Among the ideas that have been floated for reducing the Social Security budget is to raise the eligibility age to receive benefits. It is currently 66-years of age; one year after a worker qualifies for Medicare.

It’s axiomatic that if the age is raised, the payout of benefits will be reduced. This is a simple way to cut the Social Security budget, but not without reducing the well-earned benefits of recipients. Furthermore, it is a breach of contract. Millions of Americans patiently stand in line to receive the promised rewards of years of work after having paid in mandated taxes for Social Security and Medicare.

Raising the eligibility age has a serious impact on one particular sector of the American labor force besides than the elderly. If seniors work another year to qualify for Social Security, it means that the jobs from which they previously would have retired at 66 will not open up for others until a year later. This might even be longer if eligibility age is raised more than one year. Currently, when seniors retire, their positions often are turned over to young adults just entering the labor force. Blocking off this entry for many individuals who are fully trained and ready for work places a huge burden on millions of Americans and their families.

In essence, what raising the eligibility age for Social Security recipients would do is increase the number of job slots that would be in the American labor force. On first thought, this might sound like a good way to address unemployment since there would be more job openings. However, many of the jobs are ones that are not on the technological cutting edge. The jobs that many workers in their 60s hold are becoming obsolete. In reality, these jobs actually reduce our productivity. As we presently see, a variety of sectors of our economy grow while employment stays largely stagnant. Under the best of circumstances, it will take until the end of the current decade for unemployment to decline to the pre-2007 recession levels.

Our economy has evolved so that workers must be better trained and skilled than ever before. Mechanization has removed millions of jobs that used to provide solid, long-term employment for many of our workers. While the so-called Protestant work ethic is still deeply engrained in our national values and culture, we have to face current dynamics. We will have fewer jobs, and each job may have fewer hours. Raising the eligibility age for retirement would only exacerbate this problem and put a pinch on all workers, not just those who are about to retire. Workers are in many ways victimized by our modern economy. The time is long past to penalize workers for structural changes that are not of their own making. If anything, we should be reducing the eligibility age for Social Security rather than raising it.

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The chained CPI is a cut to Social Security benefits that would hurt most seniors—it’s an idea not befitting a Democratic president. If Obama really wanted to strengthen Social Security, he would insist the wealthy pay their fair share by lifting the cap on income subject to Social Security taxes. In addition, he would demand a raise in the minimum wage to at least $11, a move that would relieve a lot of economic suffering and at the same time fund Social Security at a higher rate.

Robert Reich’s compelling 2 minute video explains how chained CPI is not a Republican idea, it’s an Obama idea. It’s an idea designed to please right-wing billionaires like Pete Peterson who for decades have worked tirelessly to kill social safety nets—if not outright, than by a million cuts.

Before we get to Robert Reich’s video, a little background on Obama’s relationship to Wall Street billionaire Pete Peterson from Sourcewatch.org [boldface my emphasis]:

Peterson and his foundation had ties to The National Commission on Fiscal Responsibility and Reform, commonly known as the Simpson-Bowles Commission after its co-chairs, former U.S. Senator Alan Simpson and Morgan Stanley board member Erskine Bowles. The commission was initiated by President Barack Obama via Executive Order on February 18, 2010. According to its website, the commission was charged with proposing recommendations designed to balance the budget by 2015.

At the launch of the Simpson-Bowles Commission, it was announced that the commission would be “partnering with outside groups,” such as the Peter G. Peterson Foundation’s America Speaks initiative. The Washington Post’s Dan Eggen, in a November 2010 story titled “Many Deficit Commission Staffers Paid by Outside Groups,” revealed that two members of the Simpson-Bowles Commission worked for Peterson-funded organizations. One of them was Ed Lorezen, who worked as the Senior Policy Advisor to the CEO of the Peter G. Peterson Foundation, and formerly as the Concord Coalition’s policy director from 2005-2007.The other was Marc Goldwein, whose salary was paid for by the Peterson-funded New America Foundation’s Committee for a Responsible Federal Budget (CRFB), where he is a Senior Policy Analyst.

