When the president signed the tax bill Friday, a year’s worth of efforts aimed at modifying Social Security came to an end—at least for now. Obama’s signature was an early Christmas present to those who propose fixing the system in ways many Social Security experts say could hurt recipients in the future. The Obama-Republican compromise grants a payroll tax holiday that reduces the contributions paid by workers by two percentage points for 2011 and, ironically, aggravates a shortfall that budget hawks on the president’s now-defunct deficit commission have screamed about all year.
When the commission disbanded on December 3, eleven of its eighteen members had voted to cut Social Security benefits and make technical changes in the benefit formula that would reduce the amount of money workers would eventually receive, including cost-of-living increases for all beneficiaries beginning in 2012. “The public needs to recognize that there is a serious effort underfoot to dismantle Social Security,” says Eric Kingson, co-chair of the Strengthen Social Security Campaign, a coalition of 250 organizations—including labor unions, civil rights groups, and women’s groups—that takes a different view of what needs to be done to Social Security.
Kingson’s coalition has struggled all year to inject that view into the MSM. When they were quoted, journalists often described them as “defenders” of the country’s most successful social program, implying that, as defenders, they are seeking to hold onto something that’s outdated and unworkable. In the last couple of weeks, the press has finally noticed what they have to say. Kingson’s co-chair Nancy Altman appeared on
It’s reasonable for people to debate the merits of ways to slice the deficit or to fix Social Security’s shortfall, but it is not reasonable for the press to serve up one-sided, shallow reporting, which has been the norm from too many news outlets. As Social Security expert Alicia Munnell told Campaign Desk in late October: “We haven’t really had a debate.” And yet, a few weeks later, a headline in The Washington Post announced “Consensus is forming on what steps to take in cutting the deficit.” A consensus of elites, maybe, but not necessarily of the general public, who indicated in poll after poll they do not want to cut Social Security to reduce the deficit or achieve the long-term fiscal balance in the Social Security trust funds.
But stories asking what the public thinks or probing how ordinary citizens will be helped or hurt by proposed changes have been absent this year. CNN aired segments about why people take early retirement benefits, but stories like that were rare. That omission prompted me to travel to Champaign-Urbana, Illinois, and report in our series, “Social Security in the Heartland,” how people would fare in a different kind of system. In my admittedly unscientific sample, no one was in favor of the changes advocated by political elites and the press. One businessman who called himself a conservative and favors privatization did not like raising the retirement age because he said it would hurt some people financially. “It’s a violation of the original contract. I should get what the system was set up to give me,” he explained.
From the beginning of the deficit commission’s work early last year, the press passed along comments, even offensive ones, from co-chair Alan Simpson, famous for saying “this country is gonna go to the bow-wows unless we deal with entitlements, Social Security and Medicare,” and “we’re trying to take care of the lesser people in society,” and likening Social Security to “a milk cow with 310 million tits.” The president did not fire Simpson, and so his comments set the premise for the public discourse that followed.
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Social Security is a gloified ponzi scheme. If I setup a business with the exact approach taken with SS, the government would shut me down (and rightfully so). To act like there is nothing wrong with SS as it is now being administered is to simply have one's head in the sand. Changes have to be made, and soon. Congress has been kicking this down the road for too long, but I think a majority of Americans realize that the program is in need of fixing.
#1 Posted by Ken, CJR on Mon 20 Dec 2010 at 01:14 PM
Excellent commentary, Trudy. There is one expression missed in this helpful review of a year of misleading debate over Social Security: namely, the continued strength of 'zombie' ideas.
Krugman emphasized that in macro-economic thinking and commentary on banking regulation. But it applies to social insurance comments where claims about the deficit were made that were simply false, repeated again and again.
Ted Marmor
#2 Posted by Ted Marmor, CJR on Mon 20 Dec 2010 at 05:33 PM
Social Security is a ponzi scheme since Reagan and Greenspan set it up to take a larger share of payroll taxes than needed by S.S. in order to fund a future draw on benefits that they never intended to pay.
But, in the meantime, the republicans got to spend 2 trillion extra dollars of middle class payroll tax revenue while cutting income and capital gains taxes for the rich, never mind the corporate taxes.
And now Obama has given a payroll tax holiday to the republicans so that they can further make the case that the program is in dire fiscal trouble and should be cut instead of funded. After all, according to republicans (and the corporate, Rubin wing democrats) the government has spending problems, not revenue problems.
"Revenue cuts stimulate growth, you know." say the zombie economists.
http://www.rollingstone.com/politics/blogs/taibblog/matt-bais-post-partisanship-20101205
http://blogs.ft.com/martin-wolf-exchange/2010/07/25/the-political-genius-of-supply-side-economics/
"By the way, I find it astounding that in 2009, the total revenue from the income tax, at 6.4 per cent of GDP was almost identical to the revenue from social security receipts, at 6.3 per cent. If this were my country, I would find that scandalous, given the latter are so much more regressive (and job destroying) than the former. But it is not. I merely point it out.
Supply-side tax cuts did not sustain revenues relative to GDP. That is the truth."
