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Getting it Right on Social Security

There are a number of great articles and opinion pieces today on Social Security "reform" and the so-called "grand bargain" anti-entitlement crusaders are hoping to elicit from the Obama administration as they consider short-term stimulus legislation.  First, economist Dean Baker with the Center for Economic and Policy Research puts the whole issue in perspective wonderfully in this piece in the Guardian: 
"The classic definition of ‘chutzpah' is the kid who kills both of his parents and then begs for mercy because he is an orphan. The Wall Street crew are out to top this. After wrecking the economy with their convoluted finances, and tapping the US Treasury for trillions in bail-out bucks, they now want to cut Social Security and Medicare because we don't have the money." "The attacks are made even worse by the fact that the attackers, people like Robert Rubin and Peter Peterson, promoted policies that led to this collapse and personally profited to the tune of tens or even hundreds of millions of dollars. In other words, after pushing the economy into a severe recession and destroying the life's savings of tens of millions of working families, the Wall Street crew now wants to take away their Social Security and Medicare. This can almost make killing your parents look like a petty offence."
At Angry Bear, Bruce Webb says he's not worried the Obama administration will take the anti-entitlement bait:
"I don't think we have much to worry about to begin with. But even if the Obama team takes a look at Social Security and even if they end up tinkering with it, we still don't need to worry. Because there is a big difference between Social Security 'Transformers' and Social Security 'Fixers'. Obama is a Fixer."
The Washington Post also provides a very interesting analysis of retirement savings during this economic meltdown and what privatization would have meant for Social Security beneficiaries.  Allan Sloan describes, "How it Could Have Been Worse":   
"It's fine for you to take market and timing risks if your basic retirement needs are already being met with your own sources of income. It's another thing to have to take those risks with your eating money, which is what Social Security represents for perhaps two-thirds of retirement beneficiaries."
 "Someday, Social Security privatization will come back into vogue. When that happens, I've got two words that will remind you why it's a bad idea: Remember 2008."
Unfortunately, many retirees won't have any choice but to remember 2008.

"Let's Make a Deal" Politics Trades Social Security for Stimulus

Anti-entitlement members of Congress want President-elect Obama to make a deal to gain their support for a desperately needed stimulus package. It's a political quid-pro-quo that would trade away long-term benefits for generations of seniors, survivors, the disabled and their families for a short-term economic recovery package desperately needed to reverse the damage of eight years of flawed economic policies.   The trade-off goes something like this...Congress' so-called "fiscal-hawks" will consider supporting the economic stimulus package if the Obama administration agrees to "entitlement reform" (translation: cuts to Social Security and Medicare).  Of course, Social Security and Medicare didn't create this economic crisis but some view this as a unique political opportunity to sell their entitlement hysteria to the public. The problem is we can't balance the budget on the backs of Social Security and Medicare.    According to analysis by the Congressional Budget Office (CBO), if every so-called "entitlement" in the federal budget were repealed outright - eliminating Social Security, Medicare, Medicaid and other critical programs - but nothing were done to slow the growth in health care costs overall, we would still find ourselves spending almost 70 percent of the nation's wealth on health care by 2082. It is clear America does not face an entitlement crisis; it faces a health care financing problem.   Contrary to the "fiscal hawks'" claims that Social Security is bankrupt or unsustainable, Social Security is running a surplus today and will be entirely self-funded until the youngest of the baby boomers are nearly 80 years old. The long-term challenges facing Social Security decades from now can be addressed with modest and manageable changes. The solutions are apparent. They won't be easy politically but they are not complicated. Healthcare reform, however, is much more complicated and urgent. Under projections by Medicare's actuaries, by 2025 over one-half of the average senior's Social Security benefit check would be consumed on Medicare out-of-pocket costs. However, we cannot address Medicare's fiscal challenges without system wide healthcare reform.  Thankfully, Obama's Budget Director Peter Orszag understands this, even if the anti-entitlement crowd does not.  He told Congress:
 "The rate at which health care costs grow relative to income is the most important determinant of the long-term fiscal balance; it exerts a significantly larger influence on the budget over the long term than other commonly cited factors, such as the aging of the population."
For many, Social Security and Medicare have provided their only economic stability during this very scary time.  Millions of Americans have seen their savings depleted, home equity disappear, and healthcare costs skyrocket beyond their means. We should be looking at strengthening these programs for the long-term not cutting them in Washington's version of "Let's Make a Deal".  President-elect Obama suggests we should not ask, "What's good for me?" but "What's good for the country my children will inherit?"  Surely, this economic crisis is proof positive that we desperately need Social Security and Medicare now and for our children and grandchildren.

