Tag Archives: Social Security

Obama’s Christmas present to seniors

POSTED BY ORHAN

America’s topple from the fiscal cliff will be triggered by the Budget Control Act of 2011, which was sparked by the debt ceiling debate of the same year. Now, as part of the fiscal cliff negotiations, President Obama has agreed to cut Social Security by switching to something called Chained CPI to figure the amount in your Social Security check.

I checked the Social Security website trying understand the impact of the switch, and pulled a few facts. Turns out the Bureau of Labor Statistics employs several different CPI measurements:

  • Consumer Price Index for All Urban Consumers (CPI-U)
  • Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W)
  • Chained Consumer Price Index for All Urban Consumers (C-CPI-U)
  • An experimental data series, the CPI-E, to measure the “inflation experience” of those aged 62 or older

This chart from the site shows how the different CPIs measure inflation over time. Chained CPI calculations result in a lower inflation rate number:

CPI chart - SSA.gov

No calculation method is (or can be) completely accurate, but seniors are more likely to experience inflation patterns closer to the CPI-E, although the CPI-E may be less accurate because the population test bed is smaller. Inflation measured by the CPI-E is higher, due to seniors’ higher medical costs, which rise faster than other costs.

Inflation measured by the C-CPI-U is lower, due to the “substitution factor” caused by rising prices on some goods. For example, if the cost of chicken goes up, one would tend to substitute some lower priced meat like bologna.* (Some politicians have suggested that because of this, your Social Security check has really been too fat all these years.)

Cost of living adjustments (COLAs – the increase one sees in one’s SS check every few years) are currently based on the CPI-U and CPI-W.

Obama proposes switching to the C-CPI-U to calculate COLAs even though seniors need more than the CPI-U and CPI-W to keep up with inflation, not less. Why the switch? No other reason than C-CPI-U will pay less over time than the current method. Assertions that C-CPI-U is more “accurate”, or it’s just a “tweak” to the calculation, or “if enacted, nobody would notice the difference”, are ludicrous. Over a long retirement, Chained CPI would result in a month’s loss of benefits yearly, or about 8.3%. That’s a hefty cut.

*If the cost of bologna rises too much, I understand Kibbles ‘n Bits Bistro Meals have been found to be quite edible.

And they damn well know it!

In the mid-80’s, Ronald Reagan sat down with Speaker Tip O’Neill and crafted a few fixes to secure Social Security as a self-funding program for the next quarter century. It worked, just as planned. They knew, as did congress then and as does congress now, that future congresses would be required to do the same from time to time. They knew then as they know now, that Social Security is sound policy and a sound program, unless . . . .

For nearly a century, this marvel of policy engineering has kept generations of our elders out of poverty.

For all of that time, it’s also had enemies, determined to destroy it. In the 80’s, Reagan and O’Neill and the sensible policy establishment (much more centrist then) in Washington hadn’t yet heard of Newt Gingrich or Grover Norquist or Pete Peterson (well, those aforementoined  ‘enemies’ had heard of Peterson all right – he financed them).  Nor did they know that a well-funded campaign was already underway to convince younger Americans that SS wouldn’t be there for them, while quietly engineering its destruction.

They’ve pretty much succeeded. Because they knew that all it would take to break Social Security was to refuse to fix it.

Entitlement my poptart . . . we paid for it!

Stipulated: The average American worker contributed to their Social Security and their employer did as well; that contribution totaled 15% of  income before taxes.

These figures below reflect the 49 years worked by the man who made these calculations. Punch in your own numbers.

  • If you averaged $30K/year over your working life, the 15% contribution is $4500 a year.
  • Over 49 years, that adds up to nearly $220,500 total cash contribution.
  • If you calculate the future value of $4,500 per year  at a simple 5%, after 49 years of working you’d have $892,919.98.
  • If you took out only 3% per year, you’d receive $26,787.60 per year and it would last better than 30 years.

(h/t friend Ed)

Social Security retirment age is not 65

Fer Elvis’ sake! I can’t bear it any more.

What we hear: the eligibility age for full Social Security benefits is 65. Why, we all know that; it’s SS 101. And we also know that based on that, one of the popular ‘solutions’ to our non-existent SS problem is “raise the age to 67.”

