Here are Just a Few Things Americans Need to Know about Debt, Deficits, and Social Security
The National Commission on Fiscal Responsibility and Reform
holds its inaugural session tomorrow and it’s clear that cutting Social Security is a top priority for many commission members. Barbara Kennelly, President/COE of The National Committee to Preserve Social Security and Medicare was joined by economist and Center for Economic and Policy Research Co-Director, Dean Baker, and Social Security advocate, Dr. Maya Rockeymoore, President/CEO of Global Policy Solutions, to brief the media today on why targeting Social Security is not
the answer to our fiscal woes.
“Simply put: Social Security has not contributed one thin dime to the current deficit. It should not be used as a “piggy bank” to pay our way out of the fiscal hole we find ourselves in. Social Security has its own dedicated source of revenue and it is fully financed for decades to come. In fact, Social Security is the only major government program that has been running sustained surpluses over the years, and this has helped mask the true size of the real deficit.” Barbara B. Kennelly, President/CEO, NCPSSM
“No one disputes that Social Security is fundamentally sound for many years into the future nor that the bulk of our long-term deficit problem is attributable to a broken health care system. It is not acceptable to take benefits from people who have worked and paid for-- and need -- their Social Security benefits, because our representatives in Congress are afraid to confront the pharmaceutical industry, the insurance industry and other powerful interests who drive up the cost of health care." Dean Baker, Co-Director, CEPR
The economic recession has hit America’s seniors and baby-boomers especially hard as home prices have plummeted, savings evaporated and financial security is still a serious concern for many.
"The Commission's interest in reducing Social Security as a way to meet the nation's fiscal challenge is ill-advised given the job insecurity, food insecurity, housing insecurity and economic insecurity facing many American families. The destruction of wealth caused by the financial crisis means that many more Americans will rely heavily on Social Security's retirement, disability, and survivor benefits well into the future. The Commission needs to be discussing how to make Social Security's benefits stronger not weaker."
Dr. Maya Rockeymoore, President/CEO, Global Policy Solutions
The National Committee has released the first in a series of videos focusing on Social Security and efforts to cut benefits in the name of fiscal responsibility. Part One entitled, “Social Security: Yours, Mine and Ours”
can be found on our YouTube channel.
When you think of the people in your life who receive Social Security, do these descriptions fit?
“70- and 80-year-old people living in gated communities, driving their Lexus to the Perkins Restaurant to get the AARP discount. I mean, it's unbelievable. " Fiscal Commission co-chair, former Senator Alan Simpson, NPR, April 2010
Do they live in..?
“protracted golden years of idleness... Deranged by the entitlement mentality fostered by a metastasizing welfare state...(who) now have such low pain thresholds that suffering is defined as a slight delay in beginning a subsidized retirement often lasting one-third of the retiree's adult lifetime.” George Will, Washington Post, April 2008
Do your parents and grandparents use Social Security to...?
“... subsidize a cushy retirement, so seniors could jet set all across the globe on vacations...and too many people rely and count on Social Security funding their weekly shuffleboard tournaments.” Glenn Beck, Fox News, April 2010
We thought not.
But this is exactly how America’s retirees, who’ve invested throughout their entire working lives to fund Social Security’s modest retirement income, are being portrayed by opinion makers in Washington who hope the President’s Fiscal Commission
will balance our books through cuts in Social Security
Now is the time to Tune Out the Noise, generated by a well-financed anti-Social Security cabal.
If this fiscal commission has any hope of truly dealing with our nation’s fiscal woes, it’s important we start with some key facts
No one’s getting rich on Social Security
. Social Security benefits are modest. The average benefit for today’s retiree is only about $14,000 per year — or about $1,300 per month.
Social Security is the cornerstone of retirement.
From the program's beginning, it was intended to be a base of protection, supplemented by private pensions and savings, not an individual's sole source of retirement income. Today, nine out of ten people over age 65 receive Social Security benefits. Two out of every three Social Security beneficiaries receive over half of their income from Social Security, and it's the only source of income for nearly one-in-five seniors. Without Social Security, most older Americans would live in poverty.
Social Security is more than just a retirement plan.
Social Security means life insurance for workers and their families:
One in seven Americans will die before reaching age 67. Many workers do not have life insurance to protect their families from the loss of the earnings of their primary breadwinner. What workers may not realize is that their payroll taxes entitle their families to survivor's benefits, providing life insurance protection worth over $433,000.
Social Security means disability insurance for workers and their families:
Three out of ten of today's 20-year-olds will become disabled before reaching age 67. Yet 75% of the private sector workforce has no long-term disability insurance. Individuals with a prior history of medical problems or who work in industries with a high rate of injury frequently find it prohibitively expensive or impossible to obtain coverage. Many workers don't realize their payroll taxes are also buying them this critical protection.