Stimulus vs. Safety net is a False Choice

We here at the National Committee congratulate the new Congress and President-elect Obama for making economic recovery an immediate priority.  Skyrocketing medical bills, shrinking savings and plummeting home values have hit retirees, living on fixed incomes, especially hard. For many, Social Security and Medicare have provided their only stable economic security during these tough times.  That's why we've written Congress urging Members to reject suggestions by some that these vital safety net programs be cut to pay for rising deficits.  
 January 7, 2009   Dear Member of Congress:             The millions of members and supporters of the National Committee to Preserve Social Security and Medicare urge you to oppose any effort to link the cost of the current economic stimulus package to future cuts in Social Security benefits or other harmful budgetary processes that will weaken Social Security and Medicare. There is no logic to the argument being made by some that we should provide immediate economic relief to millions of Americans of all ages to help them with jobs, mortgages, and retirement savings, while at the same time urging cuts in Social Security and Medicare - the foundation of retirement security for current and future generations. Locking ourselves into a specific budget process or a fast-tracked Commission, as some have suggested, based on this faulty logic would be an enormous disservice to the elderly.              The 111th Congress and President-elect Barak Obama are moving aggressively to forge a comprehensive stimulus package aimed at reviving the economy and restoring the economic security of millions of Americans. In late 2008, as the financial and mortgage crises bled into the rest of the economy, many middle-class and low-income Americans lost their jobs, their homes, and their retirement savings. Now, a responsive new Congress and President are contemplating swift action on legislation aimed at job creation, including rebuilding crumbling infrastructure and advancing energy-saving technologies, coupled with middle-class tax relief. Other measures on the table include additional unemployment benefits for jobless workers and aid to hard-hit States through the Medicaid program.              Given the urgent need for financial stimulus and economic security measures, a consensus has developed around increasing federal expenditures in the short term without offsetting the cost of those expenditures elsewhere in the budget. Some leading budget hawks have argued that such spending is "reasonable and understandable" as long as the plan helps spur economic activity. Unfortunately, they go further and link aggressive spending in the short term with their desire to reduce Social Security and Medicare benefits in the longer term through so-called entitlement reform.                 The National Committee to Preserve Social Security and Medicare strongly opposes reducing Social Security benefits or cutting Medicare in order to balance the federal budget. Social Security, funded by a dedicated payroll tax, represents the bedrock retirement income of nearly every American. Social Security provides a modest benefit of only $12,000 a year for the average retiree. It is the only source of retirement income for nearly 20 percent of retirees and represents over half the income of nearly two-thirds of beneficiaries.               To urge cuts in Social Security as a trade off against current stimulus expenditures would do unnecessary harm to generations of retirees. Social Security and Medicare need to be adjusted modestly to reach solvency, but that is a manageable task. We don't have to enter into a grand bargain that pits the current recovery package against the income security of tomorrow's elderly.              The speed and depth of the current economic meltdown have reinforced the importance of Social Security as the basic foundation for retirement. The collapse of investment savings and the sharp decline in housing values have significantly reduced the retirement security of millions of Americans. Social Security was created in times much like today to provide Americans with a foundation of security they could count on in old age.  Surely, the lesson of the current financial crisis is not that we should reduce the protections of America's most successful retirement security program. Nor is the lesson that we should cut health benefits for those over 65 when health coverage for all Americans has emerged as an achievable goal in the very near future. 

                                                                        Cordially,

                                                                       Barbara B. Kennelly

President and CEO

The full letter to Congress is also on the National Committee's website at www.ncpssm.org

Failed Social Security Privatization is a Bush Achievement?

