The coming battle over Social Security

Posted by AzBlueMeanie:

Ssi_card There has been rampant speculation in the blogosphere for weeks now over how the radical Tea-Publican Congress will hold Social Security and Medicare hostage for their newfound "austerity" in reducing the federal deficit. Many have speculated that President Obama will "preempt" the GOP hostage taking by proposing his own cuts to Social Security based upon the "recommendations" of his failed Catfood Commision.

First of all, there is absolutely no reason — zip, nada, zilch — for President Obama to give this radical Tea-Publican Congress any opportunity to undermine Social Security, and as a Democrat sworn to defend the integrity and legacy of the Social Security program, he certainly should not propose any cuts of his own.

Social Security does not contribute to the federal deficit. Social Security has a $2.5 trillion surplus to cover future benefits. In fact, if we do nothing with Social Security it can meet all of its obligations until 2037. Social Security Trustees report that social security will be able to make full payments until 2037 (pdf).

So why not wait until some future date when we have a more sane political environment in this country to make the minor tweaks needed to Social Security to extend the solvency of the program indefinitely into the future? You do realize that Republicans are only interested in Social Security now because they understand that this may be their last chance to destroy the program before the tide of history turns against them?

President Obama and Democrats should flatly say that Social Security is off the table. Period. The GOP will not be taking any hostages today, thank you very much.

Second of all, why are we still talking about  the Catfood Commission, which was an epic failure? Update: Catfood Commission Recommendations DOA – R.I.P. The Catfood Commission failed to complete its work in a timely manner; as a result it failed to vote on any "recommendations" to Congress; and those commission members who publicly announced their positions, as if that counts for anything, numbered no more than 11 members on any one proposal — far short of the 14 votes required to send any recommendation to Congress pursuant to its statutory authority.

The "lamestream" corporate media that wants to convince us that these oh so serious commissioners have given us oh so serious "recommendations" that we really must take oh so seriously are full of crap (per usual). Through the looking glass of Beltway unreality. There are no recommendations.

The Catfood Commission was not statutorily tasked with examining Social Security in the first place. The Catfood Commission, whose membership was heavily weighted in favor of conservatives who adhere to faith based supply-side "trickle down" GOP religio-economics did so on their own. And their proposals, particularly the Bowles-Simpson chairmen's mark, is designed to undermine Social Security (a life-long dream of Alan Simpson). So f#%k 'em.

If Congress wants to get serious about deficit reduction then it should be looking to serious deficit reduction proposals offered by others, not the bogus chairmen's mark of the failed Catfood Commission. President Obama should meet with Rep. Jan Schakowsky to discuss her plan as well as the individuals who wrote the fiscal blueprint compiled by Demos, Economic Policy Institute, and the Century Foundation, and the economists behind the Citizens Commission who drafted a similar plan for that focus on jobs and growth. (h/t Daily Kos).

Finally, Karoli at crooksandliars.com offers these words of wisdom today in her post Social Security 101:

My career, pre-blogging, was as third-party administrator of employer-provided retirement plans. For years I was a certified practitioner, and I watched as private pensions were systematically dismantled, underfunded, and ultiimately converted to 401k plans subject to the whims of the market and unsophisticated investors. While owners might — MIGHT — have retired with adequate funds, workers almost never did. The one single thing that every worker could always count on at retirement was (and is) Social Security.

Yet it seems that conservative lies have taken hold to the extent that the truth is called a lie, while lies are called the truth. Once upon a time, that only happened in fiction. Now it's real. So let's talk about Social Security, what it is, and why you shouldn't believe everything conservatives and their minions in the press tell you:

 

Lie #1: Baby Boomers Will Bankrupt Social Security

Baby Boomers were already planned for during the reforms undertaken under Ronald Reagan's administration. Here's a chart with the inflows and outflows of the trust fund since 1958. As you can see, there has been positive cash flow since adjustments were made to the assumptions, tax rates and SSRAs. Even in 2009, cash flow was positive, leaving a $2.5 trillion surplus in the fund.

Lie #2: There is no Social Security trust fund. It's all smoke and mirrors and accounting lies.

From the SSA.gov FAQ:

Far from being "worthless IOUs," the investments held by the trust funds are backed by the full faith and credit of the U. S. Government. The government has always repaid Social Security, with interest. The special-issue securities are, therefore, just as safe as U.S. Savings Bonds or other financial instruments of the Federal government.

Not only are they the safest investment, they're the only permissible investment under current law, because they are the safest investment.

Social Security is probably the best-functioning and most solvent government program there is. The fact-twisting that yields the idea that surpluses invested in Treasury bonds makes the fund insolvent or non-existent is an infuriating product of right-wing nonsense spin.

Think on this: The entire debate about raising the debt ceiling centers on the stability of the full faith and credit of the US Government. The fact that Social Security surpluses are invested in Treasury securities does not mean there are no surpluses. It means that excess dollars paid to Social Security are invested in the single available investment vehicle which carries a high level of security. China thinks they're a great investment. So did lots of parents who saved for their kids' college educations, until they discovered mutual funds and lost their shirts. If US Treasuries were a vapor investment, would they be sought after and bought by foreign investors? Do those investors think our treasury bonds are vapor? Of course they don't and neither should we. The trust fund and the Treasury are two separate entities. They happen to fall under the auspices of the federal government, but they are not two pockets on the same pair of pants and shouldn't be considered such.

