Tag Archives: deficit

Learn the facts about Social Security by attending this event in Tacoma featuring economist Dean Baker

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event-AD-Dean---fullsize-smallLong-time opponents of Social Security spun wild yarns about the debt and deficit this summer, and during the run-up to the so-called “fiscal cliff”. Ignoring ten years of war and tax cuts for the wealthy (both purchased on the national credit card), as well as a pandemic of Wall Street greed that nearly sunk the American economy, they pointed their finger at America’s last stronghold of economic safety: Social Security.

Now, one well-known economist has had enough – and he’s visiting Washington state to talk about how to defend and improve Social Security for future generations.

Please join us at a forum to hear economist Dean Baker talk about the challenges and opportunities facing our Social Security system, on February 20 from 5:30 – 7:00 PM at the University of Washington-Tacoma’s Philip Hall, at 1918 Pacific Avenue.

This event is free and open to the public.

Dean Baker, Co-Director of the Center for Economic and Policy Research in Washington, D.C. will explain that Social Security is on sound financial footing, and show how a few tweaks can keep it strong for future generations. He refutes the misguided notions that the benefits workers have earned should be used to pay down the debt or finance ongoing tax cuts for the wealthy – or that the retirement age should be raised any further. Instead, Dean makes a strong case for increasing benefits, especially given the uncertainty most Americans are facing in retirement.

Marilyn Watkins, Policy Director at the Economic Opportunity Institute, will also be a featured speaker. Contact us for more information.

Rep. Schakowsky: Keep Social Security Out of Deficit Discussion

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Via Social Security Media Watch Project:

By Caroline Dobuzinskis

Illinois House Representative and member of President Barack Obama’s Fiscal Commission Jan Schakowsky has long been an advocate of Social Security and its importance to Americans. On a press call on Monday hosted by the Center for Law and Social Policy (CLASP), she emphasized the increasing importance of the program to retirees who are facing a downward economy.

“With the dissolution of private pension plans, Social Security has been even more important for retirement benefit plans,” Rep. Schakowsky told reporters on the call. “Right now we don’t want to cut the benefits or lower the [retirement] age.”

In March, Rep. Schakowsky came to the defense of Social Security after Virginia Rep. Eric Cantor commented on NPR that “these programs [for seniors] cannot exist if we want America to be what we want America to be.”

On Monday’s call, Rep. Schawkowsky also focused on her proposed Fairness in Taxation Act that would enact new tax brackets for very high income earners—starting at salaries of $1 million—raising the caps on their taxes.  She pointed out that Social Security should not be a part of any deficit-reduction strategy. Continue reading →

Social Security is not responsible for federal deficits

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From Ten Reasons Not to Cut Social Security Benefits:

Federal budget deficits currently are unusually high, but Social Security bears no responsibility for today’s shortfalls. Keep in mind that the federal government was experiencing budget surpluses at the end of the 1990s, but those quickly were transformed into deficits early in the 2000s because of large tax cuts and increased governmental spending on the wars in Iraq and Afghanistan, as well as homeland security.

The nation’s fiscal situation worsened when the recent economic downturn caused federal revenues to collapse along with taxable incomes and profits, greatly widening budget deficits. Because Social Security continued to collect hundreds of billions of dollars more from payroll taxes than it spent on benefits throughout the decade, however, the program actually reduced overall federal budget deficits far below what they otherwise would have been.

As the graph above shows, the dominant cause of the projected long-term debt problem is not Social Security, nor short-term deficit spending to aid economic recovery, but rather the expectation that health care costs will continue to rise much more rapidly than overall inflation. Projections show that combined Medicare and Medicaid outlays for the federal government will double, from about 5 percent of gross domestic product (GDP) today to about 10 percent by 2030.

Social Security’s expected growth is expected to be far more modest, and much more manageable, gradually rising from the same 5 percent of GDP today to about 6 percent by 2030, as the Baby Boom generation retires.

Throughout that period, the revenues dedicated to the program from payroll taxes and commitments from its large and growing trust funds will be more than sufficient to pay benefits in full until around 2037. At that point, if nothing is done, benefits would have to decline by about a fifth. But even if the Trust Fund is exhausted in 2037, payroll taxes alone at the current level would cover benefits averaging $19,300 ‐‐ about $1,600 more than today’s typical retiree receives (after inflation).

Good: No mention of Social Security cuts in SOTU. Better: Let’s improve benefits for all.

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Yesterday, the Huffington Post, Washington Post and others reported a bit of good news that was confirmed by Senators Patty Murray and Maria Cantwell to members of Social Security Works – Washington: President Obama will not endorse raising the retirement age or cutting Social Security benefits in his State of the Union Address.

Your calls, letters and emails played a large part in the President’s decision. Thank you.

However, our work is far from over. It is clear that by even considering proposals to cut Social Security, President Obama is ignoring the simple fact that per federal law, Social Security does not contribute to the deficit. The President is also ignoring any easy fix for the smallest of problems: any projected shortfall in the Social Security Trust Fund (25 years from now) would disappear by simply removing the cap on taxable earnings (currently set at $106,800).

