Retired and Bankrupt
As the great recession drags on it?s clear that the average American?s dream of retirement may be just that?a dream. Far from the fiscal hawks? mythology of ?greedy geezers? living high on the government hog or cow, or whatever farm analogy you prefer, it?s clear that a growing number of seniors are facing frightening fiscal futures.There have been a number of stories recently highlighting the realities facing today?s retirees. USA Today wrote:
The ranks of older bankruptcy filers also have been swelling rapidly. From 1991 to 2007, bankruptcy filings by those 65 and older increased by 150%, while filings in the 75-to-84 age group soared 433%, according to the Consumer Bankruptcy Project. Older Americans are staggering under debt because of a variety of problems ? from unexpected job losses late in life and underemployment to overwhelming medical bills and providing financial help to their children and grandchildren, analysts say. Making the issue even more serious: They have little time to climb out of debt, says Matthew Beatman, bankruptcy lawyer at Zeisler & Zeisler in Bridgeport, Conn.
A University of Michigan Law School study examined why Americans over 65 are the fastest growing demographic of bankruptcy filers and reports that seniors blame credit card debt.
And though older bankruptcy filers blame credit cards for their debt, they’re not the underlying cause of their problems. Much of the credit card debt resulted from attempts to supplement lost income. “When people in their 50s are laid off after they have been at the same company for 25 to 30 years, they find things have changed,” says Brian Grogg, a credit counselor at GreenPath Debt Solution in Farmington Hills, Mich. “They need to know more about computers. They find it harder to get a job.” And seniors who rely on Social Security are finding it insufficient. There will be no increase in retirement benefits in 2011 for the second year in a row. — USA Today
As we?ve reported here before, we can not afford to ignore thegrowing Retirement Income Deficit facing millions of Americans. Yet, that?s exactly what?s happening in Washington in the rush to balance the federal books on the backs of programs like Social Security and Medicare.
All Tricks & No Treats from the Fiscal Commission
Washington could have an especially frightening ?treat? for Americans this Halloween. The President?s Fiscal Commission and deficit-hawks in Congress have a terrifying new plan for America?s workers, requiringthem to stay on the job until 70 years old before qualifying for full Social Security benefits.Be afraid?be very afraid?
Social Security Sense and Nonsense
We don’t often employ the “cut and paste” style of blogging here but sometimes there’s a piece so good…it just doesn’t need any additional context or clarification. This is one of those posts. Consideradding this wonderful Social Security postfrom Paul N. Van de Water from the Center on Budget and Policy Priorities to your must-read, must-forward list for the week!
In a new paper, I?ve tried to correct some of the misinformation that critics of Social Security have been spreading about the program.Here are the facts. Social Security is a well-run, fiscally responsible program. People earn retirement, survivors, and disability benefits by making payroll tax contributions during their working years. Those taxes and other revenues are deposited in the Social Security trust funds, and all benefits and administrative expenses are paid out of the trust funds. The amount that Social Security can spend is limited by its payroll tax income plus the balance in the trust funds.The Social Security trustees ? the official body charged with evaluating the program?s long-term finances ? project that Social Security can pay 100 percent of promised benefits through 2037 and about three-quarters of scheduled benefits after that, even if Congress makes no changes in the program. Relatively modest changes would put the program on a sound financial footing for 75 years and beyond.Nonetheless, some critics are attempting to undermine confidence in Social Security with wild and blatantly false accusations. They allege that the trust funds have been ?raided? or disparage the trust funds as ?funny money? or mere ?IOUs.? Some even label Social Security a ?Ponzi scheme? after the notorious 1920s swindler Charles Ponzi. All of these claims are nonsense.Every year since 1984, Social Security has collected more in payroll taxes and other income than it pays in benefits and other expenses. (The authors of the 1983 Social Security reform law did this on purpose in order to help pre-fund some of the costs of the baby boomers? retirement.) These surpluses are invested in U.S. Treasury securities that are every bit as sound as the U.S. government securities held by investors around the globe; investors regard these securities as among the world?s very safest investments.Investing the trust funds in Treasury securities is perfectly appropriate. The federal government borrows funds from Social Security to help finance its ongoing operations in the same way that consumers and businesses borrow money deposited in a bank to finance their spending. In neither case does this represent a ?raid? on the funds. The bank depositor will get his or her money back when needed, and so will the Social Security trust funds.As far back as 1938, independent advisors to Social Security firmly endorsed the investment of Social Security surpluses in Treasury securities, saying that it does ?not involve any misuse of these moneys or endanger the safety of these funds.?Moreover, Social Security is the ?polar opposite of a Ponzi scheme,? says the man who quite literally wrote the book about Ponzi?s famous scam, Boston University professor Mitchell Zuckoff. The Social Security Administration?s historian has a piece on this topic as well.Unlike the frauds of Ponzi ? and, more recently, Bernard Madoff ? Social Security does not promise unrealistically large financial returns and does not require unsustainable increases in the number of participants to remain solvent. Instead, for the past 75 years it has provided a foundation that workers can build on for retirement as well as social insurance protection to families whose breadwinner dies and workers who become disabled.