But what about the interest on those bonds, you ask? Isn't that an obligation of the US Treasury and therefore contributory to our federal deficit? No. Because if they weren't purchased by Social Security, they'd be sold to someone else, and the interest would still be paid.

Lie #3: Means-testing benefits does no harm to Social Security

There's a movement afoot among Young Conservative Idiots to means-test Social Security benefits, which also appears to be embraced by some young progressives. Such a move would undermine the fundamentals of the program, because Social Security was established as an insurance program, not a welfare benefit. Because it is a contract between individual workers and the United States government, it cannot be contingent on need.

It is a straightforward quid pro quo: workers and employers contribute throughout their working lives and benefits are paid upon attainment of Social Security retirement age, death or disability. Because contributions and benefits are tied to the Social Security Wage Base (wages subject to the OASDI tax), it doesn't matter if a claimant is a billionaire or a pauper. Means-testing would remove that objectivity and open the door for the contract to be breached on a number of different levels.

Eligibility for benefits must be based upon covered quarters and earnings taxed in those quarters, regardless of whether there might be excess earnings. Means-testing moves it from an objective standard to a subjective standard, leaving the door open for further erosion.

For more factual information about Social Security, I highly recommend Nancy Altman's book "The Battle For Social Security". Altman is a tireless advocate for Social Security, was mentored by Robert Ball, and has a firm grasp on the history of the program as well as the law. It's a fascinating read, especially the part where she reviews what it took to get the program passed in the form we know today. If you're especially wonky, the 2010 Trustees' Report (PDF) is also worth reading.

0 responses to “The coming battle over Social Security

  1. When Social Security reform legislation was signed in 1983, the contract between the people and their government changed forever. The plan that was suppose to fix the people’s retirement program for 75 years, has practically destroyed it in less than 30 years. 78 million baby boomers are beginning to retire, the US economy is on life support, and Social Security is paying out more than it is taking in.

    The lessons of history are being ignored as once again politicians are having the wrong conversation about Social Security. It shouldn’t be about raising the retirement age or lowering retirement benefits on those who’ve already sacrificed once by over paying their Social Security taxes since 1983. This conversation has to be about those who’ve reneged, and benefited from the political pilfering of the people’s retirement dollars. Politicians have used 2.54 trillion dollars of the people’s retirement investment to fund tax cuts, pay for wars, finance earmarks, and subsidize tax rates leaving middle class Americans on the hook for 2.54 trillion dollars of new social security trust fund debt. That’s a 5 trillion dollar plus net loss, and that’s what the conversation has to be about.

    Middle class working Americans have lived up to their end of the deal; now it’s time for politicians to “MAN UP by LIVING UP” to their end of the deal by making the retirement fund whole again. Failure to do so means politicians have violated the people’s trust by crossing the line, and crossing the line will get them FIRED.

    Sign our petition: http://www.ipetitions.com/petition/crossingtheline/

  2. I agree totally with your sentiments. I agree with part of your facts, but there is a major piece of the puzzle missing that the public very much needs to know. Let me begin by saying that I am a lifelong liberal who thinks that Social Security is the most successful and the most popular program ever created by the federal government. I want to save Social Security as we now know it and I am totally against any form of privatization. But a big dark secret has been kept from the public for the past 25 years. When I first stumbled onto this secret, while doing research for a book, more than ten years ago, I was outraged and I wanted to tell the whole world so they would be outraged too, but nobody wanted to listen. On September 27, 2000 I appeared on CNN with anchor Lou Waters to discuss my newly published book, “The Alleged Budget Surplus, Social Security, and Voodoo Economics.” When I told Waters that the government was spending Social Security money for programs unrelated to Social Security, he looked at me with disbelief and asked, “Are you a voice crying in the wilderness?” As things turned out, I was a voice crying in the wilderness in 2000, and I continue to be such a voice today, three books and ten years later.

    I have devoted the past ten years of my life to researching and writing about Social Security, and during that entire period I have been on a relentless campaign to expose the government’s big dark secret to the public. In addition to my time, I have spent more than $30,000 of borrowed money trying to get the message out to the public. Only in recent months have my efforts begun to pay off. On August 10, Allan Sloan, senior editor at large for Fortune magazine, quoted me and referred to one of my books in his Washington Post column. Sloan, with whom I have engaged in periodic email correspondence over the past six years, has finally come to see the great Social Security scam. Once Sloan broke the long taboo in the media against reporting on the looting of Social Security, numerous other journalists have begun to report the great Social Security scam. I will add other posts where I can explain the scam in detail. But for now, in a nutshell, the government has for the past 25 years diverted all of the surplus Social Security revenue into the general fund and spent it on general government operations. Not a single dollar of the $2.5 trillion in Social Security surplus revenue generated by the 1983 payroll tax hike was saved or invested in anything. The money was spent and replaced with IOUs that are not marketable, and have no real economic value. These IOUs are nothing more than a claim against future tax collections which will require tax increases if they are repaid.

    Allen W. Smith, Ph.D.
    Professor of Economics, Emeritus
    Eastern Illinois University
    Website: http://www.thebiglie.net
    Email: ironwoodas@aol.com
    Phone: 1-800-840-6812