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From the category archives: Max Richtman

America’s Richest 1% Won’t Contribute Another Dime to Social Security All Year

This week America’s wealthiest will make their last contribution to the Social Security system for 2015. The rest of us...middle class and the working poor...will continue to pay 6.2% of every dollar we earn to keep Social Security strong.  How can this be?

 


So, the payroll tax cap means the wealthy will never have to contribute on all of their income, just the first $118,500 (in 2015).  Because most Americans never earn that much in a year, many don’t even realize this unfair tax cap exists or the devastating effect it’s having on Social Security’s long-term fiscal outlook: 

“... the Social Security trust fund, which currently holds $2.8 trillion, is projected to be drawn down by about 2033 (according to the Social Security trustees). After that point, if no changes are made to the program, retirees will receive only about 75 percent of scheduled benefits. One of the main causes of this projected shortfall is the growth in inequality over the last 30 years. Back in the 1980s, the last time changes were made to Social Security, Congress and President Reagan decided to build up the trust fund with workers' payroll taxes in order to essentially pre-fund the coming retirement of the Baby Boom generation.

As a result, the trust fund has been steadily building up over the decades, but they weren't able to predict how much income gaps would widen over that time. So while the payroll tax cap has been adjusted for inflation every year, the income of the richest workers has increased faster, allowing more and more earnings to escape the tax, and causing the payroll tax to collect less than needed.”  Nicole Woo, Center for Economic and Policy Research

It’s no coincidence that conservatives who constantly clamor for cutting Social Security benefits never list raising or eliminating the payroll tax cap as an alternative solution to strengthening Social Security.   Once again, for America’s 1% and their supporters in Congress, middle-class benefits cuts are always the preferred solution.

“I found an even more glaring example of the vast inequity of the Social Security tax system a couple of years ago when I was reading a report issued by an association of CEO’s here in Washington.  The report made recommendation to “fix” Social Security by cutting benefits, cutting the Social Security cost of living adjustment, raising the retirement age…no mention of the payroll cap.  I was curious about the membership of this group and after a little research I did the math and discovered that one member of their executive committee reached the cap and stopped paying FICA tax after lunch on New Years Day.  Earning $54 million dollars a year allows you to do that…but doesn’t make it right.” Max Richtman, NCPSSM President/CEO

The National Committee proudly moderated a Capitol Hill event today with Senator Bernie Sanders (D-I), Rep. Jan Schakowsky (D-IL) and the Strengthen Social Security Coalition bringing attention to this Social Security payroll tax giveaway provide only to the richest people in America each year.

The Center for American Progress released a new report today analyzing what America’s income inequality has meant for Social Security’s funding. First, some historical background...when the 1983 Greenspan Commission passed its Social Security reforms 90% of American workers paid on all of their annual income.  In other words, only 10% were exempted from the payroll tax cap.  Since then, our nation has seen more and more income shifted to the wealthy meaning there are 6 times the number of millionaires and billionaires today compared to 1983 and more people above the tax cap. That’s means America no longer collects the Social Security payroll taxes from 90% of workers...today it’s only 83%. CAP reports that’s more than a trillion dollars lost.

“Had 90 percent of covered wages been taxed from 1983 to 2013, the OASDI trust funds would have been $1.1 trillion larger by 2013, shrinking the 75-year expected shortfall by 10.1 percent.

The simulation that we have modeled is retrospective; it addresses what would have happened had 90 percent of wages been taxed since 1983. In their annual report, the Social Security trustees answer a similar, but prospective, question: How would raising the cap to cover 90 percent of earnings starting in 2015 affect the trust funds’ shortfall? The trustees find that over the 75-year period, this change would close about 27 percent of the expected shortfall in the trust funds.”

