Your Representatives Are Lying To You... Social Security is not Broke... nor is the post office!
TO BE CLEAR: The $2.7 trillion taken from the Social Security trust fund, and spent for non-Social Security purposes, must be repaid. That money was contributed by working Americans, and it belongs to the America people collectively.
Republicans and Many Democrats are on the attack:
If We're Going to Defend Social Security We Need to Understand It
By Dave Lindorff
Republicans and some treacherous Democrats are attacking Social Security again, this time in a last-gasp effort to wreck the New Deal Program, writes TCBH! journalist Dave Lindorff, who notes that even its defenders and users don't really understand it -- but must.
By Dave Lindorff -- ThisCantBeHappening!
The Republican-dominated Congress, with the help of a cadre of sell-out conservative Democrats in both chambers, are gearing up to attack Social Security again, under the guise of "saving" the program.
The attack will be brutal, because the program's assassins understand that this is probably their last chance to undermine Social Security. With the Baby Boom generation born after 1946 now seriously starting to file for retirement benefits, it will soon become such a mainstay for so many people that it will be impregnable, unless already undermined.
A person born in 1946 could have retired at age 62 as early as 2008, and next year could retire at 70 and receive maximum benefits. There are already seven years' worth of Baby Boomers who are at least eligible to start collecting benefits. By the time the last Baby Boomer born in 1964 is eligible to retire in 2026, the "senior lobby" of Social Security-eligible voters will be more double what it is today, and more importantly, will represent a 50% larger as a proportion of the voting population than in today's population. Social Security's enemies in Congress and in the business world know that as powerful as the elderly vote is today it will be 50% more powerful in years to come. And don't forget, it's not just retirees who ardently support Social Security. It's people in their 50s and early 60s, who are looking ahead at the program as their salvation in retirement.
Polls show that even among the young, there is strong and abiding support for this flawed but critical program founded in 1936, which today provides 100% of income for one-seventh of all America's elderly, and 90% or more of income for one-third of the elderly. Another one-third depend upon those benefits for more than half their income. Most of the rest too depend on their Social Security benefits for basic expenses like food and rent. It's the rare American who just uses their benefit checks for vacations, luxury purchases or investment purposes.
But for all that Americans remain incredibly ignorant about the program, and are losing out on many of its benefits because of that ignorance. If this information were more readily available and understandable, it would be far harder for the program's enemies to successfully attack it.
I've been writing about Social Security for years, and am happy to say that, only weeks away from my 66th birthday, am also getting close to the point where I will personally become a beneficiary of the program.
First of all, let's address to the main arguments of attack made by Social Security's enemies. These are:
In terms of both the two above arguments -- that the soon-to-retire may see their benefits cut in 2033, or that young people may never get their Social Security -- the reality is that for the very same demographic reason (the Baby Boomers) that the Social Security Trust Fund predictably and as planned decades ago is being run down, there will be a huge surge in retiree and near-retiree voters who will ensure that fixes are made in the program to assure full, and probably even better benefit payments going forward. Don't believe the lies being put out that your Social Security benefits won't be there when you need them! It's a political, not a financial or actuarial issue, and you simply need to make sure you are politically active in defending your benefits, and not in 2033, or whenever you retire, but now, when the program is under attack.
Now let's get to some of the other widespread misunderstandings and points about the Social Security System that people need to understand.
First of all, nobody should start collecting Social Security benefits at age 62, 0r even at age 66, unless they have no other resources, can no longer work, and do not have a spouse who could outlive them and who has little or no Social Security to depend upon. This is because Social Security benefits grow significantly for every year that you wait to start collecting.
