“We Can’t Afford To Weaken Social Security”: President Obama Just Changed The National Debate On Social Security
Speaking in Elkhart, Indiana, President Obama made a significant policy statement, one that may get lost in all the talk of the campaign to replace him. He argued that Social Security not only shouldn’t be scaled back, as many believe, but that it should be expanded.
You can look at this as a move to the left. But here’s a better way to see it: as more like a digging in, a resistance to a decades-long effort to lay the groundwork for significant cuts to the program.
Now that Obama has taken this position, it makes it much more likely that most or all Democrats will adopt it as well, which could truly change a debate that up until now has been dominated by an alliance of Republicans and supposedly centrist advocates whose mission is to scale back the most successful social programs America ever created.
Here’s what Obama said in his speech:
But look, let’s face it — a lot of Americans don’t have retirement savings. Even if they’ve got an account set up, they just don’t have enough money at the end of the month to save as much as they’d like because they’re just barely paying the bills. Fewer and fewer people have pensions they can really count on, which is why Social Security is more important than ever. We can’t afford to weaken Social Security. We should be strengthening Social Security. And not only do we need to strengthen its long-term health, it’s time we finally made Social Security more generous, and increased its benefits so that today’s retirees and future generations get the dignified retirement that they’ve earned. And we could start paying for it by asking the wealthiest Americans to contribute a little bit more. They can afford it. I can afford it.
Here’s why this is important. For a long time now, the way you’ve shown you’re a Very Serious Person about fiscal matters is to gravely intone that Social Security is “going broke” and say that we must cut back benefits, either by reducing retirees’ payments or raising the retirement age. There’s an entire industry of think tanks and advocacy groups whose mission is to create the intellectual and political environment that will make such cuts possible.
Liberals have only been pushing back against that coalition in a serious way for a few years now. There are some high-profile voices debunking the myth that Social Security is “going broke,” most notably Paul Krugman’s (I won’t bother to go over again why it’s a myth, but if you’re interested I explained it here). But they’ve been hampered by the fact that so many Democratic politicians want to communicate that they too are Very Serious, so they accept some of the premises of the other side’s argument, ceding half the battle over the existence of the program.
And make no mistake: it is a battle over the existence of the program. Despite their assurances that they only want to “strengthen” Social Security, many Republicans would like nothing more than to see it disappear, for two reasons. The first is that they’re simply opposed to large social programs on ideological grounds. The second is that by virtue of its success and popularity, Social Security is an ongoing rebuke to conservative arguments about government. It’s awkward to say, “Government can’t do anything right and should be cut back as much as possible” to a voter who has health care because of Medicare and isn’t eating cat food because of Social Security — and thinks both programs are terrific.
So the political situation is this. Republicans can’t mount a direct assault on the program because it’s spectacularly popular, particularly with those who get checks every month (and who vote in large numbers). At the same time, their campaign against it has been extremely successful in shaping public opinion. Large portions of the public have been convinced that the program is in crisis and is about to go broke, and young people in particular think Social Security won’t exist by the time they retire. The hope of the anti-entitlement forces is that if they can convince enough people of that, when they propose a specific plan to cut back the program, people will say, “Sure, whatever — it’s going broke anyway, so we might as well.”
Until recently, the debate around Social Security consisted of one side saying it was going broke and needed to be slashed, and the other side not disputing those basic assertions too strongly, but saying that we shouldn’t do anything rash. What we are moving toward, however, is the Democratic side saying not only that the program is essentially healthy, but that instead of cutting it we should be expanding it. That’s a profoundly different debate, one that produces an entirely different set of policy options.
Right now you have the president of the United States taking that position, as well as the two leading Democratic presidential candidates. Hillary Clinton has proposed some targeted expansions of Social Security benefits, for widow/ers facing a benefit cut when a spouse dies and for those whose benefits are smaller because they spent time out of the workforce raising children or caring for other family members. Bernie Sanders advocates an increase for all recipients: “expand benefits by an average of $65 a month; increase cost-of-living-adjustments; and lift more seniors out of poverty by increasing the minimum benefits paid to low-income seniors.”
With the exception of Donald Trump, all the Republican presidential candidates this year signed on to some form of Social Security cuts, either through increasing the retirement age or cutting benefits. Trump, however, said we just shouldn’t touch it. In one debate, he said, “It’s my absolute intention to leave Social Security the way it is. Not increase the age and to leave it as is.” Trump doesn’t say how he’d pay for the program, which should undercut the idea that his position somehow challenges conservative orthodoxy; in reality, all Trump is saying is that he’ll make everyone so rich that we won’t have to make tough choices about such things.
