The Truth About Social Security – A Problem of Inequality
Social insurance advocates remain dismayed by AARP’s decision to accept Social Security benefit cuts as part of a balanced solution to address the long-term funding gap, a decision they claim was not any different than their prior stances. AARP popped up yesterday to insist on their opposition to including Social Security as part of the debt limit deal, but their bombshell announcement had that practical effect. To quote Sen. Sheldon Whitehouse, who sat down with a small group of us at Netroots Nation to discuss Social Security, “As long as the dike holds, the water stays back, with not much pressure. But once there’s a hole in that dike, it comes rishing through, and there’s a lot of pressure.” This was the problem with what AARP did: it put more pressure on making an immediate deal, in an unfavorable political climate, on the most successful social insurance program in American history, “a core piece of the infrastructure of the American dream,” in the words of Sen. Whitehouse.
Pressure is countervailing, and Whitehouse said that even his colleagues who care deeply about the deficit and want to come to a solution on it, those who “needed some backbone,” stiffened once they heard from their constituents on the issue. “There are areas where the progressive perspective has strong popular support,” Whitehouse said. “It becomes energized when a message is delivered to make that latent support active.”
So public outcry can make a difference here, both with politicians and with AARP. The National Organization for Women even accused the retiree’s organization of implicit corruption in their statement, recalling the 2003 prescription drug benefit battle. NOW brings up Medicare Advantage, the privatization scheme that ultimately passed as part of that bill:
It’s deja vu all over again. In 2003, AARP, the giant lobbying organization for seniors, backed a change in Medicare that headed this health insurance program down a path toward privatization and increased costs for retirees. Why did they do this? To get fatter revenues for the insurance plans offered by AARP, a purportedly “non-profit” organization.
At the time, the National Organization for Women blasted AARP for supporting the Medicare change, pointing out that most women would lose if the government privatized coverage under for-profit, managed-care plans and that the new policy would mostly benefit higher-income seniors. We now know that, indeed, costs for health care under the private, for-profit plans have increased yearly — sometimes in the double-digits.
Now, according to a story in the Wall Street Journal, the organization is ready to accept cuts to Social Security benefits — just as budget negotiations reach a critical tipping point. John Rother, the organization’s policy chief, is quoted as saying: “The ship was sailing, I wanted to be at the wheel when that happens.” In other words, AARP cares more about positioning itself as an insider than supporting seniors. Since this story ran, AARP’s CEO has issued a non-denial denial; NOW was not impressed.
Whitehouse considered it very important to make Social Security a foundational issue. “You have to have some areas that are no-fly zones. You need to demonstrate that somehow, somewhere, we’re willing to stand and fight.” The Paul Ryan budget to end Medicare, to borrow a parallel, has really harmed the Republican brand and given Democrats an opportunity, but if they end up cutting Medicare in a debt limit deal, it would result in, says Whitehouse, “not only a defection of principle, a degradation of brand, but also an abandonment of our advantage.”
Whitehouse also expressed the need to wrap Social Security in a larger progressive story, about successful government action to solve a problem (in this case elderly poverty), about the need for community support, shared benefits, compassion for your fellow man.
I’d wrap it in one other story – the story of our economy. The long-term funding issues with Social Security are often described as a math problem. Mark Begich and Al Franken said to me at Netroots Nation that Social Security is “mathematical” in nature. Franken was speaking metaphorically. “Social Security is arithmetic, and Medicare is calculus. Social Security only has a few moving parts, and there are many ways to deal with it,” Franken said. He noted one, the fact that in the 1980s, the program’s funding mechanism, the payroll tax, captured 90% of compensation. These days, it only captures 82-83%. “If we subject it to 90%, we go a long way to fixing the program in the long run,” Franken said.
But what is the reason for that drop-off of the percentage covered by the payroll tax cap? The answer is rampant inequality. With more money being concentrated at the very top, and outside the current $106,000 a year cap limit, Social Security’s funding mechanism suffers. It leads to the same representatives of the rich and powerful, who built the system that led to massive wealth at the top, calling for cuts to Social Security benefits, which hit those vulnerable people at the bottom. This is all connected.
There are a variety of policies that encourage and foster mass inequality, which has a debilitating effect on a variety of levels. The financialization of the economy, for example, or the inability to stop runaway executive pay. 60% of the top 0.1% of income, who make on average $1.7 million a year, are executives, managers and supervisors of corporations. If you fix that outcome, if you build an economy based on shared prosperity, you would have no funding problem with Social Security, as wages rise for the broad middle. Heck, you could even afford to increase the benefit so it creates a living standard in retirement that we can all be proud of.
The rich and powerful have a choice: they can create fairer rules so everyone gets a shot at the American dream, or they can see tax rates inevitably rise on their income and their income alone. The third option is to continue down this path of an unequal, vicious, cruel society.