During President Obama’s second inaugural address yesterday, he affirmed we’re stronger when we work together:
But we have always understood that when times change, so must we; that fidelity to our founding principles requires new responses to new challenges; that preserving our individual freedoms ultimately requires collective action. For the American people can no more meet the demands of today’s world by acting alone….No single person can train all the math and science teachers we’ll need to equip our children for the future, or build the roads and networks and research labs that will bring new jobs and businesses to our shores. Now, more than ever, we must do these things together, as one nation and one people.
He also lifted up working peoples’ shared belief in a robust social insurance system.
We do not believe that in this country freedom is reserved for the lucky, or happiness for the few. We recognize that no matter how responsibly we live our lives, any one of us at any time may face a job loss, or a sudden illness, or a home swept away in a terrible storm. The commitments we make to each other through Medicare and Medicaid and Social Security, these things do not sap our initiative, they strengthen us. They do not make us a nation of takers; they free us to take the risks that make this country great.
Our journey as a nation is not complete until we achieve equality and economic opportunity for all.
For our journey is not complete until our wives, our mothers, and daughters can earn a living equal to their efforts. Our journey is not complete until our gay brothers and sisters are treated like anyone else under the law—for if we are truly created equal, then surely the love we commit to one another must be equal as well. Our journey is not complete until no citizen is forced to wait for hours to exercise the right to vote. Our journey is not complete until we find a better way to welcome the striving, hopeful immigrants who still see America as a land of opportunity; until bright young students and engineers are enlisted in our workforce rather than expelled from our country. Our journey is not complete until all our children, from the streets of Detroit to the hills of Appalachia to the quiet lanes of Newtown, know that they are cared for, and cherished, and always safe from harm.
While congressional Republicans are heavily focused on cutting Social Security, Medicaid and Medicare benefits and other harmful budget cuts that threaten the 98%, a better approach is to eliminate loopholes that allow the wealthiest 2% of Americans and Wall Street to pay much less than their fair share of taxes. Focusing on loopholes keeps money in the hands of working families, which helps the economy grow without increasing hardship and economic insecurity for working people.
Many current loopholes just aren’t fair. Take, for example, what Think Progress calls the “Mitt Romney Loophole.” People like Mitt Romney who manage investment funds get paid in two ways. Part of their income is a management fee that is taxed as ordinary income, currently at a top rate of 39.6%. But fund managers also get a cut of the profits of the investments, which is taxed as a capital gain, with a top tax rate of only 20%. The typical investment manager takes a management fee of 2% and gets a 20% cut of the profits, meaning they avoid paying the normal tax rate on the vast majority of their income, something working families are not able to do. As Think Progress explains:
This loophole is one of the main reasons that Mitt Romney paid a tax rate of just 13.9 percent on income of more than $20 MILLION. Meanwhile, millions of middle-class workers pay a much higher rate on their much, much lower salaries.
Closing this loophole would not only make our tax code fairer and more progressive, it would help raise revenue to protect vital programs and leave room in the budget for investments to grow the middle class. Closing just this one loophole that often benefits the ultra-wealthy would raise $21 billion over 10 years.
Means-testing Social Security and Medicare is an idea thrown around a lot to “find savings” because, on the surface, it doesn’t sound too painful. Wealthy people typically are able to save more and invest in retirement than lower- and middle-income earners, so they don’t need Social Security and Medicare as much, right? Wrong.
Means-testing Social Security and Medicare is a cynical way to weaken and destroy benefits for middle-income working people.
Lynn Stuart Parramore at Alternet writes:
In Washington-speak, “means-testing” is a scheme to deny or reduce Medicare and Social Security benefits for people who are “too wealthy” in the name of saving money. It’s a counterproductive, harmful idea, but one that well-intentioned liberals often get snookered into embracing.
At their heart, programs like Medicare and Social Security are about fairness, equality and shared citizenship, values that progressive Americans hold dear.
Medicare and Social Security are not welfare programs. They are benefits that people pay for as they work. They are also smart social insurance programs that spread risk across society in order to protect everyone at rates no private insurance scheme, with its much smaller risk pool, could touch.
She spoke with economist Joseph Stiglitz, who added, “We don’t means-test public education because we believe that we want people to have the same opportunities and we lose out on that with means-testing.”