 As Center for Economic and Policy Research Co-Director, Dean Baker, told the crowd today, “Social Security isn’t broke...America’s economy is.”  Contrary to the current GOP divide and conquer messaging, American seniors aren’t stealing money from children’s programs and the disabled aren’t bankrupting the Social Security retirement system.  Conservatives don’t want average Americans to see the truth -- our economic policies have shifted the nation’s wealth to the wealthy and away from everyone else.

The President’s Budget Plan -Good News and Bad News for America’s Seniors

 Reaction from National Committee to Preserve Social Security and Medicare President/CEO, Max Richtman on the President's Budget: 

“We’re glad to see President Obama respond to the GOP majority’s Social Security hostage-taking by including language in his 2016 budget allowing the routine rebalancing of the Trust Funds. Threatening people with disabilities with a 20% benefit cut unless there are broader Social Security benefit cuts plays politics with the livelihoods of 11 million Americans and their families rather than resolving this imminent funding issue. We applaud the President for taking a stand against this Social Security ploy.  The President also included increased funding for the Social Security Administration which is desperately needed by an agency that’s been forced to reduce local office hours, cut back on consumer services, and increase the wait time for disability hearings. We urge Congress to approve this Social Security Administration budget.

While the President’s budget thankfully no longer includes cuts to Social Security, through the Chained-CPI proposal, his 2016 plan unfortunately still targets seniors by shifting more costs to Medicare beneficiaries through increased means-testing, premium hikes and co-pays. While some tout increasing means testing in Medicare as a way to insure ‘rich’ seniors pay their share, the truth is, the middle-class will take this hit as well.

Medicare has been means-tested since 2007 and the number of beneficiaries subject to higher premiums has been increasing.  If passed, the President’s means testing proposal will hurt middle-class individuals and flies in the face of his budget theme of ‘middle-class’ economics.  The economic realities facing America’s middle-class retirees are ignored by these provisions which shift even more costs onto seniors and exacerbate the retirement deficit gap millions of Americans face now and into the future. These Medicare proposals are especially worrisome given the fact that with the new GOP majority in Congress, passage of these cost-shifting plans can happen with a simple majority vote in the Senate posing a serious threat to millions of American seniors.” ...Max Richtman, NCPSSM President/CEO

Will the President Fight for Social Security & Medicare?

President Obama’s State of the Union address to Congress next Tuesday should provide some desperately-needed insight into just how far this administration will go to defend and strengthen America’s two most successful income and health security programs. The new GOP Congress has made their intentions clear by attacking Social Security on Day One of the new session.  The White House; however, remains silent on the GOP’s latest move:

“TPM asked multiple times last week for the White House's position on the House action, but never received a formal response, a stark contrast to the loud public pronouncements of Brown, Warren, and others. It also invokes the uneasy relationship between the White House and Social Security advocates, who were dismayed by Obama's willingness to accept cuts to the program during the 2011 grand bargain talks with House Speaker John Boehner (R-OH).” 

{Update:  The White House did respond after our initial post . A spokesperson told TPM "Generally speaking, the Administration strongly opposes any efforts to undermine Congress’ ability to reallocate funds between the Social Security retirement and disability trust funds," a White House spokesperson told TPM, "as they have done with bipartisan support numerous times in the past in both directions."}

NCPSSM has urged the President to support reallocation, as has happened without controversy 11 previous times, to avoid a massive benefit cut Americans with disabilities simply cannot afford.

“We applaud you for making middle-class mobility and economic equality one of your top priorities.  Social Security helps to provide a lifetime of economic equality by insuring millions of Americans against the risks of retirement, disability and survivorship. 

For that reason, the National Committee urges you to support the reallocation from the OASI Trust Fund to the DI Trust Fund and oppose the House majority’s demand to cut benefits in exchange for addressing the Disability Insurance program’s financing.  Your State of the Union address would be an ideal opportunity to reaffirm your support for Social Security.”  Max Richtman, NCPSSM President/CEO

In truth, the White House could have invested an entire week just responding to all of the attacks launched by GOP Congress in its opening days (so much for working together) so it’s hard to read too much into this silence on Social Security.  However, Tuesday’s State of the Union address should change that.  President Obama must set the tone and make it clear to the House and Senate that cutting benefits to families who depend on Social Security and Medicare is simply not an option. 

