“The Romney-Ryan Budget”: A Sketchy Plan That Makes Social Security Less Secure
With Election Day two weeks away, my series of posts on the Romney-Ryan budget plan is drawing to a close. Today I’m writing about the changes GOP candidates Mitt Romney and Paul Ryan have in store for Social Security, and in my final post I’ll cover other social programs on the chopping block and call attention to who stands to profit should Romney’s sketchy deal become reality.
First, any meaningful discussion of Social Security calls for the airing of three simple truths:
Truth #1 – Social Security has played a major role in reducing poverty in the United States for 75 years. Today, one in every six U.S. residents collects Social Security benefits. Included in this group are retirees, people with disabilities and young survivors of deceased parents. According to the Center on Budget and Policy Priorities, the program keeps 21.4 million women, men and children from living in poverty. People like Social Security because it works and it’s reliable. Wall Street is risky. But Social Security hasn’t missed a payment since the first benefit was issued in 1937.
Truth #2 – Social Security is even more important to women because we live longer than men and typically retire with less savings than men. When you think about it, it’s not hard to see why that is so. On average, women are paid less than men, either due to outright wage discrimination or because women are clustered into low-paying fields. Over a lifetime, this disparity really adds up. Additionally, women are less likely than men to work for employers that provide pensions, and we often take time out of the paid workforce to care for children or other family members. Women of color retire at an even greater economic disadvantage than white women.
Truth #3 – Wealthy conservatives have been after Social Security since its inception. This is not a delusion — it’s a fact. For decades, right-wing think tanks have hatched several key myths and sound bites that politicians have repeated over and over again: The program is going bankrupt; the money’s gone; it’s a Ponzi scheme. These messages have sunk so deeply into the consciousness of this nation that you often hear people under 40 or even 50 state that “Social Security won’t be there for me when I retire.” Encouraged financial moguls and their congressional water-carriers have made numerous moves toward privatizing Social Security, including a big push in the 1980s and again under the presidency of George W. Bush.
Here’s a compelling way of looking at the situation: Truth #1 — the success of Social Security and its corresponding support from voters — has prevented Truth #3 from producing any concrete progress. But Truth #2 keeps the efforts of Truth #3 alive — meaning, conservative elites are much more likely to continue trying to dismantle a social insurance system that disproportionately benefits women and particularly women of color. It’s so much easier to funnel other people’s money into the risky stock market when you truly do see them as different, undeserving, not peers — literally as “the Other.”
It should come as no surprise, then, that Romney and Ryan share the right-wing thirst for converting Social Security to a private program under which billions of previously safeguarded dollars would flow into Wall Street traders’ hands. But these guys know their agenda is so deeply unpopular with the vast majority of voters that they have to tread very carefully, blurring their ultimate goal.
So, the Romney-Ryan budget plan is fairly cryptic on the subject. Here’s what it has to say: “[T]his budget calls for action on Social Security by requiring both the President and the Congress to put forward specific ideas and legislation to ensure the sustainable solvency of this critical program.” The budget raises suggestions such as “reforms that take into account increases in longevity, to arrest the demographic problems that are undermining Social Security’s finances.” In other words, raise the retirement age. The Romney-Ryan plan claims that “[t]he solutions are clear,” but it doesn’t really commit to anything specific.
The Oct. 11 vice presidential debate did offer a glimpse at the contrasting philosophies held by those who want to quell the panic and take responsible steps toward protecting and improving Social Security versus those who want to stir up enough public distrust in the system that gambling on Wall Street will seem like a viable alternative.
When asked about the program, Rep. Paul Ryan pulled out a string of classic right-wing scare tactics: “If we don’t shore up Social Security, when we run out of the IOUs, when the program goes bankrupt, a 25 percent across-the-board benefit cut kicks in on current seniors in the middle of their retirement.”