2. Means-Testing Won’t Stop at the Wealthy
This is where we get into the nitty-gritty that means-testing Social Security will actually cut benefits for middle-income earners…even people who make around $60,000 a year and less. Those are not the people we usually think of as being wealthy. In order to produce any significant savings, people typically considered middle class will be affected.
Political economist Thomas Ferguson told Parramore:
The truth is that means-testing is a device to destroy political support for what are still the most popular of all government programs—programs that have survived decades of attacks by the right.
3. Means-Testing Doesn’t Make Economic Sense
It’s simply untrue that means testing produces great savings, writes Parramore.
In fact, it will likely raise costs for middle- and lower-income seniors who rely on Medicare and Social Security to live decently in retirement….Means-testing will cause many high-income beneficiaries to view the programs as unfair, and they will opt out, purchasing their own insurance and retirement policies on the private market. Programs like Medicare and Social Security depend on spreading risk across a large pool of people. For example, the departure of higher-income beneficiaries from Medicare, who tend to be younger and healthier, would increase overall costs and diminish public support.
4. Means-Testing Plays into Conservative Deficit Hysteria
Even entertaining the idea of benefit cuts through means-testing suggests that Social Security is in crisis. It’s not.
Conservatives promote deficit hysteria because they have a fundamental hatred of government and wish to destroy the New Deal programs that have benefited the middle class and the poor. If they were really concerned about deficits and spending, they would not support costly and unnecessary wars, monopolistic conditions and extremely low taxes for the wealthy and large corporations….Social Security does not contribute to the deficit. It is a well-managed program in fine fiscal condition, and there is no justification for tampering with it now. The Trustees Report shows that the program will be able to meet all of its obligations at least until 2033. If there is a tweak needed down the road, that can be handled very simply by raising the cap, which stands now at just over $100,000.
Medicare was started in 1965 to provide health insurance to people 65 and older regardless of their medical history or income. Since then, 75% of the program’s Supplementary Medical Insurance (SMI), the part that goes to pay doctors, has been financed by general revenues, the largest chunk of which comes from personal income taxes. The personal income tax is progressive, which means that upper-income people pay a larger share of their income in taxes for SMI.
Since 2007, specific means-testing features have been added. For example, beneficiaries with incomes over $85,000 have been required to pay higher SMI premiums. Beginning in 2013, the 2.9 percent hospital insurance tax will continue to apply to the first $200,000 of income for individuals or $250,000 for couples filing jointly, but it will rise to 3.9 percent on income in excess of those amounts.
6. The Coming Old Age Crisis
A secure retirement is quickly becoming a thing of the past with vanishing pensions, a shaky job market, declining wages and constant attacks on Social Security and Medicare. We need more robust Social Security and Medicare benefits, not less.
The United States is a rich country, and a dignified retirement for our elderly should be one of our proudest achievements. And yet Social Security and Medicare are under near-constant attack. Pensions are vanishing, and despite 401(k)s and other voluntary retirement plans, workers still can’t save nearly enough to retire securely. [Economist Teresa] Ghilarducci warns that the economic structure of retirement in America is falling apart. She exposes the Wall Street financiers who want to privatize Social Security, the risk of 401(k) plans, do-it-yourself retirement schemes and companies like Enron that have left employees high and dry.
It was on this day 77 years ago that Franklin Roosevelt signed the Social Security Act into law.
At the time, the U.S. had just suffered a devastating depression, and around half of Americans over 65 were in poverty. The passage of the Social Security Act marked a turning point for elderly Americans—a guarantee of a basic income.
The effort to create Social Security and pass it into law was led in 1935 by one of the 20th century’s underrated heroes: Roosevelt’s Secretary of Labor, Frances Perkins, the first woman to serve in the Cabinet.
Today, as defined-benefit pensions are increasingly rare, Social Security is critical. It’s estimated that it keeps 20 million people out of poverty. It makes up 59% of older men’s income and 77% of older women’s income. As we’ve noted before, nearly 2/5 of all the income earned by seniors comes from Social Security; for a majority of seniors, Social Security represents 50% or more of their income. For a quarter of elderly couples and half of elderly single people, Social Security makes up 90% or more of their income—literally all that stands between them and severe poverty. This is especially true after our last recession, which hit retirement savings, 401ks and home values hard.
