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(If throwing a contribution Pottersville2's way won't break your budget in these difficult financial times, I really need it, and would wholeheartedly appreciate it. Anything you can afford will make a huge difference in this blog's lifetime.)
I know you know this, but how about the brilliant gambit to NOT create jobs in the U.S. for over a decade now to purposely deep six the Social Security, Medicare, Disability and Medicaid program safety net (and make the peons work without benefits - reducing minimum wage/other wages in general during this time)?
Good plan.
For them.
And lots more tax money available for their wars and future (more and more) tax cuts (which they really need in order to add to the trillions they're already investing in creating jobs overseas!).
Good times.
Campaign Desk, Swing States Project
September 13, 2012What A Higher Retirement Age Really Means
A Social Security Mini-Primer
The idea of raising the age at which workers can collect benefits from Social Security is very much in play.
Mitt Romney told the Detroit Economic Club in February that he will “slowly raise the retirement age” for Social Security. The president, meanwhile, declared in his acceptance speech last week that he is still eager to reach an agreement on the principles laid out by his deficit commission, aka the Simpson-Bowles Commission.
And in its final report, the co-chairs of the commission, Alan Simpson and Erskine Bowles, recommended gradually increasing the age from 67 (for those born after 1959) to 69. Because they propose linking the retirement age to gains in longevity, it could go even higher. Along with that rise would also come a change in the early retirement age—from 62 to 64, or higher.
To promote an honest debate about such a change means that journalists must help citizens understand what it entails, which is a lot tougher than it first sounds.
Moving up the age for collecting benefits may sound easier to swallow than some other proposed changes for Social Security, like cutting cost of living hikes for all beneficiaries. On the surface it seems to make certain sense, since people, on average, are living longer (although, in truth, longevity gains have mostly benefited white men; for women of color with low incomes, for example, average life expectancies have declined since the 1980s).
But what is not well understood is that raising the retirement age results in a benefit cut. A law passed in 1983 raised the age from 65 to 66 now and eventually to 67. That change will result in an average cut of about 13 percent for retirees. As the accompanying chart shows, raising the statutory retirement age to 69 would result in a another cut of around 13 percent. That’s a very large cut.
Explaining how raising the retirement age equates to a benefit cut is tricky, as The Associated Press discovered a few weeks ago when it reported on its own survey about preferences in dealing with the financial problems of Social Security, under, at one outlet, the headline, “Narrow majority supports raising taxes, retirement age, to save Social Security.” Most Americans, according to the AP survey, said raising taxes and raising the retirement age were preferable to “cutting monthly benefits.” The AP made that point in its lede, giving readers a clear impression that increasing the retirement age was not a cut. But it is.
The AP gave the same false impression in one of its survey questions. In our CJR Dart to the AP the other day, we reported that raising the age and cutting benefits across the board are mathematically indistinguishable from one another.
In responding to our post, reporter Stephen Olemacher, who wrote the story, pointed out that the AP did tell readers — toward the end of its piece — that “raising the retirement age is a benefit cut for future generations, because they would have to wait longer to qualify for full benefits.” But that statement confuses rather than clarifies. And in an emailed comment, Olemacher argued, incorrectly, that “raising the retirement age does not by itself result in lower monthly benefits.”
We went back to Nancy Altman, a respected Social Security expert who co-directs the advocacy group Social Security Works, and asked her why raising the age is a benefit cut. Contrary to what the AP reported, she said, “with all due respect to Mr. Olemacher, raising the age does result in ‘lower monthly benefits’ than one would receive under current law.” The chart Altman prepared, below, shows how much of a benefit reduction people retiring at different ages would experience.
(Click on image for larger version.)
It’s important for people to understand that workers have an option to claim benefits, starting at age 62 or at a later age of their choosing. It is best to think about Social Security benefits in terms of a range of ages when you can collect them. If you claim benefits before what Congress defines as the “Retirement Age,” your monthly benefits are reduced. If you claim them after you reach the statutory age, they will be higher.