#3 Posted by Thimbles, CJR on Mon 20 Dec 2010 at 08:30 PM
The thing that allows jerks like Alan Simpson and the rest of the "cut social security" media be so nonchalant about cutting a program that so many people require is that they, and the people they know, don't really need it. They are in the upper quintile of income and therefore Social Security only makes up 18% of their income (which is why they are much more sensitive on the issue of income tax cuts than on entitlement cuts).
The bottom 60% of people rely on Social Security for 60 to 80 percent of their income http://www.aoa.gov/agingstatsdotnet/Main_Site/Data/2004_Documents/economics.aspx
and they paid a much greater percentage of income over their working lives in order to fund the program.
But the rich quintile doesn't really care about that 18% of income when they retire, they are perfectly willing to sacrifice it, so long as their taxes don't go up.
Shouldn't everybody be as willing to sacrifice as the rich?
#4 Posted by Thimbles, CJR on Mon 20 Dec 2010 at 08:46 PM
Robert Knutter's claiming we're going to hear more about this in the state of the union.
http://www.politico.com/news/stories/1210/46430.html
"The second part, now being teed up by the White House and key Senate Democrats, is a scheme for the president to embrace much of the Bowles-Simpson plan — including cuts in Social Security. This is to be unveiled, according to well-placed sources, in the president’s State of the Union address.
The idea is to pre-empt an even more draconian set of budget cuts likely to be proposed by the incoming House Budget Committee chairman, Rep. Paul Ryan (R-Wis.), as a condition of extending the debt ceiling. This is expected to hit in April."
Yay! More hostages and more capitulation!
#5 Posted by Thimbles, CJR on Mon 20 Dec 2010 at 10:16 PM
"After all, according to republicans (and the corporate, Rubin wing democrats) the government has spending problems, not revenue problems."
http://voices.washingtonpost.com/ezra-klein/2010/12/republicans_are_not_fiscally_r.html
Welcome to Cutgo approach to economics.
http://mediamatters.org/blog/201012200012
#6 Posted by Thimbles, CJR on Mon 20 Dec 2010 at 11:28 PM
Thanks for doing this, Trudy. you are spot on for what's being missed and glossed over.
Bob Meyers
National Press Foundsation
#7 Posted by bob meyers, CJR on Tue 21 Dec 2010 at 02:29 PM
I don't want to distract from the social security discussion, but I just watched the 60 minutes report from the media matters link I put above detailing how "cut as you go" works in action and I couldn't help noticing how state budget crisises (many of which caused by tax cuts, tax offloading from property to sales taxes, and the recession's effect on revenue and bonds) were being used to force the sale of state assets.
This mirrors the work done in Taibbi's Griftopia:
http://www.rollingstone.com/politics/news/exclusive-excerpt-america-on-sale-from-matt-taibbis-griftopia-20101018
Which mirrors the work in Naomi Klein's shock doctrine. We are doing everything in sight to raise revenues except increase taxes. We are doing everything in sight to cut costs except debt forgiveness. We are not willing, as a society, to do anything to inconvenience the top few percent, they don't have to take haircuts, they don't have to pay taxes, they even get to buy valued assets at fire sale prices.
Nothing is sacred, not social security, not teachers, not safe passage over bridges:
http://dc.streetsblog.org/2010/12/20/gravity-always-wins-how-the-u-s-can-face-the-crisis-of-unsafe-bridges/
Only the wealthy are protected.
In the Rabbinic teachings on Sodom and Gommorah, sex was not the sin for which the city was destroyed. Only a few bandits sought to attack Lot's guests, but everyone had abandoned them in the park and no one stood up for them when they were attacked.
No one stood for the poor, everyone stood for their own. They were a rich society that had declared they needed no one and nothing. Therefore it became unsafe to stay in Sodom.
There is a reason why the God of money and the God of death were one in the same. There's a reason why we must fear a world run by plutocrats.
Because when we don't care about social security, when we don't care about our social contracts, when we care more about our taxes than our world, we have become Sodomites.
And Sodomites are silent in the face of challenges like increasing poverty, decaying society, and catastrophes like global warming.
It is our silence and our unwillingness to sacrifice and care that damns us and, in the end. cause us to burn.
Anyways, sorry for the distraction.
#8 Posted by Thimbles, CJR on Tue 21 Dec 2010 at 10:47 PM
The nonsense continues where the gatekeepers decide for the proles how they are to live their retired days while the lazy media regurgitates the same old same old.
But thanks, Ms Lieberman, for reminding us how little power we really have in this republic. And how little the powerful need the middle class.
#9 Posted by dpjbro, CJR on Wed 22 Dec 2010 at 10:37 AM
SS is not a ponzi scheme. Years ago when more money was going into the trust funds (that bought treasury bonds) than was needed, Congress borrowed the excess money (those treasury bonds) and used it to pay the bills rather than raise taxes. Now that we are at the point of more money needing to go out than is coming in - Congress doesn't want to pay back the money they borrowed - they want to change the rules. Congress needs to bite the bullet and pay back the loan.