So what does the future hold for Social Security? You’ll hear a lot of false talk that the system is in crisis, as an excuse to make unnecessary and painful cuts. Privatizing the system is a longtime project of some of the Republican Party’s top leaders, including new vice presidential pick Rep. Paul Ryan. Ryan co-sponsored a bill in 2005 to take money out of Social Security and put it into private accounts on the stock market. President Bush’s failed push for Social Security privatization was based on a gentler version of Ryan’s plan, and he still supports privatization today.
At 77, Social Security has been working a long time—but we need to keep fighting to keep the guarantee in place, for today’s retirees and future ones.
We’ve written a lot about Rep. Paul Ryan in this space, well before this weekend’s announcement that Mitt Romney would select him as the vice presidential nominee. The reason we spend so much time on Ryan is that his worldview and his proposals are the official agenda of the Republican Party—confirmed by the House Republicans passing his budget earlier this year. Ryan has spent his life in politics and is the model of the big ideological shift in Republican economic policy over that time. Romney’s pick only cements how important a player Ryan is in the debate over what kind of country we’ll have.
A quick look through the things Ryan has proposed show where his priorities lie. There are big benefits for the richest, and nothing but pain for middle-class and working-class people. In Ryan’s America, you’re on your own.
The centerpiece of the Ryan agenda is his plan to end—yes, end—Medicare. Ryan calls it a plan to “save” Medicare. Back in the real world, you can ice a pile of dirt and stick candles in it, but you can’t do that and say you’ve “saved birthday cake.”
Here’s the simple explanation: right now, Medicare is a guarantee—a program that offers coverage to every senior citizen, regardless of their economic background. It’s popular, it’s effective, and it keeps seniors out of poverty. Ryan claims his plan “protects” Medicare, but what it actually does is replace the guarantee with a voucher that seniors will use to buy their own insurance in the private market. Older people require more care and face higher health risks, so they’re more expensive to insure, especially in the individual market—the reason Medicare works is that it’s social insurance, which everyone pays into, and where a huge pool of beneficiaries helps distribute costs. Additionally, the value of the vouchers declines relative to health care costs over time, so that more and more will be paid out of retirees’ pockets.
Anyone who has ever had to deal with the private insurance market, raise your hand if you would like to rely on it—using a voucher of ever-decreasing value—when you’re no longer employed and most in need of health care? Yup, I thought so.
Last night on “60 Minutes,” Romney and Ryan sat together for an interview, and Romney said two things about Medicare that, taken together, are a pretty clear tell: he said that on the one hand, their plan would just mean “more choices,” and on the other hand, he insisted that people over 55 wouldn’t be affected. Which leads us to an important question: if all their Medicare plan represents is “more choices” and it saves Medicare, why wait? If it’s really going to be a good thing, why not give current retires and those near retirement the benefit of the change? Why reassure older people that Medicare won’t change if the plan really “protects” Medicare? The answer, of course, is that the plan means less care and more costs for beneficiaries, and they don’t want to take the political risk of imposing more cost and less care right away.
Speaking of eroding guarantees, Ryan is also one of the architects of Social Security privatization. His plan was the model for the proposal that President Bush tried, and failed, to push through in 2005. It would have diverted funds out of Social Security and into the stock market.
Anyone who lived through 2008, and saw what the market crash did to your 401k or your home value, raise your hand if you thought to yourself, “Gee, if only my Social Security had been invested in the market, too.” Anyone?
Let’s move on to taxes. Another major part of Ryan’s budget is a plan to completely eliminate taxes on investments, meaning that only work would be subject to income tax. That’s a huge boon to the very richest—CEOs, wealthy heirs, and financial industry executives especially. Let’s take Mitt Romney as an example: under a Ryan-style tax plan, Romney would pay a tax rate of less than 1 percent. The Joint Economic Committee of Congress estimates that the richest 1 percent would get a $238,000 tax cut under Ryan’s plan, while the top 0.1 percent would get a tax cut of more than $1.1 million. That’s where the savings from Ryan’s changes to Medicare would go—higher costs for seniors on fixed incomes, lower taxes for multi-millionaires.
