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Thursday, 08 November 2012

Yet Another Threat to Social Security

category_bug_politics.gif Well, there is no dearth of second-guessing along with obituaries for the Republican Party. But it's my experience that when something big changes - which is what happened in this election - it takes some time and distance to make useful sense of it.

So even though it is tempting to join the chorus, I'm going to hit you with something we know for sure is looming on the immediate horizon – another threat to current and future elders' Social Security, this time via the fiscal cliff.

Yeah, yeah, your eyes glaze over. Mine too, so I'll keep this as short as possible.

The fiscal cliff is an agreement (caused by Congressional Republicans who, in 2011, refused to raise the debt ceiling without it) to trigger massive tax increases and spending cuts unless there is a plan to balance the budget by the last day of 2012.

No such plan has materialized so unless Congress does something between now and the end of the year, the law will go into effect on 1 January causing an estimated average tax increase of $3500 per American family, according to the bipartisan Tax Policy Center.

Further, reports the Washington Post,

”The federal government will enact a 10 percent across-the-board spending cut, forcing it to lay off workers and cancel contracts to meet the 'sequestration' targets that are set in law.

“Everything from federal meat-inspectors to NASA rocket scientists would face the budget axe. So too, would federal aid to states, as well as money used to hire teachers and boost police and fire departments.”

If you can believe what you read in WaPo, Congressional Republicans have spent the past few weeks trying to devise a compromise.

”But any such deal, they say, would hinge on Obama’s willingness to rein in the cost of federal entitlement programs, including Social Security and Medicare, the biggest drivers of future borrowing.”

Oh dear. During his first administration, President Obama made it a habit, in budget discussions, to OFFER cuts to Social Security cost-of-living increases which would be a huge burden over time to retirees, especially women.

In this immediate budgetary crisis,

”The question, said former White House economist Jared Bernstein, is what Democrats would be willing to give Republicans in return for prying them away from the influence of anti-tax activist Grover Norquist, who has maintained firm discipline among GOP lawmakers.

“'I’m sure they’re going to ask for something big,' said Bernstein, now a senior fellow at the Center on Budget and Policy Priorities. 'I think Republicans would value something on Social Security as a real trophy.'”

Right. Stick it to old people and the poor again. The fiscal cliff clock is ticking. Congress reconvenes next week. We – elders – have our work cut out for us on Social Security. Stay tuned.


At The Elder Storytelling Place today, Marcy Belson: The Long Night of October 27-28, 2012


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

Comments

You say the average is $3500/family but given the significant increase for millionaires I wonder what the median increase. If you tax a billionaire an additional $2 million, that spread out over everyone distorts the "average".

I really don't think a 10% budget cut is draconian. It is not a "sky is falling" scenario. I would love to see a 10% cut every year for at least five years for our military budgets. We spend more than almost the rest of the world combined!! If we would just turn in our resignation as "policemen of the world" we could save much more than that.

Social security needs tweaking. Move the age out some and do a couple percent adjustments on both income and benefits and it would be self-sustanible for fifty years.

Sorry RJ, but across the board 10% budget cuts is not a good idea. Some essential programs are knife edge thin as it is. Closing down entire programs would be more honest rather than crippling every program.

I'll pay any attention to "bargains" when I see politicians START by erasing (not just raising) the cap on income subject to Social Security tax. People who make over $110,000 annually are doing fine. They can stop being exempted from paying further Social Security taxes on their earnings!

RJ is right. Social Security is not the problem. Minor adjustments can make it solvent.

Medicare is the problem. Or, more accurately, the entire Medical Industrial Complex in the US is the problem. The cost of medical care is rising, on average, 9.3% per year. Mathematically this cannot continue forever.

Unfortunately, as long as we are completely dependent on Mideast oil, we cannot turn in our badge as policemen of the world.

It's insulting for Seniors to be made the scapegoats in the budget crisis. If the money we have paid in the last 40 years hadn't been looted by self-serving politicians this would be a non-issue.

Ronnie: Finally, the AARP has gotten on board opposing any changes to Cost of Living (COLA) formulas for Social Security recipients. You may recall that the Erskine-Bowles Commission recommended that for the sake of deficit reduction, the existing method for calculating the COLA be replaced with a lower benefit "chained" COLA method, known as the CCPI.

