If you weren’t able to attend the Social Security forum in Tacoma on February 20th, watch this short video about how we can address the long-term issues facing Social Security in a way that protects and improves our already great Social Security system. Featuring CEPR Co-director Dean Baker, EOI Policy Director Marilyn Watkins, and others.
Video edited by Kathy Cumming at the Washington State Labor Council
Seventy-three years ago today, the first Social Security checks went out to beneficiaries. The anniversary comes at a difficult time for the program. It narrowly escaped a cut floated by the Obama administration in the fiscal cliff negotiations that would have reduced cost-of-living increases going forward. While it’s not in danger anytime soon, it does have a 75-year funding shortfall, one which has even advocates like Nobel laureate economist Peter Diamond calling for its finances to be shored up.
So the National Academy of Social Insurance hired the marketing firm Matthew Greenwald & Associates to conduct a survey of a random sample of Americans to see how they’d like to see that shortfall closed. The survey used a technique called “trade-off analysis” to see which elements of a potential deal made respondents more or less likely to support it. So if a package with spending cuts and tax increases gets a certain amount of support, and a package with just tax increases gets another amount, you can then analyze those results to figure out the response to spending cut proposals. The survey also explained policies before asking for respondents’ opinions, to avoid getting responses that were basically arbitrary.
The survey found that most major benefit cuts — including chained CPI, means testing and raising the full retirement age to 70 — strongly decreased respondents’ likelihood of supporting a deal. By contrast, revenue-raisers, such as increasing the payroll tax rate oreliminating the cap, elicited strong support and made respondents significantly more likely to support a deal. More mild measures, like raising the payroll tax cap to include 90 percent of wages, and raising the retirement age to 68, elicited mild support. The only benefit changes that people really liked were benefit increases. The following chart shows what the raw numbers looked like.
It’s always dangerous to put too much faith in public opinion surveys that ask about specific policy questions, even ones like this that preface those questions with explanations of the policy being considered. People will say a lot of things if you just call them up and ask them. What’s more, it’s hard to get policies passed even with the support of the vast majority of the country when monied interests oppose them. As Martin Gilens has documented in his book Affluence and Influence, politicians act on the preferences of low- and middle-income people only very rarely, especially when their views are opposed to those of upper-income people. “Let’s raise taxes considerably on people making over $110,000″ — which is what raising the cap on Social Security amounts to — seems to fall in that camp. But the survey does serve as a useful indication of the public’s feelings on how best to solve the long-term funding gap.
One more thing — the study also asked people if they think Social Security is in crisis. Given politicians’ and journalists’ fear-mongering on the subject, it’s not too shocking that 57 percent said yes. Then the survey conductors told respondents how much taxes would have to go up to close the gap. That dropped the number to 74 percent, as the following chart shows.
That’s an important reminder of just how elite-driven peoples’ views on topics like this are.
…[Brooks] spends most of his time, and, Third Way spends all their time, arguing that there is something deeply damaging about the fact that federal spending on Social Security, Medicare, and Medicaid is now a bigger part of the budget than public investments. There’s little economic basis for this angst.
You’d have to look hard to find a bigger fan of public investments than me. But, the economic benefits of Social Security, Medicare, and Medicaid are absolutely enormous. They provide a service (insurance against risk, and people value insurance quite highly) much more efficiently than do private-sector providers. In the case of Social Security, this efficiency is mainly in low administrative costs and the government’s ability to provide actuarially fair insurance without needing the compensation that private-sector insurance providers would demand.
… In short, the really salient choice isn’t between social insurance versus public investments—as Brooks and Third Way would have it—it’s really between those who believe the substantial evidence showing that a mixed economy (one where governments weigh in when they can do something more efficiently or set rules that rule out socially-destructive behavior) can make us richer and those who don’t. And there’s no reason why we can’t have both well-run social insurance and public investments.
By Jacob Lew, President Obama’s Chief of Staff | USA Today:
The budget put forward by President Obama last week is a blueprint for how we can live within our means and win the future. As this begins the budgeting process in Washington, we need to be clear about the causes of the pressing fiscal problems we face. Specifically, looking to the next two decades, Social Security does not cause our deficits.
Social Security benefits are entirely self-financing. They are paid for with payroll taxes collected from workers and their employers throughout their careers. These taxes are placed in a trust fund dedicated to paying benefits owed to current and future beneficiaries.
When more taxes are collected than are needed to pay benefits, funds are converted to Treasury bonds — backed with the full faith and credit of the U.S. government — and are held in reserve for when revenue collected is not enough to pay the benefits due. We have just as much obligation to pay back those bonds with interest as we do to any other bondholders. The trust fund is the backbone of an important compact: that a lifetime of work will ensure dignity in retirement.
According to the most recent report of the independent Social Security Trustees, the trust fund is currently in surplus and growing. Even though Social Security began collecting less in taxes than it paid in benefits in 2010, the trust fund will continue to accrue interest and grow until 2025, and will have adequate resources to pay full benefits for the next 26 years.
For years, the surpluses in the Social Security trust fund have helped to mask our deficits elsewhere. Now that we are paying Social Security back, the problem is not with Social Security, but with the rest of the budget. In 2001 and 2003, Washington cut taxes for the wealthiest Americans and later expanded Medicare without paying for it. Blaming Social Security for our fiscal woes is like blaming you for not saving enough in your checking account because the bank lost all depositors’ money.