By contrast, Democrats feel an obligation to explain how they’re going to pay for the benefits they propose. Obama described “asking the wealthiest Americans to contribute a little more.” That isn’t very specific, but there are a couple of ways you could do that, the most obvious of which is to raise the payroll tax cap. Right now you pay Social Security taxes only on the first $118,500 of your income, which means that beyond that level the wealthy pay a lower portion of their income than poor and middle-class people do.
Hillary Clinton says she would pay for increased benefits by “asking the highest-income Americans to pay more, including options to tax some of their income above the current Social Security cap, and taxing some of their income not currently taken into account by the Social Security system.” That would probably mean applying payroll taxes to investment income and not just wage income as it is now. Sanders wants to do that too, and is more specific about the cap: he would remove it entirely, though he would include a doughnut hole between the current cap of $118,500 and $250,000; you wouldn’t start to pay more payroll taxes until you reached that higher income.
Unfortunately, it’s a little hard to tell exactly how much in greater benefits we could afford with these kinds of measures, because how much the system takes in is heavily dependent on things we can only guess at, like what income growth, inflation, and immigration levels are going to be 10 or 20 or 50 years from now. But now that the most prominent Democrats in the country all agree that we should be expanding Social Security and not cutting it back, we could have a whole new debate on the issue.
By: Paul Waldman, Senior Writer, The American Prospect; Contributor, The Plum Line Blog, The Washington Post, June 2, 2016
“For The Moment, The Ghost Of FDR Must Be Smiling”: 2016 Is Turning Into A Historically Great Year For Social Security
Not that very long ago, Republicans were almost universally united in favor of a strategy of “entitlement reform” that included various benefit cuts — some overt, like changes in the formula for cost-of-living adjustments, and some indirect, like retirement-age increases — in Social Security. Most Republicans also favored, in principle at least, some sort of partial privatization scheme for the signature New Deal program. Meanwhile, Democrats were generally divided into a large camp trying to keep the program exactly as it was, and a smaller group — including, at least in theory, President Barack Obama — that was open to such “entitlement reforms” as part of some budgetary “grand bargain” with Republicans.
How things have changed in 2016.
The Republican presidential nomination has been won by a candidate who conspicuously refused to climb aboard the “entitlement reform” bandwagon. Since rank-and-file Republicans have never much bought into Social Security (or Medicare) cuts, it was not surprising this particular Trump heresy troubled party elites but no one else.
Meanwhile, both Bernie Sanders and (to a lesser extent) Hillary Clinton have both been talking about enhancing Social Security benefits, with their main argument being over the financing mechanism, with Clinton being reluctant to embrace a lift in the payroll tax cap that would hit upper-middle-class voters.
But now along comes another potential game-changer: President Obama.
Not only do we need to strengthen its long-term health, it’s time we finally made Social Security more generous and increased its benefits so that today’s retirees and future generations get the dignified retirement that they’ve earned,” Obama said in an economic call to arms in Elkhart, Indiana. “We could start paying for it by asking the wealthiest Americans to contribute a little bit more.”
Now you can interpret Obama’s shift any way you want — as a response to leftward pressure from the primary contest, or as proof he was never serious about “entitlement reform” to begin with, or simply as a parting middle-finger-gesture to the GOP, whose leaders were probably less serious than Obama about reaching some “grand bargain” that included high-end tax increases. But the fact remains that the combination of forces in favor of Social Security benefit cuts — or even for simple maintenance of the status quo — has been reduced significantly.
You’d have to say 2016 is becoming the best year for Social Security since at least 2005, when George W. Bush devoted most of his post-reelection political capital to a partial privatization scheme and had his presidential ass handed to him as congressional Republicans headed for the hills while Democrats failed to rise to the “bipartisanship” bait. There will continue to be extensive and fractious arguments over how to improve Social Security benefits and how to keep the whole system solvent. Meanwhile, nobody should take Donald Trump’s assurances on the subject to the bank, any more than anything else the mogul says. And if he loses in November, conventional Republican economic policy, including “entitlement reform,” could make a comeback. But for the moment the ghost of FDR must be smiling.
By: Ed Kilgore, Daily Intelligencer, New York Magazine, June 3, 2016
“Completely Ridiculous Fear-Mongering”: Stop With The Zombie Lies: No, Social Security Is Not ‘Going Broke’
Even though last night’s Republican debate featured precious little discussion of the size of the candidates’ hands, there was plenty to be disappointed and angered by. The moment that perturbed me the most was when CNN’s Dana Bash, who ought to know better, said that “Social Security is projected to run out of money within 20 years.”
