The Washington Post, which at times has acted like the head media cheerleader for the president’s deficit commission, appeared to send a political message in its Social Security analysis Saturday. The paper pointed out that the president was “reviving a scare tactic that Democrats have used before” in his weekly radio address when he charged that “some Republican leaders in Congress” want to privatize Social Security. The paper quoted the president:
“I’d have thought that debate would’ve been put to rest once and for all by the financial crisis we’ve just experienced. …after seeing the wealth people worked a lifetime to earn wiped out in a matter of days, that no one would want to place bets with Social Security on Wall Street”
The Post correctly pointed out that Republican leaders are not pressing for privatization—at least, not directly. But by coming out against privatization, Obama clearly was making sure the public understood he was against the scheme that might jeopardize the bedrock of people’s retirement savings. What we don’t really know is where the president stands on the Social Security questions that are on the table—raising the retirement age from sixty-seven to seventy; raising the amount of wages subject to Social Security payroll taxes; and means testing, which does have the potential to put Social Security on the path toward privatization in the long run, and which unglues the system’s solidarity. If recipients with higher incomes no longer have a stake in the system, why should they support it? They might as well have their own privatized accounts.
William Greider, writing in The Nation earlier this summer, reported that Obama is being coy about his grand bargain. “He ducks questions about his preferences, saying only that ‘everything is on the table,’” Greider wrote, suggesting that Obama’s coziness with Republican conservatives is his Nixon-goes-to-China thing—an attempt to prove his manhood by going against his party’s convictions.
Is this talk about privatization a red herring—a distraction to cover up what the president and others really want? The Post made that point by quoting Michael Steel, a spokesman for Rep. John Boehner of Ohio, who accused the president and the Democrats of dredging up old issues that are no longer valid. Steel’s boss supports raising the retirement age.
Last week Social Security celebrated its seventy-fifth birthday, and members of Congress scrambled to send birthday wishes. The Post quoted Michigan Republican Dave Camp, a member of the president’s deficit commission, who said “we should honor Social Security’s history of achievement by securing its future for our children and our grandchildren.” Camp’s solution: “we must protect benefits for seniors, near-retirees, and those who rely on Social Security most.” That’s code, folks, for raising the retirement age for younger workers and means-testing it for all but the poorest Americans. Indeed, Jane Hamsher on her Firedoglake blog says that Camp does not want to cut monthly benefits for current retirees. WaPo didn’t decipher this code for its readers.
The paper did mention a new effort announced last week by MoveOn.org. The advocacy group said it would demand that every member of Congress running for reelection this fall sign a pledge to oppose cuts to Social Security, such as raising the retirement age. If not, they “should be looking to retire in November.” The Post said, however, that this effort “could make the work of the deficit commission far more difficult,” and pointed out that both Boehner and House Democratic leader Steny Hoyer favor raising the retirement age.
Noticeably absent from the Post story were comments from North Dakota Rep. Earl Pomeroy, an important player in the debate. Pomeroy chairs the Social Security Subcommiteee on the House Ways and Means Committee. In a press conference call last week, he said that any benefit cuts are “completely unacceptable” and should be taken off the table. “Even a phased-in adjustment in the age would change the terms of the deal,” Pomeroy said.
There was no code to decipher in that message.
What Ms Lieberman failed to point out is that we already have a form of "means testing" which applies to Social Security recipients whose "other income" exceeds $25K (single) or $34K (married). This is the so-called senior's tax. 85% of Social Security benefits are taxed ( at full retirement age) as ordinary income when other income exceeds either of the two caps, which incidentally were not indexed to the CPI when the law was passed back in 1986. Had those earnings been indexed, the $25K cap, for example, would now be around $50K. Voting for the bill and not to index were John McCain and Joe Biden.
Congress breached its 1935 contract (promise) to the American people that Social Security benefits would never be taxable. That statement appeared in every 1040 form until 1987. In '86 there were not very many people who made more than $25K. Now come the boomers and the slightly pre-boomers.
#1 Posted by dougmatt, CJR on Tue 17 Aug 2010 at 04:02 PM
Hat off to you Trudy for bringing the realities of the Deficit Committee to public view via this review of the WA PO article on same. The public has to be made more aware of the coded comments of our public officials, almost all of whom are very wealthy themselves and will be less dependent on SS benefits than the average working American. Worse yet is that the Commission itself is top heavy with devout SS killers and representatives of great wealth. Obama, the Great Compromiser, has to be stopped from bringing a Republican-lite frame of reference to this debate.
#2 Posted by Jack, CJR on Wed 18 Aug 2010 at 07:21 AM
Those interested in lots more good information on this issue might link over to thee AngryBear blog site where the topic is discussed in detail.
http://www.angrybearblog.com/2010/08/destroying-social-security-to-save-it.html#comment-form
And even more intensely by at this site:
http://bruceweb.blogspot.com/2008/08/angry-bear-social-security-series.html
#3 Posted by Jack, CJR on Wed 18 Aug 2010 at 07:30 AM
Common Dreams has two very interesting posts about strengthening SS.
