President Obama said that Social Security is not an "entitlement," or a "driver of the deficit or debt," at a Minnesota Town Hall meeting on Monday. Then why is he allowing a Super Committee charged with deficit reduction to address the program?
"Not an Entitlement"
At the town hall meeting in Cannon Falls, Minnesota, President Obama gave perhaps the most spirited and articulate defense of Social Security -- or any other government program -- of his presidency. The president called Social Security "one of our most important social insurance programs," and for the first time, argued against calling it an "entitlement."
And by the way, you pay into Social Security. They call it an entitlement, but it's not an entitlement, you're paying for it. It's getting taken out of your paycheck.
(Click here to view the video clip and the read the complete transcript of the president's remarks.)
By effectively freeing Social Security of the "entitlement" moniker, which traditionally encompasses Social Security, Medicare and Medicaid, the President also made a crucial distinction between Social Security and the health care programs. The latter two programs, while equally important and vulnerable to attack, are not entirely self-financed like Social Security is, and have much larger long-term cost issues due to private health care costs. That is why Social Security has historically always been dealt with separately.
The president even corrected the misconception that Social Security is to blame for the deficit, because, as he has said in the past, "Social Security is not the cause of our debt and our deficit." He would be more accurate in saying it is not a cause of the deficit, rather than the cause, since it is entirely self-financed, with a revenue stream held in trust, and cannot borrow to pay benefits. But still, it is a very key distinction of Social Security from the deficit problem.
I'm betting that Jack Lew's arrival as budget director has had something to do with the White House's proactive use of positive rhetoric about Social Security. Lew is a veteran of the 1983 reforms and has strong ties to leading Social Security advocates in the progressive community. In an op-ed in USA Today, back in March, Lew explained that Social Security is "entirely self-financing." The problem he said, "is not Social Security. It is the mismatch between outlays and revenues in the rest of the budget."
Cognitive Dissonance
Unfortunately, the president's prescriptions for dealing with Social Security as part of budget talks are at odds with his stated commitment to the program's independence from the general budget and deficit. He insists that Social Security is not an "entitlement," or "the cause of the deficit." Yet, in reality, he has empowered a Super Committee, operating outside the normal legislative process, to address Social Security in the context of a larger deficit reduction package.
(More here on the Super Committee and how it could affect Social Security.)
The president claimed at the town hall that he models his bipartisan approach on that of President Reagan and House Speaker Tip O'Neill, when they reformed Social Security together in 1983. But this parallel, which he has used several times now, is not apt. In 1983, Social Security was facing an immediate financial crisis, and Democrats knew they would eventually have to give ground on cuts. With Social Security able to pay full benefits for another 25 years, an entire generation's retirement security destroyed by the financial crisis and an evolving economy, and adequacy of current benefits already shrinking due to an increasing retirement age, the same imperative to compromise on cuts is just not there.
If President Obama truly wanted to channel Reagan and O'Neill, he would assign a separate committee to Social Security, rather than entrust it to the Super Committee. Reagan convened a genuinely balanced bipartisan committee dedicated to dealing with Social Security alone. As a result, unlike President Obama, they could justly claim to be working on Social Security for its own sake, and respecting its independence as a program.
(More here on why the Reagan-O'Neill analogy does not apply to the current situation.)
In addition, the president's payroll tax cut contradicts his praise of Social Security's self-financed nature. At the town hall, the president said Social Security was not an "entitlement" specifically because it was paid for with workers' contributions. He made a good point, showing awareness that the political power of a social insurance program is dependent upon a perception that it is earned, and immune from accusations of increasing the deficit. But can we still say that Social Security is "paid for" and therefore "not an entitlement," now that the president cut the payroll tax by one-third?
And substituting the lost revenue with money from the general budget, while preventing the measure from depleting the trust fund, is no less harmful to the program. Where before Social Security did not contribute to the deficit, now it does, subjecting it to attack as a driver of our deficit.
A Cheap Shot at the Left
Buried in the president's town hall remarks could be a veiled potshot at the Left for not being more "reasonable" on Social Security.
[Social Security] is an example of where everybody gets so dug in on their positions. And I have to say -- in fairness, because I've commented on the other side not always being flexible -- there have been times, when our side, when Democrats haven't always been as flexible as we need to be. Sometimes I do get frustrated when I hear folks who say, "You can't make any changes to any government programs." Well, that can't be right. Most companies are thinking, "What can we do better -- are there some changes we can make in order to have the operation go a little smoother?
As one of the progressives Obama appears to be chiding, I think the president is not judging our position accurately. We do not oppose Social Security cuts in the context of the current budget battles because we think you shouldn't make any changes to government programs. Rather, we believe that a conservative Republican Congress hell-bent on austerity policies during a terrible economy is not the "Ronald Reagan" we need to reach a bipartisan solution to Social Security's funding gap. There are few if any cuts to Social Security that would not either significantly harm adequacy of benefits for struggling families, or undermine Social Security's status as a universal social insurance program with earned benefits. It's better to block change for now, leverage Democrats' status as defenders of Social Security and Medicare to win back Congress, and shore up Social Security's finances when it can be done on more favorable terms.