Other commission members included [Campaign to] Fix the Debt leaders David Cote, Alice Rivlin, and then-Senator Judd Gregg, as well as Representative Paul Ryan, whose proposed 2013 budget, the so-called “Path to Prosperity,” would implement massive cuts in social safety net program spending while slashing the top tax rate for corporations and individuals from 35 percent to 25 percent.

The Campaign to Fix the Debt is the latest astroturf organization started by Pete Peterson. It’s purpose is to slash earned benefit programs such as Social Security and Medicare under the guise of fixing the nation’s “debt problem.” This preamble to Reich’s video is to point out and underscore that Obama hand-picked the members of the Simpson-Bowles Commission. His close relationship with Peterson and his approval of his agenda was heavily reflected in those choices.

As poll after poll shows, no one, no matter what their party affiliation, wants Social Security benefits cut except the Peterson’s of the world and their minions who do their bidding in Washington, DC. As Reich says—dial up the White House, and your congressman and senator and just say no—loud and clear—to any cuts in Social Security, Medicaid or Medicare.

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Something unexpectedly hopeful has happened in the 2012 lame duck session of Congress: Senator Mark Begic, a Democrat from Arkansas, has introduced a Social Security reform bill that would raise the current cap on payroll taxes—a logical solvency solution that, until now, had all but disappeared from the discussion. The Washington Post reports that Begic’s bill would:

…lift the current payroll tax cap, which exempts wages in excess of a certain amount ($110,100 this year) from the tax. In turn, it would give high earners, who would pay more, additional benefits upon retirement, just as benefits increase as wages do for workers below the cap. […]

It also increases benefits across-the-board. While Bowles-Simpson and Domenici-Rivlin adopt a stingier “chained CPI” measure for inflation, Begich adopts “CPI-E,” or a measure that specifically captures inflation in goods that seniors buy.

Due to deteriorated health and other considerations, goods seniors buy tend to be more expensive than those younger people purchase. Begich’s CPI-E change would mean, effectively, a 4.5 percent benefit increase for the program’s beneficiaries, including not just seniors but their designated survivors and disabled Americans as well.

According to Think Progress:

The Congressional Research Service ran the numbers back in 2010 and concluded that eliminating the payroll tax cap — while also paying out the new benefits to wealthier Americans in accordance with their new taxes — would eliminate 95 percent of the trust fund’s shortfall over the next 75 years.

Begich may not hit that goal exactly, depending on how the legislation is written. In particular, his change to CPI-E also lifts the overall benefit level, on top of the changes in CRS’ scenario. But his reform would probably come very close.

Begich’s bill may not be a perfect solution, and it may not get any traction at all in the 2012 lame-duck Congress, but it’s refreshing to see this idea on the table. And it’s a sign that Democrats, perhaps buoyed by the results of the 2012 election, are willing to tackle the big issues and stand up to the no-tax-increases-ever Republicans who have dominated the political dialogue and shut down any discussion of the most logical solution of all.

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Contrary to warnings by politicians of both parties and by almost all of the mainstream press, America’s biggest fiscal problem is not spending on Social Security, Medicare, and Medicaid; it is our almost complete unwillingness to tax ourselves sufficiently to maintain a modern state.  —Jeff Madrick, “The Entitlement Crisis That Isn’t” Harper’s Magazine

In the November 2012 issue of Harper’s Magazine, Jeff Madrick calls out politicians in both parties for refusing to raise taxes, in a meaningful way, on millionaires and billionaires. He makes a compelling case that America’s budget problem is a revenue problem, not a spending problem.

Cutting social programs is the wrong way to fix the deficit

The United States racked up a $1.1 trillion budget deficit from two unpaid for wars, the 2001 and 2003 Bush tax cuts, and the ongoing 2008 recession. Both Republican and centrist Democrats have embraced the notion that we need to cut social programs to “fix” the deficit problem. They have cooperated in spreading the lie that “entitlements” have to be cut in order to “save” them. Both parties have brainwashed the American people into thinking the deficit problem is from excess spending on social programs we can’t afford. Conservatives in both parties claim that  higher taxes will kill the economy.

Madrick reports that the best, most objective analysis of tax rates finds no relationship between high taxes and reduced rates of economic growth, nor does large government, in any way, diminish economic growth. According to UC Davis professor Peter Lindert, federal spending on things such as affordable education, parental leave and child-care encourages growth.