More About Paul N. Van de Water
Paul N. Van de Water is a Senior Fellow at the Center on Budget and Policy Priorities, where he specializes in Medicare, Social Security, and health coverage issues.
Poverty and Seniors
There are just some records you don?t want to break. Unfortunately, the U.S. has shattered two of them, according to new numbers released this week by the Census Bureau. The income gap between the richest and poorest Americans is the widest on record and there are now more poor Americans today than in any time since the bureau has measured poverty. The Associated Press reports:
“Income inequality is rising, and if we took into account tax data, it would be even more,” said Timothy Smeeding, a University of Wisconsin-Madison professor who specializes in poverty. “More than other countries, we have a very unequal income distribution where compensation goes to the top in a winner-takes-all economy.”?The poverty gap between young and old has doubled since 2000, due partly to the strength of Social Security in helping buoy Americans 65 and over. Child poverty is now 21 percent compared with 9 percent for older Americans. In 2000, when child poverty was at 16 percent, elderly poverty stood at 10 percent. Safety nets are helping fill health gaps. The percentage of children covered by government-sponsored health insurance such as Medicaid and the Children’s Health Insurance Program jumped to 37 percent, or 27.6 million, from 24 percent in 2000. That helped offset steady losses in employer-sponsored insurance.?
How ironic that as evidence continues to show, over and over again, how critically important our nation?s safety net programs like Social Security and Medicare are for millions of Americans, so many in Washington continue to target these very same programs for cuts. And at what cost to millions of working Americans? The Center for American Progress addressed the issue of elderly poverty and seniors economic security in ?The Not-So-Golden Years?:
?Social Security is tremendously effective in helping seniors and their families stay out of poverty. Its benefits kept 14 million elderly Americans out of poverty in 2009. The Center on Budget and Policy Priorities estimated in an analysis of 2008 Census data that the elderly poverty rate would actually exceed 40 percent in most states without Social Security benefits. The majority of people kept out of poverty by Social Security are elderly, but the Census data shows almost a third of those kept out of poverty are under 65 and include more than 1 million children.?
The fact that America?s poor are worse off and adding more to their ranks while the wealthiest get richer can?t continue to be ignored in our national economic debate; particularly as some in Washington argue now?s the time to cut safety net programs for working Americans while extending tax cuts to the wealthy.
The Angry Rich
Paul Krugman?s New York Times column today is our selection for a ?Networthy Award? for outstanding coverage on the net. In ?The Angry Rich?, Mr. Krugman challenges the notion that the nation?s workers, retirees and middle class need to sacrifice even more than they already have in this economic crisis, so that America?s top 1% can keep their spoils of recent decades. Please take the time and forward to your friends, because preserving tax cuts for the wealthy while also proposing benefit cuts to Social Security is exactly the game plan proposed by too many, Republicans andDemocrats alike, in Washington today.
