On Wednesday, three weeks before their final report is due, the co-chairs of President Obama's deficit commission – Alan “tits” Simpson and Erskine “I also work for Morgan Stanley” Bowles - released a proposal (read: trial balloon) taking care to note that the other 16 members of the Commission had not read it prior to the press conference.
Overnight reaction was strong pro and con mostly along the political lines you would expect, although some Republicans are reluctant to endorse the proposal. It is important to note that overall, cuts are for you and me while the wealthy – corporations and individuals - are allowed to continue to gorge on gold bullion as represented by the $144 billion in Wall Street bonuses this year. Did you expect anything else?
Next week sometime, we'll look at some of the other proposals and Saul Friedman will tackle Medicare changes in his columns on this blog. Today, it's Social Security.
Let me reiterate what most of us who gather at this blog know: Social Security does not contribute to the deficit. It is a stand-alone program, self-funded and needs only a couple of tweaks to ensure its long-term solvency. Nevertheless, Simpson and Bowles want to cut not only future benefits, but current ones. Here are the major Social Security items in the proposal:
RAISE RETIREMENT AGE
The deficit commission calls this “indexing to increases in longevity” and it is nonsensical. The largest increase in average longevity is due to a reduction in infant deaths. Secondly, since 1997, life expectancy of male workers retiring at 65 has risen six years for those in the top half of income distribution and only 1.3 years in the bottom half.
So the Simpson/Bowles idea is, apparently, to further inhibit longevity for poorer people by forcing them to work longer reducing their benefit and affecting their health. To be fair, althought it is small consolation, there is a provision requiring the Social Security Administration to create earlier retirement for workers engaged in physically demanding jobs.
CREATE A MEANS TEST
The commission calls this “increase progressivity of benefit formula,” which, in English, is a means test. This would reduce benefits to people who have greater means to support themselves.
Superficially, this sounds like a good idea; why should rich people, for whom it is pocket change, collect Social Security? First, they pay into the program and therefore have as much right to the benefit as everyone else. Denying them the full benefit is antithetical to American values and would greatly reduce support for Social Security.
Also, as always, the difficulty is in the details - and the differing circumstances of individuals. Inevitably, some moderate-income people living on the edge would be unfairly penalized.
And, a means test would require the SSA to analyze everyone's income greatly increasing administrative costs to the agency not to mention there is no accommodation for sudden loss of income as happened to millions of retirees in 2008 crash.
Plus, a means test remakes Social Security into a poverty program leaving it vulnerable to future cuts. (Whatever happens this time around, you don't believe it is the last Social Security battle, do you?)
INCREASE THE SALARY CAP
Good idea. But the proposal would increase it only to 86 percent (from current 82.5 percent) of average earnings which leaves the richest rich still off the hook. I have never been able to understand why lowest-income people are taxed for Social Security on all their wages and the highest earners, for whom it would be no burden, are not.
In fact, many experts have said that eliminating the salary cap (currently $106,800) would relieve 95 percent of Security Security's long-term shortfall leaving five percent that could be made up with only the tiniest increase in the rate of the payroll deduction or other small fix.
INDEX THE COLA TO A LOWER INFLATION RATE
The above proposals reduce benefits for future Social Security recipients. This one affects those who are currently retired.
The cost-of-living increase now is pegged to the CPI-W, the rate of inflation for urban workers. The commission proposes changing that to the newer “chained CPI” which, according to estimates provided by the National Committee to Preserve Social Security and Medicare (NCPSSM), would “lower benefits by approximately 3 percent after 10 years of retirement and 6 percent after 20 years of retirement.”
The current calculation already penalizes elders by not taking into account elders' higher medical and drug costs which increase each year to a much larger degree than current inflation for other goods. This Simpson/Bowles proposal is just another way to further cut Social Security in general.
Because none of these proposed changes to Social Security bear on the deficit at all, Simpson and Bowles are using the deficit commission (known formally as the National Commission on Fiscal Responsibility and Reform) to arbitrarily take an axe to a program that is hated by certain rich Republicans.
In a shocking revelation yesterday, the Washington Post reported that at least two staff members of the commission work for someone else:
“Lorenzen is paid by the Peter G. Peterson Foundation, while Goldwein is paid by the Committee for a Responsible Federal Budget, which is also partly funded by the Peterson group.”
For the past 20 years, Peter G. Peterson has spent billions of his fortune in efforts to cut Social Security and just this week, a Peterson-funded, $20 million television campaign began that, while not directly naming Social Security (yet), lays the foundation for support of Social Security reform (read: cuts). Saul Friedman reported on Peterson's unholy crusade in his Gray Matters column on this blog in January.
Let's be clear: Social Security does not need reform. It is the most successful social program in the history of the world keeping millions of Americans over its 75 years of existence out of poverty. It's not like anyone is ripped off by it and no one ever got rich on Social Security. The average monthly payment is about $1,000.
Raising the salary cap together with one or two other small tweaks will keep it solvent. But some of the elite will just not stop until they have stolen every last penny from the American people.
Fighting these proposed changes is not a case of greedy geezers. The word sacrifice has been turning up a lot lately and I doubt elders are unwilling to do their part if and when taxes are raised, for example, on gasoline and other goods. Social Security cuts have no place – logically or morally – in deficit reduction measures.
On Wednesday's post, Emmett Smith left a comment asking for email addresses for writing to President Obama and others about our concerns. This commission proposal is only a draft. There will be changes before the final report is published on 1 December and the president, still in Asia, has given no response.
Rest assured that when there is something concrete, I will supply all the necessary information and call on you to write and phone and sign petitions and anything else we can do to fight back.
For the record, I don't think these draft proposals are going anywhere and the final report - on Social Security and much of the rest - will be a greatly changed in the final report. But I'm not taking my eyes off these guys - I don't trust any of them.
At The Elder Storytelling Place today, Steve Kemp: This Old Age