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The Cult of Manhattan Tower

The Secret War on Social Security and Medicare

category_bug_politics.gif Certainly you recall that back in 2004 and 2005, then-President Bush put all the substantial muscle of his office into Social Security “reform.” He and his surrogates spent more than year flitting about the nation spreading lies that Social Security was in “crisis,” that it was “broke.”

The solution to this non-problem, he said, was to privatize Social Security. Younger workers would be allowed to divert a portion of their Social Security contribution into private accounts and invest it as they chose.

Ignoring Wall Street history that includes a decade-long, ruinous Depression and several painful recessions, the president blithely suggested that everyone would be millionaires by the time they retired.

Sensibly, the people of the United States overwhelmingly rejected President Bush's privatization scheme, and if anyone had any doubts about its dangers, they were washed away in the crash of October 2008.

That should have been the end of attacks on the most successful social program in the history of the world. But no.

There is a growing drumbeat, mostly under the media radar, to cut not just Social Security benefits, but Medicare and Medicaid too. Several previous attempts at what is being called “entitlement reform” have faded away, but the pressure for it continues and is increasing.

Now, there is a proposal from Senate Budget Committee Chairman Kent Conrad (Dem. N.D.) and Republican Senator Judd Gregg of New Hampshire to create an “entitlement commission” and to do it soon.

The idea this time, as in similar past efforts, is to force major changes to Social Security, Medicare and Medicaid (read: benefit cuts) by tasking the commission of appointed members to create legislation to cut costs and then force an up or down vote in Congress without scheduling time for debate or an allowance for amendments.

Last week, the Senate Budget Committee heard testimony on the Conrad/Gregg commission proposal. All ten witnesses support the creation of this commission; none who oppose it were invited. Among the supporters who spoke was David M. Walker, president and CEO of the Peter G. Peterson Foundation who, like most proponents of the commission, seeks to conflate the current recession with the cost of entitlement programs:

“...we must recognize the reality that key factors that contributed to the recent mortgage-related sub-prime crisis also exist in connection with the federal government's own finances,” said Walker. “These factors are: first, a disconnect between the parties who benefit from prevailing policies and practices and those who will pay the price and and bear the burden for today's fiscal irresponsibility.”

Barbara B. Kennelly, president and CEO of the National Committee to Preserve Social Security and Medicare, translated that (intentionally?) murky testimony into English in a letter to Congress [pdf]:

“[W]e are surprised to see the federal deficit and the federal debt cited as the reason a commission needs to be established to make cuts in Social Security.”

That the head of the Peter G. Peterson Foundation testified in favor of the commission should raise a bright red warning flag to all of us. For years, Peterson has used his influence and his money – he endowed the Foundation with $1 billion from his personal fortune – to crusade for the dismantling of Social Security and Medicare. Earlier this year, William Greider further deconstructed Peterson's message:

“It is a frightful message,” wrote Greider. “Peterson describes a '$53 trillion hole' in America's fiscal condition - but the claim assumes numerous artful fallacies. His most blatant distortion is lumping Social Security, which is self-funded and sound, with other entitlements like Medicare and Medicaid.

“Those programs do face financial crisis - not because the elderly and poor are greedily gaming the system but because the medical-industrial complex has the profit incentive to drive healthcare costs higher and higher. Healthcare reform can solve the financing problem only if it imposes cost controls on private players like the insurance and pharmaceutical industries.”

So what we have is a well-connected, billionaire activist who has no need for Social Security and Medicare using his fortune and influence (he was Secretary of Commerce under President Nixon, founder of the Blackstone Group and former chairman of the Council on Foreign Relations) to set up a 15-person commission within Congress that would remove control from and the responsibility of ALL of Congress to make decisions about Social Security, Medicare and much of the entire tax system.

A substantial number of Congress members appear to believe this is a good idea, and it is more dangerous than President Bush's privatization scheme because it is moving forward without attention from major media. If the plan succeeds, decisions about Social Security, Medicare, Medicaid and other social programs will be made by a cabal of legislators and unelected appointees behind closed doors rather than in open Congress.