The discussion about America’s most successful and beloved social program had some interesting implications for the general election. But before we get to that, I need to say this slowly and clearly, so there’s no misunderstanding:
Social Security is not going to “run out of money.”
The idea that the program is going to “run out of money” or is “going broke” is a zombie lie, one that deserves to have its head lopped off with a quick slice of Michonne’s katana.
We’re going to have to get a little wonky for a bit, but I’ll try to make this as painless as possible. The short version: under the worst-case scenario, meaning that a poor economy in coming years deprives the system of money and no changes to the program’s financing are made, then Social Security recipients will find themselves getting smaller checks than they ought to. And that would be a bad thing — if you rely on Social Security as your main or only source of income, it would be terrible to get only 77 percent of what you should (I’ll reveal why I’m using that number in a moment).
But if the program were only able to deliver 77 percent of its benefits, it would not be “broke” or have “run out of money.” When the entitlement doomsayers use those words, they want everyone to believe that the program will be, well, broke, which would mean it would be able to pay nothing to the recipients. And that’s a lie.
Let’s remind ourselves how this program works. Workers pay Social Security taxes, which are then distributed to today’s recipients as benefits. But when the taxes (and the interest the program earns on the bonds it holds) exceed the benefits, what’s left over goes into a trust fund, commonly known as the “Social Security surplus.” According to the latest report from the Social Security Trustees, in 2014 the program took in $769 billion and paid out $714 billion. The extra $55 billion went into the trust fund, which at the end of that year contained $2.729 trillion.
We’re going to need the trust fund, because the very large Baby Boom generation has just started to retire, meaning more people are going to be drawing benefits. The Trustees’ projections say that starting in 2020, the program will take in less than it’s paying out, and the trust fund will be exhausted in 2035.
Now this is important: the whole point of the trust fund is to be there when that year’s taxes aren’t enough to pay that year’s benefits. When we take money out of the trust fund, it isn’t some kind of crisis, it’s the system working as it was intended.
But won’t the system be “broke” in 2035? No. Under these projections, in 2035 we’d only be paying out to recipients what we take in through taxes. At that point, recipients would get paid only 77 percent of their promised benefits.
As I said, this would be a very bad thing. But is it going to happen? It’s important to remember that the trustees make projections, so there’s a good deal of uncertainty around the numbers. It all depends on what kinds of assumptions you make about the future, particularly on what you think the economy will look like. If the economy is stronger, that means more tax revenue coming in, and the program can pay more benefits; if the economy is weaker, the program has more challenges.
Because of that uncertainty, the Trustees actually make three sets of projections, what they call high-cost, low-cost, and intermediate. It’s the intermediate one that everyone reports, and that’s where the date of 2035 and the figure of 77 percent of benefits come from. Without going too deeply into it, everything depends on how optimistic or pessimistic you want to be about America’s economic future, in terms of things like economic growth, productivity growth, and unemployment. Many people argue that the Trustees are unduly pessimistic about the future, and the most realistic projection is not the intermediate one but the one they call low-cost. And under that projection, the surplus never runs out, and we have plenty of funds to pay all benefits essentially forever, or at least for the next 75 years, which is how far out they attempt to project.
We aren’t going to settle that right now, but there’s an important piece of this to understand, which is that here in Washington, the opinion of Very Serious People is that Social Security is headed for disaster (along with Medicare, which is its own story), and the only thing to do is to either make people wait longer until they retire or cut their benefits. Indeed, proclaiming that you want to do one of those two things (or both) is in some circles how you demonstrate that you’re Very Serious about this issue. There is an entire mini-industry of think-tanks and advocates devoted to convincing lawmakers and the public that entitlements are a disaster in the making, so we need to cut them.
But there are other ways you could solve the problem, if it indeed turns out to be a problem. You could increase the cap on Social Security taxes — right now you only pay them on the first $118,500 of your income, which means that someone earning below that pays 6.2 percent of their income in Social Security taxes, while a hedge fund manager making $11.8 million pays only .062 percent of his income. You could also increase the tax itself, say by a tenth of a percent per year over ten years, which people would find imperceptible. In other words, you could maintain (or even increase) benefits by bringing in more money.
