What Really Matters in the Social Security Debate
By NCPSSM | September 1, 2010
Dean Baker, co-director of the Center for Economic and Policy Research, reminds us of some key points we must all remember as Washington’s fiscal hawks try to persuade us America can’t afford Social Security– Points which are all too often ignored in the crusade to cut a program which hasn’t added one penny to our national debt.
This TruthOut piece is well worth your time and deserves this month’s Networthy Award:
Senator Simpson’s Quick Budget Quiz
Monday 30 August 2010
by: Dean Baker, t r u t h o u t | Op-Ed
President Obama is apparently content to have an abrasive and abusive senator’s son sit as co-chairman of his deficit commission. We can assume that these traits were a direct result of Sen. Alan Simpson’s privileged upbringing and he is not going to change now that he is in his late 70s.
However, even if the senator is not prepared to embrace norms of civility, it is reasonable to expect that he will do his homework. In order to help him in this process, here is a quick list of study questions on Social Security for Simpson as he carries through his assignment to co-chair President Obama’s deficit commission. Reporters and editors at major news outlets may also want to review these questions, since it seems that they could also use some additional background knowledge on the program.
1) How much higher are real wages projected to be in 2040 than today? In other words, how much richer do we expect the average worker to be 30 years from now?
2) How did the 2010 Trustees Report change the projections for 2040 wages compared with the 2009 report?
3) If we solve the projected shortfall in Social Security entirely by raising the payroll tax, what percent of the gain in real wages over the next 30 years would have to go to pay the tax?
4) What percent of real wage gains over the last 30 years was absorbed by the increase in Social Security payroll taxes?
5) What percent of the projected long-term budget shortfall is due to the inefficiencies of the US health care system?
6) How much wealth should we expect near retirees to have to support themselves in retirement?
7) What percent of older workers have jobs in which they can reasonably be expected to work at into their late 60s?
Certainly anyone on the deficit commission should be able to answer these questions off the top of their heads, as should any of the people reporting on Social Security or deficits in the media. But for those readers who do not fit these descriptions, here are the answers.
1) According to the Social Security Trustees Report, the average real wage is projected to be 48.7 percent higher in 2040 than it is today. In other words, if our kids work 30-hour weeks on average, they would take home about 10 percent more than we do today working 40-hour weeks. Senator Simpson has been known to quip about how our children and grandchildren will be living in chicken coops, but he’s just kidding, right?
As a practical matter, most workers have not seen much in the way of wage gains over the last three decades because such a large portion of wage growth has gone to those at the top: people like Senator Simpson and his co-chairman Erskine Bowles. This upward redistribution of income of this period, and the possibility that it could continue, is the reason that most people who are concerned about the well-being of future generations focus on the distribution of income. The impact of any potential increases in Social Security taxes on the typical worker’s income is trivial compared to the impact of a continued upward redistribution of income.
2) The 2010 Trustees Report had good news on the wage front. It assumed that health care reform would slow the rate of growth of employer provided health care benefits. This means that wages are now projected to grow more rapidly since Social Security money will be diverted to cover rising health care costs. In 2009, the trustees projected that the average wages would only rise by 37.2 percent between 2010 and 2040.
This means that the changes between the 2009 and 2010 Trustees Report imply that wages will be nearly 10 percent higher in 2040 than we previously believed. Everyone saw or heard the lead item in The Washington Post and on National Public Radio: “New Trustees Report Shows Our Children Will be Much Richer.” O.K., maybe they managed to overlook this part of the story, but Senator Simpson knows it.
3) Number 3 is somewhat of a trick question, since it depends on exactly the formula we use. The Trustees Report tells us that if we raise the tax tomorrow by 0.96 percentage points on both the employee and employer (1.92 percent in total), then the program will be fully solvent through its 75-year projection period. If we went this route, then it would mean that the tax increase would take up 5.9 percent of the projected wage growth over the next three decades.