Not only would Congress at large have no say beyond a yes/no vote on commission-created legislation, there would be no opportunity for we the people to let our representatives know where we stand. I won't stand for that and neither should you.

There are, of course, more details than there is room to explain here. If you are as interested and alarmed as I am, here are some links – in addition to the ones above - to help you understand what's going on.

Passing the Buck to an Entitlement Commission
17 November 2009

Lawmakers, White House Consider Bipartisan Route To Bend Health 'Cost Curve'
13 November 2009

Senators Discuss Creation of Panel to Control Health Costs
11 November 2009

Fast-tracking Cuts to Social Security and Medicare
10 November 2009

Senator Gregg's Comments in Congress [pdf]
13 May 2009

Checking America's Balance Sheets
12 February 2009

At The Elder Storytelling Place today, Ellen Younkins: The Scullery Maid


Thanks for pulling together all these links and information as I've read only small print scattered pieces about all this. Infuriating, dangerous and clearly requires a lot of publicity and action to prevent this railroading job.

Thanks!!!!!! These are a terrific resource.

It is very upsetting what they are doing and when you hear right wing bloggers talk about the problem with entitlements, you ask if they mean Social Security and Medicare, and they don't answer. The undefined entitlements is being done trying to keep it from revealing what it will mean to old people. It's so ironic that Republicans talk about the damage to grandma of being able to go to a doctor and discuss end of life options and how people will die if they have access to doctors; and yet they want to do this. It's rather like their rah rah for veterans while they cut their benefits.

Already they have cut SS just by limiting its increase which will soon make it worthless for living costs. They tie it to a cost of living index that is rigged against showing the true cost of inflation on real living expenses.

This whole thing is an ongoing battle where they seem to support corporate interests and the people are just in the way of what is 'best' for the nation.

I think to change any of this and get leaders we can trust, it's going to take getting rid of the lobbying system that weights all reforms and ideas toward the ones with the money. That won't be easy. It might take electing an all new Congress made up of people with that belief (if they don't get there and immediately change their minds).

Ronnie, as usual, has hit the political nail on the head. Creation of an entitlement commission, repackaged now as a deficit commission, is the biggest threat to Social Security and Medicare since privatization.

And this is very much on a Congressional fast-track (purposefully). The commission proposal could be offered during the debt limit debate in December as a quid-pro-quo "we won't raise the debt limit if you don't give us a commission" or even as an amendment to get blue dog support for health care reform in the Senate.

Either way, this vote is likely to come quickly and quietly before most seniors even knew what hit them. And what's worse, many Democrats believe a vote for a commission shows they're serious about the deficit when in reality it sub-contracts their voice to the likes of David Walker and Pete Peterson, who have never met a Social Security or Medicare cut they didn't like.

This is what $1 billion dollars in lobbying gets us.

In addition to being an attack on the Social Security and Medicare (as if it needed even more to be utterly wrong!), the drumbeat that Peterson et al. are raising about "the federal deficit" is just stupid in current conditions. When the people can't spend, the government has to or we'll really be mired in a Depression. Government spending in such a time keeps people in jobs and thus makes future growth that will get us out of deficit possible. We aren't going to have inflation when people don't have the money to buy things!!

These people, the social security cutters and deficit hawks, are just selfish millionaires. They got theirs --screw the rest of us.

Thanks Ronni.

I feel like going back to bed and hiding under the covers when I read of this. Write, call, fax your representatives today. Send a copy of this to everyone on your mailing list and ask them to kick up a fuss.

The fast track aspect of this is scary. Perhaps if we wrote the heads of all news departments and demanded that they covered this issue it would help. At the least, write letters to the Editor of all your publications.

I'm dumbfounded as to what to do about this, but not shocked. Thanks, Ronni for, once again, bringing a very important issue to our attention.

I think we just have to keep reminding ourselves, we ARE entitled to this money---we paid in advance, remember? It's ours to collect. It's no hand out!

If this benefit cutting process gets traction, perhaps a million (or more) senior "march on Washington" is in order? Ronni, call me if you need help orgazniing it.