In other words, if everyone were contributing their fair share to Social Security, we could make it stronger for the generations to come by improving benefits for working parents, students, low-income workers, and many others. Bob Herbert, writing for the New York Times, put it well:

Mugging the nation’s grandparents by depriving them of some of their modest, hard-earned Social Security retirement benefits is hardly an answer to the nation’s ills. And, believe me, those benefits are modest. The average benefit is just $14,000 a year, which is less than the minimum wage would pay. With employer-provided pensions going the way of the typewriter and pay telephones, the income from Social Security is becoming more precious by the day.

Read more of Bob Herbert’s column here: Raising False Alarms »

Why raising the Social Security retirement age means millions of Americans will never see a check

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Rep. Paul Ryan (R-WI)

Few Americans pay into Social Security thinking they won’t live to see some benefit from it when they retire – but if Rep. Paul Ryan (R-WI) has his way, that would actually be the case for millions of people.

American workers pay 6.2% of their paycheck into Social Security (well, 4.2% until the recent payroll tax reduction expires in a year). In return they are guaranteed a modicum of economic dignity in retirement, assistance if they become disabled, and peace of mind knowing their children and spouse will be taken care of if they die unexpectedly.

But Rep. Ryan’s proposal to raise the retirement age to at- or near-life expectancy levels for millions of Americans would mean many people would never see a check:

When you crunch the numbers, the conclusions are stark. The average life expectancy of an African-American in the United States is 67 years. And that’s for all African-Americans, regardless of social class. The average life expectancy of an African-American unskilled manual laborer would undoubtedly be even lower — certainly low enough that a retirement age as high as 70 would discriminate profoundly.

And it gets worse. Although life-span expectancies for all groups have been growing for the last century, the gains have been much stronger for the wealthier classes over the last few decades. Just as income inequality has grown, so has life-span inequality. A study published by the Congressional Budget Office in 2008 found that “there is a growing disparity in life expectancy between individuals with high and low income and between those with more and less education.”

Read full article at Salon.com

Wonder why deficit hawks in DC are trying to cut Social Security? So do we.

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Lately there’s been a lot of talk about ‘austerity measures’ to manage the deficit in Washington D.C., but not much in the way of specifics. Perhaps attracting the most attention was President Obama’s Fiscal Commission, which proposed benefit cuts and increases in the retirement age. Many elected officials have been reluctant to comment on these plans — with some notable exceptions in defense of Social Security and Medicare — but those supportive of the cuts have been light on specifics and heavy on talking points.

Their reluctance to elaborate comes as no surprise. Polls show that the vast majority of Americans (across both age and partisan lines) don’t want the budget balanced on the backs of the middle class, seniors, and disabled workers. Still, some of our elected officials still don’t seem to get it.

So we’ve done them a favor, gathering up all of the polling data we could find around Social Security. As a bonus, we’ve also included some data allowing them to find out how many of their constituents utilize Social Security for retiree, survivors, or disability benefits.  Continue reading →

President Obama’s Payroll Tax Holiday Could Unravel Social Security

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Via Social Security Works

President Obama has proposed a 2% payroll tax holiday on employees only. Currently, employees pay a 6.2% FICA tax on wages up to $106,800. The Administration’s proposal would exist for one-year and is estimated to cost $120 billion. The revenue Social Security would lose from the payroll tax cut would be paid back from general revenues by the U.S. Treasury. Here’s why this temporary move puts Social Security in danger:

It’s easy to enact tax cuts – it’s very hard to end them.

A 2% payroll tax cut significantly reduces people’s tax burden.  Restoring the tax a year from now will result in a substantial tax increase, which Republicans will vehemently oppose – especially in the Senate where just 53 Senators voted to let the Bush tax cuts for millionaires expire – 7 short of the 60 needed.

Election-year politics will doom restoring the tax. A more conservative Senate and a Republican House of Representatives in 2011 will resist such a massive tax increase on virtually every worker in the country, especially leading up to an election.

Undermines Social Security’s long-range solvency.

  • A 2% payroll tax cut, if unfunded from general revenue, doubles the 75-year projected shortfall projected by the actuaries in the 2010 Trustees Report.
  • Deficit hawks will resist raiding the Treasury to pay for the tax cut after the first year; resulting in a huge revenue drain to Social Security.

Keeping the payroll tax cut in place but not paying Social Security back will lead to massive benefits cuts, even as the population rapidly ages.

  • Making up for the $120 billion of lost annual revenue plus eliminating the already existing long-term shortfall will require deep cuts in benefits for the middle class and erode its support.

The weakening of middle-class support will unravel the program in the future.

  • President Franklin Roosevelt understood this, when he designed Social Security:

“We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program. Those taxes aren’t a matter of economics, they’re straight politics.”

A payroll tax holiday will promote privatization of Social Security. Once people are used to having the 2% cut in their own pockets, they will be more susceptible to arguments that they should be able to put the funds into a private account where they can control it.  Two percent of the payroll tax diverted to private accounts is the amount Rep. Paul Ryan has proposed be diverted in his A Roadmap for America’s Future, which proposes to privatize Social Security.

There are much better ways to provide stimulus to the economy. They would do less harm than a payroll tax holiday, as described in this analysis by the Center on Budget and Policy Priorities.