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Saturday, 21 August 2010

GRAY MATTERS: Social Security's Diamond Jubilee

SaulFriedman75x75 Pulitzer Prize-winning journalist Saul Friedman (bio) writes the weekly Gray Matters column which appears here each Saturday. Links to past Gray Matters columns can be found here. Saul's Reflections column, in which he comments on news, politics and social issues from his perspective as one of the younger members of the greatest generation, also appears at Time Goes By twice each month.


FDR Signs SSA

”We can never insure one-hundred percent of the population against one-hundred percent of the hazards and vicissitudes of life," said FDR that day. "But we have tried to frame a law which will give some measure of protection to the average citizen and to his family against…poverty-ridden old age.”

I have not yet celebrated the Diamond Jubilee – the 75th anniversary last week of the adoption of Social Security. That’s because I suspect President Obama may consider agreeing to a cut in benefits for future retirees by raising the retirement age, which would be disastrous for them and for his presidency.

So far, he has not said whether he’s for or against the idea, advanced by Republicans and his fiscal commission. Once he was against it but now, as you’ll see, we cannot be sure.

In the days leading up to the August 14 anniversary, Obama said most of the right things. In his White House proclamation, Obama recalled that in the midst of the Great Depression,

“...the Social Security Act brought hope to some of our most vulnerable citizens, giving elderly Americans income security and bringing us closer to President Roosevelt’s vision of a nation free from want or fear.”

He added,

“My administration is committed to strengthening...and protecting Social Security as a reliable income source for seniors, workers who develop disabilities and dependents....Let us ensure we continue to preserve this program’s original purpose in the 21st century.”

He didn’t say how, but presidential proclamations are usually empty of substance. Obama followed with his weekly Saturday radio address in which he repeated his administration’s

“...obligation to keep that promise (of Social Security) for our seniors, people with disabilities and all Americans – today, tomorrow and forever.”

Then he vigorously promised to protect Social Security from

“...some Republican leaders in Congress who are pushing to make privatizing Social Security a key part of their legislative agenda if they win a majority in Congress this fall.”

Privatization, allowing workers to create personal retirement accounts, like 401(k)s, he said, is

“...an ill-conceived idea that would add trillions of dollars to our budget deficit while tying your benefits to the whims of Wall Street traders and the ups and downs of the stock market.”

That’s true enough, but to mix a metaphor, Obama was beating a dead straw man.

George W. Bush’s failed attempt to sell privatization in 2005, crippled his presidency. And as the Associated Press pointed out in reporting on the president’s speech,

“...most Republicans, in fact, are wary of touching that idea because Social Security is virtually sacrosanct to voters, particularly seniors.”

Indeed, the most prominent Republican favoring privatization of Social Security and Medicare, Representative Paul Ryan of Wisconsin, has gotten little support from his Republican colleagues.

What was missing from Obama’s address was a single proposal to solve Social Security’s long-term shortfall which the program’s trustees estimate will come in 2037. That is when the program’s $2.6 trillion trust fund, which is held in treasury bonds, may run out. According to the trustees, a one percent raise each in the payroll taxes split between employee and employer enacted now would end the problem. Even now, the trust fund is continuing to grow with interest payments of more than $100 billion a year.

During his presidential campaign, Obama criticized Republican John McCain for favoring cuts in benefits. And Obama, who repeatedly has said that Social Security was not facing a “crisis,” offered a sensible, relatively painless proposal, which is now favored by most Social Security advocates.

Obama proposed raising the amount of one’s income that is subject to the payroll tax from the present $106,800 to $250,000. And in a gesture to the middle class, he proposed exempting from the tax the first $20,000 of a worker’s salary. (Some advocates would abolish the ceiling, which would go a long way towards putting Social Security in the black for the rest of this century.)

But Obama has not repeated that proposal nor has he said what he would oppose. Instead, he has created a commission to cut the deficit, a commission which is populated with right-wingers who are hostile to Social Security and believe, wrongly, that Social Security adds to the deficit.