While Republicans certainly didn’t campaign on cutting benefits to middle-class families, now that they’re elected, GOP leaders in the House have made it clear that’s exactly their intention.  President Obama’s State of the Union provides an important opportunity to set the record straight and push back on all of the falsehoods currently being used to justify cutting benefits to the middle class.

Here are just some of the more outrageous claims:

The new Chairman of the House Budget Committee, Rep. Tom Price (R-GA), went so far as to create his own set of Social Security numbers to justify the GOP attack by claiming Social Security:

 “is a program that right now on its current course will not be able to provide 75 or 80 percent of the benefits that individuals have paid into in a relatively short period of time …”

There’s nothing about this statement that is true.  Even if Congress does absolutely nothing to improve Social Security’s long-term solvency (and no one believes that will happen) the program would be forced to reduce benefits by about 25% two decades from now. Any benefit cut is unacceptable; however, it’s not too much to expect Congressional Committee Chairmen to stick to the facts. Another House Committee Chairman, the head of the Social Security subcommittee Rep. Sam Johnson (R-Texas), led recent House the effort to hold the Disability program hostage in order to extract cuts program-wide.  He claims:

the program is “plagued by fraud” and that “the public is fast losing faith in Social Security, and I don’t blame them, because I have too.” 

Neither are true. 

The Government Accountability Office found that improper payments of Social Security benefits that include Disability Insurance had an error rate of just 0.6 percent.  SSA’s Inspector General reports less than 1% fraud in the disability program.  Any fraud is too much but what reasonable person would consider  less than 1% of anything a “plague.”

Far from losing faith in Social Security, the American people of all ages and political parties continue to show unparalleled support for the program in spite of Congressional conservatives’ campaign to undermine it. Not only do they support Social Security in its current form, by large margins they’re willing to pay more to improve it and boost benefits. The latest National Academy of Social Insurance survey of Americans found:

Seven out of 10 participants prefer a package that would eliminate Social Security’s long-term financing gap without cutting benefits. The preferred package would:

  • Gradually, over 10 years, eliminate the cap on earnings taxed for Social Security. With this change, the 6% of workers who earn more than the cap would pay into Social Security all year, as other workers do. In return, they would get somewhat higher benefits.
  • Gradually, over 20 years, raise the Social Security tax rate that workers and employers each pay from 6.2% of earnings to 7.2%. A worker earning $50,000 a year would pay about 50 cents a week more each year, matched by the employer.
  • Increase Social Security’s cost-of-living adjustment to reflect the inflation experienced by seniors.
  • Raise Social Security’s minimum benefit so that a worker who pays into Social Security for 30 years or more can retire at 62 or later and have benefits above the federal poverty line.

With this State of the Union, President Obama has an opportunity to provide some truth-telling on Social Security and Medicare while also sending a clear message that the White House will not aide and abet conservatives who intend to cut middle-class benefits to pay for tax cuts for huge corporations and the wealthy.  

We hope the President will join the American people and be bold in the defense and expansion of Social Security and Medicare rather than leave the door open to continued hostage-taking and deal-making designed to unravel the economic security so many Americans depend on.

 

Social Security Targeted on Day One of New Congress

Members of the new 114th Congress had barely taken their oaths of office today when they passed a proposal threatening millions of Americans who receive Social Security benefits.  The Center on Budget and Policy Priorities describes the plan:

“Buried in the new rules that the House Republican majority {adopted} for the 114thCongress is a provision that could threaten Disability Insurance (DI) beneficiaries — a group of severely impaired and vulnerable Americans — with a sudden, one-fifth cut in their benefits by late 2016. The provision bars the House from replenishing the DI trust fund simply by shifting some payroll tax revenues from Social Security’s retirement trust fund.”