Social Security’s foes have promised they’ll leave current retirees alone
in their quest for cuts; however, what they didn’t understand during President Bush’s campaign to privatize Social Security,
clearly don’t understand now, is that seniors want the same protections for their children and grandchildren when they retire. Seniors know that near-retirees
took an especially hard hit with the collapse of the housing bubble and the stock market plunge.
Cutting Social Security and Medicare at a time when these Americans are facing skyrocketing health care costs, no COLA, shrinking home values, decimated savings and a shaky economy will leave potentially millions of working Americans facing reduced incomes and even near-poverty level incomes in their retirement.
Is this really the future our nation envisions for future generations of Americans? When someone tries to tell you we can’t afford Social Security, our response should be...we can’t afford a future without
So far this week, we’ve talked about the upcoming Presidential Fiscal Commission
meeting, debt, deficits, and Social Security. At this point, it’s fair to ask, why would Social Security become the primary target for this commission? While Fed Chairman Ben Bernanke says, “That’s where the money is” we also looked to history
for the answer.
The promise of secure benefits is a “hoax”, the taxes paid into the trust fund are “wasted” by the government rather than prudently invested and “the so-called reserve fund…is no reserve at all”.
Sound familiar? That’s because it is. You’ve heard the same core argument made most recently by President George Bush
, now multi-billionaire and fiscal hawk Peter Peterson
, David Walker, and countless other conservatives on Fox News and Capitol Hill. However, this particular statement was made by Republican presidential hopeful, Alf Landon
, in 1936 before
the first Social Security check had even been delivered.
Regardless of the decade or the specific approach, the underlying message continues to be the same. “Social Security won’t be there for you”…“Social Security is flawed” and the newest deficit-hawk incarnation…“we can’t afford Social Security”. This, in spite of the overwhelming facts to the contrary.
Creation of a fiscal commission has been a top priority for those leading the anti-Social Security clarion call, namely David Walker and the Peterson Foundation. Wealthy financier and former Nixon Commerce Secretary, Pete Peterson
has invested $1 billion dollars of his personal fortune to convince the nation that Social Security and Medicare are to blame for our current fiscal woes. This time the same-tried and true “Social Security won’t be there for you” message is wrapped in a cloak of fiscal responsibility
Peterson is no stranger to the battle against America’s retirement safety net. He’s called the current cost of living increases
in Social Security, which provide adjustments of roughly 3% a year, “one of the greatest fiscal tragedies of American history” because he considers them excessive. At the same time, Peterson steadfastly defends a controversial private equity tax break that benefits America’s wealthiest investors. So much for fiscal responsibility.
So what do these “fiscal hawks” really want for Social Security? Robert S. McIntyre, Director of the Citizens for Tax Justice
offered this analysis:
“Along with tax cuts for the rich, he explicitly endorses tax increases for the poor and the middle class as well as sharp reductions in what average families receive from the government. But because Peterson cloaks his goals in the rhetoric of progressivity, the press has fawned over him. The misleading notions that entitlements are running up the deficit, stealing from future generations, and maintaining the elderly in affluence while young people suffer, have become received wisdom for many.”
Peterson's also a long time advocate of turning Social Security over to Wall Street, and he said this
before the last major Social Security reforms were enacted:
“...even if Social Security were able to survive indefinitely, the time would be ripe to re-examine its premises...If we were starting fresh today, a different system would deserve serious consideration—one in which each generation of workers, individually and through public taxes and funds, saved amounts that were adequate to support its own needs during retirement.”
“Social Security, one of the principal legacies of the New Deal, must be rescued and transformed during the next few years. Otherwise it will visit upon our children the same conditions of economic chaos that attended the system's birth.”
So when someone tells you “we can’t afford Social Security” remember the countless Washington think-tankers, Social Security foes and their allies in Congress who have spent their careers and millions (eventually billions) of dollars selling us that exact message. Ultimately, American workers and their families must sort the facts from the fiction
and in the end we must not Buy the Lie
we’re being sold on Social Security.
Central to persuading Americans that Social Security is broken is the meme offered by President Bush during his privatization campaign 5 years ago, that there is no trust fund
or on alternate days that the trust fund is full of worthless IOU’s
This failed pitch is still the cornerstone of the fiscal hawks’ campaign to erode public support for Social Security. The Cato Institute described their long-term strategy (implemented after the last major Social Security reform in 1983) this way:
“the aim is to weaken political support for the present system when the next financial crisis appears.” Achieving a Leninist Strategy, 1983
So here we are. As promised, the American people have been bombarded
with a steady stream of pronouncements that Social Security is bankrupt, broken, or just too expensive. In truth, what these folks really
mean is that they don’t Washington to honor its obligations to the Social Security trust fund.
