On his tour of the Midwest last week, President Obama again indicated his interest in cutting Social Security. He repeated a proposal that his administration first put forward in the debt ceiling negotiations: he wants to cut the annual cost of living adjustment by 0.3 percentage points.
This cut may sound small, but it adds up over time. A person in their 70s who had been getting benefits for ten years would see a reduction of 3 percent. By the time they were in their 80s, the cut would be 6 percent. And if they lived into their 90s, their benefit would be more than 9 percent lower as a result of President Obama's proposal.
For an average retiree who can expect to get benefits for 20 years, President Obama's plan would cut their lifetime Social Security benefits by roughly 3 percent. By comparison, his much feared tax increases on the rich would reduce the after-tax income of someone earning $300,000 a year by just 0.5 percent. In this case, a beneficiary who will be mostly dependent on their Social Security income in retirement will take about six times as large a hit relative to their income under President Obama's plan to cut Social Security than a couple earning $300,000 would from his plan to raise their taxes.
This cut to Social Security seems especially inappropriate since the near retirees who would feel the full impact of this cut have just seen most of their wealth destroyed by the collapse of the housing bubble and the plunge in the stock market. The typical near retiree (ages 55-64) has just $170,000 in net wealth, including the equity in their home.
This means that if they used every last penny in their 401(k) and other savings, they would have just about enough money to pay off the mortgage on a typical home. This would leave them 100 percent dependent on Social Security for their income. And of course, half of near retirees have less than this amount, meaning that they will not even be able to pay off the mortgage on a typical home. But apparently President Obama feels that these people need to make greater sacrifices.
The determination to cut Social Security is especially strange given the finances of the program. Under the law, Social Security is financed by the designated Social Security tax. It does not contribute to the deficit, since the law prohibits payments from being made if there is not money in the Social Security trust fund. That means that if the trust fund were drained, rather than contributing to the deficit, full benefits would not be paid.
And the date where this could be an issue is still relatively distant. The Congressional Budget Office just released new projections showing that the Social Security trust fund is fully solvent through the year 2038. Even after that date, the program would have enough money to pay 81 percent of scheduled benefits for the rest of the century. The folks who say that there will be nothing there for our children or grandchildren are just making it up or repeating the nonsense promulgated by some political hack.
Furthermore, this gap is not hard to close. Currently, the tax on the wages subject to the tax is capped at $107,000. The upward redistribution of income over the last three decades has caused a large share of wage income to escape taxation, as more money ends up in the pocket of CEOs and Wall Street types than ordinary workers. If all wage income were subject to the tax, then it would leave Social Security fully solvent for its 75-year planning period.
We could also go the route of increasing the tax on ordinary workers to cover the shortfall. After all, part of the story is that people are enjoying longer retirements, even if the wealthy have benefited much more from the increase in longevity than the typical worker. By 2040, average wages are projected to be 45 percent higher than today, adjusting for the impact of inflation. If just 5 percent of the projected wage growth over this period was used to finance Social Security, the program would be fully solvent for the rest of the century.
Most people would be surprised to know that 5 percent of the wage growth projected over the next three decades would be sufficient to keep Social Security solvent. After all, there is a well-funded and well-connected industry of people spreading disaster stories about Social Security and its massive deficit.
Many people will be taken aback by the idea of "projected wage growth," after all most workers' wages have been stagnant or falling in recent years. This is true. The projections refer to average wages, which had been rising, at least until the recession.
This brings up the fundamental point. The country has been and is getting richer. The reason that most people do not feel better off is that most of the money has gone to those at the top. Part of the reason is that they have been distracted by nonsense about the crushing burden of Social Security, so they have not paid attention to the policies that put more money in the pockets of the rich. Unfortunately, at the moment, President Obama seems to be working with the distracters.
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People have to know who they should be upset with. Obama isn't it.
