Social Security: Where Do the 2020 Candidates Stand?

[New York Times] No topic is more important than Social Security to the well-being of today’s older voters — and younger workers who will come to rely on the program. Nearly all Americans pay into the program and can expect to receive a benefit. It is the largest retirement income source for a majority of older households.

Just 52 percent of households owned retirement accounts in 2016, according to Federal Reserve data. And at a time when fewer retirees can rely on traditional pensions, Social Security will be the only source of guaranteed lifetime income for most workers. Benefits are adjusted annually for inflation — a unique feature that adds substantially to Social Security’s value.

Read more: New York Times »

Trump’s audacious new plan to cut Medicaid, explained

President Donald J. Trump with (clockwise from left) Ms.Seema Verma, Administrator of the Centers for Medicare and Medicaid Services, Secretary Tom Price, U.S. Secretary of Health and Human Services, and Vice President Mike Pence on March 14, 2017, in the Oval Office of the White House. Image: Flickr Creative Commons | https://flic.kr/p/U3Tp7r

[Vox] President Donald Trump’s administration is taking its most audacious step yet to roll back Medicaid, with a new plan that would cap spending for the government program upon which poor Americans depend for health insurance.

The Centers for Medicare and Medicaid Services announced on Thursday they would accept applications from states that want to set up a Medicaid block grant, a long-held goal of ideological conservatives who want to scale back the social safety net, and one deployed successfully to severely limit cash welfare benefits in the 1990s.

These spending caps would fundamentally change how the program is financed, ending Medicaid’s days as an open-ended entitlement by putting new hard limits on how much the government is willing to spend on health care for certain enrollees. Medicaid would no longer pay whatever is necessary to provide medical care to the people in or near poverty who qualify for its benefits. Instead, spending would be limited in states that got a waiver from the federal government, and they could impose cuts on benefits.

Trump has already tried to fundamentally alter the Medicaid program through work requirements, though he’s been stopped in the courts. But the block grants represent an even more basic remaking of Medicaid on his watch, one that would lead to spending cuts and fewer benefits.

The block grants are also, like work requirements, a roundabout way to roll back Obamacare’s expansion of Medicaid specifically. Under the guidance released by CMS, it would be benefits for people newly eligible under the health care law — mostly childless adults and parents who are living in or near poverty — that would be subject to the block grants. In that context, despite Trump’s campaign promise not to cut Medicaid, these policies make sense as a means to an end for the conservatives whom Trump has put in charge of his health department.

Block grants could run into trouble in the courts, just as Medicaid work requirements already have, if judges find they are contrary to the purpose of the Medicaid program (which is supposed to be providing medical benefits to vulnerable people).

But Trump’s latest steps to pare back Medicaid, taken early in an election year, are a reminder that his administration has proven steadily committed to cutting federal health care spending.

Read more [Vox]»

Working Longer Is A Lame Answer For Failing Pensions. We Need A Gray New Deal.

Image: Scott Lewis via Flickr Creative Commons, https://flic.kr/p/qZzNYX

[Forbes.com] It’s a journalism cliche that reporters always highlight the bad: they never write about the planes that don’t crash or the companies that don’t lie and cheat. But the topic of working into old age seems to be one of the most consistent exceptions. Most every example of journalism about working longer is of someone for whom working in their 70s, 80s, 90s is full of joy; everything has gone right! 

Often these stories have not a single proviso that working longer in a nice job—a job that doesn’t break down health and spirits or take away from important end-of-life leisure—might be a scarce privilege that class status affords. 

For example, John D. Stoll began a Wall Street Journal article last week on “the end of retirement” with the following: “It took about six years of annual asset reviews with my financial planner…” When I read that, I knew the focus would not be on the typical worker approaching retirement. Instead, it focused on the ability of a privileged slice of professional workers to work as long as they please, however they please.

Most Americans don’t have that luxury. Without decent pensions, working longer is not the answer for most people. For the first time in modern history, the American elderly will be relatively worse off than their parents and grandparents. Many will turn to work—any kind of work. The failing do-it-yourself American pension system will cause humanitarian and political crises unless we find a better way.

Read more: Forbes.com »

Which Democrat is most committed to protecting Social Security?