Anger is sweeping America. True, this white-hot rage is a minority phenomenon, not something that characterizes most of our fellow citizens. But the angry minority is angry indeed, consisting of people who feel that things to which they are entitled are being taken away. And they?re out for revenge.No, I?m not talking about the Tea Partiers. I?m talking about the rich.These are terrible times for many people in this country. Poverty, especially acute poverty, has soared in the economic slump; millions of people have lost their homes. Young people can?t find jobs; laid-off 50-somethings fear that they?ll never work again.Yet if you want to find real political rage ? the kind of rage that makes people compare President Obama to Hitler, or accuse him of treason ? you won?t find it among these suffering Americans. You?ll find it instead among the very privileged, people who don?t have to worry about losing their jobs, their homes, or their health insurance, but who are outraged, outraged, at the thought of paying modestly higher taxes.The rage of the rich has been building ever since Mr. Obama took office. At first, however, it was largely confined to Wall Street. Thus when New York magazine published an article titled ?The Wail Of the 1%,? it was talking about financial wheeler-dealers whose firms had been bailed out with taxpayer funds, but were furious at suggestions that the price of these bailouts should include temporary limits on bonuses. When the billionaire Stephen Schwarzman compared an Obama proposal to the Nazi invasion of Poland, the proposal in question would have closed a tax loophole that specifically benefits fund managers like him.Now, however, as decision time looms for the fate of the Bush tax cuts ? will top tax rates go back to Clinton-era levels? ? the rage of the rich has broadened, and also in some ways changed its character.For one thing, craziness has gone mainstream. It?s one thing when a billionaire rants at a dinner event. It?s another when Forbes magazine runs a cover story alleging that the president of the United States is deliberately trying to bring America down as part of his Kenyan, ?anticolonialist? agenda, that ?the U.S. is being ruled according to the dreams of a Luo tribesman of the 1950s.? When it comes to defending the interests of the rich, it seems, the normal rules of civilized (and rational) discourse no longer apply.At the same time, self-pity among the privileged has become acceptable, even fashionable.Tax-cut advocates used to pretend that they were mainly concerned about helping typical American families. Even tax breaks for the rich were justified in terms of trickle-down economics, the claim that lower taxes at the top would make the economy stronger for everyone.These days, however, tax-cutters are hardly even trying to make the trickle-down case. Yes, Republicans are pushing the line that raising taxes at the top would hurt small businesses, but their hearts don?t really seem in it. Instead, it has become common to hear vehement denials that people making $400,000 or $500,000 a year are rich. I mean, look at the expenses of people in that income class ? the property taxes they have to pay on their expensive houses, the cost of sending their kids to elite private schools, and so on. Why, they can barely make ends meet.And among the undeniably rich, a belligerent sense of entitlement has taken hold: it?s their money, and they have the right to keep it. ?Taxes are what we pay for civilized society,? said Oliver Wendell Holmes ? but that was a long time ago.The spectacle of high-income Americans, the world?s luckiest people, wallowing in self-pity and self-righteousness would be funny, except for one thing: they may well get their way. Never mind the $700 billion price tag for extending the high-end tax breaks: virtually all Republicans and some Democrats are rushing to the aid of the oppressed affluent.You see, the rich are different from you and me: they have more influence. It?s partly a matter of campaign contributions, but it?s also a matter of social pressure, since politicians spend a lot of time hanging out with the wealthy. So when the rich face the prospect of paying an extra 3 or 4 percent of their income in taxes, politicians feel their pain ? feel it much more acutely, it?s clear, than they feel the pain of families who are losing their jobs, their houses, and their hopes.And when the tax fight is over, one way or another, you can be sure that the people currently defending the incomes of the elite will go back to demanding cuts in Social Security and aid to the unemployed. America must make hard choices, they?ll say; we all have to be willing to make sacrifices.But when they say ?we,? they mean ?you.? Sacrifice is for the little people.
