“Didn’t See That One Coming”: How Paul Ryan Helped Save Medicare And Social Security By Trying To Gut Them
President Obama’s new budget will not include a proposal to implement “chained CPI” to slow the growth of Social Security benefits, according to White House officials.
And there’s one man who deserves most of the credit for making sure there will be no cuts to benefits to seniors until at least 2017 — ironically the politician who has worked the hardest to reduce the promises made to America’s retirees — Rep. Paul Ryan (R-WI).
The president had included the reform measure in his 2013 budget as an attempt to provoke a so-called Grand Bargain with House Republican leaders. Such a deal would have required them to end some tax breaks for the rich. That was never going to happen and the White House’s acceptance of this fact helps focus the 2014 elections on votes most Republicans in Congress have taken in the past to cut both Social Security and Medicare, thanks to Paul Ryan.
The chairman of the House Budget Committee’s first budget plan in 2011 not only privatized Social Security — a proposal that President George W. Bush could not even get a vote on when the GOP controlled both houses of Congress — it remade Medicare into a voucher program that radically shifted the financial burden to seniors without doing much to reduce the overall cost of health care. The plan was so popular — at least with Republican donors — that it instantly made Ryan a national hero and possible presidential candidate.
The chances of enacting the plan with President Obama in office were zero, but Ryan, buoyed by his new stardom, helped guide House Speaker John Boehner (R-OH) into a debt-limit crisis that shook global markets still dizzy from the financial crisis. House Republicans demanded a dollar in cuts for every dollar the debt ceiling was raised and President Obama obliged with a plan that not only included chained CPI, but also raised the Medicare eligibility age. To sell this plan to Democrats, the president demanded a small percentage of new revenues by ending tax breaks on upper-income Americans.
Boehner was about to make the deal, when Ryan “dropped a bomb” on it, fearing it would guarantee Obama’s re-election. Instead both sides settled on the sequester.
Ryan released another budget in 2012 that dropped Social Security privatization and added a public option to his Medicare plan. Desperate for Tea Party credibility, Mitt Romney selected Ryan to be his running mate after being forced to embrace the congressman’s budget during the primary. Together, the two men re-elected the president.
After Obama’s re-election, Speaker Boehner reportedly tried to take the offer Ryan had rejected in 2011. The president told him it was off the table, and likely will be for the rest of his term unless Republicans consider higher taxes on the rich, which they won’t.
In the past two years, the deficit has been cut in half and is projected to be even lower within 10 years as a share of GDP than if the Simpson-Bowles debt plan or Paul Ryan’s first budget had become law. If the reforms to Medicare implemented in the Affordable Care Act continue to slow the growth of costs as they have since 2010, our long-term debt crisis may be solved, despite Paul Ryan’s best efforts.
By: Jason Sattler, The National Memo, February 20, 2014
“Throwing Their Own Under The Bus”: CEO’s With Massive Retirement Fortunes Push Social Security Cuts
With budget negotiations on the horizon, a buzz is building around Social Security, from Elizabeth Warren and other Democrats calling for an expansion of benefits to The Washington Post arguing that seniors must be sacrificed for the good of the “poor young.”
Two of the biggest players in the debate are largely behind the scenes: Business Roundtable and Fix the Debt, corporate lobbies that use deficit fear-mongering to sell benefit cuts. These groups are made up of CEOs of America’s largest corporations—people with retirement accounts that are more than 1,000 times as large as those of the average Social Security beneficiary.
Each of the 200 executives of Business Roundtable has retirement savings averaging $14.5 million, according to a new report from the Institute for Policy Studies and the Center for Effective Government. That’s compared to the $12,000 that the median US worker near retirement age has managed to put away. Once Business Roundtable CEOs start drawing Social Security themselves, they’ll be cashing a monthly check that is sixty-eight times larger than an ordinary retiree’s, ensuring that they’ll never bear the burden of the cuts they’re advocating.
