Looting Social Security, Part 2

[one...two...tree 2,762]

By William Greider, The Nation

He's baaack--the Wall Street billionaire who wants to loot Social Security. This time, Pete Peterson has invented his own "news network" to promote his right-wing rants about shrinking the only retirement security system available to millions of working people. Peterson styles himself as a patriot saving the nation from fiscal insolvency and has committed $1 billion to that cause (a chunk of the wealth he accumulated at Blackstone Group, the notorious corporate-takeover firm). His efforts might be dismissed as ludicrous--except money does talk in Washington, and Peterson is now buying Washington reporters to spread his dire warnings.

The retired mogul has created a digital news agency he dubs "The Fiscal Times" and hired eight seasoned reporters to do the work there. "An impressive group of veteran journalists," Peterson calls them. I hope they have shaken a lot of money out of this rich geezer. Because I predict doing hack work for him will seriously soil their reputations for objectivity and independence. With his great wealth, Peterson could have also bought a newspaper to publish his dispatches, but he did better than that. He hooked up with the Washington Post, which has agreed to "jointly produce content focusing on the budget and fiscal issues." (This media scandal was first uncovered by economist Dean Baker.) The newspaper is thus compromising its own integrity. It's like buying political propaganda from a Washington lobbyist, then printing it in the news columns as if it was just another news story. Shame on the Post, my old newspaper. I predict a big stink like the one that greeted the Post when its publisher decided to hold pay-for-access "salons" for corporate biggies.

The first TFT "dispatch" to appear in the Post--"Support grows for tackling nation's debt"--made no mention of Peterson's crusade. But it featured the same devious gimmick the financier has been peddling around Washington. Congress should create a special commission of eighteen senators and representatives empowered to to make the "tough" budget decisions politicians are loathe to face--slashing benefits, raising payroll taxes or both. Other members of Congress would be prohibited from changing any of the particular measures, and would cast only an up-or-down vote on the entire package, no amendments allowed. Supposedly, this would give them political cover. Look, no hands. We just cut Social Security but it wasn't our fault.

This "reform" is profoundly antidemocratic because it would strip ordinary citizens of the only leverage they have in Washington--the ability to lean on their elected representatives and exact retribution if they get sold out. Peterson has two advocates in the Senate--Kent Conrad of South Dakota and Judd Gregg of New Hampshire--who are self-righteous fiscal hawks. The TFT story describes the rising federal deficits as a threat to the republic, yet fails to explain why deficits on rising. The billions have been devoted to bailing out major banks and Peterson's old chums in Wall Street or to turning around the failed economy or fighting two wars at once.

So why do the TFT reporters (Elaine Povich and Eric Pianin) zero in on old folks and Social Security or entitlements like Medicare and Medicaid? Because those are Pete Peterson's favorite targets. He has flogged Social Security as a blight on our future for at least twenty years. He is a nut on the subject. His "facts" are wildly distorted or simply not true. Never mind, the establishment press portrays him as a disinterested statesman.

This crusade is dangerous for the people because the "respectables" in governing circles and both parties embrace the same reactionary logic. Does government have money problems? Don't restore the progressive income tax on the wealthy or capital, don't cut away some of the corporate boodle in the federal budget--that politics is too difficult. Instead, let's whack Social Security while folks aren't watching.

The biggest lie in Peterson's story-telling is his refusal to acknowledge the looting aspect of what he proposes. Despite his inflamed rhetoric, Social Security is not broke--it has a huge surplus of around $3 trillion (trillion, not billion). With no changes at all, the trust fund will be solvent for at least another thirty years. In fact, workers retiring now have already paid for their Social Security benefits because they paid higher payroll taxes for the past twenty-five years. I might have a little respect for fiscal crazies like Peterson, Conrad and Gregg if I once heard them state these facts honestly instead of demonizing Social Security recipients.

Here is what really worries the fiscal hawks: as the Social Security trust fund built up the huge surpluses, the federal government borrowed the money and spent it. The time is approaching--maybe ten or twelve years from now--when the federal treasury will have to start paying back its debts to Social Security. The accumulated wealth does not belong to the US government, any more than the money it borrowed from China. The beneficial owners are all those working people who faithfully paid their FICA taxes for all those years. If Washington stiffs them now, it will be a bait-and-switch swindle larger than Wall Street's.

