A President Who’ll Cut Social Security — And Liberals Who Love Him Too Much
Richard Eskow points us to a trend with liberals media types and Social Security:
A President Who’ll Cut Social Security — And Liberals Who Love Him Too Much
The spectacle of a supposedly liberal president repeatedly and needlessly trying to cut Social Security is enough to bring a reasonable, economically literate person to the point of existential despair. To see leading liberal lights like Rachel Maddow and Ezra Klein chuckle indulgently at those foolish Republicans in Congress over the subject — Don’t they know he’s already giving them what they want? — is to risk plunging into the depths of that despair.
This week the president hosted a dinner for Republicans leaders where he worked to sell his budget proposal, including his harmful plan to cut benefits through the “chained CPI.” National Security was the main course and Social Security was the dessert. And guess who wasn’t coming to dinner: The elderly, the disabled, or any policy experts who understand the disastrous implications of the chained CPI.
The Maddow/Klein exchange (which we’ll bring to you as soon as a transcript is available) is the crest of a building wave in pro-Democratic Party commentary which says, as Klein puts it, that “what we have here is a failure to communicate.” Klein says that at least “some of the gridlock (in Washington) is due to poor information.” Jonathan Chait bemoans the fact that Republicans “won’t acknowledge [Obama’s] actual offer, which includes large cuts to retirement programs.”
…
But Democrats like Maddow, Klein, and Chait know better. They know exactly what Obama’s been trying to do. And their only complaint seems to be that he’s not doing effectively enough. We’re not hearing much from the ‘left’ side of the debate about the profound flaws, biases, and inherent cynicism behind both the President’s policy and his rhetoric.
Here are the facts:
1.Research suggests that Social Security cost-of-living increases are already inadequate. (See studies on “CPI-E” for more details on the best ways to increase them.)2.Obama’s proposed chained-CPI cut would typically reduce benefits for 3 percent, and by as much as 6 percent for some recipients.
3.The White House’s decision to label this cut the “superlative CPI” is grotesque. It suggests that elderly women who receive an average of $950 or so per month are receiving “superlative” benefit increases each year.
4.The administration’s insistence on speaking of “entitlement reform,” mixing Medicare (which has a real cost problem because of our for-profit health system) with Social Security, is a cheap trick first devised by Republican consultants.
(hat tip Nancy Ortiz)
Regardless of whether we should cut SS or not, chained CPI is a poor cut. It leaves benefits of new retirees unchanged from current law, but gradually slows their COLA. Thus, our oldest, most vulnerable retirees get hit the hardest, and the younger ones with more cash in the bank and options to earn money face no cuts at all. If anything, this is the reverse of how we should spread out any pain, if necessary.
That being said, I would be perfectly happy with a balanced deal (50% OASDI revenue increase, 50% spending cuts) that took SS off the table forever. In fact I think this would be a big win for Democrats as a lot of non-wing-nut young people mistakenly believe they will never benefit from SS.
Lets not forget democrat “Liberals” in the Senate, like E Warren, D-MA, who just voted to confirm the anti abortion extremist C Hagel as Sec Def, and the bush torture guy Brennan as DCIA (only Leahy and Merkely had the balls to say no to brennan)
and liberal like warren will probably vote to confirm Lew as Sec of Treasury
It is not possible to take SS off the table forever unless you are willing to put tax increases on automatic. The program must be able to adjust to changes in lifespan and productivity and …
“It is not possible to take SS off the table forever unless you are willing to put tax increases on automatic”
True. But some intelligent tweaks now could balance it for a couple of generations, which is as far forward as we really should worry about. Both the economy and human lifespans are so unpredictable any further out as to make today’s projections pretty much guesses. SS is an issue that we will have to revisit every 30-40 years in order to make a choice between cutting benefits, raising the retirement age, or raising taxes that is a necessary result of lengthening lifespans. This is true of any retirement system, public or private.
Meanwhile, the deficit is retreating at a good pace. The overall issue is getting people back to work.