“I find it hypocritical to see CEOs sitting on massive retirement fortunes of their own saying that the solution to the country’s fiscal challenge is to put an even greater burden on retirees, many of whom already struggling,” said Sarah Anderson, director of the Global Economy Project at IPS and one of the report’s authors.
One of those CEOs is David Cote, the vice-chair of Business Roundtable and a member of the steering committee for Fix the Debt. After eleven years at Honeywell where he’s now the chief executive, his retirement assets are worth $134.5 million. That means that as a retiree he’ll draw a monthly pension of nearly $800,000.
Cote is a deficit hawk, and claims to be worried about the long-term stability of Social Security. A member of the Bowles-Simpson commission and President Obama’s debt committee, Cote has called for $3 to $4 trillion in spending cuts over the next decade, “especially when it comes to entitlements.”
To make some of those reductions via cuts to Social Security, Business Roundtable has proposed raising the retirement age to 70, restricting benefit growth and changing the way inflation is calculated in a way that amounts to a benefit cut for seniors. (Read George Zornick on why this change, called Chained CPI, is a bad deal.) At the same time, Business Roundtable and Fix the Debt are calling for more corporate tax breaks.
“If Congress approves of proposals like ones that Business Roundtable are pushing, we could see severe cuts that could mean the difference between any kind of dignified retirement and absolute poverty,” Anderson said. Two-thirds of retired Americans rely on Social Security for the majority of their income, and more than 40 percent would be in poverty without those benefits.
These CEOs aren’t just trying to short the average American retiree; they’re throwing their own under the bus. While raising alarm about the federal debt, Business Roundtable CEOs have run up massive deficits in their employees’ pension funds. According to the report, ten companies led by members of Business Roundtable have shortfalls in their employee pension funds of between $4.9 and $22.6 billion. The largest of those belongs to General Electric, run by Business Roundtable and Fix the Debt member Jeffrey Immelt, the prospective beneficiary of a $59.3 million retirement fund.
GE stopped offering traditional pension plans for new employees in 2011, forcing workers to switch to 401(k) plans. Many other companies have shifted the burden of retirement savings to their employees in this way in recent years, and that’s been a significant driver of the retirement crisis. Just 18 percent of workers can expect traditional pensions today, compared with 38 percent in 1985. Instead of getting a fixed check, retirees are at the mercy of the market—making the assurance of Social Security benefits even more essential. But Business Roundtable continues to put the responsibility for the retirement crisis on retirees themselves. “[T]rue retirement security will be achieved only if Americans save more,” reads the group’s 2013 CEO Growth Agenda.
Saving more is an increasingly unworkable solution for the millions of workers whose wages and benefits are being undercut by some of the same CEOs directing them to do so. As the report lays out, many of the most effective ways to strengthen Social Security involve asking more of executives, not employees. Eliminating the cap on wages subject to Social Security taxes (currently set at $113,700) would eliminate 95 percent of the projected shortfall for seventy-five years, according to the Congressional Research Service. That’s three times the deficit reduction achieved by raising the retirement age to 70. Subjecting stock-based compensation to Social Security taxes would raise billions more.
Don’t expect to hear about those proposals from Business Roundtable, however. “I do think that it is a real weakness of these corporate lobby groups, that they’re making the public face of the agenda to cut Social Security these CEOs that are sitting on massive nest eggs of their own,” said Anderson. “It undercuts their credibility and influence in these debates, and I’m hoping it will make it difficult to achieve the cuts they’re proposing.”
By: Zoe Carpenter, The Nation, November 19, 2013
“Expanding Social Security”: The Fiscal Scolds Driving The Cut-Social-Security Orthodoxy Have Deservedly Lost Credibility
For many years there has been one overwhelming rule for people who wanted to be considered serious inside the Beltway. It was this: You must declare your willingness to cut Social Security in the name of “entitlement reform.” It wasn’t really about the numbers, which never supported the notion that Social Security faced an acute crisis. It was instead a sort of declaration of identity, a way to show that you were an establishment guy, willing to impose pain (on other people, as usual) in the name of fiscal responsibility.