My poet brother called me when he turned 62, and proudly announced that he had filed for his benefits and was collecting $750 a month. I told him he was making a huge mistake, and that, as a basically healthy, fit guy, he was dooming himself to a pathetic $750 a month (plus inflation adjustment) for a life that, given our family's history, could see him living well into his 90s and beyond. I said that if he waited until 70, even if he never worked for another day in his life for pay, he could expect to start receiving, instead of $750 a month, $1320 in constant dollars, or in other words $1320 plus whatever CPI increases were approved over the intervening 8 years. I said that if he didn't want to work anymore at the manual labor jobs that he had been doing, he should draw that $750 a month from small sum of money he had inherited from our late parents, instead of saving it for later, and hold off on collecting his Social Security benefits until he hit 70. He agreed, and luckily, since one is allowed to buy back up to a year's benefits and reverse a mistaken decision to start drawing Social Security, he is now waiting 'until later to collect.
This was the right move. As Kitces, who has done research comparing potential investment returns to the guaranteed 76% boost in benefits you get for waiting until 70 too collect, puts it, Social Security is "a highly beneficial investment, with a real return that dominates TIPS, is radically superior to commercially available annuities, and even generates a real return comparable to equities but without any market risk." He calls waiting until 70 to collect your benefits "the best long-term return money can buy."
Obviously, if someone has no savings and can't stand working any longer, or gets laid off, starting to collect Social Security at 62 or some other year earlier than age 70 can be a must. But at present almost half of all Americans start their benefits at 62 and only 1-2% wait until 70. Such numbers are clearly the result of widespread sheer ignorance, which must be ended.
Meanwhile there is another thing to consider, and that's one's spouse. If you are the largest earner in a married couple, you cannot just think about your own longevity. Your spouse, if you die, will be eligible to receive, instead of his or her own Social Security, a "survivor benefit" equal to what you would have received on your own, so you need to factor in your spouse's longevity, if your higher benefit from waiting to collect will mean the difference between a reasonable life and a life of brutal penury for your spouse.
And don't forget the important strategy of file-and-suspend available to couples. If you are married, and one spouse has earned significantly more over the years than the other-- or even if your earnings were about equal-- one spouse, or the lower-earning spouse can opt to receive what are called "spousal benefits" on the account of the other, usually higher-earner, once that spouse has reached so-called the "full retirement" age of 66 (for people born in 1954), or 67 (for those born after 1954). Ideally the spouse going for spousal benefits should be at full retirement age too for this maneuver, in order to collect the highest amount. The way it works is that one spouse, usually the higher earner, at full retirement age, files for benefits, and then asks to have those benefits suspended until age 70. That way, the benefit amount keeps rising to the maximum, but meanwhile, because the account was opened, the other spouse, if also at full retirement age, can start receiving 50% of the full-retirement benefit amount the first spouse is eligible to receive, but is leaving untouched. For example, if one spouse at 66 this year were able to start receiving $1500 a month at that age and files, but then suspends benefits, that spouse would continue not receiving benefits until reaching 70 and then would start receiving $1960 a month. Meanwhile the other spouse, if also 66, could start receiving spousal benefits of $750/month, which would continue until age 70, at which point this person could switch over to her or his own account and start receiving the maximum possible benefit, too. This maneuver can substantially improve the retirement prospects of most couples by providing them with the essentially free cash over four years that can help them both hold off until 70 to start receiving their own benefits.
Minor children can also receive Social Security benefits, either based upon a parent who is receiving disability benefits under the program, or as additional survivor benefits if a Social Security eligible parent dies. A child can receive up to half of the monthly benefit of a disabled parent, or 75% of a deceased parent's final benefit amount. Children who are in a legal guardianship relationship of a grandparent can also receive dependent benefits on the grandparent-guardian's account. In the case of multiple children in a family, there is a limit of 150-180% of the primary Social Security recipient's benefit amount, so where there are three or more kids involved, the benefit amount per child will be reduced, but this is a substantial benefit that can help in such situations of family distress.
While more than a year after starting to collect Social Security benefits at any age lower than 70, you're locked into the benefit level you got, you are not locked into your benefit if certain situations change. For example, if you opted to collect spousal benefits on your higher-earning spouse's account, and then your spouse dies, you can switch over to receiving a survivor's benefit, which would be at least double what you are receiving a a spousal benefit. If your own account will end up being even higher once you reach 70, you can then switch from the spousal benefit to your own account.