FACT: The age for full benefits hasn’t been 65 since 2005.  At that point, based on the 30-year formula worked out by Ronald Reagan and Tip O’Neill and passed into law by Congress, the age began adjusting upward by two month increments each year, beginning in 2005. By 2016, the age will be 67. By law. Passed 28 yeas ago.

We need to get the word to our press and our legislators. Before they hunker down to write legislation, they really need to know this:

The social security age is not 65 any more.

Another media failure: everyone should know this stuff, but there isn’t really time. Ya’ know?

You know the endless and annoying hysterical script that goes like this:

  • OMG Social Security is a Ponzi scheme!
  • OMG it’s going broke!
  • OMG people live longer!
  • OMG fewer workers per retiree!
  • Et-freacking-cetera.

A little reality:

  • Social Security has run a surplus since it began
  • has a trust fund in the trillions
  • is completely sound for at least 25 more years
  • cannot legally borrow so cannot contribute to the deficit, and
  • life expectancy is a false issue; people today who reach 65 live about the same number of years as earlier generations. (Our stunning achievement in nearly defeating infant mortality is what changed  life expectancy figures.)

Try to memorize this – makes for great dinner table conversation.

via links at Bartcop which mostly go here

Obama gives good speech

POSTED BY ORHAN

Measured and persuasive, last night President Obama was the soul of moderation, rationality, and responsibility as he made the case for passing his version of the debt deal. But he did leave a few items out of his story:

He blamed his predecessor for squandering the budget on two wars and a prescription drug program. But he neglected to mention that he continued those wars, and expanded American military operations into new countries; meanwhile he secretly bargained away the public option with the same pharmaceutical companies that had benefitted from the drug program he criticized.

He pointed out that Americans making under $250K would see no tax increase at all. But he neglected to mention that those same Americans will be in fact paying more, by having to make up for the cuts to Social Security and Medicare out of their own pockets.

He called his plan a balanced approach and said no one would be required to sacrifice too much, while acknowledging the cuts would be “painful”. But he neglected to mention that he was planning Social Security and Medicare cuts as far back as January 2009; the kind of cuts a Republican president could never push through.

Obama’s narrative of reason and compromise heroically standing up to the Tea Party’s barbarian hordes was quite stirring, and if one ignores the fact that he just happened to shit-can fundamental Democratic principles and programs as the first step in the process, quite true. No doubt at this moment, Democrats are battling tooth and nail to get his version of the debt ceiling deal passed, a deal they would have fought to the death if proposed by George W. Bush.

All in all, it was an excellent speech; classic Obama.

A dime’s worth of difference?

POSTED BY ORHAN

So Obama offers a debt deal to the Republicans: he’ll cut Social Security and Medicare. In exchange, the Republicans will, maybe, allow the Bush tax cuts to expire. Or hike some other taxes; whatever.

Now the Republicans are saying no deal, they’ll only accept spending cuts; they’ll cut Social Security and Medicare, plus keep the Bush cuts, but deep-six the tax hikes.

So, let’s see, that means if Option 1, the Democratic plan, had been accepted, the rich would have been back to where they were under Clinton, and the poor and middle would have been worse off. But if Option 2, the Republican plan, is enacted, the rich will keep what they got from Bush, and the poor and middle will be worse off.

What can we say about America’s future from the horns of this little dilemma? If it plays out the way the health care farce did, we can make a few predictions:

The Tea Party will be left swinging in the breeze. The folks who screamed, “Keep your hands off my Medicare!” are about to have their Social Security and Medicare seriously FUBARed. Even the most hardcore non-rich Tea Partier will realize sooner or later there’s nothing here but, as the song says, the promise of an early death.

The Democratic base will be left swinging in the breeze, after having its veins opened, its throat slit, and a dagger slipped between its ribs. The new default “far left” bargaining position will start with Social Security and Medicare cuts. Obama will initiate his trademark “compromising” from there. Predicting which once-sacrosanct progressive program he’ll negotiate away next will be all the rage in DC.