Even before the commission went to work, members made cutting Social Security benefits one of their targets. One proposal that is most prominently supported by deficit hawks and Republican congressional leaders is raising the retirement age from 66 to 70.

As I’ve said, Obama has taken no position on this but he said in his radio speech that he’s

“...committed to working with anyone, Democrat or Republican, who wants to strengthen Social Security.”

It would be easy for a Republican or the commission to claim that Social Security would be “strengthened’ by raising the retirement age and saving the benefits that now go to those under 70. Besides, when have Republicans worked with Obama, except to cut spending? Today’s extremist Republicans have never supported Social Security – probably because it’s a government program that works.

That’s why my alarm bells rang when a search in Google brought me a story in Slate by Peter Bray about the Obama campaign and Social Security, way back there on September 19, 2008. It said,

“This week the Obama campaign modified his position on a sensitive issue, Social Security. Compare the current ‘Seniors & Social Security’ page with the previous version.

“Now, tell me, why, oh why, would the Obama campaign delete the following sentence: ‘[Obama] does not believe it is fair to hardworking seniors to raise the retirement age...The new page includes some reassuring language about ‘work[ing] with members of Congress from both parties to strengthen Social Security and prevent privatization while protecting middle class families from tax increases and benefit cuts.’

“Still, for those who pay attention to such things, what the new page leaves out is as important as what it puts in.”

As I said, I believe Obama has not taken a position on raising the retirement age; and I don’t know if he’s been asked. But such a proposal is anathema to most of Obama’s supporters. Ruben Burks [pdf], an official of the labor-backed Alliance of Retired Americans said,

“Can you imagine working until 70? In physically demanding jobs like construction, manufacturing and the service sector, I just don’t see how you can. And in a tough job market who would hire someone in their late 60s? Raising the retirement age is a benefit cut – plain and simple. We cannot allow it to be done.”

Social Security is keeping 20 million older and disabled Americans and over a million children out of poverty. Polls report that 77 percent of Americans an 68 percent of Republicans believe that Washington should find other ways, rather than Social Security, to reduce the deficit. And AARP’s survey shows strong majorities would prefer that their payroll taxes are raised rather than see benefits cuts.

Because Obama has yet to make his views known on raising the retirement age, AARP – the nation’s largest and most powerful organization of older Americans - has yet to take an official position on the issue which is an ominous sign. But a high-ranking source told me,

“In fact, we opposed raising the age to 70. The idea is tremendously unpopular and amounts to a serious, across-the-board benefit cut and is based on the fantasy that employers would hire people that age.

“Most have forgotten that normal retirement age goes to 67 under current law. Half of all people turning 62 claim Social Security today. Accepting a 25 percent benefit cut is mostly shortsighted in view of needs later on.”

The National Academy of Social Insurance says raising the retirement age would save about a third of the projected shortfall, but it suggests caution because low income and older workers in physically demanding jobs have shorter life spans than, say, white collar workers.

I will repeat what I asked in my column some weeks ago, how many men and women in their sixties will die while waiting for their first Social Security check.

Richard Eskow of ourfuture.org reported that while voters, Democrats and Republicans, oppose Social Security benefit cuts

"...not enough Democrats have promised they won't. Some, including the president, are avoiding the issue...The president spoke about Social Security again [on Wednesday] in Columbus, Ohio. While reassuring voters the program is 'not in crisis,' he repeated his statement that 'fairly modest changes' will stabilize it...voters will get the benefits they deserve' rather than the benefits as designed."

Might those changes mean raising the retirement age?

Liberal economist Dean Baker says that those who would slice benefits are saying, in effect,

“In the future, Social Security might have to cut benefits. To prevent these possible future benefits cuts, we must cut future benefits.”

Economist and New York Times columnist Paul Krugman charges that Republicans and the deficit commission say,

“...in order to avoid the possibility of future benefit cuts we must cut future benefits.”

Tell us this isn’t so, Mr. President.

