Among the sacrifices Congressional representatives placed on the altar of deficit negotiations is an “inflation adjustment” that will shave “only” a few hundred dollars from an average, newly retired Social Security beneficiary’s income each year. But the cruel hoax is that the reduction will amount to as much as $1600 when the beneficiary is older, poorer, and sicker. Many seniors already have a tough time paying for food, rent, and medical care.
Even worse, reductions in beneficiaries’ incomes may well cost government more for potentially preventable hospital and long-term care. Senator Elizabeth Warren and other New England lawmakers should be lauded for splitting from Democratic representatives and the Administration regarding this ill-conceived proposal.
Many senior citizens are already vulnerable to economic hardship. A recent US Census analysis that counts rising medical expenses found that over 1 in 6 elderly people live in poverty, unable to meet basic living expenses, and almost 20% more are living just above the poverty line. Social Security is the only or largest source of income for about 70% of seniors; the average monthly check is only about $1200.
The typical retirement savings of seniors is a paltry $50,000 — barely enough to get through several years’ living expenses, let alone 20-30 years of retirement. This is not the result of cavalier actions by the older generation; these are the Americans whose home values have plummeted, whose defined-benefit pension plans have been decimated or disappeared, and whose retirement accounts were eviscerated by the Wall Street meltdown of the last decade. Yet the current proposal punishes these Americans as if they were at fault for their poverty.
Fidelity Investments has estimated that the average retired couple will need more than $200,000 to pay their out-of-pocket medical expenses during retirement, and that figure is probably conservative.
The arithmetic of Social Security benefit reductions just doesn’t fit with this reality.
It has become accepted economic wisdom, uttered with deadpan certainty by policy pundits and budget scolds on both sides of the aisle, that the only way to get control over America’s looming deficits is to “reform entitlements.”
But the accepted wisdom is wrong.
Start with the statistics Republicans trot out at the slightest provocation — federal budget data showing a huge spike in direct payments to individuals since the start of 2009, shooting up by almost $600 billion, a 32 percent increase.
And Census data showing 49 percent of Americans living in homes where at least one person is collecting a federal benefit – food stamps, unemployment insurance, worker’s compensation, or subsidized housing — up from 44 percent in 2008.
But these expenditures aren’t driving the federal budget deficit in future years. They’re temporary. The reason for the spike is Americans got clobbered in 2008 with the worst economic catastrophe since the Great Depression. They and their families have needed whatever helping hands they could get.
If anything, America’s safety nets have been too small and shot through with holes. That’s why the number and percentage of Americans in poverty has increased dramatically, including 22 percent of our children.
What about Social Security and Medicare (along with Medicare’s poor step-child, Medicaid)?
One of the few things Mitt Romney and Newt Gingrich agree on is that President Obama is turning America into “European-style welfare culture.”
In his standard stump speech Romney charges Obama with creating a nation of dependents. “Over the past three years Barack Obama has been replacing our merit-based society with an entitlement society.”
Gingrich calls Obama “the best food-stamp president in American history.”
What’s their evidence? Both rely on federal budget data showing direct payments to individuals shot up by almost $600 billion, a 32 percent increase, since the start of 2009.
They also point to Census data showing that 49 percent of Americans now live in homes where at least one person is collecting a federal benefit – Social Security, food stamps, unemployment insurance, worker’s compensation, or subsidized housing. That’s up from 44 percent in 2008.
Finally, they trumpet Social Security Administration figures showing that the number of people on Social Security disability jumped 10 percent in Obama’s first two years in office.
They argue our economic problems stem from this sharp rise in “dependency.” Get rid of these benefits and people will work harder.
It’s the season of political misinterpretations and outright lies. Websites like Politifact try to sort things out. But people still seem willing to believe the most negative things about two of our most durable social programs – Social Security and Medicare. Are they really in terrible trouble and will disappear soon?
If you are over 65, have a parent or friend who is, please read and pass along. I have written some of this before, but when we hear political candidates saying inflammatory things about these programs, it seems like a little truth-telling is never redundant.
Myth #1: Social Security is in grave financial condition and must be reformed now!
Actually, Social Security is completely funded until 2036 (that’s 25 years from now!) and even if we did nothing to fix it, it would still cover 78% of the costs after 2036. So why are the Republicans trying to make it into an urgent issue and scare everyone in the meantime? In Gov. Perry’s case, he is stuck with charges he made in his book Fed Up! and may feel he has to stay with his argument to avoid a flip flop. It doesn’t seem to be working. Bachmann and Romney and Gingrich have all risen to the defense of Social Security, but we should all be wary about the conversation, because part of their solution may be to privatize the program. Given the behavior of the stock market in the past few years, that doesn’t sound very reassuring.
Myth #2 – Medicare is in grave financial condition and must be reformed now.
This is not completely a myth. Medicare does need reform. It does not need to be turned into a voucher program, but it needs better data systems so that it can pay providers more quickly and track fraud more effectively. It also needs to get tougher on reimbursements for new treatments which are much more expensive than existing treatments but provide no greater benefit. Lobbyists for the companies that make these new treatments and devices have pretty much had their way with Medicare for years. One of the solutions in the Affordable Care Act was the establishment of the Independent Payment Advisory Board (IPAB), which was supposed to provide solutions to Medicare’s problems without undue interference from lobbyists and Congress (who rely on lobby money for their campaigns). Unfortunately, the IPAB is under fire and may not ever be implemented.Continue reading…
Jack Lew is lucky he isn’t in prison. Were he representing a private pension fund and if he made the sort of statements he made in USA Today the other day, he might well be sharing a cell with Bernie Madoff.
So who is Jack Lew? And what did he say?
Lew is the Director of the federal Office of Management and Budget. About Social Security, he wrote: “Taxes are placed in a trust fund dedicated to paying benefits owed to current and future beneficiaries. When more taxes are collected than are needed to pay benefits, funds are converted to Treasury bonds — backed with the full faith and credit of the U.S. government.” As a result of these investments, the Social Security trust fund will be able “to pay full benefits for the next 26 years.” Not only is this preposterous, Charles Krauthammer called it a “breathtaking fraud.”
Before dissecting Lew, let’s consider why Bernie Madoff is in the hoosegow. Madoff told investors he was investing their funds in real assets, when in fact he was not. He secretly used their funds for personal consumption and to pay off other investors. Either figuratively or imaginatively, Madoff wrote IOUs to himself, all backed by the full faith and credit of Bernie Madoff. Maybe in the beginning he fully intended to pay off. But that’s beside the point. Inducing people to give you money with this sort of lie is criminal fraud. It’s against the law.
Like most government-sponsored retirement programs in the world today, our Social Security system is pay-as-you-go. All payroll tax revenues are spent — the very minute, the very hour, the very day they are received by the U.S. Treasury. Most of these revenues are spent on benefits for current retirees. Any additional amount is spent in other ways.
But there is no funding of future benefits. No money is being stashed away in bank vaults. No investments are made in real assets.Continue reading…