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

AEI Election Watch 2014: What will happen and why it matters
image A nation divided by marriage
image Teaching reform
image Socialist party pushing $20 minimum wage defends $13-an-hour job listing
AEI on Facebook
Events Calendar
  • 27
    MON
  • 28
    TUE
  • 29
    WED
  • 30
    THU
  • 31
    FRI
Monday, October 27, 2014 | 10:00 a.m. – 11:30 a.m.
State income taxes and the Supreme Court: Maryland Comptroller v. Wynne

Please join AEI for a panel discussion exploring these and other questions about this crucial case.

Tuesday, October 28, 2014 | 9:30 a.m. – 12:15 p.m.
For richer, for poorer: How family structures economic success in America

Join Lerman, Wilcox, and a group of distinguished scholars and commentators for the release of Lerman and Wilcox’s report, which examines the relationships among and policy implications of marriage, family structure, and economic success in America.

Tuesday, October 28, 2014 | 5:30 p.m. – 7:00 p.m.
The 7 deadly virtues: 18 conservative writers on why the virtuous life is funny as hell

Please join AEI for a book forum moderated by Last and featuring five of these leading conservative voices. By the time the forum is over, attendees may be on their way to discovering an entirely different — and better — moral universe.

Thursday, October 30, 2014 | 2:00 p.m. – 3:00 p.m.
A nuclear deal with Iran? Weighing the possibilities

Join us, as experts discuss their predictions for whether the United States will strike a nuclear deal with Iran ahead of the November 24 deadline, and the repercussions of the possible outcomes.

Thursday, October 30, 2014 | 5:00 p.m. – 6:15 p.m.
The forgotten depression — 1921: The crash that cured itself

Please join Author James Grant and AEI senior economists for a discussion about Grant's book, "The Forgotten Depression: 1921: The Crash That Cured Itself" (Simon & Schuster, 2014).

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