Many people are following the presidential election closely with the idea that the outcome will have a major impact on national policy. However, according to Steven Pearlstein, a veteran Washington Post columnist and reporter, it may not matter who wins the election. In a column last week, Pearlstein told readers that the top executives of some of the country's largest companies are getting together to craft a budget package that they will try to push through Congress and get the president to sign.
While Pearlstein clearly sees these backroom meetings of corporate chieftains in positive terms (he refers to them as "grown-ups" who have been noticeably absent from the conversation about the budget), the rest of us might view this plotting a bit differently. As Pearlstein openly acknowledges, this corporate coup is an end-run around the electorate. As corrupt as the political process may have become, at least we will get a vote in the election. Pearlstein's plotters are not inviting the rest of us into the conversation.
Many of the same folks who brought the economy to ruin just a few years ago are now going to come up with a plan that is supposed to set the budget and the economy on a forward path. At the center of their proposal are big cuts in Social Security and Medicare.
The most popular Social Security cut among this gang is a reduction in the annual cost-of-living adjustment (COLA) by 0.3 percentage points. They are betting that ordinary people are too dumb to notice this cut since it is a relatively small amount each year.
However, the effect of this cut accumulates into a much bigger deal over time. After 10 years it is roughly 3 percent, after 20 years it would be close to 6 percent, and after 30 years it would be close to 9 percent.
If we assume that an average retiree collects benefits for 20 years, this implies an average cut in their benefits of 3 percent. Is that a big deal? Well, there are a lot of would-be Social Security cutters who are screaming bloody murder because President Obama wants to increase the tax rate on a portion of their income by a bit more than 3 percentage points. This means that if President Obama's proposal to increase taxes on the richest 2 percent is a big deal, then the plan to cut the Social Security COLA is also a big deal.
The corporate CEO crew is also considering a plan to raise the normal retirement age for Social Security to 69. And, they want to reduce the benefit formula for high income workers which, incredibly, they define as people who earn more than $40,000 a year.
Their main trick for Medicare is to raise the age of eligibility from 65 to 67. Apparently our CEO gang has not discovered that the health insurance market for older people is a disaster. They also continue to promote the misconception that the problem is Medicare and Medicaid.
These programs are actually much more efficient than private insurers. The real problem is our private sector health care system, which already costs more than twice as much per person as the average in other wealthy countries, with few obvious benefits in outcomes.
The scary budget projections that our CEOs like to tout assume that health care costs will exceed 20 percent of GDP in a decade. That would imply costs of more than $34,000 for a family of four in today's economy. And these costs are projected to keep growing through time.
The normal response to this situation would be to focus on the need to fix the health care system. But many of Pearlstein's CEOs profit from the waste in the health care system, so they would rather cut our Medicare benefits.
So there you have it, the richest people in the country -- the big gainers from economic growth over the last three decades -- have plans to cut Social Security and Medicare benefits for current and future retirees.
To get some perspective on this story, the typical near-retiree has about $170,000 in wealth including everything, such as the equity in their home, their 401(k) and any other savings. That is what our CEO gang makes in a week. The average Social Security check of $1,200 a month is more than half of the income for two-thirds of seniors and more than 90 percent for one third. Yet, the CEOs think seniors are living too well.
But wait, there's more. We're all paying for their campaign to take away our Social Security and Medicare. We do this through several different channels.
First, many of these CEO- and honcho-types come from Wall Street. For example, Erskine Bowles, the co-chair of President Obama's deficit commission, is a director of Morgan Stanley in one of his day jobs. Had it not been for the taxpayers' generosity, the bank that Mr. Bowles directs would have died in the fall of 2008, so it would not be around to pay him his six-figure stipend.
The other way we are paying for this corporate effort to cut our Social Security and Medicare is by virtue of the fact that we allow the CEOs to pay for their campaign with pre-tax dollars. If most of want to give $100 to a political candidate or political cause we have to first pay taxes on our income and then make the campaign contribution out of what we have left.
However, if you are a CEO who wants to cut Social Security and Medicare, the Supreme Court says you can make your contributions with pre-tax dollars, in effect deducting this contribution as if you were giving money to charity. According to Pearlstein, the CEOs "charitable" contribution for cutting Social Security and Medicare will be on the order of $278 million.
For most of us, that sum would be real money, but not for CEOs who control trillions of dollars. And, with the rest of us subsidizing through our tax dollars this effort to cut our Social Security and Medicare, how can the CEOs not take up Pearlstein's call?
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My main reason for commenting is to pose a question: How much of the additional expense of medical care for the American family would go away if we had significant tort reform? Yes. There are some people/families who are ruined because some drug was not properly vetted or some medical practitioner was incompetent or negligent. The tort system is not the proper remedy. people suffer every single day who were somehow harmed by another--or simply by disease--and do not qualify for compensation. It is called "life". Yet we enrich the legal profession and try to fairly compensate individuals/families who encounter certain types of catastrophes. The "guilty parties", whether physicians or pharmaceutical companies do not pay--we all do in the form of higher costs.
Why don't any of the politicians tout tort reform????? I don't need to answer that. You know.
Those who drew a paycheck paid from every paycheck to assure a Social Security retirement benefit since their first paycheck. They also have contributed to Medicare to have affordable medical care. Those who started to work in 1964 have paid into the programs 48 years.
Those two programs should not be compromised.