According to this morning's Huffington Post, Barry Rand, AARP CEO, stated in a letter to lawmakers, "On behalf of millions of members nationwide and all Americans age 50 and older, AARP writes to reiterate our opposition to adopting a chained consumer price index to calculate the Social Security cost of living adjustment for the purpose of reducing the deficit."

The Obama administration recently announced that the COLA for next year will increase Social Security benefits by 1.7%. Mr. Rand stated in his letter that "If Congress had already adopted CCPI, the 2013 COLA would be even less, at only 1.4 percent. However, adopting a chained consumer price index to calculate Social Security COLAs is not a small benefit change -- it will compound benefit reductions dramatically over time, resulting in an annual benefit that is roughly $1,000 (2012 dollars) lower by the time a beneficiary reaches age 85."

I am normally not a cheerleader for AARP politics, but this time I have to hand it to Mr. Rand for finally taking a position in favor of his membership, and not his organization's bottom line.

I have a pension which is a little over $52000/yr., gross. Single. Under 65. Standard deductions. If Obama lets the tax cuts expire, I'll pay around $600 more in fed tax per year. I really don't think the average retired over-65 couple, standard deductions, is going to be paying $3500 more in fed taxes per year. Let's not panic here. However, the BIG problem is that Obama doesn't care about senior citizens, SS, and Medicare, and there is nothing we can do to change it. (I think Romney would have been ever harder on us.) Now THAT is something to be upset about.

Here we go again. Social Security does NOT contribute one penny to the deficit. Leave it alone.

If our lawmakers were dedicated to common sense instead of having to raise re-election money all of the time they might become practical and do two things that would change the dynamics of our deficit. 1) If they would enact a single payer health care system it would go a long way toward eliminating the drain on the budget for health care. 2) If they would cut the military budget in half we would still be able to police the parts of the world where it is necessary to have a presence. We could close bases that are no longer needed. For example, the cold war is over. Why do we need bases in Germany?

Our priorities are out of whack because of ideology and habit. It's time to look at the entire budget and not just the ones the ideologues want to eliminate.

On Charlie Rose Weds, Nov. 7th, David Brooks had the audacity to address the true problem in the budget which is end of life care in Medicare. He said it wasn't the dying who are demanding ongoing pointless treatment, it's their families. And they do it because they don't want to deal with the guilt of saying 'Let him or her go', but mostly because they don't have to pay for it!

If everyone over 65 would fill out a directive and have their children acknowledge their wishes, this travesty might be minimized.

I'm not talking about a 75 year old with treatable pneumonia - I'm talking about those of us with intractable, severe health conditions that will end our lives with or without extraordinary measures by the medical community.

This is a harsh subject but death is not optional, nor is it the taxpayer's duty to keep us alive with breathing machines and feeding tubes.

Excellent post and comments. I agree that the cost of health-care is the problem, not the cost of Medicare per se.

A recent report by the Institute of Medicine discussed enormous costs associated with fraud, medical error, huge profits by surgeons and medical-device manufacturers when certain procedures with questionable benefit are done, and other factors.

I also agree that there needs to be far more discussion of end-of-life care, no matter who pays for it. And yet every time the topic comes up, there are cries of "rationing" of healthcare and hints of bureaucratic "death panels".

It is a never-ending nightmare.

How about a 10% increase in Social Security benefits for every citizen who signs and maintains a "Living Will" or directive limiting life prolonging procedures when patient is terminal.
While were at it, now that we really are in the 21st century with life expectancy edging close to 80, how about setting retirement age at 70 and blowing the "contributions cap" at $100K? And draw the line in the sand right there. No other cuts or changes under pain of death for anyone who even suggests any.

From FactCheck.org:
"Some senior Democrats are claiming that Social Security does not contribute "one penny" to the federal deficit. That’s not true. The fact is, the federal government had to borrow $37 billion last year to finance Social Security, and will need to borrow more this year. The red ink is projected to total well over half a trillion dollars in the coming decade."

