If back-channel sources are correct, the Deficit Commission is finalizing a deal that would increase Social Security benefits slightly for low-income recipients while cutting them for everyone else. The Commissioners apparently believe that putting this "progressive" gloss on a package of unneeded cuts would allow them to move forward with their predetermined anti-Social Security agenda.
The new proposal would pit middle-class seniors against the elderly poor, forcing them to compete for a stripped-down pool of dollars. The end result would be the one that many Commission members have pursued for years: to cut the most stable and successful program in the Federal government's history.
Accounts of this pending deal come from the top-secret, behind-a-firewall, inside-the-Cone-of-Silence proceedings of the Commission itself, which is why they can't be officially confirmed. (Remind me again: Why are such critical issues being debated in secret, only to be presented to Congress for ratification after the November elections?) But if these reports are correct -- and there is good reason to believe they are -- some members of the Commission presumably believe this strategy would confuse and divide the many Americans who oppose Social Security cuts, while defusing the growing resistance to their actions among progressive members of Congress.
The Commissioners have clearly been stung by the nickname bloggers have given them: the "Catfood Commission." This recommendation would take the edge off that name, since they could now claim they've made sure nobody will be eating Purina Old Folks' Chow as a result of their actions. It would also give them chance to bait their opponents: Don't you care about poor people? But there are a number of problems with their proposal, and there are fairer and more cost-effective ways to help impoverished seniors. Here's what this new proposal gets wrong.
They're misreading the public: First, progressives aren't the only ones opposed to cutting Social Security. Recent polling by the Celinda Lake organization showed that seven out of ten voters opposed cutting benefits for people earning over $30,000 in order to reduce the deficit. 76% of independents oppose cutting Social Security to reduce the deficit, as do 77% of Republicans -- and 76% of Tea Party supporters! Putting an antipoverty gloss on overall cuts won't impress these voters. Nuanced arguments -- "we're cutting the program to save it" or "we're not reducing the deficit, we're stabilizing the program" -- will be lost on angry voters with finely-tune BS detectors who have contributed to the program for years.
It's a broken promise: This policy would violate a compact the United States government made to generations of its citizens: Pay into the system and you'll receive what's been promised in the end. Social Security is a self-funded system that provides some income security during old age or disability. Using employee and employer contributions to reduce poverty would be a redirection of the money that working Americans and their employers paid to help them when they're disabled or retired. If the Commissioners have a new antipoverty mission, there are better ways to pay for that.
There aren't enough "rich" beneficiaries: The Commissioners will no doubt make the argument that Warren Buffett and others in his income shouldn't receive the same benefit income as somebody who's struggling to make ends meet. But there aren't enough Warren Buffetts in the system to make a difference. Since Social Security benefits are capped at a relatively low level, Warren Buffett isn't likely to receive any more in benefits than someone who earned less than $100,000 per year.
If benefits are going to be tied to overall income and wealth in the future, cuts will have to reach deep into the middle-class in order to make any real difference -- especially if there's a slight benefit increase at the low end. The number of Social Security recipients who are still impoverished (from 2000-2002 data) is 1. million, or 8.7% of the elderly. Since Social Security currently keeps 13 million seniors out of poverty, that leaves a lot of stable or increased benefits that would have to be offset by by reducing benefits for middle-class recipients in order to cut overall costs.
Benefit redutions will have to be deep, wide, and painful. This new proposal bears some resemblance to "progressive price indexing," a Republican proposal that would have left benefits intact for recipients with the lowest incomes while progressively reducing them for everyone else. Unfortunately, a 2005 paper by Jason Furman (now the White House's Deputy Director of the Economic Council) showed that this approach would cut benefits for today's average 25 year worker by 16% if he or she retires in 2045, and would result in a 28% for the average worker retiring in 2075. Any other approach the Commission takes will come up against the same challenge: If you're not willing to raise revenues by lifting the payroll cap, you'll need to make deep benefit cuts for the middle class. (And if you are willing to lift that cap, benefit cuts are unnecessary.)