But we may not want to impose a tax increase like this tomorrow. There is a huge amount of uncertainty about these projections, and the program faces no imminent shortfall. Suppose we raised both side of the payroll tax by 0.07 percentage points annually beginning in 2020 and continuing at least to 2040. Then by 2040, the rate would have risen by 1.47 percentage points on both the worker and employer. This would take up 12.0 percent of the projected wage growth over this period, leaving our children on an after-tax basis just 42.8 percent richer than we are. This doesn’t quite sound like Senator Simpson’s story about our kids living in chicken coops.
4) The Social Security tax increases of the last 30 years took 6.8 percent of average wage growth. This is in the same range as the portion of projected future wage growth that may have to go to higher Social Security taxes. The big problem in the story is that people have been living longer through time. If we want to enjoy a growing portion of our lives in retirement, then it will cost somewhat more money. This means that after-tax wages will grow Social Security more rapidly than would otherwise be the case.
It is worth noting that the gains in life expectancy also have not been distributed evenly. Most of the gains went to those in the top two quintiles of the income distribution.
5) The United States has by far the most inefficient health care system on the planet. We pay more than twice as much per person as people in other wealthy countries with very little to show for it in terms of health outcomes. If we had the same per-person health care costs as any other country in the world, the long-term budget projections would show huge surpluses rather than deficit.
6) Senator Simpson has repeatedly held up the image of affluent elderly getting Social Security checks. He talks of seniors driving up to their gated communities in their Lexuses. While this may describe Senator Simpson’s friends, it is not an accurate description of the vast majority of seniors, most of whom rely on Social Security for the majority of their income.
This is likely to be even more true of the baby boom generation that is at the edge of retirement. Few have traditional defined benefit pensions. They have seen much of the wealth they were able to accumulate destroyed by the collapse of the housing bubble and the subsequent plunge in the stock market.
7) Senator Simpson is still working into his late 70s as is, no doubt, the case with many of his friends also. These leads many deficit hawk types to think all workers should be expected to work until 70 or even older.
However, this is not likely to be as easy for most workers as it is for Senator Simpson. Forty-five percent of workers over age 58 work at jobs that are physically demanding or have difficult work conditions.
So, there you have it: seven key facts about Social Security, the budget and the well-being of workers and retirees. Senator Simpson should know this information inside out.
But does he? Try asking him. If he can restrain his curses and insults long enough, maybe we can find out if he is qualified for the position he holds. At this point, we only know that he has a poor understanding of the anatomy of barnyard animals.
Topics: Social Security, fiscal commission | 1 Comment »
There He Goes Again…
By NCPSSM | August 25, 2010
Fiscal Commission Co-Chair Alan Simpson made news earlier this year when he called seniors “lesser people” in a video interview, and now in an angry email he sent yesterday to the executive director of National Older Women’s League, Simpson says Social Security is “like a milk cow with 310 million tits“.
Apparently a blog post Ashley Carson wrote last spring entitled “Enough with the Pink Panthers Bit” just caught Simpson’s attention and ire which inspired his email response:
“I’ve spent many years in public life trying to stabilize that system while people like you babble into the vapors about ‘disgusting attempts at ageism and sexism’ and all the rest of that crap…take a look at the chart on Page 6 which I hope you are able to discern if you are any good at reading graphs – or anything that might challenge your biases and prejudices. Anyway, have a look at it and if you should choose, you might communicate with me. If you have some better suggestions about how to stabilize Social Security instead of just babbling into the vapors, let me know. And yes, I’ve made some plenty smart cracks about people on Social Security who milk it to the last degree. You know ‘em too. It’s the same with any system in America. We’ve reached a point now where it’s like a milk cow with 310 million tits! Call when you get honest work!” Al
Honest work…really? We’d argue that advocating for America’s seniors is pretty honest work.
The National Council of Women’s Organizations has written President Obama calling for Simpson’s resignation:
“The facts speak for themselves, but Mr. Simpson suggests that anyone supporting people who most need help and who deserve the benefits they paid for must be dishonest or stupid. Such open contempt goes beyond the pale and cannot be tolerated from someone in such a position of authority.”
Here is another good rap up of the issue in this Huffington Post piece.
