UPDATE 1-Obama holds line on Social Security in budget plan

Mon Feb 14, 2011 4:50pm EST

* Program not contributing to deficit-Jack Lew

* Obama 2012 plan excludes deficit commission cuts

(Adds Lew comments, background, byline)

By Kevin Drawbaugh

WASHINGTON, Feb 14 (Reuters) - Social Security would not change significantly under President Barack Obama's 2012 budget plan, leaving for later a fiscal reckoning on the massive U.S. pension program for the elderly and disabled.

Saying he wants to work with Congress, Obama offered general principles for reform reflecting Democrats' long-held commitment to defend the politically popular program, but he offered no new proposals to secure its long-term stability.

"I want to make clear, first, that Social Security isn't contributing to the deficit in the next 5 to 10 years or considerably beyond that," Jack Lew, Obama's budget director, told reporters at a briefing on the budget proposal.

"Social Security is something that we need to address in the long term ... The president wants to work together on a bipartisan basis to have a conversation about how we can do this in a way that meets our values," Lew said.

More than 50 million Americans receive benefits through the $700 billion program, which is projected to be able to continue paying 100 percent of benefits through 2037.

In the long run, however, Social Security faces a problem. "Because of the economic downturn, the Social Security surplus has been declining for several years," the administration said in analysis of the budget proposal.

The surplus is projected to begin growing again as the economy recovers, but "under present law, the surplus is eventually estimated to decline, turn into a deficit, and never reach balance again," it said.

Looking at the program's distant horizon, a commission formed by Obama last year to tackle the federal deficit proposed raising the Social Security retirement age and cutting future benefits. Obama did not adopt the commission's Social Security proposals in his budget plan.

In a statement that could leave the door open for negotiation on modest benefit cutbacks for future beneficiaries, Obama said he "will not accept an approach that slashes benefits for future generations. No current beneficiaries should see their basic benefits reduced."

Taking a stand on the issue of privatizing part of the program, an idea some Republicans have embraced in the past, Obama said "the administration will oppose any measures that privatize or weaken the Social Security system."

Along with the Medicare and Medicaid healthcare programs for seniors and the poor, Social Security is one of the three major entitlement programs that in fiscal 2010 accounted for 44 percent of non-interest federal spending, up from 30 percent in 1980.

By 2035, when surviving baby boomers will be 70 or older, these three programs could account for more than 60 percent of non-interest federal spending.

Because of reforms in 1983, Social Security had been running a cash surplus, with taxes exceeding costs, until 2010.

"The 2010 Social Security trustees' report projects that the trust fund will return to cash surplus briefly as the economy improves, but that cash deficits will reappear in 2015," said long-term analysis included in the budget plan. (Additional reporting by Patricia Zengerle and Donna Smith; editing by John Whitesides)

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Comments (1)
bootcut1 wrote:
I don’t think Social Security would be such as big issue if the money that was paid into it from its conception was left alone and possibly invested in corporate America with insurance to protect those investment. Ever Since LBJ started raiding the social security fund to help fund the Government every President and Congress since has been using the money to fund their spending habits until there was no money left. Now it sits on a pile of I.O.U’S issued by the Government. Some people say the last time the Government had a budget surplus was when Clinton was President. Fact of the matter is if Clinton had not used the social security revenue there would have been a deficit. Social Security paid in today does not go into a fund but the Governments general revenue. They use it to pay their bills. Of course they pay interest on the social security money they spent and are now spending. So what it boils down to since the Government has no money except from what it borrows and taxes it collects. The American people are forced to pay the interest back to them selves on their Social Security the Government spent. Then to add insult to injury if you make to much money when you start to draw Social Security, your taxed on it again. Also on a side note since Social Security that is paid in now goes into the Governments general fund, and is spent however they see fit, if you were to subtract that amount out our Governments revenue, the deficit would be a lot bigger. America you have no idea how bad your Government hoses you.

Feb 15, 2011 1:05am EST  --  Report as abuse
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