Social Security and Medicare are two of the government’s mandatory spending programs — and popular programs — but a senator has proposed changing that label, leaving them vulnerable to annual budget cuts each year.
Under the current structure, Social Security and health care budgets are automatically approved and disbursed, but under the plan of Republican Senator Ron Johnson of Wisconsin, Congress would have the opportunity to review and change the budgets of these programs each year.
“If you qualify for the right, you just get it, no matter the cost,” Johnson said during an interview on “The Regular Joe Show.” “What we should do is we should turn everything into discretionary spending, so it’s all being evaluated so we can fix problems or fix programs that break and go out of business.”
“As long as things go on autopilot, we will keep piling up debt,” he added.
Read: How prepared are women for retirement after 50 years of progress?
Other examples of discretionary spending programs include Pell Scholarships for Students and Veterans Benefits. Tensions over the budget — and whether money would be allocated from mandatory versus discretionary spending — arose in the Senate last month when a bill on health benefits for veterans who suffered burns abroad stalled.
To see: This word describes social security, but not everyone wants to hear it
Social Security celebrates its 87e anniversary this month, at a time when many Democratic lawmakers are pushing to improve it — or just keep it solvent. The two trust funds that support the program’s retirement, survivorship and disability benefits are expected to run out of money by 2035, after which beneficiaries will receive only about 80% of what they owe. For many Americans, such a cut would be devastating, as many retirees rely on the program for part, if not most of their retirement income.
Medicare Part A has until 2028 before a 10% benefit cut can take place. Congress has never let these programs falter, but little progress has been made so far to deter impending insolvency.
Johnson did not respond to MarketWatch’s request for comment within the deadline. His spokeswoman Alexa Henning told Bloomberg in an emailed statement that the senator’s statement was about taking seriously his responsibilities to seniors and the programs they rely on. “The senator’s point was that without the fiscal discipline and oversight typically found in discretionary spending, Congress has allowed the guaranteed benefits for programs like Social Security and Medicare to be threatened.”
Read: Fix the unfair GPO calculation in Social Security
But critics say Johnson’s proposal could hurt Social Security and health care, giving politicians an opportunity to cut spending on beneficiaries.
“It’s another way of saying, let’s end the program as you know it,” said Nancy Altman, president of Social Security Works, which advocates expanding the program. Employees contribute to the program throughout their careers and expect to receive benefits when they retire, she said. If the program were to switch from a mandatory spending budget line to a discretionary budget, those benefits would be “left to the whim of Congress.”
Also see: Social Security turns 87 – why it’s still so important
The change would be futile as politicians would have a hard time denying beneficiaries their benefits, said economist Andrew Biggs, who was nominated this year by President Biden as a Republican candidate to the Social Security Advisory Board, a bipartisan independent agency.
“What are the chances that next year Social Security will say what we need to pay full benefits and Congress would say no?” said Biggs. “If Congress decides they want to reduce, [benefits], they must make a proposal for this. Changing the fiscal rules won’t do it for them.”
However, Democrats also have other ideas for strengthening the program. Rep. John Larson of Connecticut has been pushing his bill, the Social Security 2100 Act, for years. If passed, the bill would increase the minimum benefit for low-income retirees, switch the program to the consumer price index for older consumers (so that the benefits’ cost-of-living adjustments better reflect how older Americans spend on goods and services. ) and create care credits for people who leave the workforce to care for their loved ones. Larson said raising the payroll tax for high-income workers, which is currently $147,000 by 2022, would fund these expansions.
Learn how to shake up your financial routine at the Best New Ideas in Money Festival on September 21-22 in New York. Join Carrie Schwab, president of the Charles Schwab Foundation.