Retired and Bankrupt
As the great recession drags on it?s clear that the average American?s dream of retirement may be just that?a dream. Far from the fiscal hawks? mythology of ?greedy geezers? living high on the government hog or cow, or whatever farm analogy you prefer, it?s clear that a growing number of seniors are facing frightening fiscal futures.There have been a number of stories recently highlighting the realities facing today?s retirees. USA Today wrote:
The ranks of older bankruptcy filers also have been swelling rapidly. From 1991 to 2007, bankruptcy filings by those 65 and older increased by 150%, while filings in the 75-to-84 age group soared 433%, according to the Consumer Bankruptcy Project. Older Americans are staggering under debt because of a variety of problems ? from unexpected job losses late in life and underemployment to overwhelming medical bills and providing financial help to their children and grandchildren, analysts say. Making the issue even more serious: They have little time to climb out of debt, says Matthew Beatman, bankruptcy lawyer at Zeisler & Zeisler in Bridgeport, Conn.
A University of Michigan Law School study examined why Americans over 65 are the fastest growing demographic of bankruptcy filers and reports that seniors blame credit card debt.
And though older bankruptcy filers blame credit cards for their debt, they’re not the underlying cause of their problems. Much of the credit card debt resulted from attempts to supplement lost income. “When people in their 50s are laid off after they have been at the same company for 25 to 30 years, they find things have changed,” says Brian Grogg, a credit counselor at GreenPath Debt Solution in Farmington Hills, Mich. “They need to know more about computers. They find it harder to get a job.” And seniors who rely on Social Security are finding it insufficient. There will be no increase in retirement benefits in 2011 for the second year in a row. — USA Today
As we?ve reported here before, we can not afford to ignore thegrowing Retirement Income Deficit facing millions of Americans. Yet, that?s exactly what?s happening in Washington in the rush to balance the federal books on the backs of programs like Social Security and Medicare.
All Tricks & No Treats from the Fiscal Commission
Washington could have an especially frightening ?treat? for Americans this Halloween. The President?s Fiscal Commission and deficit-hawks in Congress have a terrifying new plan for America?s workers, requiringthem to stay on the job until 70 years old before qualifying for full Social Security benefits.Be afraid?be very afraid?
Social Security Sense and Nonsense
We don’t often employ the “cut and paste” style of blogging here but sometimes there’s a piece so good…it just doesn’t need any additional context or clarification. This is one of those posts. Consideradding this wonderful Social Security postfrom Paul N. Van de Water from the Center on Budget and Policy Priorities to your must-read, must-forward list for the week!
In a new paper, I?ve tried to correct some of the misinformation that critics of Social Security have been spreading about the program.Here are the facts. Social Security is a well-run, fiscally responsible program. People earn retirement, survivors, and disability benefits by making payroll tax contributions during their working years. Those taxes and other revenues are deposited in the Social Security trust funds, and all benefits and administrative expenses are paid out of the trust funds. The amount that Social Security can spend is limited by its payroll tax income plus the balance in the trust funds.The Social Security trustees ? the official body charged with evaluating the program?s long-term finances ? project that Social Security can pay 100 percent of promised benefits through 2037 and about three-quarters of scheduled benefits after that, even if Congress makes no changes in the program. Relatively modest changes would put the program on a sound financial footing for 75 years and beyond.Nonetheless, some critics are attempting to undermine confidence in Social Security with wild and blatantly false accusations. They allege that the trust funds have been ?raided? or disparage the trust funds as ?funny money? or mere ?IOUs.? Some even label Social Security a ?Ponzi scheme? after the notorious 1920s swindler Charles Ponzi. All of these claims are nonsense.Every year since 1984, Social Security has collected more in payroll taxes and other income than it pays in benefits and other expenses. (The authors of the 1983 Social Security reform law did this on purpose in order to help pre-fund some of the costs of the baby boomers? retirement.) These surpluses are invested in U.S. Treasury securities that are every bit as sound as the U.S. government securities held by investors around the globe; investors regard these securities as among the world?s very safest investments.Investing the trust funds in Treasury securities is perfectly appropriate. The federal government borrows funds from Social Security to help finance its ongoing operations in the same way that consumers and businesses borrow money deposited in a bank to finance their spending. In neither case does this represent a ?raid? on the funds. The bank depositor will get his or her money back when needed, and so will the Social Security trust funds.As far back as 1938, independent advisors to Social Security firmly endorsed the investment of Social Security surpluses in Treasury securities, saying that it does ?not involve any misuse of these moneys or endanger the safety of these funds.?Moreover, Social Security is the ?polar opposite of a Ponzi scheme,? says the man who quite literally wrote the book about Ponzi?s famous scam, Boston University professor Mitchell Zuckoff. The Social Security Administration?s historian has a piece on this topic as well.Unlike the frauds of Ponzi ? and, more recently, Bernard Madoff ? Social Security does not promise unrealistically large financial returns and does not require unsustainable increases in the number of participants to remain solvent. Instead, for the past 75 years it has provided a foundation that workers can build on for retirement as well as social insurance protection to families whose breadwinner dies and workers who become disabled.