Vice President Joe Biden replied: “If we had listened to Romney, Governor Romney, and the congressman during the Bush years, imagine where all those seniors would be now if their money had been in the market.”
Ryan pulled out the standard caveat that he’s not talking about changing the system for people who have already retired or are about to retire: “[W]hat I’ve always agreed is let younger Americans have a voluntary choice of making their money work faster for them within the Social Security system.”
But what about the single mom — one of Ryan’s “younger Americans” — who’s working two jobs trying to support her family when suddenly all the money in her private retirement account is gone because Wall Street had another collapse? Now she has to start all over again. Is that fair? Is it even remotely wise to put the people of our nation, the people who drive our economy, at such risk?
Romney and Ryan know that there is no compelling reason to turn Social Security over to the private market. Those with enough money to invest in the market can already do so. But most people need the economic security that comes from a stable system of retirement insurance that isn’t out to make its shareholders rich.
You may be asking yourself at this point: But isn’t Social Security in danger of falling behind, now that the Baby Boomers are starting to retire? Don’t we need to do something?
Yes, we do. But we don’t have to settle for what the privatizers are selling us. After all, they’re working for the one-hundredth of one percent, not us. In fact, the elites’ lobbyists have produced policies that are draining money from the Social Security trust fund. According to the Economic Policy Institute, “Low- and middle-income workers and their families would have had far better income growth over the past 30 years if economic policies had not directed the fruits of economic growth to the highest-income Americans.” In effect, fairer wages would have resulted in more payroll taxes going into the system for the last three decades.
Elites, meanwhile, have enjoyed drastically lower payroll tax rates than the rest of us. Currently, there is a cap on the amount of a worker’s wages that are subject to Social Security deductions: If you make less than $110,100, all of your salary is in play; if you are paid more than that, everything over $110,100 is in the clear. For most of us, the payroll tax is about six percent. But for someone earning $1 million per year, it’s 0.6 percent! You see, as income in this country increasingly shifts to higher earners, less and less money flows into the Social Security pool.
This May, the National Organization for Women Foundation put out a report along with the National Committee to Preserve Social Security and Medicare Foundation and the Institute for Women’s Policy Research. Unlike the Social Security raiders, we see the good in the system — its strengths and potential. Breaking the Social Security Glass Ceiling: A Proposal to Modernize Women’s Benefits presents 10 improvements, such as providing credits for caregivers, that would make Social Security more equitable while safeguarding benefits for women. Simply eliminating the cap on payroll contributions would pay for the vast majority of these improvements and ensure the system’s solvency for at least 75 years. A higher minimum wage and a lower unemployment rate would pay for the rest by creating higher payrolls, thus more contributions into the system. Small tweaks in the payroll tax rate are also both feasible and promising.
Big business and the wealthy, who have an outsized influence on our discourse, will fight tooth and nail against common-sense options like these. They will generously fund the campaigns of their wealthy friends, like Mitt Romney and Paul Ryan, and do all they can to control the media outlets from which the voters get their information.
Women like Linda, who would be completely dependent on her daughter if it weren’t for her monthly Social Security check, rarely have a voice in this process. But they do have a voice at the polls on Election Day. The people’s greatest defense against attacks on Social Security is our voting power. And politicians know it.
That is why Romney and Ryan are working so hard to downplay their Social Security plans. But we need to send them the message that women are not fooled. We may not have access to their billions of dollars, but we can and must use our votes to let them know: Social Security is ours, and we will continue to protect it for generations to come.
By: Terry O’Neil, President, National Organization for Women; The Huffington Post, October 22, 2012
“No Deal Here Mr. Romney”: Why America Doesn’t Need A “Financier In Chief”
During the second presidential debate, Mitt Romney returned to one of the original themes of his campaign – namely that his financial experience at Bain Capital qualifies him to solve the problems of a nation plagued by unemployment and debt. Ridiculed and reviled in millions of dollars of advertising by his political rivals, from Newt Gingrich to Rick Perry to President Obama, Romney’s private sector career remains his central argument for electing him on November 6.