Chad Brick
i wish I could penetrate your … ah, set in concrete preconceptions.
a tax increase of one tenth of one percent… eighty cents per week… would “fix” Social Security forever… if repeated as needed. since wages are going up over one full percent… eight dollars per week… this would be no hardship to the workers.
when you talk about cuts… you are NOT talking “balance” you are talking about cutting your own benefits below the near survival level at which they have been set in the first place.
and when you talk about raising the retirement age, you are talking about murdering old people. sorry, that’s what it amounts to.
stop being so damned willing to “compromise” with the rapist and murderers.
and really, try to understand what you are talking about.
the “flexibility” we need is not “every couple of generations or so” it is “as we go.”
tiny changes in time. changes in the amount we pay for something we are going to need as a matter of life and death.
Chad while not going so rhetorically far as my friend Dale it would seem you have internalized the idea of “shared sacrifice” and “balance” as if it really came about after some examination of the true costs tradeoffs for “fixing” Social Security rather than before.
In 2001 Bush established his CSSS, the Commission To Strengthen Social Security with the claim that “all options had to be on the table”. Except that he issued six Guidelines that among other things 1) forbade any inclusion of increases in FICA and 2) mandated personal/private accounts. Now if this had come with some detailed case as to why FICA increases were arithmetically more burdensome for ordinary workers than the set of benefit cuts that were in fact left on the table and/or some analysis showing that personal/private accounts could actually be financed during the transition at a lower cost than a simple permanent fix on the payroll side then we could be said to have had an honest debate.
But they weren’t. Mainly because the Plans actually advanced which included the very similar Posen Plan (Posen was a Dem member of CSSS and had his plan used as a ‘bi-partisan’ stalking horse), the Commission’s ultimate preferred ‘Bush Option 2’ and the somewhat later LMS Plan all failed on both counts.
That is the game was rigged from the git-go and the Bush 2005 Social Security Tour was fundamentally fraudulent. If you remember the focus of the Tour was to get all parties concerned to concede ‘Crisis’ while claiming that there was no actual Bush Plan (as said Posen being a stalking horse) and that “all options were on the table” once we had consensus on Crisis.
But the real plan was clear. Get Dems to admit ‘crisis’, then introduce Plans strictly bound by the six guidelines of CSSS, while forbidding consideration of any plans that would violate them, and then if Dems balked to blame them for being not only in denial but having actively lied when they conceded ‘crisis’. Which is why the pushback didn’t take the form of proposing plans like Northwest but instead came in the form of “There is No Crisis”.
But an unfortunate by-product of this was that even progressives who admitted there was, if not a ‘crisis’, certainly a gap to be ‘fixed’, implicitly internalized the CSSS guidelines relating to “no payroll tax increase”. Apparently under the illusion that someone had actually examined that alternative and ruled it out as too burdensome and dare I say it “regressive”, leading to the current situation where even on the good guys side the discussion is mostly limited to increases in tax on the “wealthy” vs “tweaks” to benefits.
That is Bush’s loss in 2005 was mitigated by his covert win in 2001 which ended up shaping the discussion ever since. And BTW making Coberly and his 80 cents a week sound like the ravings of a nutter, because if it was that easy surely an honest appraisal of the options back in 2001 would have revealed it. When in fact there very deliberately was no such honest appraisal, the Bushies having rigged the game.
Or to put it more succinctly from this life-long and soon to be former Democrat “What kind of a person would screw old people out of their money? Simple answer for simple question: A SLIMEBALL!”
Chad, my own “read” of the situation calls for a different ending to your sentence: “SS is an issue that we will have to revisit every 30-40 years in order to make a choice between cutting benefits, raising the retirement age, or raising taxes that is a necessary result of” politicians who want to keep the issue alive as a subject for their political campaign agendas, rather than legislate a permanent, automatic FICA adjustment mechanism. They believe that they can’t promise to change things if they cede power to apolitical technocrats. In the 1980s, Greenspan knowingly and willfully recommended changes that would only postpone further argument until, he hoped, the GOP could better control the outcome. The 2004 election results suggested that the moment had arrived–but the GOP grossly overreached.