More About Paul N. Van de Water
Paul N. Van de Water is a Senior Fellow at the Center on Budget and Policy Priorities, where he specializes in Medicare, Social Security, and health coverage issues.
Poverty and Seniors
There are just some records you don?t want to break. Unfortunately, the U.S. has shattered two of them, according to new numbers released this week by the Census Bureau. The income gap between the richest and poorest Americans is the widest on record and there are now more poor Americans today than in any time since the bureau has measured poverty. The Associated Press reports:
“Income inequality is rising, and if we took into account tax data, it would be even more,” said Timothy Smeeding, a University of Wisconsin-Madison professor who specializes in poverty. “More than other countries, we have a very unequal income distribution where compensation goes to the top in a winner-takes-all economy.”?The poverty gap between young and old has doubled since 2000, due partly to the strength of Social Security in helping buoy Americans 65 and over. Child poverty is now 21 percent compared with 9 percent for older Americans. In 2000, when child poverty was at 16 percent, elderly poverty stood at 10 percent. Safety nets are helping fill health gaps. The percentage of children covered by government-sponsored health insurance such as Medicaid and the Children’s Health Insurance Program jumped to 37 percent, or 27.6 million, from 24 percent in 2000. That helped offset steady losses in employer-sponsored insurance.?
How ironic that as evidence continues to show, over and over again, how critically important our nation?s safety net programs like Social Security and Medicare are for millions of Americans, so many in Washington continue to target these very same programs for cuts. And at what cost to millions of working Americans? The Center for American Progress addressed the issue of elderly poverty and seniors economic security in ?The Not-So-Golden Years?:
?Social Security is tremendously effective in helping seniors and their families stay out of poverty. Its benefits kept 14 million elderly Americans out of poverty in 2009. The Center on Budget and Policy Priorities estimated in an analysis of 2008 Census data that the elderly poverty rate would actually exceed 40 percent in most states without Social Security benefits. The majority of people kept out of poverty by Social Security are elderly, but the Census data shows almost a third of those kept out of poverty are under 65 and include more than 1 million children.?
The fact that America?s poor are worse off and adding more to their ranks while the wealthiest get richer can?t continue to be ignored in our national economic debate; particularly as some in Washington argue now?s the time to cut safety net programs for working Americans while extending tax cuts to the wealthy.
The Angry Rich
Paul Krugman?s New York Times column today is our selection for a ?Networthy Award? for outstanding coverage on the net. In ?The Angry Rich?, Mr. Krugman challenges the notion that the nation?s workers, retirees and middle class need to sacrifice even more than they already have in this economic crisis, so that America?s top 1% can keep their spoils of recent decades. Please take the time and forward to your friends, because preserving tax cuts for the wealthy while also proposing benefit cuts to Social Security is exactly the game plan proposed by too many, Republicans andDemocrats alike, in Washington today.
