Fiscal Commission Co-Chairs Propose Social Security Cuts—Did They Know Women's Benefits Average Just $12,000 Per Year?

The deficit reduction recommendations released last week by Alan Simpson and Erskine Bowles, Co-Chairs of the President’s National Commission on Fiscal Responsibility and Reform, include deep cuts to already modest Social Security benefits. That’s no surprise: the co-chairs had said from the beginning that they were targeting Social Security, and co-chair Alan Simpson derided the program—which Americans pay into and justifiably rely on—as "a milk cow with three hundred million tits". The Simpson-Bowles proposals for Social Security, like their overall deficit proposals, rely far more heavily on cutting benefits for the vast majority of beneficiaries than on raising revenue from those most able to pay. Their plan cuts Social Security benefits in three ways: by changing the basic benefit formula, which will reduce benefits for all types of beneficiaries, including retired and disabled workers, widows and children; by raising the retirement age; and by lowering the cost of living adjustment (COLA). These reductions will disproportionately affect women because Social Security is especially important to women’s economic security.

• Women are a large majority of Social Security beneficiaries: 57 percent of beneficiaries 62 and older, and 68 percent of beneficiaries 85 and older.
• Women rely more on income from Social Security than men do. Over half (52 percent) of all women 65 and older get 50 percent or more of their income from Social Security and more than a quarter (26 percent) get 90 percent or more of their income from Social Security. In comparison, less than 45 percent of men 65 and older rely on Social Security for half of their income, and fewer than one in five men 65 and older rely on Social Security for 90 percent of their income. 
• Women’s average Social Security benefits are lower than men’s; among beneficiaries 65 and older, women receive an annual benefit of $11,846 compared to $15,679 for men.

The Simpson-Bowles proposals do include two benefit improvements: an improved special minimum benefit for lifetime low earners and a benefit boost for the oldest retirees. Both improvements are important to women, who are a large majority of the elderly poor and are more likely to have low lifetime earnings and to live beyond age 85. But an analysis by the Social Security actuaries, and the limited information provided by the Commission, show that these improvements come at an unnecessary price in benefit cuts for other beneficiaries of modest means. On average, all but the poorest 20 percent of beneficiaries would see benefit cuts from the plan. Workers earning average wages of less than $20,000 annually (in 2010 dollars) would face benefit cuts, and workers earning average wages of $43,000 would face deeper cuts.

While younger workers would face the deepest cuts, benefits for current beneficiaries would also be reduced under the Simpson-Bowles plan. A new method for calculating the COLA (the "chained CPI") that would reduce annual cost-of-living adjustments would take effect beginning next year. The impact of the COLA reduction would increase over time; the Social Security actuaries estimate that the change would reduce benefits by nearly 4 percent at age 75, increasing to more than 9 percent at age 95. The reduced COLA would hit women particularly hard because they tend to live longer than men and rely more on income from Social Security.

Simpson and Bowles don’t seem to have paid much attention to what their Social Security proposals would mean for the well-being of women and their families.  We’re counting on the full commission, and Congress, to do better.