All in all, though it is nowhere near as generous a program as the social security schemes that exist in much of Europe and other developed countries, and though it was never intended to provide for a fully-funded retirement as those countries' plans are, Social Security is a wonderful program that has substantially reduced poverty among America's elderly (once a desperate problem in the US), as well as substantially easing the burden on children and grandchildren to provide for their elders, but make no mistake -- its enemies are hell-bent on wrecking it as much as they can before the mass of Baby Boomers wake up to the threat and rise en masse to its defense.
Now is the moment for a new progressive movement of Americans of all ages built around defending and expanding this signal accomplishment of the New Deal.
Democrats failed to make defending and expanding Social Security a cornerstone of their congressional campaign last year, and as a result, they got trounced, and handed Congress to the Republicans. This disaster cannot be allowed to be repeated in 2016. No one should be supported for Congress in the next election who does not stand foursquare for a progressive funding increase for Social Security designed not only to guarantee full benefits for all for as far as can be predicted, but to improve those benefits so Americans no longer will have to scrimp and save during their working lives, only to see their savings destroyed by a corrupted financial market, and sucked dry by the fee-greedy investment and insurance industry and its agents.
DAVE LINDORFF is a member of ThisCantBeHappening!, the new independent, uncompromised, five-time Project Censored Award-winning online alternative newspaper. His work, and that of colleagues JOHN GRANT, GARY LINDORFF, ALFREDO LOPEZ, LORI SPENCER, LINN WASHINGTON, JR. and the late CHARLES M. YOUNG, can be found at www.thiscantbehappening.net
Dave Lindorff is a founding member of the collectively-owned, journalist-run online newspaper www.thiscantbehappening.net. He is a columnist for Counterpunch, is author of several recent books ("This Can't Be Happening! Resisting the Disintegration of American Democracy" and "Killing Time: An Investigation into the Death Penalty Case of Mumia Abu-Jamal"). His latest book, coauthored with Barbara Olshanshky, is "The Case for Impeachment: The Legal Argument for Removing President George W. Bush from Office (St. Martin's Press, May 2006).
The Phony Crisis
From the University of Chicago Press:
Is it true that the Social Security system is in serious trouble and must be repaired? As baby boomers begin to retire, will they inevitably, by force of their sheer numbers, bankrupt the system? Is Social Security a big Ponzi scheme that will leave future generations with little to show for their lifetime of contributions? Is the only way to solve the Social Security crisis through radical changes like privatization or bolstering it with massive new taxes?
According to the authors of this important new study, the answer to these questions is a resounding no. In Social Security: The Phony Crisis, economists Dean Baker and Mark Weisbrot argue that there is no economic, demographic, or actuarial basis for the widespread belief that the program needs to be fixed.
As the authors emphasize, there is virtually no disagreement about the facts of Social Security's finances, or even the projections for its future. Rather, the Social Security debate has been foundering on misconceptions, confusion, and lack of agreement on the meaning of crucial terms.
The authors also take on related issues: that privatization would help save Social Security, that America has a pressing need to increase its national savings, and that future generations will suffer from the costs—especially for health care—of supporting a growing elderly population.
As New York Times columnist Fred Brock recently wrote, "So-called reform of the Social Security system is looking more and more like a solution in search of a problem." In this accessible and insightful work, Baker and Weisbrot seek to cut through some of the myths and fallacies surrounding this crucial policy issue.