The situation hasn’t changed much in 30 years, politically. Obama and his advisers (like Lew) think the Greenspan Commission was a model. Dems in Congress generally want to “buy more time” by raising the earnings cap, so later they can seek more revenue enhancements–and perhaps higher benefits. The GOP wants further benefit cuts (favoring another raise in the normal retirement age) ostensibly to help balance the unified budget–hoping that this linkage opens the door to ever-more benefit cuts and the program’s ultimate demise.
I’d be pleasantly surprised if politicians agreed to a technical solution that would only make it more difficult for them in the future to campaign for their respective and opposing agendas. Such things can and do happen, so it’s really important to keep the smart solution on the negotiating table in front of them. They might reluctantly choose it.
Sorry, I got long-winded.
“benefits below the near survival level at which they have been set”
Where should benefits levels be set?
The median worker gets a replecement rate of about 40 percent from SS. Fianancial planners encourage people to seek an 80 percent replacement rate. For the median worker, who we hope is successful, that means having a pension or personal savings for the other half.
I frequently describe SS as insurance against outliving your life savings, but this is rather vague since living longer than expected has much the same impact on savings as never managing to save enough in the first place.
This is not an idle question because the structure of initial benefits increases faster than inflation. The benefit that pays for an 1100 square foot house today will pay for a 1500 to 1600 square foot house 20 years from now (assuming Dean Baker is right that housing really increases with CPI over a long enough period).
Bruce Webb
thank you for translating my rhetoric into a clear argument.
Arne
not sure I am following you. but setting benefit growth to “inflation” means privileging some particular year to be “The” standard of living for old people. Why pick 2013? 1933 would do as well. Old people don’t need refrigerators, cars, telephones or indoor toilets. So why would they need whatever it is the people in 2033 or 2133 will take for granted… and actually need if they are going to be able to live in the society they retire in, after having contributed to the rise in standard of living.
Can you really walk to the grocery store today? Can you really “live” without a computer?
There is NO SS benefit that will pay for an 1100 square foot house. If you haven’t paid for your house by the time you retire, and all you have to live on is SS.. you are not going to be able to buy a house.
SS is “the minimum you can live on” because any more would require a higher “tax” and even the evil government prefers to let people make most decisions about how they spend their money to the people themselves. just as long as the rest of us don ‘t have to step over their starving bodies when they get too old to work.
workers should of course seek the highest replacement rate they can get. the 40% is just the “minimum” they will need to survive. at a level not much in advance of the stone age, but with maybe a few modern conveniences that essentially fall off the junk wagon of our richer society.
coberly,
The thing is that you understad the numbers for the 100 percent tax increase scenario, but you don’t understand the numbers for the alternative. That ends up making you a poor spokesman for SS. Outside your comfort zone you start throwing around irrelevent (and numerically inaccurate) examples about indoor toilets.
You can pay the mortgage on an 1100 square foot house with an average$1230 benefit. If you bought it 10 years ago when the kids moved out there would be something left for food. They don’t build such houses in our community, but you can buy one built in the 1950s. I want that 1500 square foot house that they do build today, and I will be able to afford if I save enough to provide the other $1230 per month that the financial guy says I will need.
Raising payroll taxes enough to maintain the current benefit schedule is very doable and makes a lot of sense, but it is not going to happen, so it is important to truly understand whether Chad’ suggestion is actually horrible or just sub-optimal. If I have to doom the person who would have had enough for a 1500 square foot house to having only enough for 1350 square feet in order to prevent the Right from concluding that 1100 square feet was enough for their parents and is therefore enough for anyone, then I will.
In this world, the NW Plan is a negotiating offer and what Chad suggests is the more likely end point. Please continue to educate people about how easy the NW Plan would be, but stop treating compromise as evil.