It will cut a needed lifeline for seniors living on modest incomes.Those cuts would hurt a lot of people. Social Security benefits represent 40% of seniors' income, on average and that figure'ss bound to rise as corporations continue to cut back on employee pension plans. The median income for Social Security recipients in 2008 was $18,001. Cuts would affect people whose average incomes are somewhat higher, but most of them certainly won't be wealthy. The demographics and income statistics show that Commission can't make a meaningful dent in the overall numbers without cutting benefits for people with modest incomes. (Figures are from the Employee Benefits Research Institute.)
Administrative costs would offset a lot of their expected savings. Current administrative costs amount to less than 1 percent of benefits, a figure that's extremely low when compared to other programs. While linking benefits to income or other assets may sound like a good idea, it will add enormously to the administrative costs. It's not just a matter of cross-referencing the Social Security system to the IRS databases -- although that's a lot bigger undertaking than it sounds. Any needs-based system will require appeals processes, exceptions for certain mitigating circumstances, and other provisions that will be labor-intensive to administer. Part of the beauty of the current Social Security system -- and one of the keys to its success -- is its simplicity. That would be lost under this proposal.
Fortunately, there's a solution:
Lifting the payroll tax cap is fairer and more efficient. The administratively simple, cost-effective approach to Social Security's minor long-term funding problem is to raise the payroll tax cap from its current $106,000 level. Systems are already in place to handle that change (at the IRS and in automated payroll systems for employers). That would address the long-term funding issues for Social Security itself, cleanly and efficiently. What's more, that move (perhaps supplemented by a relatively modest payroll tax increase for very high earners) could also help fortify benefits those low-income recipients. A progressive adjustment to the payroll tax would provide for the needs of that 8.7% still in poverty more cost-effectively and more fairly than this plan would.
In other words, the Commission's new goal can be more efficiently and fairly funded by a marginal increase in taxes for the wealthiest Americans. If Commissioners lack the political will to make this kind of antipoverty commitment on behalf of the well-to-do -- and with the preponderance of conservatives and millionaires on the Commission, that's likely -- why are they asking middle-class seniors with an average total income of $18,000 to carry that burden instead?
If this were a public debate and not a secret one, this latest move could be used to start the debate we should be having: Why don't we strengthen and increase Social Security, rather than cut it?
Of course, the minor adjustments needed to stabilize Social Security for a century aren't the only issue. Many Commissioners want the Federal government to keep the $2.5 trillion it borrowed from Social Security's trust fund (and therefore from working Americans and their employers) so they can continue to use it for other purposes. That would amount to a regressive tax on the middle class.
Overall, this new proposal is simply a smokescreen for overall benefit cuts, camouflaged by a small social mission subsidized by a hidden tax on the middle class. It's a political trick. Commissioners like Alan Simpson can now claim to be working on behalf of the "lesser people," to use his preferred choice of words, defending them against "greedy geezers" whose desire to collect the benefits they've subsidized is selfish and uncaring. That may sound like smart divide-and-conquer politics to the Commission, but it won't play as well on Main Street as it will on Wall Street.
There are ways to help impoverished seniors that don't involve cutting Social Security benefits or forcing more sacrifices onto the middle class in order to protect the well-to-do. The Deficit Commission shouldn't use impoverished seniors as hostages in order to finish what many of them have been trying to do for decades: cut Social Security.
Sign the petition: Social Security doesn't contribute to the deficit, so stop the Deficit Commission from cutting Social Security.
Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America's Future. This post was produced as part of the Strengthen Social Security campaign. Richard also blogs at A Night Light.
He can be reached at "rjeskow@ourfuture.org."