1. The "average" SocSec recipient has little if any savings or retirement fund.
2. Of the 50 Million plus on SocSec, 43 percent LIVE exclusively on their SocSec.
3. The average check is 1200.00 for single men, 700.00 for single women.
4. We haven't had a cost of living in THREE years....so, I'd be pleased with any at all.
5. Bush's Medicare insurance program takes more money from us that the rent we pay and premiums go up every year...services cut, co-pay raised, claimes denied go up. Get rid of it...it's too expensive.
6. Most of us don't live in a "retirement community" surrounded by golf courses or gates.
7. Most of us don't have a boat, nor go fishing, nor take elaborate vacations Most of us are happy if we can make the rent, food and utitlies..and have a little left over for a gallon or two of gas in our 10 year old cars.
There are lots of ways to save money in SocSec. Raise the cap on FICA. Raise the retirement age to 68...with a safety net for those unable to work due to illness.Kick the deadbeats off the rolls of SocSec disability,there are plenty of them. Implement a means test.using a sliding scale..
I am still confused about people who receive benefits as retired military and dependents, as I know some of them recieve SS.
Before Congress starts adjusting the amounts they need to cut out the people who did not pay into the system. Move military and their dependents to other plans and clean out the roles of Medicare and Medicaid of those who did not pay into the plan during their working lives.
Military get FICA taxes taken out of their paychecks just like you do. If they work long enough in their lifetime to get the required number of work credits, they are eligible just like you. The military is a JOB,
http://www.ssa.gov/pubs/10035.html
Same with Medicare....you have to had worked for at least 10 years and paid into Medicare to be eligible.
http://www.ssa.gov/pubs/10035.html
What is important to remember is this: These are not "government" programs. Workers pay into these programs all their working lives and the employers match a percentage of the taxes....It's not a giveaway.....it's a return of money invested in the program. How much you receive depends totally upon how much you paid into it over the years.
What's confusing re dependents. If Mary pays for something, and Mary dies, shouldn't Mary's kids get that something? Or should it go back to the person she was paying. That's what Social Security is. Just as your dependents would get the home you sleep in or the car you drive (assuming they were paid for).
What's to be confused about?
He needs to be forced from office.
Hopefully the black congressional caucus will fry him and the sooner the better.
So, what's your beef, specifically???
Well, I have an idea, lets keep our IOUs to Americans that have lent our country our money, and try telling our other debtors that we can't afford to pay them.
The Trust fund is managed, monies invested mostly in Treasury Bonds with any gains returning to the Fund.....but cannot be borrowed against.
It's a myth.....and a fairly powerful one used by the conservatives of the Right Wing and especially Republicans.
It scares the masses and gets 'em all riled up.
I was being sarcastic.
I went to politifact.org they were saying that SS factually adds to the deficit because the government has to borrow to pay out SS deficits that started this year, 35+billion.
They have to borrow to pay back any bond holders, because they have no money held 'in trust', they spent it.
Google politifact.org
I think it is a stretch to blame it on SS, but they do.
i've heard the quote "broaden the (tax) base and lower the rates" 1000 times thru-out the debt ceiling debate
amazing how we've yet to hear that regarding the soc sec payroll tax---i believe we are now paying around 4% on the first $107K, with the current payroll tx "holiday"---eliminate the cap, and we all pay between 1-2%, possibly even less than 1%
and the CBO says soc sec is fully solvent thru 2038---consider the problem solved, because by 2038, most of the boomers, possibly even me (i'd be 82), will be gone anyway
scam exposed
The President's obsession with Social Security may well be a window into his economic position as a very conservative fiscal policy politician who doesn't understand what senior citizens endured living in poverty after years of working and saving. Or he may be using SS as some form of a bargaining chip for some unclear political gain. In either case, he proves his progressive rhetoric lacks substance. My guess is reconfiguring SS, Medicare and Medicaid gives him props with the plutocracy and assures the comfortable lifestyle he already lives and will live late into his life