In calculating your benefit, the Social Security Administration figures your monthly earnings over your working years, indexed to average wages. That number is plugged into a benefits formula to arrive at your Primary Insurance Amount, or PIA for short. Social Security’s next step is to look at your birthday and make an actuarial adjustment for your age. The size of the adjustment depends on where Congress sets the statutory Retirement Age.
If Congress sets the Retirement Age at 67, which is currently the case for those born after 1959, the adjustment will result in less of a reduction than someone will experience if it is set at 69. Likewise, a statutory age of 67, will give retirees more of an increase than they would receive if the age were set at 69.
In other words, it’s the actuarial alchemy that results in the cut as you increase the Retirement Age. Here’s what it means in terms of the numbers: If workers retired at 62 when the retirement age was 65, they would have had their PIA reduced by 20 percent. With 67 as the statutory definition of Retirement Age, those claiming benefits at 62 will find their PIA reduced by 30 percent.
If the retirement age were ultimately raised to 69, Altman says the PIA for those claiming benefits at 62 would be reduced by 39 percent. Similarly, if workers claimed benefits at age 70 when the Retirement Age was defined at 65, their PIA would have been increased by 40 percent.
With the Retirement Age defined at 67, workers claiming benefits at age 70 will find their PIA increased by only 24 percent. And with a Retirement Age of 69, workers waiting that long to claim benefits would get an increase in their PIA of only eight percent.
“Without understanding the intricacies of how benefits are calculated, it’s not surprising that people don’t see that raising Social Security’s Retirement Age is an across-the-board benefit cut,” Altman says. “But is is.”
We hope our chart here helps. This is complicated stuff, and perhaps not a lot of fun to write about. But if we are serious about helping the public understand the choices between possible changes to Social Security as part of a grand bargain on deficit reduction, we have to hunker down and get it right.
September 12
Obama’s Campaign Duplicities Rival Romney’s and Ryan’s
By John R. MacArthur
John R. MacArthur is publisher of Harper’s and author of the book You Can’t Be President: The Outrageous Barriers to Democracy in America. This column originally appeared in the Providence Journal on September 12, 2012.
Like other liberals, I’ve been inundated with e-mails attacking the “lies” lately retailed by the Republican Party and the two candidates leading its national ticket.
Paul Ryan’s remarks about the shutdown of his hometown General Motors plant, and President Obama’s alleged deception about keeping it open, is the casus belli cited by most of the anti-Ryan/Romney truthers. But the Janesville/GM gambit seems to stand in for a broader belief among Obama partisans that the Republicans are “lying” on a grander scale than ever before.
I don’t disagree that Paul Ryan and Mitt Romney are dishonest propagandists (Ryan posing as the future savior of Medicare is the most laughable lie to date), but why isn’t Obama being held to the same standard? While the Republicans get slammed for reading back the president’s words to their advantage, Obama gets a free ride from liberals about his own double talk, especially on matters industrial and blue collar.
To be sure, all politicians lie, but Obama has distinguished himself with prevarications such as not closing Guantánamo and not even trying to raise the minimum wage as he pledged. And on “free trade” and tax policy, Ryan’s lies are no match for Obama’s powers of outright distortion. The incumbent’s rhetoric these days is populist, but his record shows him squarely on the side of the capitalist/banking class he purports to oppose.
Obama quickly reversed his pledge to “renegotiate” the North American Free Trade Agreement once in office and then compounded his hypocrisy by pushing through new job-killing trade deals with South Korea, Colombia, and Panama.
As far as I know, he’s made no mention whatsoever of Permanent Normal Trade Relations with China or our tiny 2.5 percent tariff on Japanese car imports (not including pickup trucks)—two policies that contributed greatly to the death of the Janesville, Wisconsin, GM plant.
Obama’s approach to taxing the rich has always been timid, but he has repeatedly backed down when his foes make loud enough threats, as when the G.O.P. objected to raising the debt ceiling. Sacrificed was Obama’s commitment to letting the Bush tax cuts expire, which would have raised the top marginal tax rate a few points, to the still historically low 39.6 percent of the Clinton era.