[Washington Post] In recent days, Sen. Bernie Sanders (I-Vt.) has been attacking Joe Biden for flirting with the idea of Social Security cuts over the course of his career; Sen. Elizabeth Warren (D-Mass.) has now joined Sanders in criticizing Biden. Biden is hitting back angrily over a video that takes some of his comments on the topic out of context.

So let’s put aside the criticisms and counter-criticisms and focus on three questions: What’s the problem with Social Security? What do the candidates want to do about it? And how is this likely to play out in the general election?

We’ll do the wonky part first, but to understand it you have to remember that there exists a center-right consensus that deficits are a dire threat to the republic, and it’s worth making painful cuts to government services to reduce them. It’s hard to overstate how powerful this idea has been in Washington; there are entire organizations, well-funded by wealthy people and corporations, whose mission is to spread panic about deficits and urge cuts to entitlement programs (with perhaps some tax increases here and there).

When it comes to Social Security in particular (which has its own funding apart from the rest of the federal budget), the deficit scolds argue that the program is “going broke,” a falsehood meant to convince people that if radical steps aren’t taken soon — including benefit cuts — the program will be unable to provide benefits for retirees.

But the program is not “going broke.” With the retirement of the baby boom generation, Social Security is now giving out more in benefits than it takes in, but this isn’t some kind of unforeseen emergency. It’s exactly what we knew would happen, and it’s the reason the Social Security Trust Fund exists: to make up the shortfall.

According to the latest Social Security trustees report, that trust fund will be exhausted in 2035 (for old-age pensions; the fund for disability benefits has enough reserves to last until 2052). At that point, if the projections are accurate, the program will still be able to provide about three-quarters of benefits.

Getting three-quarters of your scheduled benefits is worse than getting 100 percent. But it’s not nothing. So how do we fix it?

Full story: Washington Post »

Social Security Benefits Are Modest: Benefit Cuts Would Cause Hardship for Many

Image: Penn State via Flickr Creative Commons (https://flic.kr/p/MzurY5)

[Center on Budget and Policy Priorities] Social Security benefits are a perennial target for cuts because the program faces a long-run shortfall. Some lawmakers and opinion leaders mistakenly portray the program’s benefits as lavish. The fact is, benefits are modest and workers have earned them by paying into Social Security — protecting themselves and their families if they retire, become disabled, or die leaving family members to support.

Here are five key facts that policymakers need to keep in mind:

  1. Social Security benefits are modest.
  2. Most beneficiaries rely on Social Security for most of their income.
  3. For most seniors, Social Security is the only income they receive that’s guaranteed to last as long as they live and to provide full inflation protection.
  4. Social Security benefits in the United States are lower than many other developed countries.
  5. Future retirees already face lower benefits (relative to their past earnings) than current retirees because of a rising Social Security retirement age and escalating Medicare premiums.

These facts argue for avoiding cuts in future benefits — a position that the majority of Americans support strongly.[1]

Social Security faces a real but manageable long-term shortfall. The program’s trustees project that its trust fund reserves will last until 2035, and that even after that, tax revenue anticipated under current law would support three-fourths of scheduled benefits. Social Security’s fundamental challenge is demographic, traceable to a rising number of beneficiaries rather than to escalating costs per beneficiary. In the mid-2030s, when the large baby boom generation exerts its greatest demographic pressure, benefits will cost just under 6 percent of Gross Domestic Product (GDP), up from 5 percent today.[2]

There is no imminent crisis, and policymakers have time to put Social Security on sound financial footing. However, they shouldn’t wait until the last minute because a carefully crafted solvency package could strengthen public confidence in the program, share sacrifices fairly across generations, and give workers plenty of notice so that they can plan their work, saving, and retirement.

Read the rest: Center on Budget and Policy Priorities »

Congress Underfunds Social Security Administration – Again

[Via NCPSSM] While it’s laudable that Congress reached a 2020 spending deal in time to avert a government shutdown, the news wasn’t great for those who rely on the Social Security Administration (SSA), which basically means almost every American senior.

Monday’s $1.4 trillion agreement – which does increase spending on other programs for older Americans – gives SSA only a small bump in its operating budget. The $99 million increase (less than 1%) over 2019 funding levels does not even keep pace with inflation, and perpetuates the decade-long divestment in crucial customer service functions for Social Security’s 69 million beneficiaries. The agency has been chronically underfunded at a time when 10,000 Americans turn 65 every day.