Mainstream middle and working class Republicans will be left swinging in the breeze; it’ll just take them a while to figure it out. Sooner or later the most diehard trickle-down true believer will realize the upcoming corporate cash infusion (via “amnesty” or any other method) isn’t going to create any jobs for Americans, other than the corner-office and lobbying jobs for the politicians who sold us all down the river; but CEOs will no doubt receive some kickass bonuses over the next few years.

Life is about to get one hell of a lot harder for most Americans. Thanks to Democrats. And Republicans.

AARP not now screwing seniors

POSTED BY ORHAN

…because they’ve already been doing it for years. So when AARP’s CEO A. Barry Rand said, responding to criticism, “AARP has not changed its position on Social Security”, he was 100% right. A post at Firedoglake shows AARP has supported Social Security cuts since 2005.

And the rising age at which one can begin to draw benefits, automatic increases in Medicare costs, and rising taxes on benefits–all constitute cuts already built in to existing Social Security legislation.

Cut spending? How ’bout earning more?

Oh those Republicans! They hate taxes even when we’re starved for revenue. They don’t much like caring for ‘the least among us’ or – as modern reality would have it  – the sick, the poor and the elderly. They say they believe in education, but think every eight year old is able to set the course for a successful life – not the taxpayers problem. They love our hi tech future but don’t worry about who’s going to have the education and skills to fill those hi tech jobs. They’re big fans of moving Social Security from a defined benefit and exposing it to the volatile wonders of the ‘market’. Which worked so well for folks who pensions evaporated in ’08-’09.

A local city has for some time been dipping into their diminishing reserves to cover pensions for police and firemen. Now they’re actually considering tax increases. They (tea party favorites) – and the previous city council – refused till now to own the looming problem. Now it’s biting them in the butt.

As property tax revenue has plummeted along with values, the council for four years has not increased the tax rate as many communities have done. Instead it has relied on reserves to plug the hole. Now it does not have that option, especially as officials anticipate another pension shortfall next year.

Must shrink government. Must shrink government.

via Digby, from a story at ourfuture.org, here’s another example of how a flawed bit of received wisdom (probably originated with  Grover Norquist!) settles into lazy minds to be plucked out as necessary with no further examination required. Schieffer, whom I generally like, has obviously not bothered to inform himself beyond the universal script, but fer Elvis’ sake, Warner is a US Senator. My expectations are apparently too high.

On Face the Nation, Sen. Mark Warner was asked by host Bob Schieffer [what action] his ‘Gang of Six’ would take on Social Security reform . . . Warner gave. . .  the popular refrain that “part of this is just math: 16 workers for every one retiree 50 years ago, three workers for every retiree now.”

. . .  In fact, the high ratio of workers to retirees in 1950 was an anomaly, which resulted from the larger number of workers that were incorporated into the program at the time, such as millions of farm workers and domestic workers. Furthermore, because the program was still relatively new, the first workers to contribute to the program had not yet started to collect benefits. To demonstrate how meaningless the 16:1 number it, consider this: Only five years later [in 1955], the worker-to-beneficiary ratio was halved to 8:1, and by 1975 it was down to what it is today. And just ten years earlier, in 1940, the ratio  had been 149.5 workers for every one retiree!

. . .  The worker-to-retiree ratio has been stable for almost forty years and has not failed to supply adequate levels of benefits.

Betcha didn’t know that.

We iz all grownups. Maybe?

There is a young man on CSpan right now talking about Social Security and retirements benefits. He is smart and hasn’t yet said a word I don’t agree with. His name is Andrew Bigg and he is a resident scholar at the American Enterprise Institute.

Either I went through the looking glass overnight, or we Americans have more areas of agreement than our political/media culture would like us to notice. (Actually, AEI – top of the pile of the conservative thinktanks – also houses Norm Ornstein, whom I admire greatly.)

If the Heritage Foundation is the FOX News of thinktanks,  then AEI is perhaps The McLaughlin Group.

The Great (independant) Republic of Texas

Umm, is Rick Perry moving to start his own country so he can be a President? This isn’t his first foray into secession territory.

Rick Perry: Let States Secede From Social Security

What the Bush tax cuts were really about

For my commenter-friend Alan who argues that all Bush (GW) wanted to do wtih Social Security was allow 4-5% of withholding to go to private accounts. Right, and that was for starters. (from 2001)