In last night’s debate, Marco Rubio said: “Social Security will go bankrupt and it will bankrupt the country with it.” This is the kind of completely ridiculous fear-mongering that gets you rounds of applause from those who want to cut the program. He then explained that he wants to raise the retirement age from 66 to 70 and reduce benefits (but of course, he says these things will happen in the future and not affect current retirees, who vote in such high numbers and are rather protective of their benefits). Ted Cruz said that he wants to slow the rate of growth in benefits (they’re adjusted for the cost of living) and convert some part of them to stock market accounts. But it’s what Donald Trump said that’s genuinely interesting:
“The Democrats are doing nothing with Social Security. They’re leaving it the way it is. In fact, they want to increase it. They want to actually give more. And that’s what we’re up against. And whether we like it or not, that is what we’re up against.
“I will do everything within my power not to touch Social Security, to leave it the way it is; to make this country rich again; to bring back our jobs; to get rid of deficits; to get rid of waste, fraud and abuse, which is rampant in this country, rampant, totally rampant. And it’s my absolute intention to leave Social Security the way it is. Not increase the age and to leave it as is.
“You have 22 years, you have a long time to go. It’s not long in terms of what we’re talking about, but it’s still a long time to go, and I want to leave Social Security as is, I want to make our country rich again so we can afford it.”
Strip away all the Trumpian bluster, and what you have is 1) a pledge not to cut benefits or raise the retirement age; and 2) the assurance that the program’s cost will be covered because the economy will perform well. Trump sounds an awful lot like…a liberal!
When Trump says, “that’s what we’re up against,” he seems to be saying that because the Democrats want to increase benefits, they’ll be able to present themselves as the program’s protectors and criticize Republicans for trying to undermine it (unless he’s the nominee). And about that, he’s right. Democrats will do that, because that’s what they almost always do. It’s usually an effective attack, both because Americans love Social Security, and because it’s true.
So how does Trump compare to the Democrats, and what is the debate on this issue in the general election going to look like? Bernie Sanders’ position is that benefits should be expanded, particularly since so many Americans lack retirement savings. He has proposed keeping the cap, but having the tax kick in again above $250,000, essentially inserting a “doughnut hole” in the tax; he has also suggested applying the tax to wealthy households’ investment income, and not just wages as it is now. Hillary Clinton has a similar, though less detailed, position: she rules out increasing the retirement age or cutting benefits, and wants to raise the cap to some unspecified level in order to increase some benefits.
Trump has broken with Republican orthodoxy in a few areas where Republican orthodoxy is deeply unpopular, and this is one of them. He probably has the political calculation right: it will be hard for Clinton or Sanders to go after him on Social Security when he’s pledging to protect it without any changes. They’re not going to move to his right on the issue, and while they’ve staked out a position somewhat to his left, he’ll be offering much the same result, without having to pay for it. A tax increase, he’ll say, won’t be necessary because when I’m president gold will practically fall from the sky.
Is that going to work? Frankly, I suspect it will, at least in taking Social Security off the table as an issue of contention between the two party nominees. But don’t worry — the Democrats will have plenty of other things to criticize him for.
By: Paul Waldman, Senior Writer, The American Prospect; Contributor, The Plum Line Blog, The Washington Post, March 11, 2016
“How Could Paul Ryan Have Known?”: Super-Wonk, Budget Wizard And Speaker-Designate Ryan Didn’t Know What His Staff Was Up To?
One of the more ridiculous and cynical features of this whole surprise budget deal is Paul Ryan’s expressions of horror and anger. Aside from the fact that the Republican House leadership is not about to blindside their hand-picked Speaker on something this big, there’s the little issue that Ryan’s staff helped draft a big chunk of it. HuffPost’s Arthur Delaney has the story:
Rep. Paul Ryan (R-Wis.) said Tuesday morning that he hadn’t seen the new bipartisan budget deal and that the secretive process used to craft it “stinks,” but there’s stuff in the bill that should smell good and familiar to him.
One of its most important provisions makes changes to the Social Security Disability Insurance program, and some of those changes came from the House Ways and Means Committee, which oversees Social Security and which Ryan chairs.
“Paul Ryan’s staff was involved in crafting the provision for weeks,” a Democratic aide told HuffPost. “His staff signed off on the provision, his staff also signed off on other key provisions” related to tax compliance and Medicare.
Ryan spokesman Brendan Buck denied that Ryan’s committee staff crafted the disability provision within the context of the legislation, which was negotiated by the White House with party leaders in the House and Senate. The committee had been working on changes to disability benefits earlier this year; Buck acknowledged that Ways and Means staff were aware the disability provision would be included.
At 52 pages, the disability insurance provision comprises a significant portion of the 144 page bill. It would prevent a 20 percent benefit cut scheduled to kick in next year for SSDI’s 11 million beneficiaries by diverting revenue from Social Security’s better-known retirement insurance program — a strategy some Republicans previously said amounted to “raiding” that program’s coffers.
