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GRAY MATTERS: Annual Medicare Enrollment Period Begins on Monday

Deficit Commission Chairs: Cut Social Security

category_bug_politics.gif 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


Comments

Actually, I'm hoping the Cat Food Commission will be unable to reach agreement on report at all (that seems possible.)

But I'm prepared to howl bloody murder about this rip off and we all need to be.

During Sarah Palin's barnstorming tour of the Heartland we saw hundred's of right-wing nut middle-aged American's screaming "Don't touch my Medicare" or words to that effect. Now the left-wing nuts are screaming "Don't touch my Social Security"

Thanks for keeping us so well informed.

I never thought the wage caps made sense for social security tax.

I'd have to do some research to determine the reasoning behind the cap, but suffice to say it was included to give a break to the wealthiest Americans.

I agree with everything you wrote Ronni. In my opinion they simply must remove the tax cap and it will be nearly over and a done deal. They are nuts to pick on SS.
Medicare waste and fraud is a fair target. For instance, in some nursing homes, dental teeth cleaning crews come through, and spray a little water and go through the motions and collect a big fee--nearly nothing is accomplished otherwise. This is just one example. That's fair game, not SS.

Social Security is no longer the third rail in politics. Now it is the whipping boy. As you noted, it has no place in the budget decisions.

Alan Simpson is the last person on the planet who should have been appointed to head up this commission. His hatred of S. S. is legendary.

I'll say one thing for this commission it bears looking at because so many on both sides of the political isle are complaining about it. The problem in my mind re: Social Security is that the gov has used it as their mad money.

http://www.whitehouse.gov/contact

This links to a site that will allow you to voice your concerns.

I am like many feeling really scared.

Yet another interesting, thoughtful post from you, Ronni. Thanks.

But when you talked about the means test, I think you made a common assumption, that because one pays into the system, one deserves something out of it.

Social Security began under FDR as a benefit for widows & orphans to keep them out of abject poverty. The widows and orphans weren't getting anything for paying into a system (which hadn't previously existed). They were receiving support from others more fortunate than they.

These days, Social Security is a communitarian program (oh, OK, socialist) whereby the ably working contribute to the welfare of elders who previously did the same for their elders. It's not meant to be a savings plan. In fact, Social Security never was supposed to be a person's sole income, but rather a hedge against poverty. Obviously, for many it IS sole support.

I'm not sure a means test is a bad idea, especially given the grotesque income disparities we're seeing as our economy continues to fry. If you don't need it, don't take it.

Thoughts?

I don't like means testing it at all. That would mean those who had savings, had worked to have dollars set aside might be denied what someone else, who had never done that, would get. I do favor upping the amount it's paid on as that seems fair but turning it into a charitable issue, which means testing wold do-- not to mention add a lot to the cost of administering it-- doesn't seem smart or beneficial in the long run for anybody.

Exactly, Ronni! I don't trust any of them either--and with good reason. They're looking out for themselves and their wealthy friends, not the rest of us, no matter how they spin it! I SO agree that the salary cap should be removed entirely. The rich and superrich need to pay S/S tax on ALL their income (which they can well afford to do).

Like you, I'm opposed in principle to means testing S/S, but I must confess that it's a bit off-putting to consider that Bill Gates (currently worth $50+ BILLION)will be eligible for S/S in a few years and that Warren Buffett already is. The plus factor for both of them is that they're dedicating most of their wealth to improving the lives of others. Are many of the superrich right wingers (Pete Peterson, for example) doing that? If they are, I sure haven't heard about it.

The wage caps in Social Security have to go. It's no longer the third rail of politics because the young are beginning to catch on to the scheme and they lose. It should be privatized at least for them so they at least have a chance of getting something out of it… Think that’s bad ? Come on, the politicians have been putting it into bonds all these years already (ie … treasuries)… The great bull bond market is over for good. Give it to the people and let them decide what to do with it before the politicians lose more of it.

See the new documentary "Inside Job".

We all have plenty of reasons to "not take our eyes off these people".

Ronni, you need to go on one of the Sunday talk shows to debate this!!!

Thanks for the alert, Ronni. I am in the trenches and awaiting orders.

What is it about programs that are particularly successful in this country? It seems that once something like S.S. or Headstart or Public Education gets a firm grounding and begins to show strength and value to society, it correspondingly becomes drained by pressures of being required to maintain a constant defense! It is so frustrating!

Stop whining America. We are ALL going to have to make sacrifices for the gluttony of the past 20 years. Nothing is sacred. As long as anyone says "but not me" we'll not get anywhere.

Alice, actually I think you're right. Although my husband and I didn't do much participating in the gluttony, we'll still have to help pay for it. Unfair? Sure, but this is the real world. As tempting as it was during the bubble years, we resisted upgrading to a bigger condo (with a new, unaffordable mortgage) and continued to pay off any credit card balances every month. Our 10+ year old cars are owned free and clear.

