Tuesday, 05 June 2012
Grading Obama on Social Security
Back in 2010, President Barack Obama agreed to a “temporary” 2 percent cut in the FICA payroll tax for 2011. That cut was renewed for this year and the loss to Social Security revenue is made up from the general revenue fund. This is a really bad idea for reasons we discussed here on this blog.
During the 2008 campaign, Obama promised to preserve Social Security as it is, a defined benefit pension/insurance fund. Then he famously said “everything is on the table” as he appointed two well-known Social Security antagonists, Erskine Bowles and Alan Simpson, to co-chair a fiscal commission and who – surprise! - recommended cutting Social Security.
At other times, the president has said he is in favor of “entitlement reform” (read Social Security and Medicare cuts) and during the days of the possible “grand bargain,” House Speaker John Boehner announced that Obama “responded positively” to making changes to the two programs.
So when I see or hear the president's name and the phrase “Social Security” in the same breath, I get nervous as I did when I noticed his annual AARP interview in the current issue of that organization's magazine.
In regard to Social Security, this interview takes on more importance than many others because the president knows he is speaking directly to the people to whom the program matters most – about 50 million aged 50 and older who receive the magazine and whatever number read it online.
It is a softball interview with only one question about Social Security and please note the subtle bias of the question – the assumption that Social Security is not “stable,” with “benefit adjustments” as the interviewer's suggested solution:
”Are there any benefit adjustments you would support to put it on a more stable footing into the future?”
I can remember early on in Obama's presidency when his statements would lead one to believe that he did not understand how Social Security works in regard to the Trust Fund and not contributing a penny to the country's deficit. So it was heartening to read:
”Social Security is not in an immediate crisis. It's not the driver of our deficits.”
And he has some related encouraging words:
”But it's going to require us not playing politics with Social Security. Understanding that millions of Americans have been lifted out of poverty because of Social Security. It is the linchpin of our social safety net.
“We can't privatize it. We don't want it to be subject to the winds of the stock market. We want it there for people over the long run.”
Those are his opening and closing statements on the subject and they sound good, don't they. But he is a politician and not one of them likes to say anything definitive that doesn't leave him or her some wiggle room. And the president certainly did that with the AARP interview. This is the middle section. I have italicized the words that send me into high alert:
”We can easily tweak the Social Security program while protecting current beneficiaries, ensuring that it's there for future generations.
“There are ways that involve, for example, slightly raising the [payroll] cap. I think it's a pretty sensible thing to do.
“What I've said to [Republicans] is, 'I am prepared to sit down with you, the way Ronald Reagan and Tip O'Neill sat down together. And make very modest adjustments that extend the life of Social Security for 75 years.' We can do that again.”
Like “Ronald Reagan and Tip O'Neill?” Oh, please, Mr. President. Those days are long gone. Today's Congressional Republicans openly and regularly repeat that their single goal for the United States of America, above all others, is to make you a one-term president. Get over bipartisanship. It doesn't exist.
Now, as to those two weasel-word phrases:
- protecting current beneficiaries
- very modest adjustments
These leave room for the president to support a remarkable number of changes to Social Security that would decrease current and future benefits that already do not keep up with inflation.
“Protecting current beneficiaries” always means lowering benefits through various means for future recipients and these cuts are always framed as affecting only those people younger than 55.
It amazes me that politicians apparently believe current beneficiaries are willing to sell out their children and grandchildren as long as no one touches their own benefits – an attitude that reveals a lot, I think, about the ethos of politicians in general.
One method of making “very modest adjustments” is to change the calculation of the Social Security cost-of-living adjustment (COLA) from the standard CPI to the chained CPI which would dramatically reduce COLA increases especially for those most in need.
This change, by the way, is supported by AARP as a method of “strengthening” Social Security, an idea that TGB reader Jim Newman shredded here in March in an open letter to AARP CEO A. Barry Rand. You should go read it.
At least the president seems to see the usefulness of raising the payroll cap, but he wimps out with the adverb, “slightly.” There is no reason low- and moderate-income workers should pay the tax on 100 percent of their income and high-income earners pay only a tiny fraction of their salaries.
So I give the president a D grade on this Social Security statement. He seems, at last, to understand how the program works, but he leaves way too much wiggle room for Republicans to slash benefits that are already lower than they should be.
At The Elder Storytelling Place today, Stroppy: The Family Tree
Posted by Ronni Bennett at 05:30 AM | Permalink | Email this post
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I think we need to be aggressively campaigning for raising the cap on the amount of income taxed for Social Security. There is literally no earthly reason why income over about $105,000 should be exempt from Social Security taxes! None. Folks with that kind of money are living high on the hog if they'd miss contributing to the common good and they should get over it.
Posted by: janinsanfran | Tuesday, 05 June 2012 at 07:47 AM
Amen, amen, amen, to both this column and the previous comment. This is one of the most intelligent blogs going and I both look forward to, and forward, every one.
Posted by: Jean Gogolin | Tuesday, 05 June 2012 at 08:23 AM
Thank you, Ronni, for staying on top of this issue. I am sure that all of your followers agree with me that we learn more from your blogs than we do from reading the newspapers.
Posted by: Darlene | Tuesday, 05 June 2012 at 08:42 AM
Jan...$105K doesn't do as much as it used to, especially for young family's. I do agree though that the taxable tax should be raised though. I have voted for nearly 50 years now. Why am I surprised that this President, is pretty much the same as the rest? I believed in his promises of transformation, and being a President for the People. Yes, I'm one of the let down Liberals, but where do we go from here?