A year ago, the Obama White House was playing footsie with Peterson and intended to give him a starring role in its "fiscal responsibility summit." The Nation disrupted those plans. I wrote a fierce attack on the billionaire's looting scheme and the true fiscal history of Social Security. The sting that really hurt was The Nation's cover--an unfortunate photograph of Mr. Peterson in which he resembled a Mafia don. The White House abruptly downplayed its summit and dropped Peterson as keynote speaker.

But the assault on Society Security, we knew, would come back sooner or later because many of Obama's lieutenants are devoted to Peterson's fiscal logic. Budget director Peter Orszag once co-authored a "reform" plan that would raise the payroll tax on young workers and cut benefits for older people near retirement. Isn't that clever? Pinhead economists evidently think that workers won't notice. Now the billionaire is cranking up another fight. We should finger him again, big-time, and all those who willingly collaborate in his plot.

more...

[Danno 1,228]

That was funny first the writer reassures the reader that Social Security is well funded (in the trillions even) then is casually mentions "but congress spent it all".

But not to worrry, they promise to pay it back.. (about the time the free medical programs kick in)

Yeah right,

I'm sure the money to pay it back will be right on-hand.

And tell us again who exactly is the "looter" in this story?

[Dan J 277]

That was funny first the writer reassures the reader that Social Security is well funded (in the trillions even) then is casually mentions "but congress spent it all".

But not to worrry, they promise to pay it back.. (about the time the free medical programs kick in)

Yeah right,

I'm sure the money to pay it back will be right on-hand.

And tell us again who exactly is the "looter" in this story?

There is nothing wrong with the way social security works. But it does need a buffer for the times, like now, in which the retirement population is much larger than it was built for.

Of course, there is no incentive in government for long term planning. Or really any company for that matter

Edited January 5, 2010 by Dan + Gemvita

[Danno 1,228]

There is nothing wrong with the way social security works. But it does need a buffer for the times, like now, in which the retirement population is much larger than it was built for.

You better order a BIG BUFFER.

In 1940, benefits paid totaled $35 million.

These rose to $961 million in 1950,

$11.2 billion in 1960,

$31.9 billion in 1970,

$120.5 billion in 1980, and

$247.8 billion in 1990 (all figures in nominal dollars, not adjusted for inflation

, $492 billion of benefits were paid In 2004 to 47.5 million beneficiaries.

In 2009, nearly 51 million Americans will receive $650 billion in Social Security benefits.

It's now the largest Gvt. program in the world and growing at a healthy rate.

[Darnell 8,478]

Wesley Mouch, step on up.. Yer Next to Play at the Looters Emporium..

[SMR 368]

For every worker that makes $40,000/year, the government receives $4960/year. So, if you make $40,000/year every year from the time you are 21 until you turn 65 and invest the social security tax money each year in a 3% CD compounded annually, you will have $459,890 when you retire. If you reinvest that money every year at 3% interest, you would receive $13,796 without touching the principal. If you assume you'll live until you're 90, you can spend over $25,000/year.

I'm not saying that's enough to retire on, but it's certainly a lot more than social security will give you.

I realize this program can't be implemented right now because social security has to pay out benefits to those who are currently retired. In short, we're already stuck in a system that is unable to support itself and isn't obtaining the results that a simple bank account would.

I find it somewhat difficult to stomach the claim that social security is a generally sound system.

[one...two...tree 2,762]

For every worker that makes $40,000/year, the government receives $4960/year. So, if you make $40,000/year every year from the time you are 21 until you turn 65 and invest the social security tax money each year in a 3% CD compounded annually, you will have $459,890 when you retire. If you reinvest that money every year at 3% interest, you would receive $13,796 without touching the principal. If you assume you'll live until you're 90, you can spend over $25,000/year.

I'm not saying that's enough to retire on, but it's certainly a lot more than social security will give you.

I realize this program can't be implemented right now because social security has to pay out benefits to those who are currently retired. In short, we're already stuck in a system that is unable to support itself and isn't obtaining the results that a simple bank account would.

I find it somewhat difficult to stomach the claim that social security is a generally sound system.