As NCPSSM’s Max Richtman explains, this move was pure politics:

“Today’s unprecedented House vote preventing a routine rebalancing of the Social Security Disability Trust Funds puts politics ahead of policy and partisanship ahead of people.  This House Rules change would allow a 20% benefit cut for millions of disabled Americans unless there are broader Social Security benefit cuts or tax increases improving the solvency of the combined trust funds.  It is difficult to believe that there is any purpose to this unprecedented change to House Rules other than to cut benefits for Americans who have worked hard all their lives, paid into Social Security, and rely on their Social Security benefits, including Disability, in order to survive. 

A modest and temporary reallocation of part of the 6.2 percent Social Security tax rate to the DI Trust Fund would put the entire Social Security program on an equal footing, with all benefits payable at least until 2033.  Democrats and Republicans have authorized this same strategy eleven times without controversy (including four times during the Reagan administration); however, this new House majority would rather play politics with the livelihoods of millions of Americans than solve this important funding issue.  This sends a clear message to middle-class families about the House majority’s priorities -- targeting Social Security for cuts clearly ranks high on their list.”

We’ve written before about the GOP strategy to force broad Social Security benefit cuts while simultaneously demonizing America’s disabled. Senator Sherrod Brown (D-OH) raised the alarm about attempts to politicize what has always been a routine and non-partisan legislative solution to balance the Social Security Trust Funds:

“Reallocation has never been controversial, but detractors working to privatize Social Security will do anything to manufacture a crisis out of a routine administrative function. Modest reallocation of payroll taxes would ensure solvency of both trust funds until 2033. But if House Republicans block reallocation, insurance for disabled Americans, veterans, and children could face severe cuts once the trust fund is exhausted in 2016.”

Not only does this proposal threaten benefit cuts to people with disabilities but it also creates a false either-or scenario that pits retirees and disabled beneficiaries against each other. That’s a particularly absurd notion since the majority of disability recipients are also older, as CBPP explains:

“A reallocation would have only a tiny effect on the retirement program’s solvency. Reallocating taxes to put the two trust funds on an even footing would prolong the DI trust fund by 17 years (from 2016 to 2033), while advancing the OASI fund’s depletion by just one year (from 2034 to 2033). The reason is simple: OASI is much bigger than DI, so a modest reallocation barely dents OASI. And before then, policymakers will almost surely address Social Security solvency in a comprehensive fashion.

Most DI recipients are older people, so helping DI helps seniors. The risk of disability rises with age, and most DI beneficiaries are older. Seventy percent of disabled workers are age 50 or older, 30 percent are 60 or older, and 20 percent are 62 or older and would actually qualify as early retirees under Social Security.”

Changing the rules of the game to target Social Security in the very first hours of a new Congress sends a clear message to seniors, people with disabilities, survivors and their families – a message that certainly wasn’t shared with voters before Election Day – American families who count on Social Security in any way should beware. 

Congress Goes Home Leaving Social Security Administration Without a Director – Again

Let’s take quick stock of what this lame duck Congressional session has meant for middle-class Americans, especially seniors and their families:
  1.  Legislation that reversed 40 years of federal law protecting retirees’ pensions was tucked quietly into the massive spending bill. The change will allow benefit cuts for more than 1.5 million workers; many of them part of a shrinking middle-class workforce in businesses such as construction and trucking.

 2.   $42 billion in largely corporate tax breaks was passed without the “pay-fors” demanded by Congress for virtually every other spending provision. According to the Congressional Budget Office, if Congress keeps passing short-terms extensions every year or two, the tax breaks will cost $700 billion over the coming decade.  As Citizens for Tax Justice so aptly put it: “If our government has $700 billion to spare, it should be devoted to paying for things we really need, not wasted on corporate tax giveaways.”