Too bad Bush gave away the Surplus - that was a perfect opportunity to repay SS and Medicare.
#10 Posted by Cmac, CJR on Wed 22 Dec 2010 at 10:45 PM
I'm reminded of the statement, "We had to destroy the village in order to save it," from the Vietnam War. The so-called "reform" movement is really a movement to try to destroy Social Security.
#11 Posted by Mgleaf, CJR on Wed 22 Dec 2010 at 11:45 PM
It's not a Ponzi scheme:
At the height of the Great Depression, our society (see "Social") resolved to create a safety net (see "Security") in the form of a social insurance policy that would pay modest benefits to retirees, the disabled and the survivors of deceased workers. By design, that means a certain amount of wealth transfer, with richer workers subsidizing poorer ones. That might rankle, but it's not fraud.
http://money.cnn.com/2009/01/06/news/economy/social.security.fortune/index.htm
#12 Posted by Bea, CJR on Thu 23 Dec 2010 at 07:07 AM
the financial industry will do anything to get its hands on social security monies
#13 Posted by jamzo, CJR on Thu 23 Dec 2010 at 11:22 AM
Let me be clear, I don't think it's a ponzi scheme, I don't think it was designed to be a ponzi scheme, but unless America gets the political will to raise enough revenue to pay its debt to the social security trust fund, the American government will not have the money.
So America has to raise taxes in order to repay the debt it owes to Social Security and other parties such as Japan and China.
But we have seen that there is NO political will for that from either of the viable political parties. And the elite class, the ones who pushed for the renewal of the Bush tax cuts (see the effect of that here:
http://voices.washingtonpost.com/ezra-klein/2010/08/how_to_fix_social_security_in.html
), see the program as expendable.
They see social security and medicare, where the mandatory money is going, as the places to cut, as if that's where the money is.
See Ben Bernanke:http://www.huffingtonpost.com/2009/12/03/bernanke-channels-willie_n_378963.html
"Bernanke reminded Congress that it has the power to repeal Social Security and Medicare.
"It's only mandatory until Congress says it's not mandatory. And we have no option but to address those costs at some point or else we will have an unsustainable situation," said Bernanke...
Sen. Jack Reed (D-R.I.) followed Bennett and pointed out that "there's only really two ways you can deflect this deficit, and that's either by cutting expenditures or raising income taxes or other forms of taxes."
Reed asked him if he could think of other ways, but Bernanke returned to entitlement money as the way to balance the budget.
"Willie Sutton robbed banks because that's where the money is, as he put it," Bernanke said. "The money in this case is in entitlements."
There's also money at the very top of the income ladder. Reed asked if Congress would be wise to tax some of it. Full of suggestions when it came to cutting entitlements, Bernanke was suddenly overtaken by a bout of policy modesty.
"Would you take taxes off the table?" Reed asked.
"Those decisions are up to Congress," Bernanke said.
"Well, your predecessor signaled very strongly that the tax cuts in 2000 were appropriate," Reed reminded him.
"I have not done that. I've done my best to leave that authority where it belongs, with the Congress," Bernanke said, just moments after telling Congress to cut entitlement spending."
This is the view of the elites on both political sides, they see SS as a ponzi scheme and this generation of American people, the people at the bottom income quintiles, are the suckers. Unless a power bloc comes along that's strong enough to challenge the bipartisan elites - these guys from Rubin's Concord Coalition and Pete Peterson's Foundation, and the guys who are coming from Freedom Works and the Koch bought libertarian side - they will engineer a crisis, likely stemming from radical republican demands to change entitlements or they will not raise the debt ceiling (causing America to default on all its debt), and the only solution to that crisis will be gutting social security and making the trust fund debt vanish in a poof of numbers.
Which, in effect, will mean that for thirty years half of government revenue was paid by a regressive tax on lower income wages without the architects of that plan having to pay a political price for shifting the tax burden onto lower income brackets while cutting taxes for the higher ones.
FDR's social security program was not a ponzi scheme. Reagan and Greenspan's was, or at least it will be if the American elites have their say.
And the more I see people congratulating Obama on his lame duck tax capitulation as a victory, the less chance I see of Americans challenging the elite consensus that "Social security will be cut, or the Ameri
#14 Posted by Thimbles, CJR on Thu 23 Dec 2010 at 08:20 PM
This does not look good:
http://news.firedoglake.com/2010/12/22/republican-house-rules-makes-it-harder-to-increase-debt-limit-raise-taxes/
And it's not like it wasn't predictable:
http://online.wsj.com/article/SB10001424052748704405704575596781566162158.html
Everybody congratulating Obama on the lame duck now, realize he gave away tax cuts without securing a raise in the debt limit. It's not like the republicans have been quiet about their strategy, it's not like no one in either the press or the blogs hadn't warned about this. To not secure a deal that lowers revenue without raising the debt limit is political malpractice.
Obama and his stupid team need a primary.
#15 Posted by Thimbles, CJR on Fri 24 Dec 2010 at 08:55 PM