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POLICY: Social Security “reform” as a health care issue

Ever since Bush claimed his "mandate" (meaning he actually got more votes than the other guy in this election), we’ve been hearing a little too much about social security reform. As San Francisco standalone journalist Chris Nolan points out in her blog Politics from Left to Right, the real "reform" in question is the de-linking of social security payments from wages to inflation, which will eventually reduce the value of the benefit. The privitization thing is just a sop to Wall Street.

Turns out that the Brits did this delinking a while ago and then privatized a segment of their state pensions by paying such huge bribes in tax incentives that it actually cost the government money. Then because interest rates dropped well below the levels at which the private plans had forecast their investment returns in the 1980s, they don’t have enough to pay the pensions at the rate that those few who stayed behind in the government plan (called SERPS) are getting. Not a pretty picture, and one well described in this article from the American Prospect, which though it appears in a lefty journal is written by a Financial Times reporter.

Why am I writing about social security in a health care blog? Good question. My primary focus on health insurance is that it ought to be a form of social insurance because the payments required for it are very uneven (some people are sick–others are not). Theoretically you might be able to design a largely private pension/savings system that might actually work and not compound social inequality. We already have private pensions from both employers and 401K and other plans for individuals that provide some mechanisms for savings and retirement. So there is the basis for a mixed public-private system–not unlike in health care.

Furthermore the separation of social security from general taxation is mostly an accounting sham which also allows the those earning substantially more than $87,000 a year to pay a proportionately lower share of their income in tax than those earning less–something that is clearly regressive but explained away by the concept that it’s a savings plan. So I’m not against reform per se, especially if the tax inequity was changed.

However, Paul Krugman in his latest NY Times op-ed lays out clearly that the attempt by the Bush Administration to privitize social security is going to cost a whole lot of money while these individual accounts are set up. And that lack of money is going to add to the deficit, which in the end will require less money to be spent on other things as we instead spend money servicing the national debt. What are those other things? Well, apart from servicing the debt Federal and state governments really only spend money on three things–defense, education and health care. Guess which one of these will get cut first?Furthermore, the diversion of tax revenues into private accounts leaving a shortfall in the overall amount needed for keeping current benefits in social security has an eerie parallel in the diversion of money from the health insurance risk pool to HSA accounts. And in one more parallel, I have an HSA account with less than $2,000, and I pay a fee of $20 a year to manage it. Not a huge fee by any means, but assuming that it’s related to costs, I suspect that’s a much larger cost than what the government pays to manage social security accounts. In fact the management fees on British private pension accounts were so high the industry was forced into a huge settlement with its customers.

So as we head towards a self-funded, individual insurance funding future, there must be strong questions asked about the impact on health care, and society’s ability to pay for what’s needed for its less wealthy citizens.

