Social security cuts offered…why? Irresistible to Obama.
There is no crisis with Social Security. Social Security is not going broke. Social Security adds NOTHING to the deficit. Social Security is not welfare.
Update: Pelosi says she can live with it
There are many options to address issues for the program, which are not offered as part of Pres. Obama’s insistence on keeping Social Security on the table and front and center. Perhaps the ‘chained cpi’ is abstract enough to look harmless, and trying to ‘fix’ a possible problem decades in advance doesn’t appear to be simply weird?? From comments comes this note from Dale Coberly. There are several other plans carefully thought out that fix things if needed…
A reader suggested I check the results of the “one tenth of one percent tax increase” against the recent bad news from the Trustees.
I looked at the result of increasing the tax one tenth of one percent for each the employee and the employer whenever the Trustees project short term actuarial insolvency. The results were the same as before the recession: an average increase of one half of one tenth of one percent increase on the combined employer-employee tax over the seventy five year actuarial window results in no insolvency whatsoever.
The effect of the Recession has been to move forward about six years the date of the first one tenth of one percent increase to about 2018.
By 2033 the tax would have been increased about one and a half percent for each, while wages will have gone up about 25%. Workers will have MORE money in their pockets AND will have paid for a longer retirement at a higher standard of living.
There is no crisis. Social Security is not going broke. Social Security adds NOTHING to the deficit. Social Security is not welfare.
Over the whole century and into the next, the SS tax would need to be raised another one percent, while wages will have gone up over one hundred percent.
What the bad guys have done is looked at the possible need for the tax raise, assumed that we will not be smart enough to raise the tax and called the difference “a huge debt.”
There will be no debt. But if people are not smart enough to realize that if they are going to live longer they are going to have to put aside a little more to pay for groceries after they can’t work any more, then they are going to have to learn to live on a little less .
They could even do that. It wouldn’t be wise, but at least it wouldn’t be as stupid as letting them “fix” Social Security in a way that destroys its value as insurance. And that’s all it is: a way to insure your own savings against inflation, market losses, and personal bad luck. Even against recessions.
But unless the people tell the president and the congress… that’s exactly what they will do” “Fix” it.. the way a two year old fixes his daddy’s watch.
David Duyan offers some ideas on the current issues:
- What Chained CPI Means, and Why a Cut in a Time of Inadequate Social Security Benefits Makes No Sense
“Workers will have MORE money in their pockets AND will have paid for a longer retirement at a higher standard of living.”
End of story. Keep it that simple.
According to the 2007 CBO report Options for Social Security the chained CPI will “solve” about one third of the projected shortfall.
Since a tax raise of forty cents per week per year over the same time would solve the entire projected shortfall, it looks as though the chained CPI is going to save workers about 13 cents per week per year while their wages are going up eight dollars per week per year.
Of course the chained CPI is going to cost them a thousand dollars a year when they are too old to do anything about it.
Makes you wonder who the President’s financial advisor is.
Is there anybody out there who can explain the insanity of this to him?
Is there anyone out there that can explain this insanity to me?
something everyone seems to be missing; changing the computation for the COLA not only affects social security, but all other government workers and pensions that have a COLA clause in their contracts, like postal employees…this is a mass screwing, not just the elderly…
It is irresistable to Obama because he really believes in Reagan. I am now convinced that Obama see’s himself accomplishing what he believes Reagan could not. What Obama does not get is that what Reagan et al wanted to do was not possible because it was not real (as they found out later having to raise the rates).
Plus he’s a lawyer and to them compromise is always the goal and everything is always in flux of compromise. Nothing is ever held as a solid necessity. Hell, they would compromise away mother nature’s ratio of oxygen in the atmosphere if someone put it up for negotiation.
And Nancy Pelosi? Glen Greenwald called it right after the election that it would be all thearter ultimately with the dems falling in line selling it as the best could be done. To many like Rep DiFazio I heard him say this morning that he needs to “see the whole package”. You know what that means, he’s ready to give in.
give in to what? the R’s have no hand.
they can’t shut down the government, whatever they say. the bush tax cuts expire if they do nothing. if SS is left alone, that is the second best outcome for the people (second to raising the tax a tiny amount and taking “the crisis” off the table forever.)
if Obama and the Dems “give in” to this it’s because the fix is in.
FDR is likely spinning in his grave.
Obama is doing what he always wanted to do: to introduce a new paradigm for politics to replace the New Deal vs. Conservative models we have now.
He wants to erase the divide between R’s and D’s. I don’t. I suspect other people–a lot of them–join me in that.
But O just wants a whole bunch of technocrats running the country by consulting with the plicy/planning people of the corporations/financial institutions who really run things.
The pols in Congress don’t care about what the people want as long as they stay in office. So, they’ll go along with this President and “comprimise”. About what? About what “everyone knows”: to wit, we have to fix the deficit by reducing SS benefits. Period.
So, read this link to eschation.blog for a better version of the story. http://www.eschatonblog.com/2011/10/centrists.html
i didn’t see where the quoted passage was from.