Less publicized has been Obama’s reneging on another campaign pledge — to raise the capital-gains tax to 25 percent from 15 percent, which would have forced hedge-fund and private-equity partners to pay higher tax on income they claim as “fees” but that should really be treated as personal income and taxed at 35 percent.
Much liberal hot air has been bloviated about Romney paying the 15 percent capital-gains rate for his ill-gotten gains from Bain Capital, but liberals evidently don’t find it appropriate to mention that the big Democratic congressional majority in 2009–10 chose not to raise Romney’s taxes when it could have easily done so.
None of this should be surprising to anyone who has read Obama’s campaign book The Audacity of Hope, in which he expresses his admiration for Robert Rubin, the arch deregulator who did so much damage on behalf of Clinton’s “new Democrat” lurch to the right. But what should be surprising is Obama’s hypocrisy about GM.
With its initial 61 percent stake in the corporation, the Obama Administration could have insisted that GM preserve more American jobs (including at GM/Janesville) in exchange for the government’s largesse with taxpayer money.
But it didn’t, because the principal architect of the GM bailout was the financier Steven Rattner, himself a disciple of Rubin and his free-market church.
Rattner’s plan wasn’t that different from what Bain Capital and Romney would propose: Refinance GM and Chrysler with other people’s money and saddle them with debt while both companies continue to shut down unionized plants and outsource jobs to such cheap labor locales as Mexico and China.
Today, fewer than half of GM jobs are in the United States, and the corporation has made it clear it intends to increase manufacturing in Mexico and China.
The more pertinent critique of Paul Ryan’s “lying” use of Obama’s Janesville/GM speech would have concerned his choice of quotes. For it’s clear that Ryan’s speechwriters shied away from the more damning section about “free trade” and NAFTA. If Ryan and the Republicans had any guts, or honesty — if they really disagreed with Obama — this is how his speech would have gone:
“My fellow Americans, we need to face up to the reality and the ravages of globalization — the damage done by so-called free-trade policies that benefit no one but the financial class. Where we desperately need candor, we instead get deception and dissembling from the president. I know, because he was at his very worst in my hometown of Janesville. I’d like to quote from candidate Obama’s campaign speech of February 13, 2008:Maybe in 2016, someone will run for president who doesn’t give duplicitous speeches like Paul Ryan and Barack Obama.
‘It’s also time to look to the future and figure out how to make trade work for American workers. I won’t stand here and tell you that we can — or should — stop free trade. We can’t stop every job from going overseas. But I also won’t stand here and accept an America where we do nothing to help American workers who lost jobs and opportunities because of these trade agreements. And that’s a position of mine that doesn’t change based on who I’m talking to or the election I’m running in.
You know, in the years after her husband signed NAFTA, Senator Clinton would go around talking about how great it was and how many benefits it would bring. Now that she’s running for president, she says we need a time-out on trade. No one knows when this time-out will end. Maybe after the election. I don’t know about a timeout, but I do know this — when I am president, I will not sign another trade agreement unless it has protections for the environment and protections for American workers.’ ”
Dirty Deals on Social Security Likely to Succeed
Monday, 27 June 2011
By Jack Rasmus, Truthout
Jack Hartley, 58, at his home with his dog, Bouncer, in Fostoria, Ohio, September 3, 2010. Hartley, who works a 12-hour shift assembling tires, said he does not think he can last until age 66, when he will be eligible for full Social Security retirement benefits. (Photo: Stephen McGee / The New York Times)
The current offensive underway against Medicare by Paul Ryan and the House Republican majority is well known. Less well known is the somewhat hidden undermining of Medicare in the 2010 Obama health bill that will take effect in a few more years and cost retirees a significant increase in out-of-pocket costs and caps on benefits. In contrast to Medicare, Social Security retirement and disability programs were, according to the Washington political consensus, to be delayed from cuts until after the November 2012 elections.
But there is new evidence that the growing coziness between Obama and mainstream Republicans, on the one hand, and corporate interests on the other is about to result in a new offensive against Social Security before the 2012 elections. What this means is that the "old age retirement" benefits fund as well as the "disability insurance" fund programs of Social Security are now, like Medicare, about to become prime targets for cuts in the 2012 budget this Fall.