Website: Eskow and Associates
Follow Richard (RJ) Eskow on Twitter: www.twitter.com/rjeskow
What Social Security Report SAYS vs What They Tell You It Says
By Dave Johnson
http://www.ourfuture.org/blog-entry/2010083105/what-social-security-report-says-vs-what-they-tell-you-it-says
The summary of the report says, "The financial outlook for Social Security is little changed from last year. The short term outlook is worsened by a deeper recession than was projected last year, but the overall 75-year outlook is nevertheless somewhat improved..." and is otherwise fine until at least 2037 with no changes.
It is just fine forever, in fact, if we do something simple like raise the "cap" on earnings that are taxed to pay for the program. (That's right, when you make more than a certain income level you stop paying the tax!) Compare that to the military budget. We spend more than $1 trillion on military and related programs each year - more than every other country combined - and unlike Social Security that is completely "unfunded," and adds to the deficit.
I pointed out in an earlier post that the governing body of the Social Security program, the Social Security Trustees, is made up of six members. Four of them are designated cabinet members, and the other two are supposed to represent the public. Could it be that president has deliberately kept those positions open so that he would have total control (through the four cabinet members who serve at his pleasure) over proposed Social Security reform that he has in mind. This question has not been brought up in the news, and quite frankly, it did not occur to me until now. But the president has been in office plenty long enough to have filled the vacancies. Those two vacant trustee seats are supposed to be filled by individuals who will look out for the public good. They are appointed by the President subject to confirmation by the Senate, but once they are seated they are supposed to be independent. The four cabinet members are "yes" people who must do what the president wants or risk being fired. The President's hand has been substantially strengthened by having control over all trustees. I am a strong Obama supporter, but I am troubled by what he might have in mind in terms of Social Security reform. I would feel better if the two vacant seats were filled with independent trustees.
"Patriotism means to stand by the country. It does not mean to stand by the president or any other public official, save exactly to the degree in which he himself stands by the country. It is patriotic to support him insofar as he efficiently serves the country. It is unpatriotic not to oppose him to the exact extent that by inefficiently or otherwise he fails in his duty to stand by the country. In either event, it is unpatriotic not to tell the truth, whether about the president or anyone else."--Theodore Roosevelt
I get the feeling from some of the comments posted that some of you think I am too disrespectful of our government, so I am posting the above quotation from Theodore Roosevelt which has always been my anchor when deciding how far to go in criticizing the government. Remember, that I have devoted the past ten years of my life to trying to expose the Social Security scam and to researching and writing about Social Security. I am an equal opportunity basher. Ronald Reagan and George H.W. Bush were the pioneer raiders of the trust fund. I hoped it would end when Bill Clinton became President, but it did not. For 16 years, eight under Bill Clinton, and eight under George W. Bush, Social Security contributions of working Americans were embezzled and diverted to the general fund. I find that unforgiveable.
The link you provided, http://www.ssa.gov/OACT/ProgData/fundFAQ.html#n2 is to the Official Website of the Social Security Administration. This site is the propoganda machine that has allowed the government to embezzle the $2.54 trillion in Social Security contributions over the past 25 years and spend it to fund tax cuts, wars, and other government programs. People, who want to get “the truth” about the trust fund like to get it directly from the horse’s mouth by checking out the official website. The problem is that this horse speaks with a forked tongue. Relying on the SSA to tell us about the true status of Social Security is like relying on Fox News to give us an objective and unbiased analysis of the news.
By law, there are are six Social Security Trustees, four cabinet members: the Secretary of the Treasury, the Secretary of Labor, the Secretary of Health and Human Services, and the Commissioner of Social Security. The other two Trustees are public representatives appointed by the President. The two Public Trustee positions are currently vacant, as they often are, meaning that four of the president’s cabinet members are in total control of all decisions regarding Social Security. Since these cabinet members serve at the pleasure of the president, essentially the president has dictatorial control over Social Security.
One of the least known facts about Social Security is that, although the government does have a moral obligation to pay Social Security benefits, it does not have a legal obligation to do so. Section 1104 of the 1935 Social Security Act specifically states, “The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress.” In a 1960 ruling (Fleming v. Nestor) by the United States Supreme Court, the court ruled that nobody has a “contractual earned right“ to Social Security benefits. In its ruling, the Supreme Court established the principle that entitlement to Social Security benefits “is not a contractual right.”
