Senate drops income penalty

New legislation lifts earnings limit for workers ages 65 to 69

Clinton to sign GOP bill

Change would provide average of $8,000 for 631,000 seniors

March 23, 2000|By Karen Hosler | Karen Hosler,SUN NATIONAL STAFF

WASHINGTON -- Thousands of older Americans will soon begin receiving an income boost, after the Senate voted unanimously yesterday to lift the penalty for Social Security beneficiaries who continue to work.

After a brief return to the House for approval of a technical change, the measure will be sent to President Clinton, who has promised to sign it.

The new law, which would take effect immediately, would provide an average of $8,000 annually for about 631,000 workers ages 65 to 69.

Removing the penalty, which reduces Social Security benefits by $1 for each $3 earned above $17,000, is also expected to boost the supply of experienced workers at a time when the labor market is especially tight.

"This is good for seniors, good for America and it's good government," said Senate Finance Committee Chairman William V. Roth Jr., a Delaware Republican.

Officials at the Social Security Administration said they do not know how long it would take before the increased benefits started showing up in monthly benefit checks. A lump-sum payment would be sent this year to reflect benefits owed since Jan. 1, 2000, which would be the effective date of the change.

House Republican leaders were behind the measure. A similar proposal was included in a $800 billion tax-cut bill that was vetoed.

Republicans figured, correctly, that ending the earnings penalty was too popular for Clinton to veto as a separate item, and the administration endorsed it almost immediately.

Texas Gov. George W. Bush, the likely Republican presidential nominee, also sought to share the credit, calling elimination of the earnings limit "an important part of my tax plan."

The swift election-year action is a tribute to the political influence of older voters. Republican congressional leaders are hoping that it will improve the party's standing among those voters.

"It should be helpful," said Senate Majority Leader Trent Lott, who held a news conference after the 100-0 vote. He was flanked by four Republican colleagues, including Roth, who is facing a tough re-election contest this year.

Providing financial relief to older workers is "so potent" an issue, Lott said, that "even the Democrats said, 'Oooh, we can't mess with that.'"

The cost of the change, estimated at about $22 billion over 10 years, is expected to be offset by the projected federal budget surplus.

Over the long run, the change is expected to save the government money because, under current law, workers who are penalized at ages 65 to 69 are entitled to higher monthly benefits after they turn 70.

The earnings penalty was established about the time the Social Security program was created, during the 1930s, as a way of encouraging older workers to retire and make way for younger people who couldn't find jobs.

Since then, the earnings threshold at which the penalty is applied has been raised many times.

The decision to eliminate the provision comes at time when Americans are living longer and their skills are increasingly in demand in the work force.

"It is simply illogical to prevent those who are willing and able to do so from joining the economy by working in areas that desperately need their talents," said Sen. Richard H. Bryan, a Nevada Democrat.

"While many people choose to retire from their jobs at the traditional age of 65, or earlier, more and more want to continue working well into their late 60s and into their 70s," he said.

Several senators in both parties complained that Congress had again delayed consideration of more comprehensive Social Security reforms, which will be needed to avoid bankruptcy when the baby boomers retire.

"People under 40 are going to pay a terrible price for that," said Sen. Bob Kerrey, a Nebraska Democrat. "We have an unprecedented demographic program."

Others were disappointed that repeal of the "earnings test" did not apply to workers ages 62 to 64, who will continue to face a penalty that reduces their Social Security benefits by $1 for every $2 earned over $10,044 annually.

About three of every four new Social Security beneficiaries are claiming their benefits early -- before age 65 -- even though their monthly checks will be reduced by 20 percent through the rest of their lives.

The Clinton administration opposes removing the earnings penalty on younger workers for fear that it would encourage more men to retire early, which would reduce survivor's benefits for their wives.

"A very likely consequence would be an increase in the number of elderly widows who are poor," Social Security Commissioner Kenneth S. Apfel told a House committee last month.

Sen. Daniel Patrick Moynihan countered yesterday that Congress has no business making such decisions for beneficiaries of a social insurance program.

"It is not for us to judge the behavior of citizens who have paid into a system and are being paid back by it," the New York Democrat said.

Senate leaders had hoped to avoid changes in the House version so that the measure could be sent to Clinton directly from the Senate.

But Roth and his staff discovered a flaw that would have inadvertently penalized workers between their 64th and 65th birthdays. The House is expected to fix the problem as early as next week, clearing the way for Clinton to sign the measure into law early next month.

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