"Dean Baker and Mark Weisbrot have no trouble at all demonstrating that even on highly conservative assumptions about economic growth, the much-forecast insolvency of the Social Security system by about 2030 is most unlikely to happen then, if indeed ever."--The Economist
"The authors challenge basic assumptions with vigor and intelligence. . . . An absolutely relevant and important analysis, presented with force and clarity, that asks, basically, what kind of a nation we really are."--Kirkus Reviews
"Proponents—like George W. Bush—of Social Security privatization . . . typically ignore prospects for a stagnant or falling stock market. In Social Security: The Phony Crisis, [Baker and Weisbrot] show how a falling stock market could place pressure on both future Social Security payments and privatization schemes because earnings from the trust fund could actually fall."—Jeff Madrick, New York Review of Books
your 'leaders' continue to steal from you and to lie to you... wake up!
Increase the Payroll Tax Cap
The Social Security payroll tax currently applies to annual earnings up to $110,100. Any wages earned above $110,100 go untaxed for Social Security. This cap generally increases every year as the national average wage increases. Today, the cap covers about 84 percent of total earnings in the nation. Raising the cap to cover a higher percent of total earnings would help close Social Security’s funding gap. How much depends on how high the cap is set and how quickly the cap would be raised to reach that level. One commonly mentioned goal would raise the cap to cover 90 percent of all earnings, which in 2012 would have meant a cap of about $215,000. This would mean any employee earning more than the current tax cap of $110,100 (as well as his or her employer) would have to pay more payroll taxes, up to about $6,500 per year for those earning $215,000 a year or more. Raising the cap to 90 percent is estimated to fill 36 percent of the funding gap.
PRO: Lifting the cap to cover 90 percent of all earnings is sensible and fair. Only 6 percent of workers earn more than the current cap of $110,100. It is fair for top earners to pay more into Social Security, and they would get a bit more in benefits. This change reflects the intent of Congress in 1977, when it set the cap to include 90 percent of earnings. Congress also provided for automatic adjustments for average wage growth so that the cap would continue to cover 90 percent. But with today’s top earners enjoying much bigger gains than everyone else, the cap now covers only about 84 percent of all earnings. This proposal, together with other changes, could keep Social Security strong and pay for benefit improvements. (Virginia Reno, National Academy of Social Insurance)
CON: In general, increasing taxes is a serious mistake... *abbreviated argument... see full 'con' position at (David John, Heritage Foundation)
SOCIAL SECURITY & the Post Office are broke only when using a similar type of dishonest accounting
sign the petition to save
How to save Social Security
By: Jim Kessler and David Brown
There are a lot of charts, numbers, and projections in the annual report released by the Social Security Trustees Friday, but they really boil down to this: Social Security’s trust fund has 20 years to live.
Started in 1935 as the first major strand in America’s safety net, Social Security will arrive at insolvency at the venerable age of 98. By ignoring this reality, Congress is guaranteeing that the program’s reserves will expire, forcing benefits for the retired and disabled to immediately fall by 23 percent starting in 2033.
But the retired and disabled won’t be the only victims. The rising cost of Social Security and health care programs is crowding out investments in kids and future generations. In the mid-1960s, the federal government spent three dollars on investments — in education, research, and infrastructure — for every one dollar on entitlements. In 2023, it will spend one dollar on investments for every five dollars on entitlements. That means less money for teaching kids, curing diseases, and building roads.
The question now is whether the same dysfunctional Congress that cannot seem to muster enough votes to name a post office can touch the third rail of politics, to keep Social Security from going down and taking public investments with it.
To that we answer a loud no and yes. No, Congress is unable to develop and pass a Social Security solvency plan with the necessary super majority in the Democratic Senate and a majority in the Republican House. That piece of legislation is a fantasy. But the same two chambers could pass a law that outsources the job to a commission, to develop the plan and leave Congress in the position with only two choices: vote yes on the commission plan to save Social Security or vote no to let its financing dry up.
Here is why we believe a Social Security Commission can succeed where Simpson-Bowles failed.
First, this is how Social Security was fixed in the past. The last time Social Security was on its deathbed, President Ronald Reagan and congressional leaders appointed a commission, led by Alan Greenspan, to develop a 75-year solvency plan. The plan included a balance of tax increases and benefit reductions and laid the groundwork for a bill that passed both chambers and was signed by the president.