Going beyond Medicare and taxes, Ryan’s budget is pretty hard on all the other stuff the federal government does, too. And by “all the other stuff” I mean things like schools, roads, Pell Grants for college, food inspection, and food stamps, to name a few. Those are programs that employ people, put money in working-class people’s pockets, and help keep America growing over the long term.
It’s no wonder that the Ryan budget has been described as “the largest redistribution of income from the bottom to the top in modern U.S. history,” one that would cause “an even wider gap between the very well-off and everyone else.”
Raise your hand if you think that solves any of the problems America faces. Anyone?
Yesterday, Susan wrote about the tough reception Republicans who voted to gut Medicare and Medicaid are getting at town hall meetings in their districts. The representatives mentioned in Susan’s posts aren’t alone in hearing from angry constituents.
Charlie Bass, my former and Susan’s current representative in New Hampshire:
WOMAN: Despite all we’re hearing about Ryan and Medicare, there’s a 10 percent reduction in the taxes for the wealthiest Americans. My feeling is this whole thing about saying 55 and under or under 55 is a way to divide and conquer because their benefits will be cut and then we as older people will, there will be anger fomenting against us. A generational gap will start where the younger people are told you’re playing for these Cadillac plans these older people how is that fair. Because we’re older the thought is we won’t speak up and won’t tell congress this is not acceptable. All generations have to stand together and say we need this social safety net. The bigger part of the problem is the commercial insurance industry.
BASS: Well first of all the tax part of the budget is revenue neutral. [...] The tax reduction is not a reduction in taxes on the wealthiest Americans, it’s a reduction of corporate tax rate so that we’re competitive around the world [...]
WOMAN: No, this is –
BASS: Very few companies, we tax foreign income, companies keep foreign income offshore. [...] The quickest way to turn this deficit down is to turn this economy around [...] off this federal system, so that the deficit goes down. We’re in this situation now here we’re bumping along unless we do something to stimulate real growth in this economy […] Who’s going to pay the bills? It’s going to be the younger people, that’s the real generational war, they’re going to say we’re not gonna pay 50, 60 percent of our income to subsidize the rest of the population older [...]
WOMAN: I agree, you guys are setting it up! [laughter from audience]
During a town hall in Orlando earlier today, Rep. Daniel Webster (R-FL) faced a barrage of questions from outraged constituents about the Republican budget. The Orlando Sentinel accurately described the scene as “bedlam.”
For nearly an hour, Webster was peppered with one question after another about his support for ending Medicare, his desire to see tax breaks for the wealthy extended, and his vote to repeal health care reform, including its protections for people with preexisting conditions. For his part, Webster didn’t just avoid the questions by resorting to talking points, as most politicians commonly do. On numerous occasions, Webster simply declined to give an answer to contentious questions altogether, moving on to take a new question instead.
“I would like to know: Did you vote to eliminate Medicare as it is today?” a man asks Berg during his library appearance in an exchange caught on video by PlainsDaily.com
“No,” Berg says, before the audience contradicts him.
“You voted for every Republican issue and that was part of the issues that went out there,” the man says.
A woman interrupts to ask how much the elderly will be asked to pay out of pocket for health care costs under the new system.
“I want you to tell me how much it’s going to cost us when we’re 65 years old after you give us a voucher,” she says.
“Fifty-five or over, absolutely no change, absolutely no change, in this Medicare program,” Berg promises.
“As long as you are over 55,” the woman responds. “If you’re 54, to hell with those people.”
West’s town hall in Fort Lauderdale was interrupted by hecklers, one of whom shouted at the beginning of his remarks “How about our Medicare that you’re stealing?” The Palm Beach Post reports that that West took written questions submitted before the meeting, prompting another man to yell out that questions should be allowed from the audience.
You may recall that when tea partiers (often bused in from outside) showed up at town hall meetings to argue (often in monstrously inaccurate terms) against health care reform, it made national news for weeks. But here, though constituents are asking questions that are based in fact, it’s still a relatively low-profile story on a national level. These representatives should be sweating the fact that it is getting coverage in their districts, though.