Views expressed are those of the author, and do not reflect the views of Social Security Works or the Strengthen Social Security Campaign.
Follow Daniel Marans on Twitter: www.twitter.com/danielmarans
In order to prevent such things from occurring changes will have to be made. Such things as raising the retirement age. This switch would eliminate less than a one-third of the projected deficit. However, this needs to be done because people are living longer; therefore more people are getting paid for longer periods of time while fewer people are paying into the system. It would help to reduce benefits. If Social Security payouts were reduced by 3% or 5% for new beneficiaries, about 18% or 30% (respectively) of the funding shortfall would be eliminated. Also, bigger contributions should be required from workers and employers. Right now they pay 6.2% of earnings up to $106,800, or as much as $6,622 per year, into the Social Security system. If the contribution rate were increased to 7.3% of earnings, Social Security's projected deficit would be eliminated (http://eng.am/rtUMqX ).
This is silly semantics. The money is taken out of our paycheck with the understanding that we will get it back when we retire ... in other words, we have been sold that we are 'entitled' to have this money back.
Now the fact that the government may have lied to use about this is immaterial to the semantics. In fact, the government is under no obligation to pay SS. However, that is not how the program was/is sold.
If they government decides to not pay these sums, which it SOLD to the payee as the payee being ENTITLED to when retired, then government should be sued by all SS payers for fraudulent advertising. Regardless that they are not required to pay it back they sold the program in that way.
:-)
How about just raise the limit on payroll tax. Capping at $106K is nothing more than another tax break.
The word 'entitlement' has been basardized. Is simply means you are entitled to the money you paid in plus interest.
It is also interesting that if SS is "entirely self-financed, with a revenue stream held in trust, and cannot borrow to pay benefits", then why did the President threaten to stop SS checks when faced with a the debt ceiling? Someone is lying.
And yes, I know the deeply cynical R party wants them to believe that they will be unscathed and only their children will be cut loose to enjoy impoverished futures. But the funny thing is, except for the most callous, most of these old people think their kids are ALSO hardworking, good people who've paid into these programs and deserve them.
It's going to take a lot of Fox News style repetition to get these people to understand that when the Rs speak of "entitlements" they mean average American senior citizens above and beyond all others. Somehow I don't see Fox putting their usual propaganda machine into motion on this one. Could it be because the Rs benefit so much from the false impressions they deliberately perpetuate?
Your rhetoric is straight out of the Democrat playbook - and a big reason for many of our current problems. You yap eagerly at the chance to scare, insult, and divide people in order to make the "other party" look bad and just to win elections. You don't have any interest in the truth or working toward a solution.
I think most American, especially seniors, understand that the vague word "entitlements" is mostly about SS and Medicare. I don't believe that most of them are the selfish bigots that you imagine. And most of them know that we need to make long term changes to these programs so that they remain viable.
This is undeniable. It is absolutely factual. You cannot refute it in any manner because it is factual. Why is it that commentators such as this author are unable to stop lying about this existential reality?
If the government issued treasury certificates for the surplus money it took from Social Security,
then the government OWES Social Security. That debt is one that was taken on by the govt.,
not by Social Security, a VERY important distinction. You have conveniently switched this
around to now say that "Social Security is an obligation required to be paid by the genreal
revenue of the U.S." That, sir, is throwing out the baby with the bath water. It is the DEBT for
which treasury certificates were issued that is payable out of the general fund, not everyone's
Soc. Sec. check.
Just as the governments income does not automatically become Social Securitys income, the
governments debts do not automatically become Social Securitys debts. The govt. is NOT
required to pay Soc.Sec. out of the general fund, but it IS required to pay its debts out of the
general fund. The DEBT that the govt. took on when it took the Soc.Sec. surplus, is to be paid
back and paid out of the general revenue. Got it?
So you want us to take solace in the fact that SS does not have an accumulated debt, it is just owed a significant loan from the US government, which has an untenable amount of accumulated debt? OK, no problem then?
This is the kind of budget BS that is drowning is today. Even with the distinction that you make, the fact remains that in order for SS to survive in the short run, it will contribute significantly to the deficit in the general fund. In the long run, unless it is restructured, SS will need loans from the general fund, contributing even more to the deficit and, therefore, the debt.
Now Social Security has always been presented as a form of insurance. We have been led to believe that we have paid into a discrete, segregated "trust fund," out of which we shall be paid in retirement or time of disability.
It this true or not? Is Social Security insurance, or is it welfare? Of course, the reality is that is both and neither at the same time. Be very wary of the sneaky, equivocal way the word "entitlement" is being used in the Obama speech. Whatever does that mean? Is what I receive in my privately funded retirement annuity an "entitlement?" I surely feel entitled to keep getting it. But now "entitlement" is being used in a new way, to mean out-an-out welfare--something to which you are "entitled" to because someone deigns to give it to you.