But, we're all in this together and one way or another, most of us will (or should) be asked to step up. Getting out of the mess we're in won't be painless, but we can't keep on borrowing from China, which is how we're financing the deficit.

Shared sacrifice for the greater good of our country--maybe even its survival--what a concept! We did it during the Great Depression and WWII, and we can do it again. The first thing I'd ask is that the wealthy lead the way (greed is NOT good). They could renounce the Bush tax cuts and agree to removal of the salary cap so they pay S/S tax on all their income, which would help to ensure the long-term solvency of S/S.

Congress could consider imposing a TEMPORARY, progressive "Deficit Reduction Surtax" of between 2-5% on incomes over $100K for individuals and $250K for families. Small business owners could be partially exempt if they re-invest in their business (which perhaps would enable them to hire an unemployed worker).

Sure, the tea baggers and other conservatives will scream, but aren't they the ones who are shouting the loudest about the deficit? And aren't a large percentage of them older people? Seems to me that the folks who are able should be willing to do their patriotic duty to help this country regain its financial footing.

We're far from wealthy, but we'd be willing to forego our Social Security cost-of-living increase for a couple more years. Of course, it goes without saying that I would expect my government to make significant reductions in spending as well; however, I believe that we MUST preserve the social safety net, go forward with healthcare reform and extricate ourselves from Iraq and Afghanistan.

Preserving Social Security and Burying the Obama Deficit Commission Proposals on Social Security
By Emeritus Professor of Mathematics, CSULB
President Obama's National Commission on Fiscal Responsibility and Reform, co-chaired by Alan Simpson and Erskine Bowlers, has issued a doomsday report on "fixing" the Social Security retirement system (OASDI) as a part of its proposals to reduce the Federal deficit. This flies in the face of the fact that, not only has Social Security not contributed a dime to the deficit, it has a $2.52 trillion surplus! Amongst other things, the co-chairs would drastically cut retirement benefits and increase the retirement age to 69. Not a single member of this commission, or of the vast TV/audio/print media, has mentioned nor studied other solutions to the alleged Social Security "crisis".
There is no crisis and there is most definitely no need to advance the retirement age to 69 nor to cut the retirement benefits. .
Based on the data in the totality of individual income tax returns for the 16 year period of 1993 through 2008, there are easy structural changes that can be made to the Social Security (OASDI) taxation system that will easily provide for sufficient annual contributions and assets growth to take care of the retirement needs of the increasingly aging population for the indefinite future, as well as the replacement of the existing 73-year old REGRESSIVE OASDI taxation system by a PROGRESSIVE one, and without reducing retirement benefits nor increasing the retirement age. Regrettably, the ever-present plethora of “privatization” and “fix-it” advocates are clueless about this analysis.
To illustrate the regressive nature of the OASDI taxation system, the data from the calendar year 2008 shows the following. Tax returns listing an Adjusted Gross Income (AGI) of over $200 K (= only 3% of all tax returns) held 30% of all AGI, yet less than 3% of the listed AGI was paid to OASDI; returns listing over $1 Million (= only 0.23% of all tax returns) held 13% of all AGI, yet less than 0.6% of the listed AGI was paid to OASDI; finally, the $10 million and over AGI class had an average GROSS income (AGI plus all exclusionary gross income) of $37 million, yet paid an average of less than 0.006% to OASDI
By using a progressive tax rate system (applied to ALL INCOME, not merely to salary/wage income) for OASDI, the rate for OASDI payments for 85% of all tax returns (= below $100,000 annually) will be LOWER than the current rate of 6.2%. This is because the total income of this class is in the form of salaries/wages, and everything below the salary/wage cap of $100,000 is taxed at 6.2% for OASDI contributions.
Here are the details for a typical progressive OASDI tax rate system: 4% rate on all income below $30,000 (40.3% of all tax returns in 2008); 5% rate for the range $30,00 to $75,000 (24.6% of all tax returns in 2008); 6% rate for the range $75,000 to $200,000 (22.1% of all tax returns in 2008; currently, those from $100,000 to $200,000 pay as little as 3% to OASDI); 7% for the range $200,000 and up (13.0% of all tax returns in 2008; this group pays from below 3% to as little as 0.006% to OASDI).
In addition to providing more than the annual retirement/disability needs produced under the existing regressive taxation system, the annual OASDI Trust Fund assets at the end of 2009, for each of five progressive tax systems that were analyzed for the 16 year period, would have INCREASED from the current $2.52 trillion (2008) to:
$3.47 trillion for tax-rate system 1; $4.17 trillion for tax-rate system 2; $4.27 trillion for tax-rate system 3; $4.41 trillion for tax-rate system 4; $4.83 trillion for tax-rate system 5.
Clearly, this revised progressive OASDI tax rate system would preserve Social Security, the most successful US government program in history, for the indefinite future, and would silence the plethora of “privatizers” and “fix-it” advocates.

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