While we here at the National Committee certainly celebrated the failure of President Bush's attempt to destroy Social Security through privatization...it's a surprise to see President Bush now counts that failure as a...domestic success?  As part of his redefining-my-legacy-tour with friendly reporters and columnists, President Bush sat down and had lunch with Fred Barnes and William Kristol of the Weekly Standard.    Here's his take on his administration's domestic successes:
On domestic policy, Bush was asked if he made progress in some areas for which he hasn't and probably won't get credit. Topping his list was his unsuccessful drive in 2005 to reform Social Security. Bush said his effort showed it's politically safe to campaign on changing Social Security and then actually seek to change it. He also said it was important to have raised private investment accounts as an attractive option in reforming Social Security.
Of course, the American people don't see private investment accounts as an "attractive option" and the more President Bush pushed private accounts the more the American people understood they would destroy Social Security's guaranteed benefit. In fact, in the midst of the recent market meltdown the Center for American Progress reported:   
A person with a private Social Security account similar to what President George W. Bush proposed in 2005 that was invested in stocks retiring on October 1, 2008 after saving for 35 years (since 1973), would have seen a negative return on their account-an effective -0.6 percent net annual real rate of return-and lost $26,000 on the market.
Ultimately, Americans understand the inherent unpredictability of their 401K's, pensions and stocks and while most work hard to manage those assets carefully; as the current economy shows, even the best stewardship of private investments can't always avoid losses.  Social Security is the one stable and constant retirement income source seniors can depend on in good economic times and bad.  That is a true domestic success story.  One thankfully untouched by the Bush administration's privatization schemes.

Part D Enrollment Deadline Tomorrow!

O.K., so you've put off looking at your Part D prescription drug coverage (even though you know you should) and now the Part D deadline is looming. Whether you're a new enrollee or someone who's already covered...it's still NOT too late to take some time to review your options!  Current beneficiaries need to evaluate your current plan to ensure your prescriptions remain covered next year and at what cost.  When evaluating plans consider the three C's: 
Coverage - Does the plan cover your medicine, brand names or generics? What is the plan's coverage gap (doughnut hole)? Do you need more comprehensive coverage next year? Cost - What is the plan's monthly premium? Does the plan have a deductible? How does the plan handle co-payments? Convenience - Is your pharmacy in the plan's network?  Does the plan have a mail-order option?
The National Committee's Frequently Asked Question Booklet provides more detailed answers to many Part D questions.  You can see it on our website. For new beneficiaries, it's especially critical that you not let the daunting task of evaluating your prescription drug needs and the myriad of diverse plans delay your decision to enroll in Part D.  For every year of delay, you will be penalized.  Here's one example of how the enrollment penalty works: John was first eligible to enroll in Medicare Part D during the Initial Enrollment Period that began on November 15, 2008 . Despite his eligibility for drug coverage, John did not enroll in Part D. 
John waits until Nov 2009 to enroll for 2010 coverage (1 year)
  • At enrollment, national average premium is $30
  • His penalty added to each month's premium is 1 percent of $30 x 12 months = $3.60
John waits until Nov 2013 to enroll for 2014 coverage (5 years)  
  • At enrollment, national average premium is $40
  • His penalty added to each month's premium is 1 percent of $40 x 60 months = $24
John waits until Nov 2018 to enroll for 2019 coverage (10 years)  
  • At enrollment, national average premium is $53
  • His penalty added to each month's premium is 1 percent of $53 x 120 months = $64
  • His premium payment is now doubled because of the penalty
  • If he enrolls in a plan with a $30 premium, his payment is tripled because of the penalty
CMS also provides a drug plan finder tool on its website.  About now you're probably asking "Why does it have to be so difficult?"  We don't believe it should!  The National Committee believes Part D needs immediate changes to:   
  • Allow seniors to get prescription drugs directly from Medicare while requiring Medicare to negotiate the lowest prices for seniors, just like the VA.
  • Eliminate the lifetime penalty for seniors until this confusing plan is overhauled.
  • Eliminate government subsidies to insurance companies which would free up funds to close the costly coverage gap to seniors, known as the "donut hole".

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Pamela Causey
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Causeyp@ncpssm.org(202) 216-8378
(202) 236-2123 cell

Kim Wright
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Wrightk@ncpssm.org
(202) 216-8414

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