The Greenspan Commission plan promised to make Social Security solvent for 75 years. In the end, the law achieved 50 years of solvency — which by government standards is pretty good work. Seniors kept receiving the Social Security benefits they needed; members of Congress got reelected without much of a fight. Most everyone was happy.
Second, Simpson-Bowles (which we hailed and endorsed) failed because it tried to be to the federal budget what King James was to the Bible. It would have practically rewritten the whole thing, from the tax code to entitlements to national defense. It is very hard to imagine elected officials handing over rewrites of the tax code, entitlements, and the rest of the budget to an unelected commission.
To stack the odds against Simpson-Bowles even further, it was comprised of far too many elected officials beholden to their own leadership. And, the vote threshold was far too high, requiring 14 of 18 in favor to move the plan to Congress. That Simpson-Bowles achieved the level of success that it enjoyed — essentially defining the budget debate — was a miracle. It was designed, frankly, to fail.
Third, the politics favor a commission. Social Security can only be fixed under divided government, because no one party wants to shoulder the entire solution — which inevitably includes a mix of tax hikes and benefit cuts — on its own. We certainly have divided government now.
In addition, a commission-led fix would give each party something it wants.For Democrats, a Social Security fix is the surest path to more revenue, which would come almost entirely from high-income workers, likely through a partial lifting of the payroll tax. A fix would also protect the vulnerable for generations and guarantee that the program is extended to many more generations. For Republicans, a fix would narrow the gap between total federal spending and revenue. And it would end the Democratic drumbeat that Republicans are out to end Social Security as we know it.
A national commission on Social Security is modest and practical. It should guarantee solvency for at least 75 years. Members of Congress should be required to either vote yes or no, or offer a substitute amendment that also achieves 75 year solvency.
If it votes no, Congress will be abdicating responsibility, jeopardizing retirement security for all Americans and plaguing public investments in future generations.
Jim Kessler is Senior Vice President for Policy and David Brown is a Policy Advisor for the Economic Program at Third Way, a moderate Washington, D.C. think tank.
The short-term solvency of Social Security is in the hands of the federal government.
Enough payroll taxes have been paid to cover full benefit payments until 2033. But $2.7 trillion of that money was taken by the government and spent for non-Social Security purposes. The spent money was replaced with government IOUs, called “Special Issues of the Treasury.”
The public has been misled about the true nature of these IOUs for the past 30 years. Most Americans seem to have the impression that the IOUs, held by the trust fund, are like the marketable Treasury bonds, which China and other lenders hold.
But the IOUs are very different from marketable Treasury bonds. The IOUs cannot be sold to anyone at any price, and they can’t be used to pay benefits. The only way the IOUs have any value is if the government is able and willing to pay back all of the $2.7 trillion.
The rallying cry from those who continue to falsely claim that the IOUs are like the marketable Treasury bonds is, “They are backed by the full faith and credit of the United States government.” That is true, but what do those words mean? The financial condition of the United States government is dire.
The national debt, which first reached $1 trillion in 1981, is today more than $18 trillion. The credit of the United States government today is not nearly as good as it was in 1981.
The statement, “Social Security has enough money to pay full benefits until 2033,” is made over and over as proof of Social Security’s short-term solvency. It has been repeated so many times that almost nobody questions its validity.
But it is not true. Social Security does not have the means to pay full benefits, even for the current year.
Since 2010, the cost of paying full Social Security benefits has exceeded tax revenue, and the gap is growing at an increasing rate. Each year, the government has to borrow money to fill the gap. Without the borrowing, full Social Security benefits could not currently be paid.
The harsh reality is that the trust fund has no real assets that can be turned into cash. The IOUs are claims against future tax collections, and can only be redeemed by raising taxes. With Republicans in control of Congress, it is hard to believe that taxes will go up anytime soon.