So could someone explain to me how SS is not part of the problem just because people pay into the system? When I recently started taking early retirement, it was reported to me that my contributions and those of my employers totaled about $85,000 for the 44 years that I worked. (Many of those years were part-time while raising children) I am collecting about $11,000 a year, which began a few months ago, at age 62. I had not planned to start taking benefits this soon, but was in a situation where it became necessary. The piece of imformation that's missing is what the contributions plus earnings on them may have totaled before I began drawing on them, but even without that figure, its seems to me that I most likely will exceed what was paid in plus interest if I live to the average life expectancy today. Many people are currently living beyond today's life expectancy. My father-in-law, who passed away two years ago at age 90 was receiving a little over $1,000 monthly. He retired from a relatively middle income job at age 62, in 1982. I don;t know what he made each year while working, nor his SS income for each of his years of retirement, but if he averaged just half of what the benefit was at his death, he would have collected $168,000. It seems to me that's likely to be a much higher figure than what he and his employers had paid in during his 36 years of employment from 1946 to 1982 plus interest. Could someone who has actuarial experience explain how it is that SS pays for itself? I understand of course that many people don't live long enough to even collect what they may have paid in, but these days it seems that the reverse of that is often the case.Longer life spans, low interest rates, and the number of boomers entering the system seem to not bode well for the solvency of this program. Where are the flaws in this logic?

Cathy: This may explain why the SSA Trust Fund has to "borrow" (the $37 billion you mentioned) to make their guaranteed payments.

The Social Security Trust Fund (hereafter, The Fund) has run a surplus since its inception in the 1930's. By law, income to The Fund must be invested, on a daily basis, in Federal Government securities (i.e. Bonds) that guarantee both principal and interest. All bonds held by the Trust Fund are "special issues" of the United States Treasury. These bonds are available only to the Social Security trust fund (that is, they are not "marketable" Treasury bonds available to the general public). Further, unlike marketable bonds, special issues can be redeemed by The Fund at any time at face value, whereas Marketable bonds are subject to the forces of the open market and may suffer a loss, or enjoy a gain, if sold before maturity. Investment in these special issues gives The Fund the same flexibility as holding cash.

The surplus Social Security dollars used to buy these bonds goes into the US General Fund and are allocated by Congress to whatever need the Congress deems important - the military, new roads, Congressional boondoggles to far away places, etc.

Now, the funds to cover expenditures (i.e. benefit payments to the normal Social Security recipient) comes from the redemption or sale of the bonds held by The Fund. When these "special-issue" bonds are redeemed, interest is paid (in 2011 the average interest was a little over 2.4%). The principal amount of bonds redeemed, plus the corresponding interest, is just enough to cover an expenditure (again, the total benefit amount for all Social Security recipients).

Now here is where it gets sticky. Since Congress has been running deficits, the money used to "redeem" the social security has got to be borrowed by Congress from another source (usually by the sale of "Marketable" Treasury bonds). Therefore, The Fund is being paid back by Congress with borrowed funds in order to honor its obligation to redeem both principal and interest on the original investment by The Fund. Hence, you may hear erroneously in the press and elsewhere that The Fund has to "borrow" from Congress to meet its obligations.

In a nutshell, all The Fund is doing is demanding back the money it "loaned" to Congress in order to meet its obligations.

I hope this makes it clearer that the $37 billion you mentioned may have been borrowed funds from Congress, but was not "borrowed" by The Fund.


Isn't it a fact that President Obama HASN'T submitted any budget proposals since he took office? Hasn't the U.S. operated on a budget before? Why is that impossible now? A balanced budget would be the answer to all these pending problems. With one, there would be no "fiscal cliff" to fall over. Change course ... Don't continue to run toward the cliff. Forward is still a possible direction but the course needs to change ... or else! If all the government services made a balanced budget their main goal, that would give it a single, unified purpose. Let that purpose serve as a temporary distraction for both sides and bring them together under the banner of national salvation. It's obvious that our country is still in peril. Our NEW president has plenty of experience. He should know HOW to get it done. YOU elected him, now tell his to get to work and prove himself to be worthy of all the trust you demonstrated in him. Personally, I expect only more of the same. I suppose, whatever the future holds, it will still be DUBYA's fault or some other scapegoat.