Topics: Social Security, fiscal commission | Comments »
Why Americans Really Retire Early
By NCPSSM | August 19, 2010
We all know the real-life retirement picture for Americans is quite different than the ridiculous caricature of old cats living “ in gated communities and driv(ing) their Lexus to the Perkins restaurant to get the AARP discount”. This “greedy geezer” myth so frequently proferred by some in Washington, makes for good newspaper copy but of course bears no resemblance to the frightening reality facing millions of seniors who’ve seen their retirement savings decimated, their home values plummet and face new threats of cuts to Social Security through raising the retirement age, means testing or countless other ways.
That’s why we were especially glad to find a CNN piece that actually took the time to step outside the confines of Washington deficit-mania to ask a simple question: Why did you take Social Security early?
While the answers don’t surprise us because we talk to seniors each and every day…these answers certainly don’t fit the greedy geezer mythology promoted by so-called “deficit hawks” looking for a way to pay for years of failed borrow and spend policies that have absolutely nothing to do with Social Security.
Here is just a sampling of the comments. We really recommend you read the entire piece:
We’ve been dutifully searching for employment to no avail…We both are in good health and have 80 years of experience between us to offer. Although we each have a pension and some 401(k) funds, we have to start taking Social Security in order to make ends meet. It deeply saddens us to be in this position, but we have no choice. Paul Henderson, 62
At age 62, I was laid off from my job… I see no jobs on the horizon for anyone, let alone someone of my age. Still, I’m looking. Elaine Armstrong, 63That was just the beginning as I found myself in the world of age discrimination. Even though I had years of tech work for companies like Sony, Microsoft, etc. I was unable to get work. Then in 2005, my wife’s company decided to shut down her office. It took her 5 years to get a part-time job! Daniel Ryan, 63
Topics: Social Security, fiscal commission | 2 Comments »
Without Social Security_______???
By NCPSSM | August 13, 2010
Thank you to the many, many members of our Facebook and blog community who participated in our Social Security 75th Anniversary “Fill in the Blank” campaign. Your voices helped us tell the real-life success stories that are all too often lost as Washington insiders blithely propose benefit cuts to millions of Americans already suffering in this recession. As Social Security celebrates this anniversary it’s vital we remember the program’s impact on millions of working Americans and their families.
That’s why we asked you to fill in the blank for this statement:
”Without Social Security ___________”.
Your answers were heartfelt and enlightening, and tell Social Security’s success story better than we ever could.
Topics: Social Security | Comments »
How Many Times Do Americans Have To Say It? – Cutting Social Security is Not an Option
By NCPSSM | August 12, 2010
In poll after poll, the American people of all ages and political persuasions continue to send Washington a clear message—cutting Social Security in the name of deficit reduction is not “fiscal responsibility”.
The latest research survey on investment and deficit reduction was done by Greenberg Quinlan Rosner commissioned by the Campaign for America’s Future and Democracy Corps, with support from MoveOn.org; the American Federation of State, County and Municipal employees, and the Service Employees International Union.
They describe their findings this way:
“Voters are united on this key point: Social Security and Medicare are off-limits as a way to reduce the deficit. It is the threat to Social Security that leads many voters to prioritize deficit reductions. Voters instead want to see higher taxes on top income earners and big corporations.
As Social Security celebrates its 75th anniversary this week in the midst of this troubled economy, voters across the political divide want these programs defended.
68 percent said they would oppose making major spending cuts in Social Security and Medicare to reduce the deficit, while 28 percent said they would favor cutting those programs. That included 61 percent of Republicans and 56 percent of independents.
Strong majorities support progressive solutions for addressing the federal deficit: 63 percent back lifting the Social Security cap on incomes higher than $107,000 a year; 64 percent would favor eliminating tax breaks for corporations that outsource jobs; 62 percent would support a tax on excessive Wall Street bank profits. ”
These results mirror results of our National Committee Foundation poll conducted earlier this summer in which only 2% of Americans believe Social Security is a major cause of the deficit with 77% opposing any changes in Social Security as part of a deficit reduction plan.
Theye also echo what Americans told AARP in another recent poll in which 85 percent of adults oppose cutting Social Security to reduce the deficit; 72 percent “strongly oppose” doing so.
It’s clear the Washington Disconnect between working Americans and policy makers on the issue of Social Security couldn’t be larger.