But a funny thing has happened in the past year or so. Suddenly, we’re hearing open discussion of the idea that Social Security should be expanded, not cut. Talk of Social Security expansion has even reached the Senate, with Tom Harkin introducing legislation that would increase benefits. A few days ago Senator Elizabeth Warren gave a stirring floor speech making the case for expanded benefits.
Where is this coming from? One answer is that the fiscal scolds driving the cut-Social-Security orthodoxy have, deservedly, lost a lot of credibility over the past few years. (Giving the ludicrous Paul Ryan an award for fiscal responsibility? And where’s my debt crisis?) Beyond that, America’s overall retirement system is in big trouble. There’s just one part of that system that’s working well: Social Security. And this suggests that we should make that program stronger, not weaker.
Before I get there, however, let me briefly take on two bad arguments for cutting Social Security that you still hear a lot.
One is that we should raise the retirement age — currently 66, and scheduled to rise to 67 — because people are living longer. This sounds plausible until you look at exactly who is living longer. The rise in life expectancy, it turns out, is overwhelmingly a story about affluent, well-educated Americans. Those with lower incomes and less education have, at best, seen hardly any rise in life expectancy at age 65; in fact, those with less education have seen their life expectancy decline.
So this common argument amounts, in effect, to the notion that we can’t let janitors retire because lawyers are living longer. And lower-income Americans, in case you haven’t noticed, are the people who need Social Security most.
The other argument is that seniors are doing just fine. Hey, their poverty rate is only 9 percent.
There are two big problems here. First, there are well-known flaws with the official poverty measure, and these flaws almost surely lead to serious understatement of elderly poverty. In an attempt to provide a more realistic picture, the Census Bureau now regularly releases a supplemental measure that most experts consider superior — and this measure puts senior poverty at 14.8 percent, close to the rate for younger adults.
Furthermore, the elderly poverty rate is highly likely to rise sharply in the future, as the failure of America’s private pension system takes its toll.
When you look at today’s older Americans, you are in large part looking at the legacy of an economy that is no more. Many workers used to have defined-benefit retirement plans, plans in which their employers guaranteed a steady income after retirement. And a fair number of seniors (like my father, until he passed away a few months ago) are still collecting benefits from such plans.
Today, however, workers who have any retirement plan at all generally have defined-contribution plans — basically, 401(k)’s — in which employers put money into a tax-sheltered account that’s supposed to end up big enough to retire on. The trouble is that at this point it’s clear that the shift to 401(k)’s was a gigantic failure. Employers took advantage of the switch to surreptitiously cut benefits; investment returns have been far lower than workers were told to expect; and, to be fair, many people haven’t managed their money wisely.
As a result, we’re looking at a looming retirement crisis, with tens of millions of Americans facing a sharp decline in living standards at the end of their working lives. For many, the only thing protecting them from abject penury will be Social Security. Aren’t you glad we didn’t privatize the program?
So there’s a strong case for expanding, not contracting, Social Security. Yes, this would cost money, and it would require additional taxes — a suggestion that will horrify the fiscal scolds, who have been insisting that if we raise taxes at all, the proceeds must go to deficit reduction, not to making our lives better. But the fiscal scolds have been wrong about everything, and it’s time to start thinking outside their box.
Realistically, Social Security expansion won’t happen anytime soon. But it’s an idea that deserves to be on the table — and it’s a very good sign that it finally is.
By: Paul Krugman, Op-Ed Columnist, The New York Times, November 22, 2013
“Fruits Of Republican Folly”: It Falls To Democrats To Find A Way To Take Advantage Of The Moment
The Republicans badly damaged themselves with their contrived government shutdown and debt crisis, but it remains for the Democrats to drive home their advantage. Will they?
Based on the cost to the Republican brand and the pressure from corporate elites not to harm the economy, the days of shutdowns and games with the debt are probably over for the foreseeable future. If the Tea Party faction tries to repeat these maneuvers, House Speaker John Boehner would likely permit a free vote again, and enough Republicans would vote with Democrats to keep the government open.