3.   Congress has headed home for the holidays without confirming a Director of the Social Security Administration.  This is after nearly 18 months without a permanent agency head at a time when the agency faces the largest workload increase and budgets cuts it’s faced in its history.

Since we’ve already written about the first two items, we’re going to fill in the details on the third, including why it matters so much to Social Security beneficiaries.  Social Security expert, Eric Laursen provides this recap:

“Republican senators are upset about delays and cost overruns on a new computer system at the Social Security Administration—so upset, they have blocked President Obama’s nominee for commissioner. The only the trouble is, the new computer system was planned and ordered up by the prior commissioner—a George W. Bush appointee.”

“A lot of this is simply hyperventilating. It’s not clear that the GOP senators “received information from whistleblowers,” as they claim. What happened for sure was that an interim report from the Social Security Administration’s inspector general said that officials at the SSA may have misled Congress about aspects of the $300 million computer system. The report stems from an investigation that Colvin herself ordered after she took over from Astrue early last year. And when the senators point their fingers at “the activities of certain members of your immediate office” in their letter, they would be referring to officials who were in place under Astrue as well. Yet the tone of their letter suggests, misleadingly, that Colvin herself may be under suspicion.”

“It’s been an article of faith for Republicans from the early days of the Reagan administration that the heads of agencies like the SSA must not come from within the agency itself. If at all possible, they must be strongly conservative critics who are committed to “reforming” it by shrinking it and pushing back against its unionized workforce. The less experience they have with the day-to-day running of a big, complex agency like the SSA, the better. Astrue fit that bill. Colvin, by contrast, represents the so-called “permanent government” Republicans are determined to break. That they were ready to exploit any chink in her armor, however unfair, should have been foreseeable.”

Colvin’s qualifications to be SSA’s Director are undeniable, as NCPSSM’s President/CEO, Max Richtman, told the Senate in a letter last week:

“Ms. Colvin has extensive experience with the Social Security Administration (SSA) that makes her uniquely qualified to provide leadership to this vitally important agency. She has been Acting Commissioner of SSA for more than a year and, before that, had served since 2010 as the agency’s Deputy Commissioner. In addition, she has in the past held a number of other key executive positions at Social Security headquarters, including Deputy Commissioner for Programs and Policy and Deputy Commissioner for Operations.

The broad-ranging nature of Ms. Colvin’s experience has provided her with the knowledge and the temperament to lead SSA through the years that lie ahead. We personally know her to be a woman of great integrity and respect the compassionate leadership she has displayed throughout a long and distinguished career.”

Why does this matter to beneficiaries?  Because the Social Security Administration needs a leader in place to tackle the challenges ahead.  Leaving the agency in limbo leaves it vulnerable to even further attacks virtually guaranteed with the new Congress:

... as Social Security faces the sharpest increase in its workload and its most bitter political challenges since its creation in 1935, it will continue to chug along without an official commissioner. Colvin, 72, will stay on as acting commissioner, a post she has held since February 2013.”

“...there's no reason to doubt Colvin's commitment to Social Security, which she served as a high-level executive from 1994 to 2001, returning in 2010 as deputy commissioner. As Paul Van de Water of the Center on Budget and Policy Priorities observes, Colvin has to work with the budget cards she's dealt: "She been doing a good job under very difficult circumstances, with a continually shrinking real budget," he said.

Indeed, the problem is Social Security's budget -- and the Democrats' failure to safeguard it. The crisis emerged in 2011, when Congress started to pare the president's budget requests for the Social Security Administration. From then through fiscal 2013, Social Security got $2.7 billion less than the president sought. Some of the shortfall was restored this year, but most of the increase was designated for anti-fraud programs, not pure administration.”

Michael Hiltzik at the Los Angeles Times asks, “Are the Democrats allowing Social Security to Twist in the Wind?”  We think that’s a very good question.

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