Hearing on “Examining Backdoor Spending by Federal Agencies”

2018-12-11T17:00:36+00:00December 11th, 2018|Letters 115th|

Statement for the Record of

Max Richtman, President and CEO

National Committee to Preserve Social Security and Medicare

Before the Committee on Oversight and Government Reform

Subcommittee on Intergovernmental Affairs

House of Representatives

 

Mr. Chairman and Members of the Committee:

On behalf of the millions of members and supporters of the National Committee to Preserve Social Security and Medicare, I am pleased to be able to provide this statement for the record for the Subcommittee’s hearing to examine what has been called “backdoor spending” by Federal Agencies.  While there is a long list of agencies that receive funding through what are known as standing appropriations, we are here to discuss the manner in which Congress has funded the Social Security and Medicare programs.

Since 1939 Congress has funded the Social Security program through a standing appropriation.  A similar approach has been followed by Congress with regard to funding for the Medicare program.  In the case of Social Security, the standing appropriation is to be found in section 201(a) of the Social Security Act, which reads, in part as follows:  “There is hereby appropriated to the Federal Old-Age and Survivors Insurance Trust Fund for the fiscal year ending June 30, 1941, and for each fiscal year thereafter…amounts equivalent to 100 percent…” of the payroll taxes paid into the trust funds by American workers and their employers.  In other words, in the nearly 80 years the Social Security program has paid benefits to retirees and their family members, Congress has appropriated to the Social Security trust funds, through a standing appropriation, every penny paid into the program, money which is available to pay benefits that are owed to those who qualify for them.

Why did Congress settle on this approach?  The answer lies in House Report 728 of the Committee on Ways and Means (76th Congress, 1st Session) to accompany the Social Security Act Amendments of 1939.  In that report, Congress said, “It is further proposed that an amount equal to the full amount of the old-age insurance taxes collected in the future be permanently appropriated to the Trust Fund” (p. 15).  The report goes on to say that permanently appropriating 100 percent of the taxes received under the Federal Insurance Contribution Act (and later Self-Employment Contribution Act) to the trust fund and old-age and survivors insurance benefits will “…clarify the relationship between contributions under the Social Security program in the form of taxes and the source of benefits” (p. 34).

And so it has been now for nearly 80 years.  During that time, thanks to the wise policymaking of those in Congress in 1939, the Social Security program has always had the funds it needs to pay benefits to those who qualify for them.  In general, taxes paid into the trust funds, along with interest earned on the trust fund’s reserves, define the amount of money available for the purpose of paying benefits, and no beneficiary of the program has ever failed to receive their monthly benefit because the money wasn’t appropriated in a timely manner by the current Congress.

Thus, what seems now to have been an arcane decision regarding appropriations rules turns out to be a foundational principle of the Social Security program:  The money will be paid to those who qualify, in the correct amount and on time.   Equally important in providing America’s seniors peace of mind regarding Social Security is that the benefits are not subject to sequestration.  Happily, the Congress, when it established the Medicare program, followed essentially the same approach with regard to providing on-going funding for seniors’ health care benefits.

Given the vital importance of Social Security and Medicare to the financial well-being of the 62 million Americans who receive benefits from these programs, it is difficult to believe that anyone would actually want to make the amount paid to retirees or the availability of Medicare dependent on the vagaries of the Federal budget process, whether through the uncertainty of annual appropriations or inclusion of Social Security among programs that are subject to sequester.

To give some idea of the importance of Social Security to all Americans, we would like to take a moment to focus on the magnitude of Social Security and its importance to the financial security of seniors.

  • Americans of all ages rely on Social Security. About 173 million American workers and their employers contributed to the Social Security program through their FICA and SECA taxes, in the expectation that, when the time comes, they too will be able to receive Social Security.  Their contributions totaled about $874 billion in 2018.
  • Many seniors and disabled workers receive benefits. As stated earlier, about 62 million individuals receive Social Security.  Of these, 45.5 million are retired workers and their family members; 6 million are survivors of deceased workers; and 10.4 million are disabled workers and their family members.
  • While essential, benefits are in fact modest. For example, the average retiree receives about $1,404 per month while the average disability benefit is about $1,197.  Aged widows receive, on average, about $1,338 per month.
  • The magnitude of the program is difficult to underestimate. In fiscal year 2017, the Social Security Administration paid approximately $990 billion to a monthly average of over 69 million Social Security beneficiaries and Supplemental Security Income recipients. The agency served about 42 million visitors in its network of over 1,200 offices and handled over 36 million calls on its National 800 Number.
  • Social Security lifts 15 million seniors out of poverty. Most people aged 65 and older receive a majority of their income from Social Security.  Without Social Security benefits, 39.2 percent of elderly Americans would have incomes below the official poverty line (Center on Budget and Policy Priorities).  With Social Security, only 9.2 percent do.

To conclude, Mr. Chairman, we believe that the decisions that the Congress made back in 1939 and 1965 regarding the appropriation of funds to Social Security and Medicare have withstood the test of time.  Looking back over the past 80 years, there has never been a time when the appropriations issues have threatened the delivery of benefit payments.  This is an amazing achievement, and one that from our perspective, vindicates the appropriations policies adopted by Congress for Social Security and Medicare.  On behalf of the members of the National Committee, we thank you for the current policy and urge you to leave this policy in place.