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  1. Mayflower Compact Coalition (Wangstas Fo’ Shizzle My Nizzle)…
    RNC Chairman Ken Mehlman today attended the unveiling of the 21st Century Mayflower Compact at the Mayflower Hotel in Washington D.C.. The nine-point agenda includes support for school choice and private social security accounts. The Coalition is advised in part by former House Speaker Newt Gingrich’s consulting firm.
    African Americans often reach different and surprising conclusions on social issues that the casual (Caucasian) observer just won’t understand. For example, Black folks still want to see Michael Jackson find happiness. His high-pitched voice and soulful delivery is the soundtrack of generations and has a permanent place in the Black community’s psyche, no matter the plastic surgery, skin bleaching and alleged child molestation charges. Possibly, it’s the “he’s still Black” phenomenon that African Americans well understand. They want Michael Jackson’s name cleared. In short, they want him to make good music and just leave the damn kids alone.
    Likewise, Blacks see Old Age Survivors and Disability Insurance Program, popularly known as Social Security, as an entitlement forced into place during a period when “bigots” wanted to run things. And against the odds, a well respected Franklin Roosevelt was able to established needed protection for the public from the economic fears of old age, sickness, accident, and unemployment. As its original name suggest, African Americans believe the insurance program was created to do much more than provide an old age benefit.
    Wangstas (whites and uh oh oreos) are extremely white persons who attempt to be “gangsta” (cool with Black people) in order to “pimp out.” They dress, speak and act for all practical purposes as a African Americans aside from the fact that they are not. Normally they are hated by the fam for being fake.
    The White House and its oreos who support overhauling Social Security have launched a highly targeted campaign to convince Black people that President Bush’s plan to create private investment accounts will have special benefits for them. The ghetto fab element about the GOP message to African Americans: “The shorter life expectancy of Black males means Social Security in its current form is not a favorable deal.”
    Proponents of privatizing social security who claim no group has as much at stake in the debate over reform as African Americans, in fact, are right. Black families of workers who become disabled or die are much more likely than their Caucasian counterparts to be dependent on the grip available from disability and/or survivor benefits. Blacks make up 12 percent of the U.S. population, but 23 percent of African American children receive survivor benefits, and 18 percent of the community are disability beneficiaries.
    Although the wangstas are making a special effort to appeal to the strizzeet with the 21st Century Mayflower Compact, the “lower life expectancies” illusion appears to reached every one except the African American senior. Their attempt to focus on a very narrow element of the system (current program based on longevity is unfair) is misplaced and doesn’t gain cool points. What the oreos fail to realize is their attempt to be “down” for da brothas… is just “gosh-darn” obnoxious (using their vernacular) and another clue identifying the new face of segregation.
    “A’ight?”
    Social Security is an insurance program that protects workers and their families against the income loss that occurs when a worker retires, becomes disabled, or dies. All workers will eventually either grow too old to compete in the labor market, become disabled, or die. President Roosevelt created the program to insure all workers and their families against these universal risks, while spreading the costs and benefits of that insurance protection among the entire workforce.
    It is a “pay as you go” program, which means the Federal Insurance Contribution Act (FICA) payroll tax paid by today’s workers are not set aside to pay their own benefits down the road, but rather go to pay the benefits of current recipients. The tax isn’t progressive. The low-wage workers receive a greater percentage of pre-retirement earnings from the program than higher-wage workers. And, in the 1980’s, Congress passed reforms to raise extra tax revenues above and beyond the current need and set up a trust fund to hold a reserve.
    As was the case when the program was established, higher-wage workers still oppose the social nature of the program. They argue low rates of return as a reason to switch from the current “pay-as-you-go” system to one in which individual workers claim their own contribution and decide where and how to invest it. In short, rather than sharing the risk across the entire workforce to ensure that all workers and their families are protected from old age, disability, and death, higher-wage workers want to enable opportunity to reap gains from private investment without having to help protect lower-wage workers from their disproportionate risks.
    Allowing high-wage workers (who are more likely to live long enough to retire) opportunity to opt out of the general risk pool and devote all their money to retirement without having to cover the risk of those who may become disabled or die, is da fo’ shizzle identifying the republican party’s desire to return to a segregated society.
    Roosevelt’s benefit formula currently in place intentionally helps low income earners. Lifetime earnings directly factor into the formula. And, thirty-five percent of Black workers born between 1931 and 1940 had lifetime earnings that fell into the bottom fifth of earnings received by workers born in these years. African Americans’ median earnings (working-age in jobs covered by Social Security in 2002) were about $21,200, compared to $28,400 for all working-age people.
    HNIC, president Bush, does acknowledge the difficulty Blacks will have in accumulating enough savings in their individual accounts to provide for a secure retirement once the progressivity of the current system is eliminated. However, he has only suggested allowing lower-income workers to place higher portions of their income into the uncertainties of investment accounts (creating even more risk).
    Yes! Private accounts would be passed on to children or other heirs. But, what the HNIC and his oreos doesn’t explain is lower-income workers would be forced to buy an annuity large enough (when combined with their traditional Social Security benefit) to ensure that they would at least have a poverty level income for retirement.
    Yo’ playa… da new private social security account fizzle sucks!

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