The bill is also supposed to save $4 or $5 billion by tightening eligibility requirements for disability benefits, partly by requiring the Social Security Administration to make sure all initial applications include a medical screening.
But we’re supposed to believe super-wonk, budget wizard and Speaker-designate Ryan didn’t know what his staff was up to or how it related to an overall budget deal. Give me a break.
By: Ed Kilgore, Contributing Writer, Political Animal Blog, The Washington Monthly, October 27, 2015
“Republicans Against Retirement”: Republicans Who Would Be President Seem To Be Lining Up For Another Round Of Punishment
Something strange is happening in the Republican primary — something strange, that is, besides the Trump phenomenon. For some reason, just about all the leading candidates other than The Donald have taken a deeply unpopular position, a known political loser, on a major domestic policy issue. And it’s interesting to ask why.
The issue in question is the future of Social Security, which turned 80 last week. The retirement program is, of course, both extremely popular and a long-term target of conservatives, who want to kill it precisely because its popularity helps legitimize government action in general. As the right-wing activist Stephen Moore (now chief economist of the Heritage Foundation) once declared, Social Security is “the soft underbelly of the welfare state”; “jab your spear through that” and you can undermine the whole thing.
But that was a decade ago, during former President George W. Bush’s attempt to privatize the program — and what Mr. Bush learned was that the underbelly wasn’t that soft after all. Despite the political momentum coming from the G.O.P.’s victory in the 2004 election, despite support from much of the media establishment, the assault on Social Security quickly crashed and burned. Voters, it turns out, like Social Security as it is, and don’t want it cut.
It’s remarkable, then, that most of the Republicans who would be president seem to be lining up for another round of punishment. In particular, they’ve been declaring that the retirement age — which has already been pushed up from 65 to 66, and is scheduled to rise to 67 — should go up even further.
Thus, Jeb Bush says that the retirement age should be pushed back to “68 or 70”. Scott Walker has echoed that position. Marco Rubio wants both to raise the retirement age and to cut benefits for higher-income seniors. Rand Paul wants to raise the retirement age to 70 and means-test benefits. Ted Cruz wants to revive the Bush privatization plan.
For the record, these proposals would be really bad public policy — a harsh blow to Americans in the bottom half of the income distribution, who depend on Social Security, often have jobs that involve manual labor, and have not, in fact, seen a big rise in life expectancy. Meanwhile, the decline of private pensions has left working Americans more reliant on Social Security than ever.
And no, Social Security does not face a financial crisis; its long-term funding shortfall could easily be closed with modest increases in revenue.
Still, nobody should be surprised at the spectacle of politicians enthusiastically endorsing destructive policies. What’s puzzling about the renewed Republican assault on Social Security is that it looks like bad politics as well as bad policy. Americans love Social Security, so why aren’t the candidates at least pretending to share that sentiment?
The answer, I’d suggest, is that it’s all about the big money.
Wealthy individuals have long played a disproportionate role in politics, but we’ve never seen anything like what’s happening now: domination of campaign finance, especially on the Republican side, by a tiny group of immensely wealthy donors. Indeed, more than half the funds raised by Republican candidates through June came from just 130 families.
And while most Americans love Social Security, the wealthy don’t. Two years ago a pioneering study of the policy preferences of the very wealthy found many contrasts with the views of the general public; as you might expect, the rich are politically different from you and me. But nowhere are they as different as they are on the matter of Social Security. By a very wide margin, ordinary Americans want to see Social Security expanded. But by an even wider margin, Americans in the top 1 percent want to see it cut. And guess whose preferences are prevailing among Republican candidates.
You often see political analyses pointing out, rightly, that voting in actual primaries is preceded by an “invisible primary” in which candidates compete for the support of crucial elites. But who are these elites? In the past, it might have been members of the political establishment and other opinion leaders. But what the new attack on Social Security tells us is that the rules have changed. Nowadays, at least on the Republican side, the invisible primary has been reduced to a stark competition for the affections and, of course, the money of a few dozen plutocrats.
What this means, in turn, is that the eventual Republican nominee — assuming that it’s not Mr. Trump —will be committed not just to a renewed attack on Social Security but to a broader plutocratic agenda. Whatever the rhetoric, the GOP is on track to nominate someone who has won over the big money by promising government by the 1 percent, for the 1 percent.
By: Paul Krugman, Op-Ed Columnist, The New York Times, August 17, 2015
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