As a result of the 1960 Supreme Court ruling, the future of Social Security is totally in the hands of Congress and the President. They have the legal authority to amend any and all parts of the Social Security Act, as well as the authority to either increase or decrease Social Security benefits. WE MUST DEMAND THAT THE MONEY BE REPAID!
The government has been violating federal law and the public trust for the past two decades as it committed “the crime of the century.”
Allen W. Smith, Ph.D.
Website: www.thebiglie.net
Email: ironwoodas@aol.com
Phone: 1-800-840-6812
Is there insatiable greed out there when it comes to medical charges?
Jobless Boomers are taking early retirements at 62, getting 25% less monthly benefits. Many will never retire because they were wiped out by the market crash. Others say they can't afford to retire because they received cheap, conservative wages all their working lives. The lower benefits of those retiring early, along with those who can't afford to retire, will lower the costs of Social Security benefits.
In 2000, the tax base for Social Security and Medicare was $76,200 now it is $106, 800. The tax base is what your Social Security and Medicare contributions are figured on. This should make a big difference in the income of Social Security.
For years the government had been saying that our Social Security trust fund would last until year 2042. As the wage base went up, the year the trust fund will last has went down to year 2037. Once we get jobs back, then that should make a big difference.
Social Security pays for some Medical Care. I hope medical care costs don't ruin Social Security, too.
There may be enough of that 2.6 trillion dollar surplus left to pay any predicted shortfall for the younger generations.
Here is where we now stand:
1. The 1983 payroll tax hike has generated $2.54 trillion in surplus revenue that was supposed to be saved and invested.
2. That would be enough to pay full benefits until 2037 if the money were in the trust fund in the form of real assets that could be converted into cash.
3. As soon as the first surplus revenue, resulting from the 1983 payroll tax hike began flowing in, during President Reagan's second term, the government began using the surplus money for general government operations as if it were general revenue. The government has continued this practice to this very day. It is a violation of both federal law and the public trust, but it has been going on for more than 25 years.
4. The net result is that there is no money, or any other kind of real assets, in the trust fund. There are no marketable bonds that can be converted to cash. It is true that the government owes the money to Social Security and to future recipients. But there is no way to make the government repay the money if it chooses not to do so. The real shocker is that the Congress and the President, together, have the legal authority to default on that debt, if they choose to do so!
They tell us this after they have taking all the surplus????? What kind of people are they. Are they human?
“In other words, the trust fund is of no economic value.
This sentence wasn't in the 2010 introduction, released last week. Treasury says that it stands by the statement but that the Social Security trustees decided not to include it this year because it reiterates the obvious.”—Allan Sloan, Fortune’s Senior Editor at Large in his Washington Post column, August 10, 2010
“Doesn’t the Social Security trust fund cover that? No, silly. All those years of surplus in Social Security were recorded in a book entry dubbed the “trust fund, but the non-marketable special Treasury bonds that make up the fund don’t represent any assets that can be cashed in to pay benefits.”--Eric Schurenberg from CBS Money Watch, August 19, 2010
“Your payroll taxes go into a bottomless hole. So where did all that FICA money go? Down the drain of federal spending on everything. It’s certainly not sitting in an account waiting to pay your retirement benefits.”—Terry Savage, Chicago Sun-Times, September 6, 2010
“For more than 25 years, while working people were told that they were paying extra taxes to ensure their retirement security, that surplus tax revenue was actually being siphoned off to run general government operations…In reality, the trust fund contains government IOUs that taxpayers today and tomorrow will have to redeem probably through paying higher taxes” –Jay Bookman, Atlanta Journal-Constitution, September 7, 2010
1. Lock it up (literally)
2. Invest it publicly (government securities)
3. Invest it privately (in whatever market or commodity you choose)
I don't think there is another option, if you know of one, please point it out. Each option above has pros and cons to it. Since what we did was #2 and according to you was so wrong, what would your solution have been, and how would you have dealt with the second order effects?