I do hope the House of Representatives most recent effort I've heard described in the news to once again "kick the can" down the road on the end of the year cliff hanger legislative issue is re-considered by them -- that the President presses for definitive, not partial, action by this year's end. The House Representatives want to delay action which seems to me to be little more than another deflecting effort to avoid honestly negotiating a resolution.

This is just the start of numerous issues we'll need to actively pursue to insure we have a truly viable health care system with Medicare and that Social Security is appropriately preserved. I think most of us recognized we would need to follow up on these issues no matter who won this election, but that the current administration was more aware and concerned about the needs of all citizen classes.

My professional work has required my intimate involvement with certain health care aspects associated with end of life decisions -- vents, feeding tubes. I certainly agree there is a need for health care directives and educating individuals to prepare them before they become ill. There's no guarantee they'll be followed as I've seen enough instances where family members have over-ruled them when a medical situation actually occurs. However, choices about feeding tubes, ventilators use is not always as simple as it may seem, nor is a person thinking they'll just stop eating and drinking to end their life if health circumstances warrant it.

I would be STRONGLY concerned that a cook book approach on care decisions based primarily on age be guarded against. I've weaned 90 yr old mentally sound patients from feeding tubes to successfully eating orally who've returned to living independently with their spouse for several more years. I've seen much much younger patients who've had no hope of eating orally again, who are not mentally alert whose family have wanted them continued to be tube fed and/or maintained on a vent and I've weaned patients on a vent to talking and eating -- in some cases there was no way to know for sure whether or not they might begin to recover when life support systems were put in place. There are so many variables and WORDING in directives is critical.

This may not come up until much later in Medicare health care adjustments, but keep it in mind for that time. Another wording area of major concern to me is the term "Elective" and the medical diagnoses plus criteria specified as such. This will be extremely significant in ensuring timely care -- especially for older patients -- when we get to health care. Delays in providing some medical procedures that might be described as "elective" could be medically detrimental for some (especially older patients) -- a situation lending itself to covert discriminatory adverse care by omission/delay by insurers/medical decision makers. (There are existing anecdotal accounts of such in nations with national health care systems. Some have suggested there have been similar instances occurring in this country beginning with the advent of HMOs.)

It's time to compromise, folks, and we elders perhaps ought to quit acting like the less-enlightened members of Congress and more like the greatest (or nearly greatest) generation.

A change to the chained CIP formula wouldn't be much of an impact on anyone IF it includes a floor that grandfathers those for whom any sort of benefit reduction is a hardship. I would suggest those whose incomes are 25 percent above the federal poverty guideline be excluded from the change, which should take care of that problem.

Going to the chained CPI would be a low-pain way to help immensely with our fiscal problems. It would rein in increases for federal retirees (I'm one of those as well as a social security recipient)and many others. For groups such as veterans (I'm also one of those, but get no benefits at all) a floor would protect those in real need.

Medicare is the real future drain on the treasury. Why not just raise the age to start receiving benefits one year? That would be hugely beneficial financially, while recognizing that we live longer and healthier lives nowadays.

I would fiercely resist any measures that attempt to privatize social security or medicare. That approach is utter nonsense, and brooks no compromises.

Thank you, Jim, for the detailed explanation of the source of shortfalls for The Fund. That is essentially what I thought, that The Fund was short due to raids on it to pay for other things. The same thing happens in state and local government at times, with funds that are supposedly sound and inviolable being tapped to cover other needs. It all leaves the problem, ultimately, of where, then, do the funds come from to pay back the raided funds? Bringing us back to the deficit and growing debt.

In reply to Clarence A. Bowles, Sr. I want to tell him that he has been listening to the wrong people. Here is the fact as reported from the Government Printing Office: "As per law, Obama has submitted a budget for each fiscal year he's been president -- fiscal years 2010, 2011 and 2012, , where the documents are posted."

I suggest that Clarence ask why the Republicans have not worked with him to finalize a budget since he was in office. The party of "No" have blocked every submission the president has offered.

And, I really hate to disillusion you Clarence, but the terrible economy started on Bush's watch. Two unfunded wars, an unfunded prescription program, and a huge tax cut for the 1% not only used up the surplus he started with, but got us trillion dollar deficit we now have. The blame has to lie with Bush. He is not a scapegoat. Facts are facts.

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