Tuesday, December 17, 2013

For the Last Generation, the Range of Permissible Opinion with Respect to the Program - Which Most Americans Depend On for Nearly All of Their Income in Old Age - Ranged from Conservatives Who Wanted to Abolish Social Security Altogether, to Press-Anointed "Progressives" and Token Democrats Who Merely Wanted to Cut Social Security Benefits

Elizabeth Warren has changed the calculus of the much-feared Social Security insoluable conundrum.

Believe it or not, people are now actually talking about increasing what Social Security pays out instead of increasing what people must pay in to get less of a payout.

Imagine! (Peak behind the curtain, kiddies!)

Dean Baker explains the whole situation even better (at the end of this essay). Read all of his articles and books for a much more comforting look at what our future retirements could look like with only minor adjustments.

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Elizabeth Warren Beats Back Social Security Plot

By Michael Lind, Salon

16 December 2013

The years-long campaign to slash Social Security benefits has finally met its match.

he Overton Window has shifted! At least in the case of Social Security.

The Overton Window - named for the late Joseph P. Overton of the Mackinac Center for Public Policy - is the frame through which acceptable options for public policy are viewed at any given time. Options that are outside of the frame (or "outside the box," to use another metaphor) are deemed unworthy of consideration or mention by the bipartisan establishment, no matter how compelling those options may actually be. The Overton Window tends to be positioned by the owners and bureaucrats of the major media, who tend to share an elite consensus with politicians and the donors who fund them.

Until recently, in discussions of the future of Social Security the Overton Window was positioned to exclude any discussion of raising, rather than cutting, Social Security benefits. For the last generation, the range of permissible opinion with respect to the program - which most Americans depend on for nearly all of their income in old age - ranged from conservatives who wanted to abolish Social Security altogether, to press-anointed "progressives" and token Democrats who merely wanted to cut Social Security benefits.

The option of maintaining scheduled Social Security benefits, and paying for them with higher taxes, was considered unworthy of discussion by the guardians of Overton Orthodoxy, both in the press and in the two major parties. As for expanding Social Security benefits - why, that's crazy talk!

It's safe to say that, within the bipartisan oligarchy, the alleged need to cut Social Security remains the consensus. But the Overton Window has shifted just a little to the left, and the idea of expanding Social Security, hitherto invisible through the frame, is now in the public field of vision.

The movement of the idea of expanding Social Security - from lunatic fringe idea to respectable subject of discussion - has been remarkably swift. For decades there have been a few lonely voices calling for benefits to be expanded, but they were consistently ignored.

In recent years, the idea of expanding Social Security benefits has been promoted by the blogger Duncan Black ("Atrios"), the Progressive Change Campaign Committee, Social Security Works and others. And in 2012 Sen. Tom Harkin introduced a bill to use a different inflation measure to raise Social Security - rather than using different measurements of inflation to cut benefits for the elderly, as President Obama and some other centrist Democrats and conservative Republicans had proposed.

My colleagues Robert Hiltonsmith, Steven Hill, Joshua Friedman and I may have played a small role in shifting the Overton Window in the spring of this year, by publishing "Expanded Social Security: A Plan to Increase Retirement Security for All Americans."

Knowing that our plan failed the test of political realism at the present moment, we proposed a truly radical expansion of Social Security to shock the commentariat into acknowledging the fact that the program is becoming more important to most Americans, thanks to the decline and failure of the other two "legs" of the traditional retirement security tripod - employer-provided defined contribution pensions and 401Ks. Widespread and surprisingly favorable reaction to our proposal among bloggers and journalists showed that the message was getting out.

Most important of all was Massachusetts Sen. Elizabeth Warren's speech on Nov. 18, in which she endorsed the heretical idea of expanding Social Security, voiced support for the Harkin proposal and declared:

"We should be talking about expanding Social Security benefits - not cutting them."

Reaction from the defenders of orthodoxy was swift. Jon Cowan and Jim Kessler, the president and vice president, respectively, of Third Way - a "centrist" think tank funded largely by Wall Street financiers, and associated with the right wing of the Democratic Party - published an Op-Ed in the conservative Wall Street Journal denouncing the "economic populism" of Warren and newly elected New York Mayor Bill de Blasio.

Cowan and Kessler wrote:

Social Security is exhibit A of this populist political and economic fantasy. A growing cascade of baby boomers will be retiring in the coming years, and the Social Security formula increases their initial benefits faster than inflation. The problem is that since 2010 Social Security payouts to seniors have exceeded payroll taxes collected from workers. This imbalance widens inexorably until it devours the entire Social Security Trust Fund in 2031, according to the Congressional Budget Office. At that point, benefits would have to be slashed by about 23%.