The assault on the disability fund is already well underway. Disability benefits administrative law judges, who decide on granting long-term disability benefits under Social Security, have recently come under intense attack for being "too generous" in granting permanent benefits to the disabled. The new offensive was initiated in the wake of a May 19 Wall Street Journal editorial attacking disability administrative judge, David Daugherty. In the wake of the Journal opening salvo, Republicans and Democrats in the House quickly joined forces calling for an investigation of disability benefits judges in general. In response to the House investigation, the offensive quickly turned even more aggressive. It has now taken on the character of a criminal probe. All this, no doubt, will have a "chilling effect" on decisions to grant benefits by judges. The cost cutting has already begun.
The disability benefits trust fund is a prime and easy target from which to attack Social Security across the board. The disability fund pays out $124 billion in benefits to 10.2 million in 2010. That's a juicy cost-cutting plum.
Rumors abounded that Obama's "golf summit" with House Majority Republican Leader John Boehner would discuss Social Security cuts as part of a larger "understanding" of broad federal budget cutting in the 2012 budget, starting next October. Obama is clearly willing to use Social Security as a bargaining chip now, instead of waiting for a second term.
Obama's new "soft" position on Social Security in general was evident in his last December 2010 decision to reduce the payroll tax by 2 percent for workers.
That resulted in more than $100 billion shortfall in revenue for Social Security this year alone, when the chronic jobless problem - 24 million still out of work - for three years now has already meant a major falloff in Social Security revenues for its various funds for the first time in decades. The 2 percent cut in the payroll tax was supposed to boost consumption, but it hasn't.
Estimates are that 60 percent of the 2 percent payroll tax cut last December has already been absorbed by oil companies to pay for $4 a gallon gasoline.
Not deterred by this fact, the Obama administration, nonetheless, in recent weeks has begun floating the idea of cutting the employers' 6.2 percent share of the payroll tax, giving yet more income to business that has been sitting on a cash hoard of $2 trillion and not investing in the US and creating jobs.
The logic of why corporations need still more cash from a payroll tax cut in order to invest is unconvincing. This second cut will drive the Social Security retirement and disability funds further in the red, making it even more convenient for those who argue for cuts now instead of after 2012.
With the imminent new offensive against Social Security "in the air," groups like the American Association of Retired Persons (AARP) last week did an about-face. AARP led the defense against Bush Jr.'s attempts to privatize Social Security last decade. Now, however, they are jumping on the cut Social Security retirement benefits bandwagon.
As the Wall St. Journal recently gleefully noted, AARP "is dropping its long standing opposition to cutting Social Security benefits, a move that could rock Washington's debate over how to revamp the nation's entitlement programs." Does anyone believe AARP hasn't discussed this already with the Obama team, that some kind of new consensus to cut early and deep is being formed?
The most recent report by the Trustees of the Social Security program stated that the retirement benefits trust would run out of revenue to provide full benefits to retirees in 2038, when only 77 percent of benefit levels could be paid. The Medicare trust will run out of funds for full benefits earlier, in 2018.
The Obama-Republican-Corporate Solutions
Republicans, Obama and Corporate interests are proposing to "solve" the Social Security retirement/disability benefits and Medicare benefits problems with the following measures:
- Raise the retirement age to 70, which would cover 28 percent of the projected shortfall.
- Eliminate the annual cost-of-living benefit increases for retirement benefits, which would cover another 23 percent.
- Make new state and local government workers go into the Social Security system instead of receiving negotiated state-local pension plans, saving another 7 percent.
- Reduce benefits for middle-income retirees and significantly for higher income retirees, raising another 39 percent.
Those four measures would amount to 97 percent of the projected shortfall and make the retirement benefits trust fund "solvent" past mid-century.
For Medicare, their proposals are not to maintain benefits, but to reduce them by various measures while raising the costs for the reduced benefits. These include:
- Cap government payments while prices are allowed to rise. Or, as in the Ryan plan, give retirees vouchers to buy insurance that is "capped" as well while insurance rates rise.