The problem is not Social Security; the problem is the mismatch between outlays and revenues in the rest of the budget. Closing that gap and paying down our debt will take tough choices, and the president’s budget makes them. Strengthening Social Security is an important, but parallel, issue that needs to be addressed as quickly as possible. But let’s not confuse it as either the cause of or a solution to our short-term fiscal problems.
A recent article by James K. Galbraith in Mother Jones News is in one respect a call to arms – a powerful reminder of how public decisions made by those we elect to office affect our lives and jobs, houses and health, and paychecks and wealth. But it is also a (perhaps unintentional) call for apathy in the face of mounting attacks on Social Security and middle class economic security.
The attack will come right after the election, when the Bowles-Simpson commission on deficit reduction issues its report. It will almost surely recommend deep cuts in Social Security, probably in the form of an increase in the retirement age. This is a direct cut in benefits, targeted in an especially nasty way at minorities and all others who work harder, earn less (PDF), and live shorter lives (PDF) after retirement than, say, college professors or senators.
The cochairman of that commission, former GOP senator Alan Simpson of Wyoming, has made his views clear. In an August email (PDF)Â to the head of OWL (née the Older Women’s League), he called Social Security “a milk cow with 310 million tits.” He wants you to think of Social Security as welfare, not something you’ve earned—a boondoggle, rather than a program that puts money into the economy every day.
The fact is, even if you were never an autoworker, were never in a union, never owned a house, even if you’ve never been sick and never got anything else from the New Deal – whoever you are, Social Security and Medicare help you right now. They support your business: Spending by old folks is part of the income of small and large companies everywhere, an effective and stable support for the economy. Social Security provides survivors’ benefits that raise children in your schools. It will keep your parents off your back. And when you do get older, Social Security and Medicare will protect you, and they will protect your children from bankrupting themselves over you. That is, if these programs are protected, now, from their assailants.
What’s odd is that while Galbraith ably describes the threat facing Social Security and Medicare, he writes as if the decision Congress is about to make is totally out of voters’ hands. His closing paragraph reads:
The House has agreed to vote on the Bowles-Simpson package – whatever it eventually contains – if it passes in the Senate. So it will come down to the Senate. Will the Democrats hold the line? Or will they give in to this assault on the last bastion of the American middle class?
This notion – of distant deliberative bodies passing down decisions from on high, or more broadly of powerful and inescapable forces shaping our lives – is woven throughout Galbraith’s column.
I don’t bring up Social Security much around my friends, probably because it’s not exactly the most riveting topic, but mainly because I know most of us in our twenties haven’t given our retirement much thought. In fact, when I finally did bring it up, it soon became clear that 1) almost nobody knew the basics, and 2) just about everybody thought Social Security wasn’t going to be around when they got older.
This might all be solved if we ever bothered to educate ourselves beyond what we “think” we know about one of the country’s oldest and most successful programs. Try to remember why you first thought Social Security wasn’t going to make it by the time you retire. Then do yourself a favor and find out for yourself. If you, did you might find out that Social Security is not in crisis, that the Social Security Administration already planned for the baby boomer retirees in 1983, or that Social Security’s long-run shortfall is small and easily manageable with reform. In a nutshell: an easy fix.
Reality: There is no Social Security crisis. By 2023, Social Security will have a $4.3 trillion surplus (yes, trillion with a ‘T’). It can pay out all scheduled benefits for the next quarter-century with no changes whatsoever. After 2037, it’ll still be able to pay out 75% of scheduled benefits–and again, that’s without any changes. The program started preparing for the Baby Boomers retirement decades ago. Anyone who insists Social Security is broke probably wants to break it themselves.
Myth 2: We have to raise the retirement age because people are living longer.
Reality: This is a red-herring to trick you into agreeing to benefit cuts. Retirees are living about the same amount of time as they were in the 1930s. The reason average life expectancy is higher is mostly because many fewer people die as children than did 70 years ago. What’s more, what gains there have been are distributed very unevenly–since 1972, life expectancy increased by 6.5 years for workers in the top half of the income brackets, but by less than 2 years for those in the bottom half. But those intent on cutting Social Security love this argument because raising the retirement age is the same as an across-the-board benefit cut.
Myth 3: Benefit cuts are the only way to fix Social Security.
Reality: Social Security doesn’t need to be fixed. But if we want to strengthen it, here’s a better way: Make the rich pay their fair share. If the very rich paid taxes on all of their income, Social Security would be sustainable for decades to come. Right now, high earners only pay Social Security taxes on the first $106,000 of their income. But conservatives insist benefit cuts are the only way because they want to protect the super-rich from paying their fair share.
Myth 4: The Social Security Trust Fund has been raided and is full of IOUs
Reality: Not even close to true. The Social Security Trust Fund isn’t full of IOUs, it’s full of U.S. Treasury Bonds. And those bonds are backed by the full faith and credit of the United States. The reason Social Security holds only treasury bonds is the same reason many Americans do: The federal government has never missed a single interest payment on its debts. President Bush wanted to put Social Security funds in the stock market–which would have been disastrous–but luckily, he failed. So the trillions of dollars in the Social Security Trust Fund, which are separate from the regular budget, are as safe as can be.
Myth 5: Social Security adds to the deficit
Reality: It’s not just wrong — it’s impossible! By law, Social Security funds are separate from the budget, and it must pay its own way. That means that Social Security can’t add one penny to the deficit.