Today Peter A. Joseph, a respected and experienced figure in the private equity business as well as a civic activist, scrupulously debunks that argument on the New York Times website.
Over the past three decades, Joseph founded two private equity firms, gaining considerable insight into Romney’s success at Bain as well as the differences between political leadership and investment savvy. While not unsympathetic to the pressures Romney faced at Bain or his industriousness in overcoming them, Joseph says those financial triumphs have no special relevance to the Oval Office.
The role of the private-equity financier, he notes, has very little to do with being a “job creator”:
A businessman seeking to optimize profitability will look to lower labor costs by reducing headcount, whether through technology, outsourcing, or rationalization. This is right out of the basic playbook. It is not the mission of the financier to create jobs. In fact, his mission is often to do just the opposite.
Joseph gently tweaks Romney for indulging in harsh anti-government rhetoric when so much of his and Bain’s wealth derive from investing the pensions of teachers, cops, firefighters and other public-sector employees. (He might also have noted Romney’s venomous hatred of the very unions whose contractual power enabled him to get his hands on their accumulated assets.) He also suggests that Bain and other private-equity outfits have ripped off their clients, including the workers, through inflated fees:
Romney constantly derides big government, but government is made up of individuals, whose pension funds helped make him and Bain unimaginably rich. There is no doubt that these pension funds sought the higher returns offered by private-equity investing. But as the private equity business grew, the public pension funds and other capital providers have gotten the short end of the stick. They have not completely shared in the value of the franchise that is created in part by their investment in the industry. It seems odd to hear Romney criticize big government without any acknowledgment that he has made much of his fortune managing the retirement funds of many public employees.
Joseph concludes by contrasting the qualifications of a private-equity financier with what is required from a president of the United States, which don’t have much in common:
Romney’s financial success is admirable and enviable, but it came by following the mantra of increasing cash flow, cutting jobs and minimizing taxable income. Though the Obama campaign has tried to exploit this with millions of dollars in anti-Bain ads, the real issue is how Romney’s experience relates to a president’s need to balance budgetary responsibility with the heavy lifting required to address our collective concerns, our common obligations. We have heard a lot about pragmatism and practicality, but I can assure you that compassion and broader social concerns rarely make it into an investment memo. If Romney really wants to push his Bain experience, Americans will have to decide whether the answers to the problems facing them are best provided by a financier president.
By: Joe Conason, The National Memo, October 19, 2012
“Economic Angel Of Death”: Mitt Romney, Non-Job-Creator
Back in August, the famous Reagan Budget Director David Stockman tore Paul Ryan a new one in an op-ed accusing his presumed doppelganger of great feats of mendacity and cowardice.
Now Stockman’s back with an enraged J’accuse! aimed at the very heart of Mitt Romney’s biography: the idea that he was a champion creator of “jobs” or “wealth” at Bain Capital. Stockman makes earlier critics of Bain look like Starbucks-addicted yuppie pikers. Here’s a sample:
Bain Capital is a product of the Great Deformation. It has garnered fabulous winnings through leveraged speculation in financial markets that have been perverted and deformed by decades of money printing and Wall Street coddling by the Fed. So Bain’s billions of profits were not rewards for capitalist creation; they were mainly windfalls collected from gambling in markets that were rigged to rise.
If you find Stockman’s rhetoric discredited by his hard-money biases, check out this:
Mitt Romney was not a businessman; he was a master financial speculator who bought, sold, flipped, and stripped businesses. He did not build enterprises the old-fashioned way—out of inspiration, perspiration, and a long slog in the free market fostering a new product, service, or process of production. Instead, he spent his 15 years raising debt in prodigious amounts on Wall Street so that Bain could purchase the pots and pans and castoffs of corporate America, leverage them to the hilt, gussy them up as reborn “roll-ups,” and then deliver them back to Wall Street for resale—the faster the better.