Tax disinformation started under George W. Bush

In 2006, Joshua Bolten, George W. Bush’s budget director, wrote  that no amount of tax increases could close the gap created by the “unsustainable growth of entitlements.” Bill Keller, executive editor of the New York Times, piled on. Like a good stenographer, he passed on Bolten’s disinformation that we couldn’t afford to keep entitlements in full. Conservative Bruce Bartlett, a Reagan era economics advisor, contradicted both Bolten and Bill Keller, claiming their assessment was “factually wrong.”

It seems that high tax economies in Europe grow just as fast, if not faster, than our own. The average tax among the thirty-four members of the Organization for Economic Cooperation and Development is 38 percent. The average tax American’s pay, including all federal, state and local taxes, is 26 percent. Denmark, Norway and Sweden have high tax rates well above 40 percent, but are among the most prosperous countries in Europe.

Madrick says a tax increase of 10 percent would bring in roughly $1.5 trillion in one year alone and $17 trillion to $18 trillion over 10 years. This enormous sum would more than provide for all possible increases in social expenditure. Even a more modest tax hike of 3 or 4 percent would add $400 billion to $600 billion per year to government revenues, guaranteeing the stability of social programs going forward.

Madrick suggests the following ways to raise taxes:

• Raise the effective tax rate on the top 1 percent of top earners to 43.5 percent. This would leave the rich with twice what they had after taxes in 1970. Madrick says: “A lot of problems would be solved with that additional revenue of $450 billion a year.”
• Make Social Security completely solvent by removing the payroll-tax cap from $100,000 to $190,000.
• Initiate a new tax on financial transactions.
• Introduce a wealth tax such as that in France.
• Reduce deductions for home mortgages, charitable giving, and corporate health expenditures which account for about $1 trillion in lost tax revenue.
• Institute a carbon tax.
• Raise hundreds of billions a year through a European style, value added tax.

But, of course, none of this is going to happen. Madrick writes that virtually no one in power, Democrat or Republican, is going to put any significant tax increase on the table. It’s easier, and more politically expedient, to blame the vulnerable for the deficit, cut “entitlements” and other important programs. and continue to protect the wealthy.  But that approach is a foolish one.

Better government, not weaker government, is the path to prosperity. The nation requires sophisticated education for all; high-speed, low-cost transportation; universal access to the Web; efficient energy usage; and adequate support for the poor and the elderly—all of which demands more government revenue.

If we are going to thrive as a nation, we need better government. When necessary government services and programs are underfunded, or not funded at all, because of a lack of adequate tax revenue, the entire economy falters. In the end, everyone suffers.

Madrick concludes with the following:

There is no debate of good conscience in America about how to pay for the nation’s most profound needs. If there were, raising taxes would be a major part of it. Instead, the lower and middle classes will bear the brunt of deficit reduction.

Politicians and ideologues are playing a cruel game by keeping serious tax increases off the table, but it is especially hypocritical to do so in the name of fiscal responsibility. America’s budget problem is a revenue problem, not a spending problem. The current national conversation about tax hikes is a fine example of political deference to the rich and powerful. It is not good economics.

 

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Sen. Bernie Sanders announced on Friday, November 12 that he will work with members of Congress, labor unions, seniors’ organizations, economists and others to develop progressive alternatives to proposals first floated on Wednesday, November 10 by Sen. Alan Simpson and former White House Chief of Staff Erskine Bowles, leaders of President Obama’s deficit commission.

We all know that there are a number of fair ways to reduce deficits without harming the middle class and those who have already lost their jobs, homes, life savings and ability to send their kids to college.  The time has come to put these proposals into a package so that a fair and progressive deficit reduction plan will become part of the national discussion,” he said.

The Simpson-Bowles deficit reduction plan is extremely disappointing and something that should be vigorously opposed by the American people. The huge increase in the national debt in recent years was caused by two unpaid wars, tax breaks for the wealthy, a Medicare prescription drug bill written by the pharmaceutical industry, and the Wall Street bailout.  Unlike Social Security, none of these proposals were paid for. Not only has Social Security not contributed a dime to the deficit, it has a $2.6 trillion surplus.