I have already answered that question on another thread, but I will answer it again here. Under current law, trust fund assets cannot be invested privately, and no sane individual would consider locking up cash in a vault. Investing it in government securities was really the only option if the money was to be invested. The money was supposed to be used to purchase pubic-issue, marketable Treasury bonds in the open market. These marketable bonds could then later be re-sold in the open market by the Trustees to raise funds with which to pay benefits to the baby boomers. Public-issue marketable Treasury bonds are the gold standard and are the only type of Treasury bonds suitable for investing large quanities of money. Bill Gates invests in them, the Chinese government also buys them, and the surplus Social Security revenue should have been invested in them. IT WAS NOT! What part of my statement, "All of the money was spent for non-Social Security purposes. None of it was invested in anything." do you not understand?
The government owes workers who have paid out of every paycheck up to 45 years to get retirement benefits and Medicare when they retire.
For the past 25 years, under five presidents and their Congresses, the United States government has been secretly “borrowing” or “embezzling” (opinions differ as to which word is more accurate) the Social Security contributions of American workers and using the money to finance tax cuts, wars, and other government programs. Although I have been trying to expose the scam for more than a decade, the news media has been hesitant to report on the issue. But that is changing. In just the past month, four major journalists have helped to expose the dark, dirty secret that the government has managed to keep under wraps for so long.
“Let me show you in two different ways how useless the fund is. The first is a quote from the introduction to the 2009 Social Security trustees report…
Allen Smith, economics professor emeritus at Eastern Illinois University and author of "The Big Lie: How Our Government Hoodwinked the Public, Emptied the S.S. Trust Fund, and caused The Great Economic Collapse," spotted the 2009 quote, and it is telling.
It says: "Neither the redemption of trust fund bonds, nor interest paid on those bonds, provides any new net income to the Treasury, which must finance redemptions and interest payments through some combination of increased taxation, reductions in other government spending, or additional borrowing from the public."
(to be continued)
Get your monopoly board out, grab your friends and family, and set the game up. Two rule changes.
1. Every time you pass go, you wait until everyone elses passes go before you take a turn again. Call every turn around the board a year if you like.
2. For the first 35 turns (max number of years that can be credited for SS benefit purposes), every time someone passes go, take 15% of their cash on hand. Don't put it in the bank, don't give it back to anybody. This is Gores lockbox. Now, if you make it this far, for the next 20 turns or so give the money back, however you would like. The important part is what happens during the 35 turns that you are taking the revenue in.
The board is the economy, the cash in the game is the money supply, and every dollar that passes between players and the bank is economic activity. Let me know how things turn out.
I'm not laughing! This subject is very dear to my heart because I am almost certain that I was the source of Gore's lockbox idea. I sent copies of my book and a lot of correspondence to Al Gore, prior to the convention. I urged him to break ranks with Bill Clinton and pledge to end the raiding of the trust fund. I sent my messages through many channels to make sure that some of them actually reached Al Gore. Finally, on the eve of the convention, I sent a telephone message to him through my Florida Senators office. I spoke with one of Senator Graham's assistants who told me that Senator Graham was already at the convention. I requested that Senator Graham remind Gore of my past correspondence and urge him to give serious consideration to pledging an end to the raiding of the trust fund. The following evening, when Gore gave his acceptance speech, he announced his proposed Social Security lockbox. I did not use the term "lockbox" and I cannot prove that my intensive efforts resulted in Gore's pledge to end the raiding. It doesn't really matter. What's important is that Gores pledge resulted in George W. Bush making a similar promise which he later broke. We cannot know for sure whether or not Gore would have kept his promise, but I believe he would have.
Is this a real question? If you'll look closely in rereading the body of the question, you just may find a clue as to the answer. The real question is why is there a "preponderance of conservatives and millionaires on the Commission"?