I remember watching those privatization SS hearing on TV. Bush and his boys sent some guy from the Cato Institute to do their bidding, as I remember. He was up against credible experts on the other side. I wasn't even close.
The Cato guy made no sense. It was just an attempt to destroy SS. And, in many ways, it put President Bush out to dry. It was an awful thing to do. Either he was too dumb to know what he was doing, or he was just being told what to do at that time. Either way, it was an awful period to experience.
I still remember the cry, "Don't mess with Social Security." I hope that cry continues to ring true. Remember that the SS Trust Fund is due $2.5 trillion, as part of the Intergovernmental national debt. That is ton of excess money deposited so that it can be used when needed.

good to see some people know what's going on.
if it helps, know that the cost of closing the Social Security actuarial deficit amounts to an average 20 cents per week increase in the tax per year per worker.

look up the NASI website for more information.

it is VERY troubling that the "high end news sources" ALWAYS tell the Peterson version of the story. It is even more troubling that the Democratic Party seems to be in on the scam. Try contacting your local Democrats and see what happens.

if it would help to know the details of Social Security financing, i might be able to help.

[email protected]

The attempt to privatize Social Security and Medicare, this after destroying the private pension system and retiree health plans, is the most perfidious scam ever attempted against a nation. It began with Milton Friedman in 1962, who got his chance to privatize Social Security in Chile when Nixon and Kissinger had General Pinochet overthrow (and murder) the democratically elected President of Chile, and was followed up in the 80's by Reagan's Chief of Staff and then Treasury Secretary, Don Regan, formerly head of Merrill Lynch, who saw in it a chance for his former company to make billions in unnecessary commissions, fees and transaction costs. In Chile those costs amounted to some 18% of every contribution.

The Cato Institute, The Heritage Foundation and other political operative extreme right-wing groups are arms of the top leadership of the Republican Party, as scurrilous and harmful a group as ever took over a national political party.
The proper way to fix Social Security is to make it real defined benefit pension system instead of the fake Potemkin Village one it is now.

You do this by (1) changing the PayGo way we finance it with Actuarial Advance Funding, and (2) adding strong laws with teeth that protect the assets and the past service accrued benefits from being cut back.

In 1762 British actuaries invented Actuarial Advance Funding and in 1912 it was adapted to defined benefit pension plans in America by the very first independent pension-consulting actuary, George Buck, whose firm is still in existence. He placed many large pension plans on a sound long term financial and actuarial basis, such as NY City’s municipal employees pension plan and Bell Labs.

It is impossible, mathematically and actuarially, to ever have a decent, affordable, pension plan, retiree medical plan, Social Security, Medicare, or medical care system, unless monies are set aside, long in advance of their being needed, with part of that money invested collectively in private securities by experts, with the key asset class being common stock. The investment returns compounded over time will pay for the bulk of the promised benefits.

This is done through an annual actuarial valuation using an Actuarial Cost Method called The Entry Age Normal Cost method. It is a systematic, mathematically rigorous, highly disciplined, and self-correcting system that also stabilizes the cost as a percent of pay and develops the right cost--the Entry Age Normal Cost, level as a percent of pay---without which you can never know if the system is affordable in the long term once the initial unfunded past service liability has been calculated and amortized, just as you would a home mortgage.

This methodology is also necessary, but not sufficient, to fix Medicare and medical care, the latter once we get around to having a universal national health care system, that is.

I know it works because I did it for most of my career as an actuary.

Of course it has to be done by an experienced independent pension-consulting actuary, one that places the public interest above private interests whenever there is a conflict.

Alas, there are only a handful of us out there any more, many actuaries having sold the nation and it's people down the river for money.

George Fulmore, you write "Remember that the SS Trust Fund is due $2.5 trillion, as part of the Intergovernmental national debt. That is ton of excess money deposited so that it can be used when needed."

So just where are these funds deposited? They are actually nowhere. They are Treasury debt owed the Social Security Trust Fund. When Social Security collects from the Treasury, where does the Treasury get the funds to pay the debt? They have only one place to get it, general tax revenue. That is they must get the money from you and me, the tax payers.

There is no real trust fund.

The only way to save any semblance of future Social Security is to allow private accounts. Why can't you people understand this?

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