One is a very interesting proposal for "Social Security Plus" which would double benefits to 60% of salary. Sounds like a very good idea (!): New Study Identifies Revenues for Doubling of Social Security Payout
Guaranteeing the American Dream with Expanded Social Security by Stephen Hill, http://www.commondreams.org/headline/2010/08/18
But this other article points out an angle about the crisis-propaganda that I had not heard before but which makes so much sense:
"Krugman is also wrong in saying that it is ideologues who are trying to wreck Social Security. The ideologues at places like the Cato Institute and Heritage Foundation are providing the intellectual justification for destroying Social Security, but the real opposition to Social Security, though, is corporate America, as represented by groups like the Business Roundtable and the US Chamber of Commerce (it's corporate America that funds those foundations and their resident "scholars," after all). And the reason for this corporate opposition is that Social Security taxes and Medicare taxes paid by workers are both matched, dollar for dollar, by employers. If you pay 6.2% of your income in taxes to the Social Security Administration each year, so does your boss, and if the income cap is lifted for workers it will also be lifted for employers. That means a bigger tax bill for the company, and of course personally for the managers and board members.
So let's at least be honest in this coming battle over "saving" Social Security. It is nothing less than a war between bosses and workers."
---From There’s Nothing Wrong with Social Security that Taxing the Rich Fairly Wouldn’t Fix by Dave Lindorff, http://www.commondreams.org/view/2010/08/16-7
So now I'm curious to know more about the income threshold for SS taxation, particularly if the employer match has influenced or contributed to the vast inflation for highly compensated employees. Is it part of the vast, growing divide? In other words, if the cap was lifted and SS payroll taxes increased, would corporations respond by limiting the incomes of its highest paid employees? I think the economics answer to that question is probably yes. But I will have to read a paper posted by Uwe Reinhardt a few months ago that I printed but did not finish. I believe the point was that employees actually do pay for all of our related fringe benefits/employer-paid taxes indirectly through reduced levels of income. But I have to check on that, understand it better.
One benefit from this latest attack on Social Security is that it's creating very good opportunities to learn about these normally obscure issues. So if it doesn't kill it, it could make SS and other American retirement options stronger. :-)
#4 Posted by MB, CJR on Wed 18 Aug 2010 at 03:22 PM
"dougmatt" tells only part of the story about the 85% income tax rate on social Security earnings for retirees about $25k for individuals and $34k for married couples. The 85% rate was set to be comparable to similar taxation of private-pension income. Passing the tax was one of the compromises that came out of the 1983 Greenspan Commission on social Security, but it wasn't enacted right away. some Democrats rationalized it as part of the progressivity of the SS program. (The FICA tax rate is regressive, but the income replacement rate is progressive, that is, on average, it replaces a greater percentage of pre-retirement income for lower inclome people (something in the 50-55% area) than for upper income people (about 25-30%). The mean is around 39%.
But doumatt is also quite right that Congress did a serious disservice to the public -- a common dirty trick -- by claiming this would affect more affluent Americans and then failing deliberately to index the income levels to inflation.
The result is the long-term erosion of income security, not only through this tax but also through things like increasing the Medicare Part B (and now adding Part D) premiums for people. About 5 years ago the Center for Retirement Research (www.bc.org/crr) showed that without change the replacement level wold dip into the 25-30% range for the average person -- hardly enough to live on. and that was before the recession crashed people's 401ks (for those who have them).
The upshot -- and something I'm sure Trudy Lieberman is likely to take on before too long, since she's already talked elsewhere about the stealth privatization of Medicare) is that the bipartisan Washington weasels are undercutting the nation's public security when they should be strengthening it.
-Paul Kleyman
#5 Posted by Paul Kleyman, CJR on Wed 18 Aug 2010 at 07:52 PM
The real problem isn't just SS; it is entitlements. Welfare and Medicaid have ballooned mor than the population increase can justify. We now have families who have known nothin else for 2 or more generations. We have high school girls who know that they want 3 out-of-wedlock children because they can then live comfortably on Welfare.
Welfare was never meant to be a career choice! The system as it exists does nothing to encourage independence. This has to stop. These people end up having no self respect, and passing this on to the next generation. These stay-at-home moms, or most of them, give the rest of us a bad name, because they do little toeducate of discipline their children. Checks should be made dependent on job training, ultimately leading to employment and independence.
#6 Posted by marilyn, CJR on Thu 19 Aug 2010 at 02:00 PM
it needs to be pointed out that Social Security's projected long term actuarial deficit can be closed entirely by a payroll tax increase of one half of one tenth of one percent per year, half of that paid by the employer.(See CBO option number 3)
There is no need to means test, or cut benefits, or raise the retirement age, or even raise the cap, or find other ways to tax the rich.
Social Security was meant to be an insurance plan for workers paid for by workers. Tell the workers they can save their Social Security for what amounts to twenty cents per week and maybe they can explain it to the President in terms he can understand.
#7 Posted by dale coberly, CJR on Thu 19 Aug 2010 at 07:49 PM
KEEP YOUR HANDS OFF SOCIAL SECURITY...WE DO NOT WANT IT PRIVITIZED...WE WANT IT STABALIZED...WE DO NOT WANT SOCIAL SECURITY TO BE THE NEXT BIG BUSINESS WALL STREET SCANDAL...
WE DO NOT WANT SOME CROOKED CEO WITH HIS MITTS ON OUR MONEY.
#8 Posted by Carol Stanton, CJR on Thu 19 Aug 2010 at 10:56 PM