Whether you find Stockman’s producerism persuasive or not, there’s no question he’s making an effective challenge to the idea that ol’ Mitt knows what ails Main Street and Wall Street, and how to fix them. Romney’s loyalties have always been with the latter, and he knows as much about the former as his campaign’s talking points explain to him when he alights in the heartland locales where people like Mitt Romney once appeared like an economic angel of death.
By: Ed Kilgore, Contributing Writer, Washington Monthly Political Animal, October 15, 2012
“And The Rich Get Richer”: Massive Insurance Industry Profits For Republicans In Ryan Medicare Scheme
Insurance companies that would benefit from a Medicare privatization program supported by GOP candidates Mitt Romney and Paul Ryan and nearly every congressional Republican are filling their campaign coffers and raising questions about whom they really work for – constituents or big insurance and Wall Street donors. The privatization scheme, designed by Ryan, would end Medicare as we know it and leave seniors without protection from soaring out-of-pocket medical costs.
The insurance industry and HMOs so far in the 2012 election cycle have given at least $14 million in campaign contributions to U.S. House members who voted for the Ryan plan to privatize Medicare, according to a new report prepared by Public Campaign Action Fund and Health Care for America Now utilizing data downloaded and coded by the Center for Responsive Politics. Mitt Romney, the Republican presidential candidate, has received $2.7 million from insurance interests this cycle alone. Taking the long view, members of Congress who voted for the Ryan budget collected $49.7 million in campaign contributions from the insurance industry over their careers – far more than those voting against the plan, the report said.
For the insurance industry, the political spending is an investment that could reap enormous returns. The market value of Wall Street-run health insurance companies will increase by $12 billion to $25 billion if the Republicans win the Senate and the White House, and by 2030 the industry would post $16 billion to $26 billion in increased annual profits attributable to the Medicare privatization, the report said.
“Americans want quality and guaranteed Medicare, but when we have a Congress on the auction block, they’ll put Medicare on the chopping block,” said David Donnelly, executive director of Public Campaign Action Fund. “This report allows voters to connect the dots for themselves by showing the members of Congress who voted for Ryan’s plan to privatize Medicare while scooping up checks from the insurance industry that would benefit.”
“The Republican plan to privatize and voucherize Medicare would increase costs for seniors and turn the most effective and cost-efficient health insurance program over to the insurance industry,” said Ethan Rome, executive director of Health Care for America Now, the nation’s largest grassroots health care advocacy organization. “It’s disturbing, though not surprising, that the GOP is bankrolled by the insurance industry – the special interests that would reap staggering profits from this plan. When the GOP and health insurance companies win, consumers lose.”
New polling shows that seniors are extremely sensitive about the alliance between the health insurance industry and the Republican Party. More than half – 55 percent – of voters said they would be less likely to vote for a candidate who supports the budget that includes the privatization scheme, according to Democracy Corps, Greenberg Quinlan Rosner Research and Public Campaign Action Fund. But that swelled to 70 percent when voters were asked if they would be less likely to vote for that candidate if he or she also took thousands in campaign donations from insurance executives, lobbyists and political action committees.
“Along with their systematic effort to undermine Medicare, the Republicans are working to repeal the Affordable Care Act and decimate Medicaid,” Rome said. “The GOP’s plan is to put seniors and their families at the mercy of the private health insurance industry without adequate coverage, without their choice of doctor and without protection from huge new out-of-pocket costs.”
“Policy in Washington is too often decided by those who give the most money at the expense of everyday Americans,” said Donnelly. “Insurance interests are pouring money into campaigns because it’s in their narrow interest to privatize Medicare and maximize profits. The problem is, Americans of all political stripes don’t have the same power and influence to shape policy. That’s why we have to hold our members of Congress accountable and it’s why we need fundamental changes to our campaign finance system.”