Topics: Social Security, fiscal commission | Comments »
The Truth About Social Security
By NCPSSM | August 10, 2010
Guest Blogger: James Roosevelt, Jr.
President and CEO of Tufts Health Plan
Former Associate Commissioner of Retirement Policy
for the Social Security Administration
Co-Chair of President Obama’s Transition Team for
Social Security
Seventy-five years ago this month, President Franklin Delano Roosevelt, spoke these words:
“We can never insure one-hundred percent of the population against one-hundred percent of the hazards and vicissitudes of life. But we have tried to frame a law which will give some measure of protection to the average citizen and to his family against … poverty-ridden old age. This law, too, represents a cornerstone in a structure which is being built, but is by no means complete…. It is…a law that will take care of human needs and at the same time provide for the United States an economic structure of vastly greater soundness.”
My grandfather uttered these words on August 14, 1935, on the proud occasion of his signing the Social Security Act into law. They expressed a fundamental belief shared by him and my grandmother that all people should be free from fear of want and destitution. My grandparents possessed an almost boundless sense of optimism in the American people; freed from our fears, they had faith that we could move mountains. Thus, in 1933 President Roosevelt summoned the courage of the American people with the immortal words: “the only thing we have to fear is fear itself.”
While this anniversary is an occasion for celebration, I am also deeply troubled by the torrent of distortions, deceptions and falsehoods being unleashed by the enemies of Social Security. Their strategy is as simple as it is reprehensible: sow enough concern and fear about the program – fears that Social Security is not working, is bankrupting the country and cannot be counted on in the future – and you can convince people of the need for radical solutions.
While there are currently no frontal assaults on Social Security akin to what President George W. Bush unleashed in 2005, there are more insidious dangers. There are ominous signs that the National Commission on Fiscal Responsibility and Reform (better known as the deficit commission) has set its sights on Social Security. It is deeply disturbing that the co-chairman of that commission, former Senator Alan Simpson, has been using this platform to put forward the same baseless claims about the program: that it’s “insolvent, it’s paying out more than it’s taking in” or “there is no surplus in there,” “there” being the Social Security Trust Fund.
Fear, my grandfather said, is “nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.” I believe that if we hold the distortions, deceptions and falsehoods up to the light of truth, we can convert retreat into advance.
The truth about Social Security is that it has contributed to the financial wellbeing of almost every American family. It is completely solvent today because it has a dedicated income stream that covers its costs, and it is actuarially sound. Moreover, it will remain solvent for decades to come, with only minor adjustments. It has consistently run a surplus.
The point is that Social Security should be “off the table” in the deficit commission’s deliberations.
As Nancy Altman wrote in her book, The Battle for Social Security, “Armed with the proper insight and understanding, we Americans can assert our will and demand that the program envisioned by Franklin Roosevelt remain his enduring legacy.”
You can watch James Roosevelt’s full address at the National Press Club marking Social Security’s 75th anniversary here.
Topics: Social Security | Comments »
Social Security – An American Success Story
By NCPSSM | August 6, 2010
For the month of August we have been celebrating Social Security’s 75th anniversary with “Keeping the Promise” events each day of the month. Today we’re releasing the third video in our Anniversary series…”An American Success Story”.
Take a moment to watch and then forward it to your friends.
Topics: Social Security | 1 Comment »
The Truth about the Trustees Report
By NCPSSM | August 5, 2010
Here it is in a nutshell…the truth about the 2010 Social Security and Medicare Trustees Report. Of course, the facts don’t fit the crisis calls from fiscal hawks and the main stream media so don’t be surprised when most of these details don’t make the headlines in your local papers tomorrow.
Social Security is still fully funded for 27 years, a COLA increase unlikely for the second year in a row, and health care reform extends Medicare’s solvency
- The 2010 Trustees report shows recently enacted health care reform will strengthen Medicare.
Trustees project that health care reform’s Medicare provisions will extend solvency 12 years, from 2017 to 2029.
Health care reform was a vital first step; however, the work is not finished. Congress must continue to address long-range cost containment in private health care systems to avoid creating provider access problems for Medicare beneficiaries.
The 2010 Trustees report shows Social Security is not facing an immediate threat.