- Raise the amount of monthly premiums by double or more. Currently, retirees must pay between $95-$115 for doctors' costs coverage and an additional amount per month to cover only part of prescription drugs. Combined premiums will, thus, rise to $250-$300 per month. And that's not counting higher deductibles and copays for doctors and drugs.
The Real Causes of the Social Security-Medicare Funding "Crisis"
The shortfall in the Social Security retirement benefits fund and disability fund are due first and foremost to the chronic lack of job creation and, thus, payroll tax revenue generation, for more than a decade now. Today, fewer are employed in the US than in 2000. The 2001 recession resulted in loss of jobs followed by weak job creation for the following four years. The 2007-11 recessions resulted in 24-27 million lost jobs and continuing weak job creation for more than three years now.
These cyclical job losses were combined with chronic structural job losses at the same time: multinational corporations created three million jobs offshore and reduced 2.4 million jobs in the US. In addition, for those with jobs, wage gains have been lagging for a decade as well. That adds up to less payroll tax revenue as well. Then on top if it all, Obama cuts the payroll tax and is about to propose even more cuts in the payroll tax.
As for Medicare's shortfall in funding, the problem has several dimensions. First, the same payroll tax of 1.45 percent for the employee and for employer is ridiculously low. Where else are 47 million recipients of medical care covered for so small a tax? The typical employer-provided health insurance in contrast costs more than 20-24 percent, the equivalent of a typical worker's monthly paycheck.
That's ten times more expensive. And the benefit coverage is often far less. The other major problem with the Medicare fund's shortfall is rising health insurance premiums and other health care costs for the past 15 years. And there's no solution to rising health costs in Obama's 2010 health care bill whatsoever.
Alternative Solutions to the Social Security-Medicare Funding "Crisis"
Solving either of the funding shortfalls, for Social Security retirement-disability or for Medicare, is not very difficult.
- Eliminate the current cap of $106,800 on earnings for the 12.4 percent. This would raise revenue to cover 86 percent of the projected shortfall for the next 75 years.
- Raise the payroll tax rate by 1 percent more, both for employee and employer, to 14.4 percent, in stages over the next 20 years. That would cover another 63 percent of the shortfall. That's just under 150 percent of what is needed.
- Use the excess 50 percent funding to reduce the retirement age to 65 for everyone, instead of the current 67. That would open up more jobs for young workers, who are suffering the worst unemployment as more older workers are forced by economic conditions to continue working past 67 or are forced to re-enter the labor force just to pay their bills.
- The Medicare shortfall can be solved simply by raising the 2.9 percent Medicare payroll tax by 0.25 percent for workers and employers each for the next ten years, then another 0.25 percent each for the second decade. That's 0.5 percent now and another 0.5 percent ten years from now.
- To sum up, what this amounts to is a simple 1 percent more each, employee and employer, for Social Security retirement, and another immediate 0.5 percent each for Medicare, applied to all "earned" incomes (wages and salary = "earned"). In short, make all earned incomes pay the same - and the so-called "great crisis" in entitlement funding disappears. These estimates, by the way, are from the Social Security administration's own calculations.
- Better and simpler yet, make everyone pay the 14.4 percent and 3.4 percent, not just those "earning" wages and salaries. Make all forms of capital incomes (capital gains, dividends, interest, rents etc.) pay the 14.4 percent and 3.4 percent - and you not only solve the so-called "entitlement funding crisis" for the remainder of this century, but you have now raised enough revenue to pay for single-payer health care for all as well.
But you won't hear these ideas and solutions coming off the "golf course summit" between Obama and Boehner this week.
Jack Rasmus
Jack Rasmus is the author of the just-released book, Obama's Economy: Recovery for the Few, published and distributed by Pluto Press and Palgrave-Macmillan, and the 2011, An Alternative Program for Economic Recovery. His web site is www.kyklosproductions.com and his blog containing past articles is at jackrasmus.com.
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