Maybe this will help you to understand what Social Security is instead of thinking of it as a retirement plan...

Social Security in the United States currently refers to the federal Old-Age, Survivors, and Disability Insurance (OASDI) program.

The original Social Security Act^[1] (1935) and the current version of the Act, as amended^[2] encompass several social welfare and social insurance programs. The larger and better known programs are:

• Federal Old-Age, Survivors, and Disability Insurance
  
• Unemployment benefits
  
• Temporary Assistance for Needy Families
  
• Health Insurance for Aged and Disabled (Medicare)
  
• Grants to States for Medical Assistance Programs (Medicaid)
  
• State Children's Health Insurance Program (SCHIP)
  
• Supplemental Security Income (SSI)
  

• 
  

http://en.wikipedia.org/wiki/Social_Security_(United_States)

[alienlovechild 75]

I find it somewhat difficult to stomach the claim that social security is a generally sound system.

It's not. Most people getting benefits get all they paid into the system fairly quickly then they start sucking on the remaining (shrinking) pool of workers to keep the scam going.

[SMR 368]

Maybe this will help you to understand what Social Security is instead of thinking of it as a retirement plan...

• 
  

http://en.wikipedia.org/wiki/Social_Security_(United_States)

You should read a little farther into the article (if you want to accept wikipedia as a reliable source).

The Social Security Act, as it was originally conceived by FDR, was indeed much more far reaching than a retirement program. The basic meaning of the words "social security" is also much broader and can mean many things in different countries. However, in the US, the Social Security tax, (6.2% taken from your paycheck and an equal amount paid by the employer) essentially pays for a retirement fund and that's it.

In the cases of death, disability, or survivorship, Social Security payouts can come before a person retires. This is reasonable and would be provided for under a simple retirement bank account. If you die or become disabled, that money would be available to you and your family.

The other purposes that you attribute to social security that perhaps fit under the broad understanding of "social security" and were part of the original Social Security Act, aren't paid for by the social security tax.

--Read your pay stub and you'll see that Medicare is a separate tax all together.

--Unemployment benefits are chiefly paid for by a separate FUTA payroll tax.

(http://en.wikipedia.org/wiki/Unemployment_benefits#United_States)

--Medicaid is paid for from state budgets and federal funds (income taxes, etc.) (http://en.wikipedia.org/wiki/Medicaid#Budget)

--SSI is paid for from general treasury funds.

(http://en.wikipedia.org/wiki/Supplemental_Security_Income)

So, yes, "social security" isn't just a retirement plan. However, the social security payroll tax is just funding a retirement plan.

[one...two...tree 2,762]

So, yes, "social security" isn't just a retirement plan. However, the social security payroll tax is just funding a retirement plan.

So which payroll tax pays for those who become disabled or to your dependents should you die?

...and also, what kind of private investment will do all the things that SSI does with the same amount of investment?

Edited January 6, 2010 by Galt's gallstones

[SMR 368]

So which payroll tax pays for those who become disabled or to your dependents should you die?

...and also, what kind of private investment will do all the things that SSI does with the same amount of investment?

Read my post again. SSI comes from general treasury funds. It isn't paid for by the social security tax.

For a few hundred dollars a year, you can get term life and disability insurance for much more than the social security payout would ever be worth. Even if every worker spent a few hundred for insurance out of his retirement fund every year, the retirement fund total would dwarf the social security payouts.

But really, you are missing the point. Yes, a small portion of the social security tax is effectively a government run life and disability insurance policy. That accounts for a few hundred dollars a year for the average policy. If you feel America can't run without that, then tax everyone a couple hundred dollars a year. Let them invest the rest of the money for retirement in a way that will allow the money to bring a return.

[one...two...tree 2,762]

Read my post again. SSI comes from general treasury funds. It isn't paid for by the social security tax.

For a few hundred dollars a year, you can get term life and disability insurance for much more than the social security payout would ever be worth. Even if every worker spent a few hundred for insurance out of his retirement fund every year, the retirement fund total would dwarf the social security payouts.