Undeterred by this undebatable solvency crisis, Sen. Warren wants to increase benefits to all seniors, including billionaires, and to pay for them by increasing taxes on working people and their employers. Her approach requires a $750 billion tax hike over the next 10 years that hits mostly Millennials and Gen Xers, plus another $750 billion tax on the businesses that employ them.
Cowan has made a career of using specious arguments that pit old people against young people. In the 1990s, he founded an organization called "Lead or Leave," one of many "Astroturf" groups funded by the right-wing billionaire Pete Peterson to argue for cutting Social Security rather than make it solvent by raising taxes somewhat on the rich.

But as far back as 1997, Henry Aaron of the Brookings Institution had already demolished the Petersonian argument that Americans must choose between funding seniors and investing in children and young adults:

What about the projected decline in the ratio of workers to retirees - from roughly 3 to 1 in 1995 to roughly 2 to 1 by 2035? It looks as if each worker, who now takes care of one-third of a retiree, will have to take care of half a retiree in 2035 - a 50-percent increase. But the real financial burden workers everywhere and at all times face is the need to support everyone who does not work, not just the elderly, as well as themselves.

The total population per 100 workers ... at a long-term high in 1960, has since fallen about 20 percent to a long-term low. The principal reasons have been a drop in the number of children per worker and, to a smaller degree, a rise in the proportion of women who work (hence, a drop in dependent non-aged adults). The number of elderly retirees per worker has risen, but not much. Over the next 45 years, it will rise rapidly.

The number of dependent non-aged adults per worker is projected to stop falling, as a decrease in the share of men who work more than offsets some further increase in the share of women who work. Partially offsetting these trends, the number of children will keep dropping.

The total number of mouths each worker has to feed will rise about 6 percent over the next 45 years, not the 50 percent suggested by focusing only on retirees. Worker productivity growth of barely 0.1 percent a year would offset that burden. In 2040, the burden will be 16 percent lower than in 1960.
The editorial board of the increasingly right-wing Washington Post has also been a guardian of what I think of as "One Percentrism," missing few opportunities to call for slashing entitlements for the middle-class elderly. In her speech in support of Social Security expansion, Sen. Warren mocked a Washington Post editorial that had denounced the very idea. According to the conservatives of the Washington Post's editorial board:

The Harkin-Sanchez proposal would change Social Security benefit formulas to produce an average increase of $60 per month, plus a more generous annual inflation adjustment, than the program uses now. It also would extend the life of the notional trust fund from which benefits are drawn by 16 years. To pay for this, the bill would subject all wage and salary income to the 12.4 percent Social Security payroll tax, as opposed to only drawing from income up to $113,700 as is presently done. For someone earning $200,000 per year, this would mean a tax increase of more than $4,000 per year. For someone earning $1 million, the tax increase would be $58,700.

And exactly why is this bad, O Great and Wise Washington Post Editorial Board?

It's a massive transfer of income from upper-income Americans to the retired.

Oh, OK. We get where you're coming from.

Back on March 23, 2011, the Washington Post published an Op-Ed under its "left leaning opinion section" by Robert Pozen, a financial industry executive and the author of a plan to radically slash Social Security benefits who happens to be a Democrat. As Jamison Foser of Media Matters observed at the time:

That's what passes as a "left-leaning" viewpoint in the Washington Post's opinion section. A column calling for a reduction in Social Security benefits written by a former Romney administration official whose previous Social Security proposals have been embraced by George W. Bush, the Heritage Foundation and the Cato Institute and derided as "Bush lite" by liberal economists.

But the days when right-wing Democrats like Pozen and the operatives of Third Way are anointed by the prestige media to represent the left-most acceptable opinion about Social Security appear to be over.

Nobody should underestimate the difficulty of enacting the relatively modest increases in Social Security benefits called for in the Harkin bill and endorsed by Warren - to say nothing of expanding Social Security much more, in order to compensate for inadequate pensions and private saving, as my colleagues and I have proposed. But the discussion has changed from a debate about how much to cut Social Security to one about whether to cut Social Security or expand it. That is real progress.

end-of-loser-liberalismIn his new book, The End of Loser Liberalism: Making Markets Progressive, Dean Baker argues that progressives hurt their cause whenever they accept the conventional wisdom that conservatives are for the "free" market while progressives are for government intervention in the market economy. In a much-needed counter-narrative, Baker stresses that this is both bad policy and bad politics. He takes apart this fundamental misframing of economics and details how conservatives actually use the government to twist markets to their advantage and points out that they are just smart enough not to own up to it.