The divestment began at the start of this decade, coinciding with the Republican take-over of the House and the ascendancy of the Tea Party. Congress slashed SSA’s operating budget 11% (adjusted for inflation) between fiscal years 2010 and 2019. Left to fend for itself with a growing customer base and reduced resources, the SSA began closing field offices and furloughing employees. Customer service suffered and seniors – especially those of modest means – paid the price in the form of increased wait times to talk to an SSA representative and long delays in disability hearings during which thousands of claimants died before their appeals could be adjudicated.

As Mark Miller reported for Reuters last June:

“[Nearly one million] people were waiting for appeals hearings before administrative law judges on disability benefit applications in fiscal 2018. In the same year, the average wait time for callers to the Social Security toll-free number was 24 minutes, up from 13.6 minutes in fiscal 2016 – and 15% of callers received a busy signal. Social Security’s processing centers, which handle claims after beneficiaries are determined to be eligible, faced an enormous backlog of 2.9 million cases this year.” – Mark Miller, Reuters, 6/5/19

After years of cuts, Congress increased SSA’s operating budget by 2% for FY 2018. But the agency’s FY 2019 budget was cut by 2%, leaving SSA financially treading water. SSA’s former acting director, Nancy Berryhill, had requested a healthy $500 million increase for 2020. The Democratic-controlled House was poised to offer a $300 million (or roughly 3%) bump. Unfortunately, the Senate and President Trump sought a zero increase for SSA, producing a House-Senate compromise of only $99 million.

The main culprits are automatic caps that were imposed on discretionary federal spending beginning in 2011. Recent Congresses have adjusted those caps to allow more spending, but SSA’s budgets have continued to languish. This is especially egregious because SSA operations are funded by workers’ Social Security payroll contributions, and should not be lumped in with discretionary spending and subject to arbitrary caps and cuts. Seniors have earned their benefits and expect them to be administered with minimal time, trouble, and pain.

Source: Center for Budget and Policy Priorities

Earlier this year, a bipartisan three-person commission recommended exempting SSA’s operating budget from automatic spending caps. Meanwhile, Rep. John Larson’s Social Security 2100 Act would require that SSA’s administrative budget be fixed at 1.5% of total benefits paid. For 2020, that would translate to a $15 billion budget compared to the actual $11 billion just approved by Congress – or 36% more under Larson’s formula. That would go a long way toward restoring the level of customer service that beneficiaries truly need and expect.

Somebody Stopped Paying Their Social Security Taxes Today

[Forbes] Most likely you will pay your Social Security taxes all year round. But some high earners will stop paying a few hours after we ring in the New Year, many before we return to work in the new year. 

Social Security benefits are paid by the FICA tax, which is 12.4% of pay (split evenly between the employer and the employee). But earnings are taxed only up to a cap. In 2019, the cap was $132,900, a threshold that rises to $137,700 in 2020. Ninety-five percent of American workers pay FICA tax all year long because our annual earnings fall below the cap, while 5% stop paying sometime during the year when their earnings reach $137,700.

Who are these people who don’t pay Social Security taxes all year? 

People don’t post their salaries, so we don’t know who is the highest salaried person in America. We know the richest man in the world is Jeff Bezos, but the system doesn’t tax wealth, it taxes wages and salaries (Social Security could tax wealth, but it never has). Public companies post the salaries and bonuses of their executives and these filings show that the highest-paid executives in 2019 were Safra Catz and the late Mark Hurd, the co-CEOs of tech giant Oracle, who each earned $108 million. At that pay level, executives effectively finish paying their Social Security taxes before noon on New Year’s Day.

In 2018, 168 million workers paid a total of $874 billion into the Social Security system. I don’t know the names of all the 1,174 people in 2018 who earned over $20 million or the 211 employees who earned over $50 million each (with an average salary of $95 million). But these extremely wealthy people paid Social Security taxes only on the first $128,400 they earned in 2018. On average, those 211 people at the top will stop paying Social Security taxes about 12 working hours into 2019.

Social Security Is Short of Funds Because of Income Inequality, Not Longevity Increases

Social Security is in good shape, but the program will have enough money to pay only 80% of benefits in 2034 unless the system obtains the equivalent of about one trillion dollars. That is unfortunate, because the Social Security system as it stands plays a crucial role in narrowing retirement wealth inequality between the rich and the poor.

Keep reading: Forbes.com »