- Trustees project Social Security will be able to pay full benefits until the year 2037. After that, Social Security will have sufficient revenue to pay about 78% of benefits.
- Low inflation means 2011 is likely to be the second year of no cost of living allowance for beneficiaries. By statute, zero COLA’s would also mean no Medicare Part B premium increase for about three-quarters of all beneficiaries. However, the remaining beneficiaries, including newly enrolled seniors and higher income seniors, will see larger premium hikes in Part B to cover the difference. Premiums for Part D, the prescription drug benefit, are not subject to this limitation and are expected to continue increasing.
- The change in short-term projections is a short-term fiscal problem, not a Social Security problem. What is happening is the annual cash surpluses collected in payroll taxes only (ignoring other revenue sources like trust fund interest) are projected to be down for 2010 and 2011, not surprising given the high unemployment rate that the country is experiencing. Fewer workers mean fewer contributions. But the economy will rebound, and in the meantime the program is able to rely on income from interest on the $2.5 trillion in reserves the Trust Fund has accumulated. Annual fluctuations such as these are anticipated in the long-term projections by the Trustees – confirmed by the fact that the insolvency projection in 2037 has not changed.
- The Disability Trust Fund faces a more immediate threat. Trustees project the DI Trust Fund will be exhausted in 2018 and recommend a reallocation of the payroll tax rate between OASI and DI, as was done in 1994.
“The 2010 Social Security Trustees Report confirms that the Social Security program is weathering these difficult economic times, providing stability and security to millions of Americans rocked by the recession. In the face of this adversity, the Social Security program has stood its ground, and remains able to pay all benefits through 2037, the same date the Trustees projected last year. Americans should be encouraged by this good news from the Trustees’ Report. And contrary to the doom and gloom crowd’s crisis calls, the Medicare Trustees confirm recently enacted Medicare reforms will add years to that program’s solvency.”…Barbara B. Kennelly, President/CEO , The National Committee to Preserve Social Security and Medicare
Topics: Barbara B. Kennelly, Medicare, Social Security | Comments »
Dancing Grannies for Medicare
By NCPSSM | August 4, 2010
Here’s our favorite video of the month by far! More than 100 folks showed up in Manhattan on Medicare’s Anniversary to protest the Fiscal Commission’s targeting Medicare for cuts in the name of deficit control.
Topics: Medicare, fiscal commission | Comments »
Women will be disproportionately harmed by benefit cuts to Social Security
By NCPSSM | August 3, 2010
By Terry O’Neill, President, National Organization of Women
Social Security, one of our country’s most important and successful social insurance programs, is especially vital to women, who would be disproportionately harmed by the cuts in benefits some in Washington are now proposing.
The “three-legged stool of retirement” is meant to consist of a pension, personal savings, and Social Security. But all too often, women have neither a pension nor savings. In fact, fewer than one in three women has income from a pension. Moreover, after a lifetime of wage discrimination, women are far more likely than men to have little in the way of personal savings. The situation for women of color is particularly dire. According to a recent report by the Insight Center, women of color often have no personal savings, or even negative net worth, as they head into retirement.
As a result, Social Security is the mainstay for millions of older women. Every year, a major share of the nearly 24 million women age 62 and older who receive benefits are kept out of poverty because of Social Security. Often that monthly Social Security check is their only income.
The members of the National Commission on Fiscal Responsibility and Reform must act responsibly and reject any effort to reduce entitlement program benefits — now or in the future. Raising the retirement age to 70 would be an especially cruel benefit cut, forcing a hardship on millions of women (and men) who have physically demanding jobs, as our sister organization the Older Women’s League (OWL) has found.
If anything, Social Security benefits should be improved — especially for elderly women, because many exhaust their savings as they grow older, and for disabled, divorced and never-married women who have had modest incomes and have been unable to save and invest for retirement. Reducing benefits for these women would be calamitous.
Rather than cutting Social Security and putting millions of women’s financial security at risk, the Fiscal Commission should address the real causes of the deficit — unfunded wars, irresponsible tax breaks for the wealthiest, and an economic crisis caused by financial regulatory failures. Women are watching the commissioners, but will we be invisible to them?
Topics: Retirement, Social Security | Comments »
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