Write to saulfriedman@comcast.net


Posted by Ronni Bennett at 05:30 AM | Permalink | Email this post

Comments

There are rich people in this country. They got that way by co-opting the labor of poor people. If they are worried about a future shortfall in Social Security, let them pay for it by raising the cap on the tax.

Very simple, except the same rich people own too many of the politicians.

What she said.

Like you, I believe there are ways other than raising the retirement age to ensure the solvency of Social Security. First, eliminate the earnings cap completely so that the wealthy pay SS tax on all their million-dollar salaries. Before raising the retirement age is even considered, we should stop paying SS benefits to the ultra-wealthy who certainly don't need them. They should receive back in benefits what they put into the system, but no more. I've always resisted the idea of means-testing SS, but it doesn't make ANY sense for super-wealthy retirees to be collecting benefits.

If, after trying all other strategies, the retirement age must be raised in order to continue paying full benefits to eligible beneficiaries, there would need to be exemptions for those who are no longer physically or mentally able to work after age 65 or, despite their best efforts, cannot find a job. At almost 74 I'm fortunate to be working part time, but my job is not physically demanding. I watched the roofing crew working at our condo complex today--no way could they do that job in their 60s (most looked to be well under 40!).

My plan is to let Bush Tax cuts lapse but get rid of the lid on social security taxes. Everybody gets something.

I am against means testing for social security. It's a pay as you go program and I do not want to see it called welfare, because it isn't now but would be then. It is a great program that a bloated government stole from.

What is the definition of rich anyway?

I agree in principle about means-testing SS--I've always resisted that--but given the stresses that will be placed on the system over the next 25+ years, it's hard to justify paying benefits to Warren Buffet, Ted Turner and George Bush (both of them) to name only a few. I think they agree.

The definition of rich is a good question, and it's one I don't have an absolute answer for. During most of my full-time work life, which began in 1958, a middle-class income was under $100K. My personal definition of rich is probably an individual who has a steady annual income of $250K or more, upscale but not luxurious home(s) and car(s), sufficient funds put away for a comfortable retirement, a generous healthcare plan, college funds for the kids (where applicable) and discretionary money for hobbies, vacations and travel. (This doesn't even begin to describe the ultra-wealthy world of mansions, private airplanes and yachts, but it's a start.)

President Obama was elected because of my vote--The Independent: He has almost lost our vote now; raising the retirement age would be the nail in the coffin. Paying the SS tax on all earned income with a bottom floor of $20,000 or a like amount and eliminating payments to the Wealthy ($250,000 or more annual income) would seem to be a no brainer. If the Repubicans under Howdy Duty from Kentucky and Slick Johny from Ohio ever reduce SS benefits in any way, they will pay a severe election price for a long, long time.

Sol, it seems to me that the Social Security Trust Fund is insolvent now, not going to be at some future date 20 or 30 years from now. Since the politicians raided the trust fund years ago, spending the money and replacing it with IOUs (Treasury Bonds), the only money in the trust fund is borrowed money (borrowed mostly from other countries like China, for instance). How can these obligations to pay IOUs be considered assets? In my book they're liabilities.

The Social Security System is still functioning without deficit spending because the current FICA tax income exceeds the SS payout obligations and are used to pay current SS benefits. The excess is put into the General Fund then used for other government expenditures rather than being allowed to accumulate in the SS trust fund, further compounding the problem. This Ponzi scheme makes Bernie Madoff seem like a two-bit chisler. Maybe he got his inspiration from how successful the politicians have been at pulling off this one.

So, maybe the current SS system is self-funding and not contributing to the deficit right now, but what happens as the population ages and the SS benefit expenditures exceed the FICA tax income and/or the government has to start paying those IOUs? Can this be fixed? Maybe. But whatever the outcome, I don't think it'll be very pleasant.

Mr. president I was 10 yrrs old when Rosevelt signed this bill,that took gusts and we loved him for it,if Bush could start a war,use your power and stop this we old people have bad hearts,thank you I know your what we need now,and the people will love you for it.

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