that Social Security will run a $45 billion deficit this year and will continue spending more on benefits than it receives in revenue for the foreseeable future.

Overhaul of the system may have to wait until after next year’s elections, says David John, a Social Security expert at the Heritage Foundation in Washington, which advocates limited government.

“The best scenario for Social Security reform is a second-term Democratic president and a Republican Congress,” John says. “First you’ve got to get the second term.”

To contact the reporter on this story: Heidi Przybyla in Washington at hprzybyla@bloomberg.net.

To contact the editor responsible for this story: Mark Silva in Washington at msilva34@bloomberg.net

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