It is reprehensible to ask working people, including many who do physically-demanding labor, to work until they are 69 years of age. It also is totally impractical. As they compete for jobs with 25-year-olds, many older workers will go unemployed and have virtually no income. Frankly, there will not be too much demand within the construction industry for 69-year-old bricklayers.

Despite all of the right-wing rhetoric, Social Security is not going bankrupt.  According to the Congressional Budget Office, Social Security can pay every nickel owed to every eligible American for the next 29 years and after that about 80 percent of benefits.

If we are serious about making Social Security strong and solvent for the next 75 years, President Obama has the right solution.  On October 14, 2010, he restated a long-held position that the cap on income subject to Social Security payroll taxes, now at $106,800, should be raised.  As the president has long stated, it is absurd that billionaires pay the same amount into the system as someone who earns $106,800.

Senator Sanders made the following preliminary suggestions:

Military Spending One way to cut the $13.7 trillion national debt, Sanders said, would be for the Department of Defense to drop outdated and expensive Cold War-era programs and refocus on modern-day enemies. “Our military posture should be fighting international terrorism and al Qaeda,” he said.  Citing other ways to save, Sanders mentioned Government Accountability Office studies he commissioned that found billions of dollars are wasted every year on unneeded spare parts.

Taxes Another way to reduce red ink, according to Sanders, is to stop giving expensive tax breaks to the wealthiest Americans whose incomes have soared while the buying power of middle-class workers has shrunk. Sanders favors renewing tax cuts for the middle class, but he said the White House should not bargain away $700 billion in tax breaks for the richest Americans for a decade.

The post Bernie Sanders’ progressive deficit-reduction plan appeared first on Occasional Planet.

So far the debate on Social Security has been between the deficit hawks who want to cut Social Security benefits to reduce government debt and others who want to preserve it as is. A recent policy paper by Stephen Hill at the New America Foundation (and reported on by Alternet) takes a surprising, and different position.  He recommends doubling the current Social Security payout, thus making it a true national retirement system. According to Hill, a more robust Social Security system would be good for American retirees and good for the economy.

Our three-legged stool has lost two legs

Hill explains that since WWII, retirement has been conceived as a “three-legged stool,” with the three legs being Social Security, a pension, and personal savings largely derived from home ownership. But in today’s world, few private sector employers provide pensions, and state and local government pensions are underfunded. In addition, the collapsed housing and stock market have devastated personal savings. What is left is a one-legged stool that is no longer stable or secure. Social Security, once conceived as a supplement, is now the only source of support for hundreds of millions of Americans.

According to Hill, the bottom half of all earners depend on Social Security for 84% of their retirement income. The next 25% of earners depend on Social Security for 55% of their income. Only the richest 25% of Americans don’t rely heavily on Social Security for their retirement income. Because the “retirement stool” is broken, the real problem with Social Security is that the payout is too small. Currently, it replaces only about 33 to 40 percent of a worker’s average wage compared to Germany, for example, where it replaces 70 percent. Obviously, Social Security is not enough money to live on for at least half of seniors for whom it is the primary, and possibly the only, source of retirement income.

But how would we pay for it?

Hill says doubling Social Security’s individual payout would cost about $650 billion annually for the 51 million Americans who currently receive benefits. Although deficit hawks would howl at this number, he counters with solid and practical ways to pay for this increase:

• Lift Social Security’s payroll cap.  Currently Social Security only taxes wages up to $106,800 a year, and any income earned above that is not taxed. The net result is that poor, middle class, and even moderately upper middle class Americans are taxed 12.4 percent (split between employee and employer) on 100 percent of their income, but the wealthy pay a much lower percentage. Making all income levels pay the same percentage would raise about $377 billion.
• Because employer based pensions would be redundant, remove the business deductions businesses currently receive for providing them. These deductions total $126 billion annually.

These two sources of revenue alone would provide three-fourths of the revenue needed to double Social Security’s payout. Hill recommends other revenue streams such as removing the unfair deductions in the tax code, which benefit the top 20 percent of earners but that most low and moderate income Americans cannot enjoy. Some examples are deductions for private retirement savings, homeownership, health care and education.

