Before I get into this post, a word about a word – entitlement. In the ignorant way of certain American politicians and too many in the media, the meaning has become twisted into the opposite of its definition. When they say “entitlement,” they almost always give it a negative spin especially when declaring Medicare and Social Security to be the causes of the budget deficit.
This may stem from a common phrase used to describe people who are overly self-involved or narcissistic: we say they have a “sense of entitlement.”
Contrary to common public usage, however, entitlement is something one is guaranteed to receive or entitled to have.
We are entitled to Social Security because we paid into it all our working lives. We are entitled to Medicare because we also paid into that program since it began in 1965. To further clarify, Medicare, as too many believe, is not free. We pay premiums for Part B and Part D and both may, depending on individual coverage, involve deductibles and copays.
Got that? Okay. Moving on.
A couple of days ago, I republished Saul Friedman's excellent and eloquent explanation of why Social Security is not, as some Republicans assert, a Ponzi scheme.
Nevertheless, you will continue to hear that lie, among others (Republican presidential candidate, Texas Governor Rick Perry is fond of this one), in the coming months and all through next year's election campaign.
Another lie is equating the costs of Social Security and Medicare with the causes of the recession. Early this week, Senator Scott Brown (R-MA) met with a group of Chinese and Russian elders at a Jewish community housing development in Brighton, Massachusetts. As reported in the Boston Globe:
”US Senator Scott Brown today warned seniors worried about Medicare and Social Security cuts that their benefits could be slashed because 'we’re in a financial emergency right now...'
“'If anybody’s telling you that “Everything’s OK, and don’t worry about it, and you’re going to get all your benefits, and everything’s fine,” then they’re not really telling you the truth.'”
When asked what the potential is for cutting Social Security,
“Brown responded that 'it was difficult to say' what might be cut until a new deficit-reduction panel in Congress releases its recommendations later this year. But he said his job was 'to try to push them toward looking at everything in a thoughtful, structured manner.'” [emphasis added]
Oy. It's going to be a rough year for truth, and scaring the piss out of old folks will be high on Republican candidates' agenda.
The “deficit-reduction panel” Brown referred to is the Joint Select Committee on Deficit Reduction enacted with the debt ceiling legislation and as of yesterday, Congressional leaders finished appointing the 12 members, six from each party and six from each House of Congress.
The committee is tasked with finding $1.2 trillion in tax cuts by Thanksgiving and if they fail to come up with a plan that can pass Congress, automatic cuts of $600 billion each in defense and non-defense (read Medicare/Medicaid) will be triggered.
Fortunately, Social Security is not included in those automatic cuts, but that does not mean the Committee will not try to take a whack at it in their deliberations. And don't forget that the Committee legislation requires an up-or-down vote in Congress with limited debate and no amendments.
The facts of Social Security will undoubtedly be mangled between now and Thanksgiving so here are a few important points to have at hand when politicians, pundits and reporters try to bamboozle us with false, exaggerated and uninformed assertions. Such as:
We Must Raise the Retirement Age to Save Social Security
When raising the retirement age is broached, remember that it is already being gradually increased. For example, I was not eligible for the full benefit until age 65 and 10 months. Full retirement age for Social Security will be 67 for everyone beginning in 2027.
During the 2010 election, I lost track of the number of candidates who said we must raise the retirement age to 67. Some, now having been set straight, have upped their proposed age increase to 70.
The Deficit is Caused by Social Security Costs
The Social Security tax, FICA, is a dedicated tax – that is, revenue collected from employees and employers goes into the Social Security Trust Fund, not into the government's general revenue fund. Therefore, by definition, it does not affect the deficit.
Current benefits are paid from the Trust Fund.
The Trust Fund is Empty
Actually, the Social Security Trust Fund is currently carrying a surplus of $2.6 trillion.
It is true that Congress and every president since at least Ronald Reagan has borrowed from the Social Security Trust Fund to pay for wars, education, highway programs and anything else they wanted that was not specifically funded.
The amount they borrow is replaced by Treasury securities that earn interest and the Trust Fund will continue to grow every year by about $1 billion until 2020.
The Trust Fund is Just Useless IOUs
Only if you believe the Chinese buy U.S. bonds and T-bills to paper their walls.
Although the securities in the Social Security Trust Fund are non-marketable, they are no different from the Treasury securities held by individuals, corporations and foreign governments, backed by the full faith and credit of the U.S. government which is obligated to pay them back with interest.
To default on the securities held in the Social Security Trust Fund is as unthinkable as defaulting on any other government debt.
Any thinking person should know that Social Security is the least of our nation's problems. The shortfall that will hit the program in 2037 can easily be fixed by eliminating the salary cap and a couple of other small tweaks that would not be painful.
And Medicare? The simplest and most productive way to fix it is to enact universal coverage, Medicare for All. This chart from Jared Bernstein's Blog is worth a look.
”[L]look at the below list of countries that both maintain a triple-A rating from S&P (though some are on their downgrade watchlist) and have some version of universal health coverage, in other words, an 'entitlement' that goes much further than anything we’ve got over here.”
We have our work cut out for us. The National Committee to Preserve Social Security and Medicare had this to say on Thursday about the Joint Deficit Committee:
”Half of these Committee members have pledged to keep revenues out of the solution, and even more than half are on the record with statements about the need to consider cuts to Social Security, Medicare and Medicaid.”
There is no post at The Elder Storytelling Place today. More next week.