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That said, more to the topic at hand. If you feel that SS is a guaranteed annuity, that's fine; certainly a legitimate perspective. However, I would question this of your perspective. Do you feel the "investment" for the annuity should be in relationship to total payroll? Would you be for including total income as the basis for calculating SS? If world economics dictate that United States will generate less income over time due to changing production models, are you concerned for a social safety net for yours or others offspring given the affecting supression of wages? Also, is the annuity limitless? Can you withdraw more than you put in?
The reality is, whether you want to believe it or not, wealth distribution in the US has become disturbingly concentrated. To ignore this fact is very myopic and historical results of such wealth disparity has not proven very beneficial to the countries/populations in which they've existed.
The word 'entitlement' has been deliberately bastardized IMO.
However, the Federal government is not required to disperse SS funds back to payees. They can disband the program at any time they wish. Congress could do this tomorrow.
Of course, they'd have to jump on their private jets and abscond to a llama ranch in Bolivia, but they *could* do this perfectly legally.
http://www.ssa.gov/history/ponzi.htm
Pay as you go is run by the government, which means that they can hold a gun to the heads of 'future investors' (current workers) and force them into the program or mandate that they have ever growing obligations with the demographics (i.e. new investors) are unfavorable. Ponzi was unable to compel people to become new investors, which limits how long his scheme can last. Government can compel new investors, which only extends the length of the scheme but does not change its overall inevitable progression.
Since your so sound bite ignorant. Average life expectancy has had essentially zero effect on SS. While it is true that average life expectancy has in the last 70 years gone from 62 to 75, that is only due to the skew of early childhood death that no longer exists (think small pox, polio, rheumatic fever...). The fact is that a woman who lived to 60 in 1940 had a life expectancy of 75; whereas today a woman that reaches 60 has a life expectancy of 78. Given the fact the age increased from 65 to 67 when you can draw SS; life expectancy has only approximately 1 year of benefit impact....nominal.
The public trustees do just that, manage the trust for public. Please do some research before you spew babble.
"These lower death rates result in a decrease in the long-range OASDI actuarial balance of 0.10 percent of taxable payroll"
http://www.socialsecurity.gov/OACT/TR/2011/IV_B_LRest.html#400766
"The impact of the demographic shifts under the three alternatives on the OASDI cost rates is clear if one considers the projected number of OASDI beneficiaries per 100 covered workers. As compared to the 2010 level of 34 beneficiaries per 100 covered workers, this ratio is estimated to rise to 48 by 2035 under the intermediate assumptions as the growth in beneficiaries greatly exceeds the growth in workers."
http://www.socialsecurity.gov/OACT/TR/2011/IV_B_LRest.html#222190
And of course, when government spending goes up 7% every year, that is considered the bare minimum...
He said he favored a public option and he says he defends Social Security.
However, that doesn't mean he won't throw them under the bus if he think it will make him look bipartisany.
The employer's half comes out of the employee's gross salary.
http://www.thenation.com/article/whacking-old-folks
http://www.marketwatch.com/story/why-social-security-isnt-going-broke
http://www.money-zine.com/Financial-Planning/Tax-Shelter/FICA-Tax/
http://strengthensocialsecurity.org/commission-watch
http://www.latimes.com/news/opinion/commentary/la-oe-dreier-social-security-20100814,0,6657114.story
http://www.tulsaworld.com/opinion/article.aspx?subjectid=62&articleid=20100817_62_A13_Recent931656
http://aging.senate.gov/record.cfm?id=325009
Now what type of savings plan(other than SS) that you know of requires you to contribute principal, have the fiduciary spend the money, then require you to pay yourself back the same amount...and then call it a benefit?
http://www.socialsecurity.gov/OACT/TR/2011/IV_A_SRest.html#126084
First. thinking of SS as a tax is part of the issue.
It is not a tax.
No part of that monies collected are done so to enhance 'government coffers' for it's general fund responsibilities.
No part of what you pay FICA may be counted towards your Federal Tax liability, for exactly this reason.
Calling it a 'tax' is wrong.
As the population of the US grew, and became less and less agrarian, it became obvious that people who were not farming their own lands had no means of support in their old age.
It is the government requiring YOU and I to save of our old age.
Anyone here who does not voluntarily put a full 10% of EVERY paycheck aside and leave it untouched, must hold their objections to SS, because they too will get old some day.
And I guarantee you, no matter how young and invincible you feel right now,
it comes far faster than you are ready for.
The problems with all FICA funds, is that Congress allowed themselves to raid the fund into oblivion, without ever paying it back.
They treat it like it is tax revenue and it is not.
It is our savings, and they are stealing it as literally as robbing a bank.
Referring to SS and FICA as 'tax' only helps them out the back door.