He argues that while a certain number of moderate income Americans benefit from these, if we doubled Social Security payments for everyone they would no longer need to rely on these deductions as vehicles for retirement savings. Home ownership and 401Ks, as we have seen, are not reliable investments. In 2010 the mortgage interest deduction alone will amount to about $108 billion. Higher income Americans who are losing these tax deductions would see part of it returned to them in the form of a greater Social Security payout.

Unfortunately, Stephen Hill does not mention the logical place to find offsets for doubling Social Security benefits: Decreased defense spending.

How would doubling Social Security work?

Hill has additional ideas for how doubling the Social Security payment could be implemented. For example, he suggests rolling it out in stages, targeting lower earners first. And, allowing seniors who have not yet reached full retirement age to take a half their Social Security and work part time without losing their right to a full Social Security payment upon their retirement.

According to Hill, an expansion of Social Security would be good for the economy because it would act as a stabilizer during economic downturns, keeping retirees secure while stimulating consumer demand. It also would help American businesses compete with foreign companies who don’t have to provide pensions because their countries already have generous national retirement plans.

Hill’s practical idea for an expanded Social Security would provide a stable, and secure retirement for every American.

The post The case for doubling Social Security benefits appeared first on Occasional Planet.

In honor of the  75^th anniversary of Social Security, Nancy Altman, Chairman of the Board of Directors of the Pension Rights Center, and Eric Kingson, professor of social Work at Syracuse University of Social Work, created “Social Security Works,” a website dedicated to spreading the word about the need to preserve Social Security for the American people, and for generations to come. Their primary goals for the next round of Social Security legislation are that it:

• Protect and improve the economic security of disadvantaged and at-risk populations
• Safeguars the economic security of those dependent on Social Security, now or in the future
• Maintain Social Security as a vehicle of social justice

Social Security Works provides information and statistics on the success and necessity of Social Security and why it needs to be protected from deficit hawks and others who might seek to dismantle it.  The following facts and statistics are from the Social Security Works website:

• Social Security has eradicated what once was a primary anxiety of a vast majority of workers: the terror of growing old with no support. It was created to provide workers with a foundation of economic support once they ceased to work, to help them maintain their standards of living and prevent them from falling into poverty .
• Social Security combines widespread protection across all income classes with provisions particularly beneficial to lower-income groups.
• Leaving aside Social Security income, nearly one of every two elderly people––46.8%––has income below the poverty line.
• By lifting 13 million seniors above the poverty line, Social Security reduces the elder poverty rate to 9.7%.
• Social Security is the primary source of life insurance and disability insurance protection for workers and their families.
• Without Social Security, more children would be living in poverty and the depth of their poverty would be much greater; of the children in families that receive Social Security, 42 percent would be poor based only on income other than Social Security.
• Social Security income raises 1.3 million children out of poverty and reduces the poverty rate to 23 percent.
• Without Social Security, 55 percent of the disabled and their families would live in poverty.
• Social Security payments, which are distributed to 9.3 million people with disabilities, their spouses and children, reduce the poverty rate to 18.5%.
• The provision of these benefits has alleviated workers’ fears of leaving themselves and their families destitute in the event of disability.
• The economic meltdown that we have just experienced has underscored the importance and soundness of Social Security. While the nation lost trillions of dollars of private pension wealth and home equity, Social Security has retained its value, because its benefits are guaranteed. Even before the recent meltdown, however, private pensions and private savings never provided adequate supplementation for most retirees.
• Social Security is particularly important to groups who have low lifetime incomes, fewer opportunities to earn pensions, and lower personal savings.
• Social Security provides 100% of income for 4 out of 10 African-Americans and four out of 10 Latinos aged 65 and older.
• Among beneficiaries aged 65 and older, Social Security is 90 percent or more of income for the majority of unmarried elders of color, including 54 percent of African Americans; 55 percent of Asian Americans; 61 percent of American Indians and Alaskan Natives, and 62 percent of Latinos.
• Social Security is also important to middle-class retirees and families. Social Security benefits allow active seniors to remain independent according to their health and according to their choices. Beneficiaries maintain their lifestyles, aging in place and living wherever they want. In promoting their own autonomy, Social Security beneficiaries enjoy their ties to their families, such as relationships with their children and grandchildren, on terms most beneficial to all generations.

Social Security works for families, Social Security works for America.

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