Anger is sweeping America. True, this white-hot rage is a minority phenomenon, not something that characterizes most of our fellow citizens. But the angry minority is angry indeed, consisting of people who feel that things to which they are entitled are being taken away. And they?re out for revenge.No, I?m not talking about the Tea Partiers. I?m talking about the rich.These are terrible times for many people in this country. Poverty, especially acute poverty, has soared in the economic slump; millions of people have lost their homes. Young people can?t find jobs; laid-off 50-somethings fear that they?ll never work again.Yet if you want to find real political rage ? the kind of rage that makes people compare President Obama to Hitler, or accuse him of treason ? you won?t find it among these suffering Americans. You?ll find it instead among the very privileged, people who don?t have to worry about losing their jobs, their homes, or their health insurance, but who are outraged, outraged, at the thought of paying modestly higher taxes.The rage of the rich has been building ever since Mr. Obama took office. At first, however, it was largely confined to Wall Street. Thus when New York magazine published an article titled ?The Wail Of the 1%,? it was talking about financial wheeler-dealers whose firms had been bailed out with taxpayer funds, but were furious at suggestions that the price of these bailouts should include temporary limits on bonuses. When the billionaire Stephen Schwarzman compared an Obama proposal to the Nazi invasion of Poland, the proposal in question would have closed a tax loophole that specifically benefits fund managers like him.Now, however, as decision time looms for the fate of the Bush tax cuts ? will top tax rates go back to Clinton-era levels? ? the rage of the rich has broadened, and also in some ways changed its character.For one thing, craziness has gone mainstream. It?s one thing when a billionaire rants at a dinner event. It?s another when Forbes magazine runs a cover story alleging that the president of the United States is deliberately trying to bring America down as part of his Kenyan, ?anticolonialist? agenda, that ?the U.S. is being ruled according to the dreams of a Luo tribesman of the 1950s.? When it comes to defending the interests of the rich, it seems, the normal rules of civilized (and rational) discourse no longer apply.At the same time, self-pity among the privileged has become acceptable, even fashionable.Tax-cut advocates used to pretend that they were mainly concerned about helping typical American families. Even tax breaks for the rich were justified in terms of trickle-down economics, the claim that lower taxes at the top would make the economy stronger for everyone.These days, however, tax-cutters are hardly even trying to make the trickle-down case. Yes, Republicans are pushing the line that raising taxes at the top would hurt small businesses, but their hearts don?t really seem in it. Instead, it has become common to hear vehement denials that people making $400,000 or $500,000 a year are rich. I mean, look at the expenses of people in that income class ? the property taxes they have to pay on their expensive houses, the cost of sending their kids to elite private schools, and so on. Why, they can barely make ends meet.And among the undeniably rich, a belligerent sense of entitlement has taken hold: it?s their money, and they have the right to keep it. ?Taxes are what we pay for civilized society,? said Oliver Wendell Holmes ? but that was a long time ago.The spectacle of high-income Americans, the world?s luckiest people, wallowing in self-pity and self-righteousness would be funny, except for one thing: they may well get their way. Never mind the $700 billion price tag for extending the high-end tax breaks: virtually all Republicans and some Democrats are rushing to the aid of the oppressed affluent.You see, the rich are different from you and me: they have more influence. It?s partly a matter of campaign contributions, but it?s also a matter of social pressure, since politicians spend a lot of time hanging out with the wealthy. So when the rich face the prospect of paying an extra 3 or 4 percent of their income in taxes, politicians feel their pain ? feel it much more acutely, it?s clear, than they feel the pain of families who are losing their jobs, their houses, and their hopes.And when the tax fight is over, one way or another, you can be sure that the people currently defending the incomes of the elite will go back to demanding cuts in Social Security and aid to the unemployed. America must make hard choices, they?ll say; we all have to be willing to make sacrifices.But when they say ?we,? they mean ?you.? Sacrifice is for the little people.