They need to put a lid on the high charges of big pharma for brand names.
The young need to defend Social Security and Medicare. If they are not careful, some of our leaders will have them working until they are 75 with meager benefits and with $10,000 deductibles on the Medicare bills. Many won't live to retire but the government and other highly paid in the judicial , etc. will have early and lush retirements.
Social Security is paid for by those who will draw family benefits and by those who profit from our labor. The taxpayers don't pay these benefits, but the GOP and some conservative democrats want to cut them. The biggest reason is because they have borrowed the money from Social Security Savings and don't want to pay it back, because the wealthy would have to pay more taxes to pay it back.
The wealthy have prospered and bought stocks and property overseas while the government used our Social Security money to pay a lot of the nation's expenses.
They have already started wacking the military pensions.
To give an inch to the
Limit the charges to Medicare.
Medical care cost what it did when Medicare started. The medical industry is determined to take every penny they can.
Obama care will help with that if people don't believe the lies being told.
The amount that we pay in is matched by our employer, which may be the reason they want to gradually ruin the program. Social Security doesn't cost the government a penny, except when they borrow it and pay interest on the surplus.
Medicare shouldn't cost the government a penny, but they are subsidizing the private companies in medicare. They need to limit the charges like the private companies do.
The do limit some of the Medigap and Medicare charges but Bush and the conservatives won't let them limit the cost of medicine. The prescription drug program costs hundreds of dollars if you have to buy some of the brand names. I pay $500 a month and I suppose the government pays the other $500 of it when I hit the doughnut hole. That is a sneaky and crafty way to ruin that program by big pharma and the rest of the medical industry.
While it's too simplistic anymore to say what or wasn't the vision of the Founding Fathers, this certainly is not the nation of the 1940s thru the 90s when we still upheld the idea of shared responsibility, and concern for the least of us.
Corporations Need Your Money More Than Kids Need Food
or
Who Needs Social Security? The Corporate State Will Take Care of Me.
or
Don't Cut Corporate Welfare! Cut Medicare!
or
Decide: Corporate Welfare or Medicare?
Anyone else?
Why was there no self-liquidating fund of interest (and later, to be redeemed, principal)?
Because the federal government found a way with the Social Security trust fund (and 23 other trust funds) to spend money when the revenues were not there. This new, innovative way of paying bills was to borrow the excess FICA dollars (and so-called "interest") from the trust fund. From an accounting perspective, this clever vehicle created an asset (what the trust fund can expect from the Treasury) and a liability (what the Treasury owed the trust fund), resulting in an "accounting wash." Even better, from a cash perspective, the asset was used for 27 years, and the liability was deferred until 2012 (when cash outgo exceeded cash income). What a fantastic way to leverage an asset, 100%, for 27 years?
Wouldn't you like to be able to borrow money interest and principal free, for 27 years?
Don Levit
Both Social Security and Medicare are currently insolvent in that FICA taxes can no longer pay the bills. The mass unemployment of the Obama administration has dropped tax revenues and Obama's FICA tax holidays have reduced them even further. The Treasury is borrowing the difference.
Even if the voters fire Obama, Romney keeps his promises of free market reforms and we return to normal American growth, these two intergenerational Ponzi schemes will again go insolvent in less than a decade as the Boomers retire.
Dems like to note that SS has a pile of intra-governmental bonds in the trust fund. There is no true trust fund, which implies SS has a pile of money it can withdraw as it needs it. Intra-governmental bonds are simply promises by the Treasury to pay SS. Our Treasury is broke and will need to borrow money to pay SS. The net effect of this is that SS is now and will increasingly borrow money to pay its bills.
We will be out of other people's money to borrow in about five years at our current rate of borrowing and spending. SS and Medicare will have no choice but to dramatically cut benefits and there will be no benefits for new beneficiaries.
If we want to avoid that future, we need to cut spending by about 40% over the next couple years and that includes SS and Medicare. This is not CEO conspiracy, this is a fiscal fact of life.
Is that about right?
2) Adopt the Ryan/Wyden Medicare reforms giving people a choice between premium support and traditional Medicare. Most folks will opt out of traditional Medicare.
3) Change the SS cost of living calculation from tracking income growth to tracking inflation. The former is a Dem idea that the wealth of the elderly ought to rise with the rest of society, instead of just keeping up with inflation. We cannot afford that redistribution of wealth anymore.
4) Raise the retirement age to 70 over the next 25 years.
5) Raise FICA by 2%.
6) Review all SSI disability recipients and remove the able bodied unemployed Obama has been adding.
SS and Medicare are borrowing to pay their bills. They are insolvent.
The shortfall in 2037 is when the Treasury intra-governmental bonds are scheduled to run out. Nothing will change, though. Before this date, the Treasury will borrow to pay the bonds to pay the SS shortfall. After this date, the Treasury will borrow to cover the shortfall without the interim step of paying the bonds. It is all an accounting game.
The Medicare overhead you quote does not count the cost to all the other agencies for dealing with Medicare fraud, which is still an insane 14% of payments. You give folks vouchers to buy insurance and put Medicare on a self funding basis, Medicare will go under in a year or two.
When Americans have to suffer homelessness and hunger to pay for it it stops being Homeland Security and it becomes Homeland Insecurity.
It is up to We The People to restore the balance, we are the ones with the vested interest in changing it into Protecting Us.
Corporations are people my friend, they just aren't good people.