But really, you are missing the point. Yes, a small portion of the social security tax is effectively a government run life and disability insurance policy. That accounts for a few hundred dollars a year for the average policy. If you feel America can't run without that, then tax everyone a couple hundred dollars a year. Let them invest the rest of the money for retirement in a way that will allow the money to bring a return.

SS was created to deal with large portions of aging Americans who had little or no retirement of their own. Are you suggesting that back 60 some years ago, people had just been irresponsible about saving for their retirement?

We now have a large portion of Americans living at or below the poverty level. Tell me, how are these people suppose to save for retirement when they can barely get by as it is? I'm talking about the working poor.

In an ideal setting - we'd bring back unions for blue collar workers in this country, particularly in service sector jobs where they'd be able to negotiate for fairer wages as well as pension benefits, not to mention health insurance. But the Right Wingers don't like the unions. So we have a system where millions of working poor in this country who will have to rely on subsidies to sustain themselves. And I actually think that the wealthiest in this country would rather pay higher taxes for those subsidies rather than supporting wages that lift all boats.

Edited January 6, 2010 by Galt's gallstones

[SMR 368]

SS was created to deal with large portions of aging Americans who had little or no retirement of their own. Are you suggesting that back 60 some years ago, people had just been irresponsible about saving for their retirement?

We now have a large portion of Americans living at or below the poverty level. Tell me, how are these people suppose to save for retirement when they can barely get by as it is? I'm talking about the working poor.

In an ideal setting - we'd bring back unions for blue collar workers in this country, particularly in service sector jobs where they'd be able to negotiate for fairer wages as well as pension benefits, not to mention health insurance. But the Right Wingers don't like the unions. So we have a system where millions of working poor in this country who will have to rely on subsidies to sustain themselves. And I actually think that the wealthiest in this country would rather pay higher taxes for those subsidies rather than supporting wages that lift all boats.

Hmm, how are working poor supposed to save for retirement? Give them back the $5000 in SS taxes a median worker pays annually and let them invest it in retirement funds. If they take the money the government is taking from them to pay for their retirement and use it to pay for their retirement themselves, they will do better. Take home pay is the same. Retirement fund is larger. How is that bad for the working poor?

On top of this, SS is a regressive tax. I thought that was a bad thing.

[one...two...tree 2,762]

Hmm, how are working poor supposed to save for retirement? Give them back the $5000 in SS taxes a median worker pays annually and let them invest it in retirement funds. If they take the money the government is taking from them to pay for their retirement and use it to pay for their retirement themselves, they will do better. Take home pay is the same. Retirement fund is larger. How is that bad for the working poor?

On top of this, SS is a regressive tax. I thought that was a bad thing.

You're an engineer, right? The math is pretty straight forward. The poverty level for one person is just over $10,000. The minimum wage is $7.25/hr. Do you know how much a person who earns that much is paying per year? Here's a tax withholding calculator to help you see it for yourself:

http://www.wsu.edu/payroll/cgi-bin/withhold2009.cgi

What you seem to overlook is that median SSI withholdings means that people who are above poverty level paying into social security while those below pay little or nothing.

Show me a private investment that allows those who make less to contribute less while still being able to collect a minimum amount back for disability or at retirement age?

You see, this system is partly what the Right Wingers helped create. You push unions aside and blue collar workers have no negotiating tools for higher wages where they would actually be contributing more. And thanks to Bush and his big tax cut for the wealthy, the tax burden has now been shifted even more to the Middle Class. While FDR's intention wasn't too keep poor people down or dependent on government, but to provide a social safety net for those who fall through the cracks. Combine that with the weakening of the unions and tax policies of the Right, and you can see why we are the ONLY industrialized nation who has seen the income gap grow exponentially over the last 30 some years.

So it's kind of a bite in the ####### to the poor to now say to them, you can just go out and invest in your own retirement program. They're looking right back at you and asking you with what income.

Edited January 7, 2010 by Galt's gallstones

[mawilson 2,133]

What you seem to overlook is that median SSI withholdings means that people who are above poverty level paying into social security while those below pay little or nothing.

I'm not sure what you mean here, Steve.

SSI and Medicare withholdings are the same (percentage-wise), regardless of income.

I agree that some will probably collect more from SSI than they paid in, though they'd

have to be perpetually poor, surviving on less than $10k/year for 30-40 years.