Back in 2005, the Center for Economic and Policy Research
“defaulting on the trust fund would transfer more than $1 trillion from the bottom 95 percent of the income distribution to the richest 5 percent. The richest 1 percent of families would walk away with nearly $750,000 each.”
According to the 2009 Social Security Trustees report
, $2.6 billion in annual surpluses have been collected since 1983 in anticipation of baby boomers’ retirement. Last year alone, workers contributed $137 billion more to Social Security than was paid out in benefits. That’s real money contributed by real workers, no matter how Social Security’s foes claim otherwise. The Trust Funds were also credited with $116 billion in interest from earnings, which represented an effective annual rate of return of 5.1 percent.
The National Committee’s policy department describes the Trust Fund Surplus
Because Social Security takes in more in taxes than it spends in benefits, it has a current surplus of $2.3 trillion invested in bonds. A bond is like a loan to the federal government that earns interest. While the federal government uses the money loaned by the Social Security Trust Fund to pay for other government spending, just as with other holders of U.S. securities, the government is legally obliged to repay the holder when the bond comes due. There has not been one case of the government failing to pay a bond holder.
But you’re thinking, “wait a minute didn’t I read Social Security is already
Economist Henry Aaron explains how recent media coverage
of the recession’s impact on Social Security’s short-term finances has clearly missed the mark:
"Much is being made these days of the projection that benefit payments will exceed earmarked payroll tax revenues. The New York Times treats this development as front-page news. Unfortunately, there is almost no genuine news in this “news.” And, the story contains an important factual error.
The reporter, Mary Williams Walsh, writes:
“[Social Security’s] so-called balance is, in fact, a history of its vast cash flows: the sum of all of its revenue in the past, minus all of its outlays. The balance is currently about $2.5 trillion because after the early 1980s the program had surplus revenue, year after year. Now that accumulated revenue will slowly start to shrink, as outlays start to exceed revenue [sic].”
Aside from the ungrammatical character of the last part of this quotation, Ms. Walsh got a key fact wrong. What she calls “accumulated revenue,” which is usually labeled as “reserves,” is going to rise, not fall, this year and next year and for several years to come."
In fact, the Congressional Budget Office anticipates cumulative surpluses of well over $1 trillion in the next decade. That’s money the federal government owes America’s retirees – and money this Fiscal Commission should not be allowed to use to balance the books in response to a well-financed anti-Social Security campaign.
Contrary to popular myth promoted by Wall Street billionaires, the main stream media, and Washington’s so-called deficit hawks, Social Security is not
to blame for the nation’s fiscal problems or our bleak debt and deficit picture. To the contrary, Social Security’s trust fund surplus has been used for years to help balance the federal books. Without it, things would look much bleaker. Yet, the economic recession and the deficits it has caused have given Social Security’s foes a political opportunity to “go where the money is”
to trim rising deficits.
Economist Dean Baker
, with the Center for Economic and Policy Research, describes this deficit hysteria this way:
This is essentially the story of the latest attack on social security. Everyone who looks at the projections agrees; the scary budget stories being hyped in the media and by the Wall Street crew are driven almost entirely by projections of exploding healthcare costs. But instead of proposing ways to fix the healthcare system, these deficit hawks want to attack social security. They tell us that fixing healthcare is hard. By contrast they think that cutting money from social security will be relatively easy.
The facts on this are straightforward and known by everyone involved in the budget debate. The US healthcare system is broken. We pay more than twice as much per person as the average for other wealthy countries...it is easy to show that if we contain healthcare costs then our budget problems are relatively minor. In fact, the current projections of enormous budget deficits two or three decades out would flip over to projections of enormous budget surpluses if our healthcare costs were comparable to those of any other wealthy country.
Logic would dictate that our top priority should be getting our healthcare costs under control. But fixing healthcare is difficult because, as we saw in the healthcare debate, this means confronting the health insurance industry, the pharmaceutical industry, the medical supply industry, highly paid medical specialists and other powerful lobbies. The deficit hawks don't want to fight this fight. Defeating these powerful interest groups would be a hard fight. And for the deficit hawks it would likely be an especially painful fight since these are their friends.
Again, let’s not forget that Social Security has not contributed one dime to our growing deficits
; however, that hasn’t stopped deficit hawks from conflating the two to achieve their ultimate goal, Social Security benefit cuts
Seniors and their families want fiscal sanity returned to Washington; however, we should not be considering cuts to the very programs which have kept millions afloat during this recovery.
Will this Presidential Commission, rise above the political rhetoric, do the right thing, and ensure Social Security does not become a piggy bank to pay for the fiscal failures of the past?
We certainly hope so -- the future of generations of Americans depends on it.
Have a Social Security or Medicare question?