Social Security

The Phony Crisis

Dean Baker and Mark Weisbrot

We have a chance, said President Clinton, to “fix the roof while the sun is still shining.” He was talking about dealing with Social Security immediately, while the economy is growing and the federal budget is balanced. The audience was a regional conference on Social Security, in Kansas City, Missouri, that the White House had helped bring together.

The roof analogy is illuminating, but we can make it more accurate. Imagine that it’s not going to rain for more than 30 years. And the rain, when it does arrive (and it might not), will be pretty light. And imagine that the average household will have a lot more income for roof repair by the time the rain approaches.

Now add this: most of the people who say they want to fix the roof actually want to knock holes in it.

This is the situation facing Social Security, and it is well known to those who have looked at the numbers. The program will take in enough revenue to keep all of its promises for over 30 years, without any changes at all. Thirty years is a long time—it’s hard to think of any other program that can claim to be secure for that long. Furthermore, the forecast of a shortfall in 2034 is based on the economy limping along at less than a 1.7 percent annual rate of growth—about half the rate of the previous three decades. If the economy were to grow at 1998’s rate, for example, the system would never run short of money.

But even if the dismal growth forecasts turn out to be true, and the program eventually runs a deficit, it’s not exactly the end of the world. For one thing, the Social Security system would be far from “broke.” While it would indeed be short of revenue to maintain promised benefits, it would still be able to pay retirees higher real benefits than they are receiving today. And the nation has managed obligations of this size in the past: the financing gap would be roughly equal to the amount by which we increased military spending between 1976 and 1986 (a period in which we were not, incidentally, at war).

The program has promised, and historically delivered, a benefit that rises with wages in the economy. In order to maintain this commitment, we may have to increase the system’s revenues at some point. Would this place an undue burden on the post-2034 labor force? Hardly. Even if we were to increase payroll taxes to cover the shortfall, the added cost would barely dent the average real wage in 2034, which will be over 30 percent higher than it is today. It takes a great deal of imagination to perceive this as some sort of highway robbery by tomorrow’s senior citizens against the youth of today.

The simple truth is that our economy is generating more than enough income to provide a rising standard of living for future generations while meeting our commitments to Social Security. That’s true even at the terribly slow rates of growth projected for the future.

The strength of the economy isn’t perhaps as obvious as it should be, mainly because the majority of employees haven’t been sharing in the gains from economic growth. For more than 20 years, most wage and salary earners have actually seen a real decline in their pay (Mishel, Bernstein, and Schmitt 1999). So when people hear that future generations will be able to meet Social Security’s obligations out of a much higher income, they don’t believe it.

To reclaim the majority’s share of the economic pie is the real “challenge and opportunity of the twenty-first century,” to paraphrase another of President Clinton’s favorite lines. Yet the question of income distribution has been removed from the political agenda. Instead we are told that we can no longer afford our not-so-generous social safety net for the elderly. It is one of the greatest triumphs in the history of public relations to have transformed this prolonged episode of class warfare into an intergenerational conflict.

Mark Twain once said that a lie can get halfway around the world before the truth even gets its shoes on, and it’s hard to find a more compelling example than the lie about Social Security’s finances. Despite the fact that none of the numbers cited here are a matter of dispute, the public has been overwhelmingly convinced that Social Security is in deep trouble. According to a February 1998 poll by Peter Hart Research, 60 percent of nonretired Americans expect Social Security to pay much lower benefits or no benefits at all when they retire. The proportion is even higher, at 72 percent, for people aged 18-34.

Ironically, the only real threat to Social Security comes not from any fiscal or demographic constraints but from the political assaults on the program by would-be “reformers.” If not for these attacks, the probability that Social Security “will not be there” when anyone who is alive today retires would be about the same as the odds that the U.S. government will not be there. The latter event is, of course, a possibility, but not enough of a likelihood that most people would plan their retirement around it.

Read it all here.

How to Raise $140 Billion a Year From Wall Street Banks

by Dean Baker

The deficit hawk crew, famous for missing the $8 trillion housing bubble that wrecked the economy, is now on the warpath pressing the case for a big new national sales tax. They claim that the country badly needs additional revenue to address projected budget shortfalls.

While we may need additional revenue at some point, it makes far more sense to impose a financial transactions tax (FTT), which would primarily hit the Wall Street banks that gave us this disaster, than to tax the consumption of ordinary working families. We can raise large amounts of money by taxing the speculation of the Wall Street high-flyers while barely affecting the sort of financial dealings that most of us do in our daily lives.

Click here for all of Dean Baker's books.

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