By: Adam Smith, Health Care For America Now, October 10, 2012
“True Perversity”: Mitt Romney’s Obscene Posturing As A Wall Street Critic
Among the many obfuscations of Mitt Romney last night, this was perhaps the biggest laugher of them all:
ROMNEY: Dodd-Frank was passed, and it includes within it a number of provisions that I think have some unintended consequences that are harmful to the economy. One is it designates a number of banks as too big to fail, and they’re effectively guaranteed by the federal government. This is the biggest kiss that’s been given to—to New York banks I’ve ever seen. This is an enormous boon for them. There’s been—22 community and small banks have closed since Dodd-Frank. So there’s one example I wouldn’t designate five banks as too big to fail and give them a blank check. That’s one of the unintended consequences of Dodd-Frank. It wasn’t thought through properly.
Romney—the private equity veteran running a presidential campaign funded by Wall Street, on a platform that contains a full repeal of every financial regulation over the past four years—positioning himself as an opponent of those big “New York banks” was a historic moment in presidential debate cravenness. (And a real missed opportunity for Obama to wallop his opponent).
So what exactly was Romney talking about? It’s a complicated answer, but understanding it reveals the true perversity of Romney’s posturing.
Dodd-Frank has two provisions regarding too-big-to-fail that Romney is talking about here. The first is the ability of the Financial Stability Oversight Council, created by the legislation, to name financial institutions “systemically significant.” This means they are so big that their failure could threaten the health of the financial sector, and that designation subjects them to heightened regulation and higher capital requirements.
The big banks hate this requirement, for obvious reasons—they come under increased scrutiny and restrictions. So Republicans have been dutifully attacking it. (Romney’s running mate, Representative Paul Ryan, repeatedly blasted it before joining the ticket). The GOP argument, as you heard Romney deliver it, is that by giving them the “systemically significant label, the government is officially “designating” banks as too-big-to-fail—a very bad-sounding thing indeed!
But this is nonsense—these firms are too big to fail. The FSOC designation doesn’t make them so, and is in no way a “kiss” to the big banks—again, it subjects them to higher regulation. Romney and his party would prefer to repeal this provision, full stop, and thus effectively stick their heads in the sand about too-big-to-fail institutions. It’s like saying a doctor who diagnoses someone with cancer has given it to him.
Interestingly, a key feature of this provision is that FSOC can name non-banks as systemically significant, and just this week news broke that AIG is on the verge of receiving this label. Republicans on the House Financial Services Committee have been trying to amend Dodd-Frank to protect AIG from that designation, which to me raises an interesting question about Romney’s timing here.
In any case, when Romney spoke about “guaranteeing” a bailout, and of “blank checks,” he’s echoing another GOP complaint about the resolution authority provision of Dodd-Frank. That gives the federal government the power to wind-down big banks in the event of a failure. The idea is to dissolve the bank, without taxpayer money, not save it—Rep. Barney Frank has called this a “death panel” for big banks. (Pat Garofalo wrote on this issue for us here).
Banks also hate this provision, preferring instead the inevitable ad hoc, blank-check bailout that we saw in 2008. So Republicans have been going after resolution authority—the 2012 Ryan Budget would repeal it—by arguing that the provision somehow guarantees bailouts. This is the same flim-flam as before: the bailout is going to happen either way if the firm is too big to fail, and by repealing resolution authority, you take away the increased power of the government under Dodd-Frank to deal the problem. (Former Treasury Secretary Hank Paulson said he “would have loved to have had” resolution authority in 2008 instead if issuing straight-up bailouts).
Many progressive critics have legitimate complaints about the failure of Dodd-Frank to be tougher in dealing with too-big-to-fail firms, but to be absolutely clear, that’s not what Romney and the Republicans are trying to do. They’re trying to get rid of the limited reforms that have been made. To do it while preening as tough-on-Wall-Street politicians is deeply, deeply cynical.
By: George Zornick, The Nation, October 4, 2012
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