The government has made little effort to inform the public about the true status of the IOUs, but there have been a few exceptions. On Oct. 3, 2013, President Obama warned that unless the debt ceiling was raised Social Security checks would not go out on time. In reference to the checks, Obama said, “In an economic shutdown, if we don’t raise the debt ceiling, they don’t go out on time.”
On Jan. 21, 2005, David Walker, the comptroller general of the GAO, tried to make it clear that the trust fund did not hold any real bonds. He said, “There are no stocks or bonds, or REAL ESTATE in the trust fund. It has nothing of real value to draw down.”
President Bill Clinton’s 2000 budget proposal included a statement of just what the IOUs truly were: “The Social Security Trust Fund does not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures.”
This point was also emphasized in the summary to the 2009 Social Security Trustees Report. The report stated, “Neither the redemption of trust fund bonds, nor interest paid on those bonds, provides any new net income to the Treasury, which must finance redemptions and interest payments through some combination of increased taxation, reductions of other government spending, or additional borrowing from the public.”
The $2.7 trillion taken from the Social Security trust fund, and spent for non-Social Security purposes, must be repaid. That money was contributed by working Americans, and it belongs to the America people collectively.
All of the money doesn’t have to be repaid in one lump sum. It could be repaid in installments over a fifteen-year period, but the repayment must be guaranteed.
If the government repaid its debt to Social Security, there would be no short-term Social Security solvency problem.
Allen W. Smith is professor emeritus of economics, Eastern Illinois University. He is the author of seven books, including “Understanding Economics,” a high school textbook published by Random House, and “The Looting of Social Security.” Smith holds a doctorate in economics from Indiana University. Copyright 2015 Allen W. Smith. firstname.lastname@example.org
The following is one of the deceptive arguments used... it may sound good, but it is inaccurate... FALSE !
The demographics of the Baby Boom will place an unbearable burden on the Social Security system.
Those who want to overhaul Social Security make their case with the following numbers: in 1960 there were more than five workers for each beneficiary; today there are 3.3 workers; by 2030 there will be only two workers for each beneficiary. At present the fund is running an annual surplus of more than $80 billion, approximately 20 percent as much as its current expenditures. This surplus will generate interest revenue to help support the system as the ratio of workers to beneficiaries continues to fall in the next century. Also, the fact that workers are becoming more productive year by year means that it will take fewer workers to support each retiree. The United States had 10.5 farm workers for every hundred people in 1929; it has fewer than 1.1 farm workers for every hundred people today. Yet the population is well fed, and we even export food. Rising farm productivity made this possible. Similarly, increases in worker productivity (which have been and should be reflected in higher incomes), however small compared with those of the past, will allow each retiree to be supported by an ever smaller number of workers.
In fact the demographics of the Baby Boom have very little to do with the long-range problems of Social Security. The main reason the fund will run into deficits in future years is that people are living longer. If people continue to retire at the same age but live longer, then a larger percentage of their lives will be spent in retirement. If people want to spend a larger portion of their lives in retirement, either they will have to accept lower incomes (reduced benefits) in their retirement years relative to those of their working years, or they will have to increase the portion of their incomes (higher taxes) that they put aside during their working years for retirement.
This is the main long-range problem facing Social Security. Current projections show that the annual deficit will be 5.71 percent of taxable payroll in 2070, long after the Baby Boom will have passed into history. But the annual deficit is expected to be only 4.44 percent of taxable payroll in 2035, when the worst crunch from retired Baby Boomers will be felt.
Examining just the change in the ratio of beneficiaries to workers overstates the burden that workers will face in the future. To assess the burden accurately it is necessary to examine the total number of dependents—beneficiaries and children—each worker will have to support. It is projected that this ratio will rise from 0.708 per worker at present to 0.795 in 2035. But even this number is well below the ratio of 0.946 that prevailed in 1965. And the fund's trustees project a lower birth rate, meaning that the increased costs of providing for a larger retired population will be largely offset by the reduction of expenses associated with caring for children.