It seems that Congresscritters are facing a lot of tough questions, and some outright hostility at town meetings in their home states. From The Nation:
Congressman Paul Ryan, R-Wisconsin, continues to be confronted with tough questions on his listening-session tour of southeastern Wisconsin communities. He’s been forced to move several of the events to bigger venues to accommodate the crowds—after things got tight and tense in places such at Milton, Wisconsin, where the crowd in a small venue was challenging him at every turn.
and
One of Ryan’s Republican colleagues, Wisconsin Congressman Jim Sensenbrenner, shut down a town hall meeting in a suburban Milwaukee community when he was challenged on economic issues in March.
This sounds a lot like the Tea Party invasion of town halls in 2009, only these folks have serious questions. The Tea Partiers intent was to disrupt, and get a lot of media attention. These folks are voters who have been suffering in this economy, and know very well when they’re being trickled down on.
The core issues that are bringing people out to the GOP town meetings are opposition to Medicare and Medicaid cuts (a real hot-button issue) and support for tax hikes for the rich. This fits with those national polls shows that show Americans are very opposed to developing voucher programs to replace traditional Medicare and Medicaid and would prefer tax hikes for the wealthy.
There is no solid, factual rationale for the proposed destruction of Medicaid, Medicare, or Social Security for that matter. No wonder these guys are having such a hard time. How do you explain that you want to destroy essential social programs because of your political ideology without actually saying that’s the reason?
One guy has an idea for how to deal with this:
Newly elected Illinois Senator Mark Kirk has an idea. Instead of hearing what the people have to say, the Republican senator is suggesting that members of Congress should hunker down in DC.
Brilliant! If you don’t go home, you won’t have to answer any pesky questions.
Strengthen Social Security is a coalition comprised of 270 state and national groups, united around the goal of protecting Social Security from cuts, and strengthening it for future generations.
On April 27 and 28, events will be taking place in 53 cities/18 states. The theme of these events is, Don’t Make Us Work Till We Die, focusing on the intent to raise the Social Security retirement age. This link will take you to the website that shows the event map, so that you can find events near you. For those who don’t have an event in their state, there’s also a virtual rally being held online, which can also be seen at the website.
Everyone who has worked in a physically demanding job knows what increasing the retirement age will mean. It’s one thing to preach the necessity of this from behind a desk in a cushy office. It’s another thing to be a miner, nurse, truck driver, cook, carpenter, janitor, or a waiter at age 67 – if our bodies last that long. For those who are among the still unemployed/underemployed, and over the age of 55, the promise of Social Security in the future is what keeps us going. We can’t let them pull the rug out from under seniors who have worked long and hard, and paid in to the Social Security Trust Fund.
Please join an event if you can, or the virtual rally if you can’t – and as always, make your feelings known to your elected officials.
Their new video:
In the interest of full disclosure, this post is part of the Campaign For America’s Future state blogger’s network project. I’m one of the bloggers participating in the project.
Noted economist Dean Baker sets the record straight following some particularly heinous untruths about Social Security that came from Sen. Richard Shelby (R-AL).
Dear Senator Shelby:
During a recent breakfast at the Institute for Education, you said that Social Security is actuarially unsound, that the next generation of workers would receive little or nothing from Social Security and that there is no proof that your sons would get much at all. This is badly mistaken. You should know, both for your own personal finances, and more importantly for your actions as Senator, that under any plausible set of circumstances you and your sons can anticipate a substantial Social Security benefit.
You reached the national retirement age for Social Security in 1999. While I don’t know your precise earnings history, your pay as a senator made you eligible for the maximum benefit if it were sustained for 35 years. The Social Security Trustees Report and likely your own personal finances show that a maximum wage earner retiring in 1999 receives an annual benefit of $21,674 in 2010 dollars.
The trustees’ projections show that if nothing is ever done, then Social Security would pay full benefits through the year 2037. At this point, even if Congress does nothing there still would be substantial money flowing into the program, allowing the program to pay just under 80 percent of benefits. In the case of your youngest son, he would receive $29,700 from 2037 on (in today’s dollars), if his lifetime earnings path is similar to your own (i.e. he is a maximum wage earner).
As can be seen in Table V1.F2 of the Trustees Report, Social Security’s revenue in 2040 will be equal to 13.23 percent of covered payroll, while its outlays are projected at 16.64 percent. This would be sufficient to pay 79.5 percent of scheduled benefits.