What O and Dems may not understand is that these “experts” and their bosses are criminals. What they want is power. And when they have it we are in for the kind of aristocracy that ruled Egypt for five thousand years.
Spend some time with your local Dems, and I think you will find their leadership is entirely sold out. The rank and file are kept busy with feel good projects that have no effect on serious policy whatsoever.
There is no debt crisis. The U.S. became Monetarily Sovereign on August 15, 1971. At that instant, it acquired the unlimited ability to pay all its bills.
Even if all federal taxes, including FICA, dropped to $0, the U.S. could support all its spending. It could provide free Social Security at double the benefits.
It could provide free Medicare for every man,woman and child in America.
And for those of you whose knee-jerk reaction is to worry about hyper-inflation and like to toss around the words “Weimar Republic,” know this: The U.S. never has had hyperinflation — not in its entire 235 year histor — not during wars or depressions.
However, we still are in a recession, which will get worse if we cut deficits. So which would you like to cure: Our current recession or something that never has happened in the history of the U.S.?
There is absolutely no reason to cut the deficit, except for one thing, but you’ll have to read why at:
Rodger old boy
I am sure that the government could just print a moderate amount of money.. enough to keep up with a rising GDP.. and even spend it doing good… and it would not have disastrous consequences.
But an “unlimited” amount? no.
Also, I think we still live in a country that likes to pay its bills. It helps keep our heads on straight if we know where the money is coming from and where it is going.
Without “money” and all the books and ledgers and laws, we could no doubt live in a communal paradise sharing everything we have, and no doubt each working as hard as he could at what he does best. This would be essentially what you would have if you just “printed” money… except that people would lose track of just who owed who how much and whether the “money” kept up with that.
But I agree with you, except for “politically” there is no need to cut the deficit at this time. But if we are going to cut it, the way to do it is by raising the taxes of those who cut their taxes in the first place.
thank you. i am trying to keep it simple.
Thank you for your excellent blog. I’ve read that when the salary cap was initially put in place, it covered 90% of wages. But over time (and mainly as a result of faster income gains for the top end of wage earners) that the FICA salary cap now only covers approx. 80% of wages. True? If true, it would be worthwhile to calculate what both the new cap dollar amount and the payroll rate would end up being to be “revenue neutral” at the 90% level. Then use that payroll rate as the baseline on the 1/10th of 1 percent increases. I wonder if we would even hit the current (that is the 6.2%) rate.
rjs good point and let me add that the COLA that is applied to Social Security also is applied to Veterans Disability Pay. Let it be noted that the GOP insists that we cut benefits for granny AND amputee war heroes (typically young folks who will rely on COLAs for decades). And that Obama says this is acceptable.
The bottom line is, none of the people negotiating with our lives will ever have to face some of the cruel choices many of us will have to make. Everyone on The Hill is living with – and amassing resources – the likes of which the people out here, jobless and pension-less, can barely imagine. The bubble that encircles these clowns is thicker than plexiglass
according to 2007 CBO report, raising the cap to cover 90% of earnings would pay about one third of the “gap.” since raising the tax one half of one tenth of one percent per year over the same time would pay 100% of the gap, and that one half of one tenth of one percent is about forty cents per week, i’d guess that raising the cap would save about 13 cents of that.
Because of the recession it would be better to raise the tax one full tenth of one percent per year starting now… or about eighty cents per week per year. I would guess that raising the cap would still only pay about 13 cents of that (different time periods).
I’ll have to check to see what the actual dollars amount of the cap would be in that case, and most important, if the people who would be taxed the extra amount would get commensurate benefits.
the CBO report was from 2010. raising the cap to cover 90% of earnings would put the cap at about 150k, and their benefits would be increased.
This might be sellable to them… if they figured the extra tax was a reasonable price to pay for the extra insurance… I am guessing their SS benefit would go from about 26k to about 35k. I don’t think they would be happy with that ratio.
In any case I would prefer to pay the extra 13 cents per week and keep Social Security “worker paid.”
you don’t want welfare. it’s ugly.
What Coberly said.
Everyone interested in actual SS numbers should read that CBO 2010 report ‘Social Security Policy Options’ or just refer to special figure 1. CBO scored 30 different policy options taken in isolation and although some would interact if enacted together for the most part you can treat the fixes as a cafeteria plan and mix and match to reach your 0.6 target. For example there is one fix that closes 0.9 of that 0.6 which makes room for proposals that shift benefits to the bottom in a way that still mets out at 0.6. Now in the event I agree with Dale that this particular combination adds up to ‘welfare’ and moreover that that would be a bad thing. But your views may vary.
The point being that most obvious changes to SS have already been scored, all you need to do is Google the cited document.
PJR, changing the computation of the inflation adjustment also affects tax bracket indexing, which means that it will adjust for inflation slower than before…
every way we turn, they’re taking another ounce of flesh…
Give in to Obama as Nancy O explained in a longer version of what I’m saying. It’s the lawyer in him and the other polls.
