WASHINGTON — The Clinton Administration on Monday strongly resisted a Republican plan to allow older Americans to earn as much as $30,000 a year without losing any of their Social Security benefits but supported a small increase in the earnings ceiling.
Social Security Commissioner Shirley Chater, under aggressive questioning from Republicans at a House hearing, said the Administration could support a "modest" hike, such as $1,000, in the current annual wage ceiling of $11,280.
But the Republicans, bidding for the support of senior citizens--among the most loyal voting blocs for Democrats in the past--have pledged as part of their "contract with America" to boost the ceiling in stages to $30,000 by the year 2000. This easing of the penalty would increase benefits for about 1 million of the 30 million recipients of monthly Social Security checks.
Currently, seniors between 65 and 69 may earn as much as $11,280 without losing Social Security benefits. For every $3 earned above that, benefits are cut by $1. The ceiling is indexed annually to the average increase in wages.
Retirees under 65 can earn up to $8,160 without penalty--above that, they lose $1 for every $2 in earnings. There is no earnings penalty for those 70 and older.
"For far too long, we have penalized our working senior citizens unfairly," Rep. J. Dennis Hastert (R-Ill.), a key sponsor of the legislation, told a hearing of the Social Security subcommittee of the House Ways and Means Committee.
The GOP proposal to alter the earnings ceiling puts the Democrats in an uncomfortable political position, appearing to be less generous to senior citizens than the Republicans. The House GOP contract also calls for repealing an Administration tax hike, approved in 1993, which increased the portion of Social Security benefits subject to taxation.
Chater said the Administration could support an increase in the earnings ceiling, but only if Congress finds a way to compensate for the additional expenditures by the retirement trust fund. She said the Republican plan would cost the Social Security system fund $7 billion by the year 2000, while an increase of $1,000 in the ceiling would cost only $900 million.
For any plan, "we would need to figure out what it would cost, to see what we could afford," Chater said. "Whatever figure we agree on, we need to finance it," she said.
Current budget rules require offsets: if spending increases in any government program, savings must be found elsewhere. The GOP answer at Monday's subcommittee hearing was "dynamic scoring," an assumption that more seniors will be encouraged to work as the penalty is eased and that they will contribute to the economy and produce increased tax revenues, eventually offsetting the loss to the trust fund.
But the Administration is not likely to accept the GOP argument on the Social Security issue because it would mean accepting a similar view on other, more expensive tax cut proposals. The heart of the Administration argument is that Republican promises for family tax credits, a new individual retirement account and other reforms can only be financed with drastic cuts in other programs.