Arne
i don’t understand your numbers and i don’t agree with them.
first, you have to be able to find that 1100 sq ft house. they don’t build them any more.
second.. where in the hell are you going to get the money to pay the mortgage if you are living on 1200 dollars a month?
the only reason “it’s not going to happen” (raising the payroll tax eighty cents per week) is that no one knows about it. and those who do all think they have something more clever in mind. such as “compromising.” how much compromise do you need to save eighty cents per week? an extra year tacked onto your sentence at a job that is killing you? how about a cut to 800 dollars a month? or maybe you think “the rich” will pay an extra 6000 a year in payroll taxes to save you 80 cents?
as for my “life or death” rhetoric, i suggest you get out and go see how people are living who depend on their Social Security. and maybe read a little about how they lived before they had Social Security.
and if you are telling yourself “why didn’t they save more?” or worse… why should i raise my tax eighty cents when I can do so much better with my own investments. that puts you into exactly the same class of people who don’t want to pay more taxes even it it’s an amount they spill in champagne in one evening, that would make the difference between grinding poverty and a reliable roof and food on the table for someone not quite as smart or lucky as yourself.
For the record I am with Arne here.
Making the jump from “scheduled benefit is set to equitably allow retirees to maintain the same proportional standard of living to then current workers as their parents did, translating to a bigger net basket of goods (because the nation as a whole got richer)” to “scheduled benefit is set at bare subsistence levels compared to then current workers, and though by some measures a bigger basket of goods, still any cut to the schedule is the same as starving gramma” is a jump too far.
I support targeting the schedule as a simple matter of social equity, something believers might trace back to “Honor Thy Father and Thy Mother”. And as such I am okay with a certain amount of demagogery over Catfood Commission in response to thoroughly dishonest arguments in re sustainability and affordability. But none of that makes Rosser’s Equation simply go away or lose all meaning.
On the other hand I am not as pessimistic as Arne either in terms of the projections as they are or the possibility of improving them and so outlook of Social Security via policy. As such I am not as willing to simply agree that Chad’s is “the more likely end point”. But the difference between me and Arne is a matter of simple judgement as to probabilities and not some claim of moral superiority on my part and still less a claim of moral depravity on the part of anyone who would surrender a little bit in recognition of Rosser’s Equation and the actual projected real basket of goods improvements the schedule projects. For example 1350 vs 1150 vs 1100 sf of living area.
An 1150 sf apartment in a senior complex is just not like living in an unheated attic room reliant on a Thunder Mug. This isn’t your Grandfather’s retirement and it borders on dishonest to suggest that it is or would be.
“a tax increase of one tenth of one percent… eighty cents per week… would “fix” Social Security forever… if repeated as needed.”
$0.80 a week across all workers is about $6 billion a year. That won’t fix SS, which has an approximate 1% of GDP (or ~$150 billion) funding gap. Your “repeated as needed” would be more like $0.80/week per year for twenty years. That’s actually not a bad idea, and has support.
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/31/americans-want-to-raise-payroll-taxes-and-social-security-benefits/
Chad “80 cents per week per worker” is shorthand for a more complex and fully spelled out plan we call the Northwest Plan for a Real Social Security Fix whose primary author was Dale with contributions by me and Arne.
You might want to look it up befor being so dismissive.
The Plan actually suggests raising FICA 0.1% per year for any year where the Trustees project a failure of their test for Short Term Acturial Balance. It is functionally equivalent to the plan outlined in the WaPo article which likely took at least partial inspiration from the 2009 version of Northwest which got significant attention in DC Policy circles at the time.
The NW Plan is more sophisticated than “just raise FICA 80 cents a year for 20 years” version in that it establishes precise ‘triggers’ for action in any given future year and also provides for triggers to back off those increases as needed (because there is a danger of overshooting).
I welcome your participation in this debate, the more the merrier, but really you need to do a little homework before blithely dismissing us oldsters with “won’t fix SS” only to turn around and essentially present our own plan back to us.
80 cents a week is the approximate amount needed for a median income worker (note not a median household), it would be more for workers making more than that and of course less for minimum wage workers. But absent reiterating the whole NW Plan complete with spreadsheets In every comment over the last four years since we introduced it, the primary author uses a certain shorthand that in turn is understood by regular readers and commenters.