The Republicans seem hopelessly split between a Tea Party faction that relishes governing crises and a more mannered corporate faction that kills government softly. But the GOP is still one party when it comes to destroying government as a constructive force in the economy and society.
Since Barack Obama took office, the two Republican factions have complemented each other in a successful “good cop, bad cop” effort to ratchet down public spending. Wall Street creates one sort of crisis; the Tea Party creates another; government takes the hit. Except for the short-lived stimulus of the American Recovery and Reinvestment Act in 2009, this is the first prolonged slump of the postwar era in which government cut rather than expanded public spending.
President Obama’s pivot to deficit reduction in late 2009 was in response to the pressures of the corporate elite, while his several capitulations in the budget cuts since 2010 have been driven by the Tea Party. In effect, the Tea Party and corporate Republicans have executed a pincer movement. Domestic discretionary spending relative to gross domestic product is now below that of the Eisenhower era.
With everything else having been cut, the pressure has shifted to the big social-insurance programs—so-called entitlements—that have thus far been protected. Once again, the corporate right and Tea Party right have called for a grand bargain targeting Social Security and Medicare.
A bargain connotes giving something and getting something. Republicans are disinclined to give anything in exchange for cuts in social insurance, least of all tax increases. Their opening gambit was an improbable offer to shrink Social Security and Medicare in exchange for increases in defense spending.
The Democratic caucuses in both the House and Senate are resolute defenders of Social Security. Polls show that more than 80 percent of Republicans and Democrats alike don’t want Social Security reduced. With Republicans pressing for cuts, defense of Social Security is a clear, bright line that benefits Democrats.
Unless, that is, President Obama chooses to blur it. He has already proposed in his 2014 budget a change in the annual cost-of-living adjustment to Social Security (the chained Consumer Price Index). Although a grand bargain is unlikely, Republicans are pushing a mini-bargain of sequester relief in exchange for cuts in other domestic spending or in Social Security. The chained CPI would yield about $34 billion of deficit reduction per year. This disguised benefit cut would split the Democrats as badly as the government shutdown split the Republicans.
A better mini-bargain would be relief from the depressive impact of the sequester without any offsetting cuts. The Democrats have some leverage here, because the sequester mandates at least $23 billion of defense cuts to take effect in January, requiring cancellation of multiyear weapons contracts dear to key Republican legislators. In exchange for restored military spending, Democrats could demand, and get, $23 billion in social spending. That $46 billion would help stimulate a stagnant economy.
Looking forward to the 2014 midterm, pollsters discern a paradox. Support for the Republican Party is down sharply. In October, Gallup found that 28 percent of those polled approve of the Republicans, down from 38 percent in September and the lowest since Gallup began asking the question in 1992. Yet message testing also shows that large majorities of voters are still inclined to fault “partisan bickering”—blaming both parties—rather than Republican obstruction for the government’s failure to make substantive progress in improving a feeble recovery.
So the shutdown debacle helps the Democrats but only marginally, unless they maximize their moment. Midterm elections are notorious for low turnout. Democrats have a prayer of taking back the House only if they energize their core voters. If President Obama goes into the midterm bragging about how much progress has been made, that won’t resonate with Americans suffering from flat or declining incomes and job insecurity. The Democrats need to stand for restored, broadly shared prosperity, not tinkering, and brand Republicans as the party that would cut your benefits.
Senate Republican leader Mitch McConnell, of all people, has set a fine example. In the deal that opened the government, McConnell sneaked in the only earmark: $3 billion for a dam in Kentucky. If we ramped that up to the whole country based on Kentucky’s share of the economy, the outlay would translate to about $200 billion. Call it the Mitch McConnell Memorial Infrastructure Program—a nice down payment on the public investment America needs.
By: Robert Kuttner, Co-Founder and Co-Editor, The American Prsopect, November 7, 2013
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