Social Security and the Stimulus Bill

As the House prepares to vote on the American Recovery and Reinvestment Act of 2009 (a.k.a the stimulus bill), the Social Security implications of the legislation have been only briefly noted.

The stimulus bill does provide explicit funding for new initiatives at SSA. These include $900 million in funding to modernize computer facilities and better process disability and retirement applications. The bill also calls for the Commissioner of SSA to work with Homeland Security to better protect sensitive information and detect fraud.

 

Congress and the administration are hoping that recipients will spend, not save, rebates to spur demand.

Yet beyond the technical changes, the bill could also impact Social Security's finances. The current plan, including a Republican-backed measure to provide relief from the Alternative Minimum tax, provides $342 billion in tax cuts. As Bloomberg reported yesterday, much of that money comes from an Obama plan to reduce payroll taxes. The payroll tax reductions come via Obama's Making Work Pay program which provides $500 to individuals and $1,000 to families in tax credits. (Andrew Biggs commented on a formative version of this plan to the Wall Street Journal during the campaign). While the rebate comes out of earned income, the credit for each year is set as 6.2 percent of earned income up $8,000. This is exactly the employee share of payroll taxes. Since many Americans already pay no income tax this provision would be a direct return of a portion of their payroll tax. Without transfers of general tax revenues, the provision would undercut Social Security's already dim finances. As the tax cuts are intended to be a boon to the economy, Congress and the administration are hoping that recipients will spend, not save, these rebates to spur demand.

The plan also impacts Social Security by extending the terms for eligibility for the Supplemental Security Income. The program, which is designed for very low-income individuals with limited work histories, contains strict total asset maximums. Anyone exceeding those limits is disqualified. The stimulus package provides a one-time provision that places earners whose eligibility expired in the last two months because they exceeded the income limit back on the program.

The Congressional Budget Office expects that 7.5 million individuals will receive payment immediately, and another 300,000 later in 2009. The plan is estimated to increase SSI outlays by $4.1 billion in 2009 and $100 million in 2010. The plan is far from a permanent fix for these retirees.

 

Adam Paul is a research assistant at AEI.

Also Visit
AEIdeas Blog The American Magazine

What's new on AEI

Love people, not pleasure
image Oval Office lacks resolve on Ukraine
image Middle East Morass: A public opinion rundown of Iraq, Iran, and more
image Verizon's Inspire Her Mind ad and the facts they didn't tell you
AEI on Facebook
Events Calendar
  • 21
    MON
  • 22
    TUE
  • 23
    WED
  • 24
    THU
  • 25
    FRI
Monday, July 21, 2014 | 9:15 a.m. – 11:30 a.m.
Closing the gaps in health outcomes: Alternative paths forward

Please join us for a broader exploration of targeted interventions that provide real promise for reducing health disparities, limiting or delaying the onset of chronic health conditions, and improving the performance of the US health care system.

Monday, July 21, 2014 | 4:00 p.m. – 5:30 p.m.
Comprehending comprehensive universities

Join us for a panel discussion that seeks to comprehend the comprehensives and to determine the role these schools play in the nation’s college completion agenda.

Tuesday, July 22, 2014 | 8:50 a.m. – 12:00 p.m.
Who governs the Internet? A conversation on securing the multistakeholder process

Please join AEI’s Center for Internet, Communications, and Technology Policy for a conference to address key steps we can take, as members of the global community, to maintain a free Internet.

Event Registration is Closed
Thursday, July 24, 2014 | 9:00 a.m. – 10:00 a.m.
Expanding opportunity in America: A conversation with House Budget Committee Chairman Paul Ryan

Please join us as House Budget Committee Chairman Paul Ryan (R-WI) unveils a new set of policy reforms aimed at reducing poverty and increasing upward mobility throughout America.

Thursday, July 24, 2014 | 6:00 p.m. – 7:15 p.m.
Is it time to end the Export-Import Bank?

We welcome you to join us at AEI as POLITICO’s Ben White moderates a lively debate between Tim Carney, one of the bank’s fiercest critics, and Tony Fratto, one of the agency’s staunchest defenders.

No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.