Social Security’s finances are actually projected to improve slightly over the next decade so that the program would be able to pay 81.0 percent of scheduled benefits in 2050. For your son, this would be a benefit of slightly over $30,000. The situation is projected to change little in subsequent years. This means that your youngest son should be able to get a benefit of roughly this size for as long as he lives, even if Congress never does anything to eliminate the shortfall in the program. Again, these sums are all adjusted for inflation.
You also said that the normal retirement age for social security should be raised “every several years”. However, this would amount to a cut in benefits with each successive increase in the retirement age. If the normal age of retirement is phased in to reach 70 by 2036, it would result in a 4.0 percent reduction in benefits for workers between the ages of 50-54 in 2007 and a 10 percent reduction for workers between the ages of 40-44 in 2007.
Another point worth considering is that if the normal retirement age increased every few years, many workers would find it increasingly difficult to work until they are eligible for Social Security benefits. Forty five percent of workers over the age of 58 work in jobs that are physically demanding or have difficult work conditions. It is hard to imagine construction workers, firefighters, or nurses working well into their mid 60’s. Many would end up taking early retirement with a considerable reduction in benefits compared to currently scheduled levels.
Of course, it would be extremely unfortunate if Congress ever allowed Social Security to pay less than the full scheduled benefit. As a political matter it also seems unlikely in a context where beneficiaries are almost 50 percent larger as a share of the adult population than they are today. It is also worth noting that the necessary increases in funding are relatively small compared to items like the rise in defense spending over the last decade, so there certainly are not major economic obstacles to maintaining full funding.
I hope that you will take the time to review the program’s finances more carefully so that when you speak on it in the future you are better informed. I would be happy to assist you in providing additional background if it would be helpful.
Regards,
Dean Baker
Co-Director, Center for Economic and Policy Research
Many seniors are living on less in 2011. From PRNewswire:
Forty-four percent of seniors are receiving lower Social Security checks this year compared to 2010, while even more are dealing with significantly higher expenses. The findings come from an annual survey of elderly Americans, released earlier today by The Senior Citizens League (TSCL), one of the nation’s largest nonpartisan senior citizens advocacy groups.
and
Social Security checks are lower because many seniors have their Medicare Part D or Medicare Advantage premiums automatically deducted, and these premiums have increased in many cases. An annual Cost of Living Adjustment (COLA) typically offsets such premium increases, but seniors are not receiving a COLA for the second year in a row.
Combine the increase in Part D premiums with falling into the donut hole, when a senior has to pay full price for prescription drugs, and you have people that are barely making ends meet, or doing without needed medications because they can’t afford them.
The fact that expenses are increasing, while Social Security checks are decreasing isn’t being reported on. Social Security is still being dishonestly presented as a reason for the expanding federal deficit. Thankfully, Social Security has a strong, persistent ally in Senator Bernie Sanders:
Even with no change, the fact is that Social Security has a $2.6 trillion surplus that is projected to grow to more than $4 trillion in 2023. Is this surplus, as some have suggested, just worthless IOUs? Absolutely not! Social Security invests, as it should, the surplus money it accumulates into U.S Treasury bonds, the safest interest-bearing securities in the world. These are the same bonds that wealthy investors, China, and other foreign countries have purchased. The bonds are backed by the full faith and credit of the U.S. government which, in our long history, has never once defaulted on its debt obligations. In other words, Social Security bonds are as safe as any other U.S. debt obligation.
Further, despite the manufactured hysteria about a “Social Security crisis,” Social Security has not contributed one penny to the very serious deficit situation we face. Social Security is fully funded by the payroll tax that workers and their employers contribute into the system, not the U.S. Treasury. Our deficit has, in recent years, been largely caused by the cost of two wars, tax breaks for the rich, a Medicare prescription drug program written by the insurance and pharmaceutical industries, and the Wall Street bailout — all unpaid for. Social Security has played no role in our deficits.
This is a great (short!) op-ed piece by Senator Sanders. Pass it on to the doubters and naysayers you come in contact with. Social Security must be protected, and strengthened, for our current seniors and the generations to come.