It’s not giving into the repubs that is of concern, it’s the giving into Obama that is the concern.
When DiFazio is saying he’s willing to see what the O plan is when he had been the one out front with Sanders saying no to anything related to SS and debt deals, you know we’re close to the edge. It’s not the fiscal edge, it’s the middle class edge.
The world according to Yglesais says granny is dead or sinking weight economics and that is why “Why The Powers That Be Hate Social Security”:
I realize that Yglesias is trying to be funny. But he’s wrong anyway.
The people who hate Social Security ARE insane. They love money (literally. they may love the idea what money will buy them, but just looking at money, or numbers in an account gives them the only real pleasure they are capable of experiencing) and they hate people. If you doubt that, pay attention to what they say when they are careless, and, of course, to what they do.
Second… granny is NOT getting “free money.” She paid for her own damn benefits. I don’t know why learned economists can’t understand that.
The idea that fewer taxes automatically translates into job creation is a myth, but they tout it anyway, just as they still preach “trickle down”, and other self-serving BS.
And if Granny has to stay in the work force longer (as if anyone will keep her on, she being a more expensive employee, generally speaking, that means fewer openings for all the 20-somethings, who aren’t exactly being snapped up in today’s job market.
From Joan Walsh, at Salon: Even some Democrats like to depict Social Security recipients as greedy geezers living well while the younger generation struggles. So it’s worth remembering: almost 70 percent depend on Social Security for more than half of their income; for 40 percent, it’s more than 90 percent of their income. And average benefits are less than $15,000 a year. This is because incomes have stagnated but also, pensions have gone the way of the VCR. After decades of declining, poverty rates for seniors are now climbing. We should be expanding Social Security, not cutting it.
It can be argued (and is) that people just “need to save more for their old age”, “fully fund their 401k’s and take advantage of the employer match” (some employers don’t provide a match, Jack),and other such obvious advice. Can’t recall her name, but an econ prof. on the Left Coast ran the numbers and said it would be impossible for anyone in the median wage strata to totally fund their retirement this way, what with the longer life spans, stagnating wages, etc.
Social Security IS saving for your old age. What the hell do those bastards think the payroll tax IS?
SS is the ONLY way ordinary workers have of protecting at least part of their savings from inflation and bad days on the market.
No. no. you are invited for your stupidity to think that pay as you go “really means” that you are paying for someone else’s greedy granny. Because, you see, when you buy a stock or bond, no one else touches your money, much less spends it. it just lies there compounding until you are ready to take it back.
Coberly, obviously I didn’t make my own views clear. I know SS is saving for my old age; been doing it for over 50 years.
My point, badly made, was that over and above that, we worker bees are expected to also pay into privatized pension plans, aka, IRAs and 401k’s (gifts that keep on giving to Wall St), as well as buy a home (keep the buildling and real estate biznizes happy), buy a car or two every 5 years, send our 2.5 kids to college, etc. And yes, I realize that IRAs and 401k’s are also “saving for our old age”. The professor mentioned noted in her research that even doing that wouldn’t enable most of us to fully fund a decent retirement, sans Social Security.
Sandi methinks (based on long experience) that Dale didn’t mean you (Sandi) when he blasted certain ‘you’s for stupidity.
i read it more as a call to “let’s me (dale) and you (sandi) take it right to the dumkopfs who don’t get it”
He just didn’t pause for the “Welcome to the team” piece.
Thanks, Bruce. I should read between the lines a little better. 🙂
Bruce is correct. I did not mean you. I meant “you”: that is, “them.”
Sometimes I just get overwhelmed with the evil and stupidity of it all and revert to my native dialect.
Thanks, Bruce, for translating.
You make my chest and chest stitches hurt from the laughing at your comment to Sandi. I knew what you meant by your comments also.
Most of us are in a rather peculiar predicament with SS and the attempts to undercut us. We can not retire and should just die to make Boehner, McConnell, Corker, the Repubs (including teabaggers [unpolished Repubs]) happy.
take car of yourself. leave the apoplexy to me.
but you left out Nancy Pelosi who says the chained CPI “will strengthen Social Security.”
See that Social Security over there, standing proud and strong. It’s too bad about all the people that had to die to strengthen it.
But what do you want… a strengthened Social Security or a lot of old people lying around not working?
Or even worse, some not yet old enough to die people using their own money to take some time off from work.
coberly, it isnt going to be the tea party that will impose chained CPI on social security; boehner couldnt even get them in line to pass an extension of bush tax cuts for all but those earning a million;
the only way the grand bargain flies is if pelosi lines up the Dems behind it, which is certainly possible; delong even thinks pelosi might back boehner for speaker…
“says the chained CPI “will strengthen Social Security.””
So will 40 cents per week per year.
well, just so you know
i have been saying for about ten years now, “don’t trust the Democrats on Social Security.”
which of course leaves the question, “who can you trust?”
“Be Fair, Be Ruthless, Trust No One!!”