Posted by: Richard | Tuesday, 05 June 2012 at 09:17 AM
I agree with the first three commenters; and you,too,Ronni.
President Obama has got to come to his senses and realize that the republicans want nothing more than his defeat in November. Does he really expect any cooperation from them in anything he does or attempts to do?
He has got to get his act together and when he has a plan for Social Security or jobs or anything else, he has got to take it directly to the people via the networks who always give him time to get his point across.
Forget Boehner and McConnell and Cantor. Bypass them completely and address the people.
Give us a plan we can agree with and you will see the result. We will back his efforts just as we did in 2008 when we first elected him.
Where did that guy go who gave those fiery speeches in Grant Park? We need him back!
Posted by: Nancy | Tuesday, 05 June 2012 at 09:20 AM
I guess I have become an incredible cynic in my old age because I no longer believe in this system. Democracy, as originally defined, has been undermined by the Supreme Court allowing corporations to back candidates. There is no way for a single voter to compete against a corporation.
Secondly, the only way that a candidate gets elected anymore is through mega amounts of money. Again, this leaves little voice to the regular Joe with a regular income.
Thirdly, I am not 100 percent sure that the current president was not put there by the very same people who put W in. Obama did nothing to deal with Wall Street after he got into office. He did very little and waited too long to implement the health care initiative. And he continues to speak about wanting to keep the Republicans at the table when the rest of us clearly see that the Republicans are out to destroy him. Now I know I am smart and I have no question that President Obama is smart so if it is so obvious to the rest of us smart people that the Republicans will never come to the table, why would this smart president continue to us the same old rhetoric of "working together?" Hm. Maybe because it is in "his" best interest, or the interest of those who actually put him in the White House (oh yes, I truly did believe that I still had a voice in 2008 and that we had actually elected someone who represented us. No more, though) to do so.
I will vote for Obama, because he still has to play the game somewhat along the lines of our needs, unlike the millionaire who has clearly indicated where his allegiances lie. But we should not be surprised by his quotes in AARP. We are no longer represented by the government. The sooner we acknowledge and recognize this as true, the more likely we will be to take action to try and rectify the situation. But we all live comfortable enough lives that we probably won't do much about it. Easier to pretend everything is still hunky dory than to expend the energy required to confront the beast.
Posted by: yvonne behrens | Tuesday, 05 June 2012 at 10:58 AM
Obama needs to do what he's doing to get re-elected. I don't like it either, but I'm holding out hope for his second term.....if he gets a Democratic majority in the House. But here's what I really want to say: Some things DO need to change no matter who we elect. If it's Mitt Romney and he finds himself with a Democratic House, it may be a re-run of the last 3 1/2 years.
I was surprised by what I heard on Fareed Zakaria's GPS, when he had Romney's financial advisor on his program and asked some tough questions. It sounded reasonable! Some points were things I hope Obama does in his second term if he gets one. I always want to read it for myself though, so I went to the Romney website and started poking around: http://www.mittromney.com/issues/health-care
His ideas sound reasonable. If people are living – on average – 80+ years, then it’s not unreasonable to increase the age for full benefits. Please remember that Social Security was originally intended to supplement income for people who only lived 3-5 years beyond retirement age. It was never intended to be the sole income in retirement. Many ideas I read on the Romney website were things I would like to see my Democratic president address.
Then I went to check out Simpson-Bowles at the Concord Coalition’s website: http://tinyurl.com/7ta4tm9 . I didn’t see anything terribly radical there either and many ideas I positively loved:
-Eliminate earmarks? Yes!
-Only allow mortgage deductions up to the cost of an ‘average’ house (that keeps you in the $150 to 300,000 bracket for a family of four)? Yes! If you can afford a million dollar home or two – good for you! But you don’t need a tax break. Especially on that second home.
-Means test for Social Security? Yes! I’ve long been an advocate of adding a column on the individual SS reports that shows how long your contributions will last, or only paying back out what you’ve put in to SS. It would be an eye opener for many, many people.
Read with a grain of salt, but read!
Posted by: Lauren Nelson | Tuesday, 05 June 2012 at 12:20 PM
Means testing Social Security makes it a welfare program, subject to alteration at the whim of whoever is in power. It's paid for by workers. It's meant for workers and their families, to insure they have a basic retirement and protections from disability. Change that, and you change the willingness to contribute to Social Security.
Social Security benefits are already subject to "means" because up to 85% of benefits can be taxable depending on a person's other income. In addition, even when a person is over full retirement age and is drawing Social Security, if that person continues to work, payment to Social Security and Medicare continues.
Posted by: Nan | Tuesday, 05 June 2012 at 06:06 PM
As I have read up on chained CPI versus standard CPI COLAs, I have begun to wonder why the COLA is a percentage of one's benefit.
Don't we all pay the same price for food, gas, housing and so forth? Yet if one person's benefit is $700 per month and another person's is $1,700, doesn't the wealthier person get a bigger benefit bump?
This makes me think of the "apartment-size" dinky refrigerator I have in my current pad, where there is adequate room for a full-size fridge. I live in a small apartment, so logically I must buy smaller food?
Am I wrong here? Shouldn't COLAs be the same dollar amount across the board instead of being less for poorer people?
Ronni, if I'm misreading how COLAs are calculated, please set me straight.
Posted by: Lee | Thursday, 07 June 2012 at 09:08 AM