The battle lines are forming within the Democratic Party over the charged question of reforming Social Security in the days leading up to President Obama’s State of the Union address.
Liberals, such as Sen. Bernie Sanders (I-Vt.), and labor unions, such as the AFL-CIO, AFSCME and SEIU, have taken a firm stand against cutting Social Security benefits.
Some worry that the cut to the payroll tax could set a precedent that is difficult to erase. They expect Republicans will campaign vigorously against allowing the rate to reset from 4.2 percent to 6.2 percent, characterizing it as a tax increase.
Sanders told The Hill on Friday that a group of Senate Democrats may support raising the retirement age. But he said there is also a faction of the caucus, led by Senate Majority Leader Harry Reid (D-Nev.), staunchly opposed to benefits cuts.
“I raised my concerns on this payroll tax holiday and it was raised by a number of other Democrats — Harry Reid was very strong on the Social Security issue,” Sanders said.
“Not every member of the Democratic caucus holds that view,” he said.
Reid said during a Jan. 9 appearance on NBC’s “Meet the Press” that he would not support “back-door methods to whack Social Security recipients.”
“One of the things that always troubles me is, when we start talking about the debt, the first thing people do is run to Social Security,” Reid said. “Social Security is a program that works, and it's going to be — it's fully funded for the next 40 years. Stop picking on Social Security.”
Democratic leaders such as Senate Assistant Majority Leader Dick Durbin (Ill.) and House Minority Whip Steny Hoyer (Md.), however, have signaled they are willing to consider a cut in Social Security benefits.
Obama could tip the balance within the party decisively on Jan. 25 when he delivers his annual address to Congress.
Representatives from about 30 labor unions and liberal groups met with senior White House officials on Monday to express their strong opposition to any cuts in Social Security benefits.
Rumors have swirled that Obama may suggest a recalculation of Social Security cost-of-living adjustments or extend an invitation to Republicans to work with him on reducing the program's costs.
Obama has stayed mostly mum on the issue of Social Security since members of the fiscal commission recommended last month raising the retirement age and lowering cost-of-living adjustments.
“He was very clear as a candidate for office; he has been murky since being in office,” a Democratic strategist said of Obama.
Jim Kessler, vice president for policy at Third Way, a centrist Democratic think tank, urged Obama to discuss the need to extend the long-term solvency of Social Security in his State of the Union address.
“I would love him to talk about Social Security in a very responsible and adult manner,” Kessler said.
“We need to have a healthy adult conversation on the subject. If we wait until after the Obama presidency to take on Social Security, that’s waiting until 2017 or 2018 to act and that puts us in a precarious situation,” he added.
A coalition of more than 200 labor unions and liberal groups, however, are waging a broad lobbying campaign to steer Obama away from endorsing cuts in benefits.
“As a candidate for office, President Obama made very strong and clear statements about Social Security: no raising the retirement age, no cuts in the COLA [cost of living adjustment],” said Frank Clemente, campaign manager of the coalition Strengthen Social Security Campaign. “Our campaign is looking for him to be as unequivocal in the State of the Union address. That’s where the American people are.”
Liberals were alarmed Friday by the announcement that Vice President Joe Biden had chosen Bruce Reed, who served as executive director of the National Commission on Fiscal Responsibility and Reform, as his new chief of staff.
Durbin spread waves of concern among some of his usual allies in the labor and liberal communities by voting for the fiscal commission’s recommendations to increase the retirement age to 68 by 2050 and to 69 by 2075. Increasing the retirement age by a year equals to a benefits cut of 6 percent to 7 percent.
The commission also proposed increasing the cap on income subject to Social Security taxes, which is now set at $106,800.
Hoyer said at an event sponsored by Third Way in June that Congress should consider raising the retirement age to prolong the solvency of Social Security.
When he was running for president in 2007, Biden said Democrats and Republicans should consider a range of options, including raising the retirement age.
The Social Security trust fund has a $2.6 trillion surplus that is expected to increase to more than $4 trillion by 2023. It is expected to stay solvent for at least another 26 years.
But centrist Democrats argue the longer Congress waits to cut benefits and increase payroll taxes, the more painful it will be to fix the program when it begins to run short of funds.
“Yeah the trust fund is solvent for the next 26 years but each year you wait to solve the problem, the cure you need to administer for solvency gets more and more severe,” Kessler said. “You need greater benefit cuts in the future, greater tax increases in the future. You get to the point of no return.”
Roger Hickey, co-director of Campaign for America’s Future, a liberal advocacy group that is part of the Strengthen Social Security Campaign, warned if Obama embraced the fiscal commission’s proposals on Social Security, “it would split the Democratic Party.”