Though maybe not entirely transparent to those who people not as nice as me might dub “Newbies” to AB.
A little hint, the proper sequence is “Ready. Aim. Fire”. You end up with more shots actually hitting the right target that way.
Bruce, I agree with your plan. My problem (such that it exists) is that the way people state it around here makes it sound like either one $0.80 tax increase is necessary, or perhaps a few more. The reality is that we would be pushing these little tax increases through almost every year for years before we hit stability, ultimately rising to more like $20/week (2012 dollars) over the next couple decades. I certainly think SS is worth that price, but you need to be clear about how often these little tax increases would have to be executed.
The NW Plan would provide a smoother and less noticeable increase in the FICA rate for Social Security than when the rate went up by 2 percent (each) during the the 20 years from 1970 to 1990. The rate hasn’t risen since.
The risk of reducing scheduled SS benefit levels would be to end and possibly reverse progress in reducing the elderly poverty rate, which is the program’s primary purpose. Proposed cuts should be judged with this metric in mind (more than measures of median apartment sizes). As Duncan Black has been saying, the 401-k system isn’t doing well–same for home equity and other ways to save for retirement. Here’s a 2001 study on elderly poverty rate progress and prospects–the study, of course, didn’t foresee the Great Recession: http://www.ssa.gov/policy/docs/workingpapers/wp94.html
pjr
you seem to get it.
i don’t know what to do about chad brick. i have made as clear as i can that the rate goes up eighty cents per week per year. i also feel i have to make clear that since wages are going up at the same time, ten times faster, the workers will never “feel” the tax raise as more than the eighty cents per week in the given year.
it is very hard to talk about stuff… especially stuff in the future, which requires a few more brain cells than most people have to think clearly about… and cover every possible little synaptic side trip that enters their mind.
that is hard to do it at one time. i try to take it up when they express their doubts. but even that is a low percentage operation. everyone has their own agenda they cling to as a matter of life and death, without regard to friendship, politics, or good policy.
chad brick
yes, SS is worth an extra 20 dollars per week. but most people won’t realize, or be able to understand, that that 20 dollars will be 25 years from now when their incomes will be maybe 200 dollars more a week than they are today. their SS will be a higher percent of their wages, but they are going to need more “benefits” if they are going to live longer. and live in a world where “everyone” is making 200 dollars more a week. AND they will have a extra 180 dollars a week AFTER paying the tax than they do today, so it won’t be any “burden” at all.
AND even if it were, it would be a question of which is harder… doing without 20 dollars a week while you are young and employed, with an income of about 800 dollars a week otherwise… or doing without 50 dollars a week when you are old and can’t work. and otherwise trying to live on 300 dollars a week.
but i guarantee you, this has too many parts for most people to get a grip on.
nor can any of them imagine what it’s going to be like being old and poor.
that’s why SS had to be invented in the first place.
in case anyone else didn’t get it.
i was NOT saying that cutting benefits… or restraining their growth to “inflation” as defined by the Boskin commission would leave seniors in stone age conditions.
i was trying to help some people who cannot imagine how the other half lives to see the future by looking at the past.
if we had restricted the growth of SS benefits to “inflation”, current beneficiaries would be living in 1936 conditions.. if they could find them. mostly they would be living on the streets.
similarly, by the time 2075 rolls around, people trying to live on 2013 level SS income will be dirt poor. they may be able to approximate 2013 living standards… except that by 2075 it will take something approximating 2075 incomes to even get to the grocery store under whatever conditions prevail then. but even if they could, the fact is that people measure poverty relative to the others around them. hell, even economists know this.
or as a lady i used to know liked to say: you can always tell a professor. you just can’t tell him much.
and the bottom line is still this: what the hell are you “saving” by saving eighty cents per week at the cost of having to live on 25% less than “barely enough” when you are old?
some people around here still think of “the elderly” as “someone else.” and in spite of knowing the words, they still think of SS as “welfare.” because of course they are going to be doing better than that if only they can keep that eighty cents per week and invest it in railways through africa.