June 20 (Bloomberg) -- Cutting U.S. Social Security benefits for seniors and the disabled may cause steeper spending declines in House districts controlled by Republicans, hurting local businesses, a Bloomberg Government study found.
Republicans are likely to represent districts with more residents collecting Social Security checks for retirees or benefits for the disabled, compared with Democrats, according to the study. Curtailing the federal aid would give recipients less spending money, said Jason Arvelo, the Bloomberg Government labor analyst who wrote the report released today.
“It tends to be the case that those checks are spent and are not being saved,” he said. “Businesses in those areas would see less spending. So those businesses may be concerned.”
Unlike federal benefits such as Medicaid and Medicare, Republicans didn’t include cuts to Social Security in their budget-cutting plan this year, and Democrats have said the program’s future should be considered separately because the benefit draws on a trust fund that doesn’t directly affect the federal deficit.
“Social Security will need to be dealt with as insolvency looms for its trust funds,” Arvelo said. “Social Security is the largest government spending program.”
Congress will be under pressure to cut Social Security benefits eventually because its disability trust fund will be insolvent by 2018 and the retirement fund by 2036, according to a May report by the Social Security Board of Trustees. Among options are increasing payroll taxes or the eligibility age.
AARP, the biggest U.S. lobbying group for retirees, is “open to talking about different options to strengthen Social Security for the long term,” including “changes on the benefit side,” David Certner, the association’s legislative director, said in an interview on June 17.
The program pays about 55 million retirees, disabled people and survivors. Monthly checks to seniors and survivors averaged $1,114.38 in May and average disability payments were $921.06.
Republicans control eight of 10 House districts -- in Florida, Michigan, New Jersey and Pennsylvania -- with the most Social Security retirement benefits to seniors and survivors per resident. Democrats hold the 10 districts in Illinois, California, New York, Texas and Arizona with the lowest average benefits.
Reducing benefits would cause the biggest economic impact in West Virginia, Florida, Pennsylvania and Michigan, according to the report by Arvelo, formerly a senior analyst at economic consulting firm Compass Lexecon LLC, a subsidiary of FTI Consulting Inc. based in West Palm Beach, Florida.
West Virginia, Kentucky, Arkansas and Alabama top the list of states that would be likely to be hurt by bills curtailing disability benefits.
Florida congressional districts would face the greatest economic effects from Social Security benefit cuts because they have a higher proportion of seniors receiving checks. Republicans control 240 of the 435 districts in the U.S. House and hold 29 governors’ offices.
--With assistance from Brian Faler and Heidi Przybyla in Washington. Editors: Steve Geimann, Larry Liebert
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