fter AARP’s policy director, John Rother, told the Wall Street Journal on Friday that they were open to cutting Social Security benefits, AARP issued a clarification supposedly “denying” that this was true. Or at least that’s how most people interpreted it. “Oh, don’t worry, that was a gaffe. AARP has clarified for the record that it’s not true.”
A closer look at AARP’s damage control statement, entitled “AARP Has Not Changed Its Position on Social Security,” reveals it to be a non-denial.
AARP claims that their openness—read: support—for cuts to Social Security benefits is based on an understanding that tax increases alone will not close the program’s modest funding gap. But that’s just not true. If we made millionaires and billionaires contribute to Social Security on all of their earnings, rather than
The White House is considering adopting a temporary Social Security tax cut on employers to stimulate the economy as part of the debt ceiling negotiations with the Republicans, according to a Bloomberg News article.
If the Administration so much as puts another Social Security tax cut on the table, they will be throwing Social Security under the bus for uncertain—indeed, unlikely—economic gain.
It seems like déjà vu. Wasn’t it just last year that progressives had to talk themselves blue in the face explaining the harm that a temporary payroll tax cut would do?
In case you hadn’t heard, the Obama Administration already enacted a one-year 2 percent payroll tax cut on the employee side as part of the tax cut deal with Republicans in December 2010. The revenue that Social Security would have gotten from the missing 2 percent of taxable payroll is being replaced by a one-time transfer of $105.2 billion from the general fund. (Click here for more on how Social Security is funded.)
At the time, the payroll tax cut was criticized by progressives for endangering Social Security’s finances and undermining the program’s political underpinnings. A critique made by Nancy J. Altman, a nationally renowned Social Security expert and co-chair of the Strengthen Social Security Campaign, still offers the best explanation for why a payroll tax cut is disastrous. Her arguments remain just as true of a payroll tax cut for employers. Here it is in a nutshell (though Nancy’s full critique is a must-read):
- Gradually defunds Social Security.
The payroll tax cut will almost undoubtedly outlast its one-year expiration date. As the debate over the Bush tax cuts illustrates, taxes are easy to cut, but hard to restore, whatever the expectations are when enacted. Maintaining the reduced payroll tax rate would require the general fund to continue to transfer a growing amount of revenue to the Social Security Trust Fund amid mounting pressure to cut spending from the general budget. Social Security would have to compete with all other domestic spending programs for its share of a rapidly diminishing pie. The result would be both a real financial crisis for Social Security, and a crisis of public confidence in the program’s integrity.
Try as they might, conservatives cannot rescue Fiscal Commission Co-Chair Alan Simpson from self-marginalization. But while Simpson’s revealing gaffes remain a welcome political gift for opponents of Social Security and Medicare cuts, his staying power in elite policymaking circles only attests to the sad and distorted state of our
The Social Security trust fund will be in surplus again in 2011, and will be able to fund scheduled benefits until 2036, according the 2011 Social Security Trustees’ report, which was released today.
This week was chock full of GOP Senators ignoring or actively distorting the truth about Social Security. Senator Orrin Hatch (R-UT), ranking member on the Senate Finance Committee, made his own disingenuous contribution to the volumes of conservative misinformation about the program at a Committee hearing on Tuesday.
Welcome to the club, Senator Hatch. Last Friday, former Senator and Fiscal Commission Co-Chair Alan Simpson (R-WY) called Social Security a “Ponzi scheme” and wished away inconvenient facts about life expectancy. Ezra Klein and Jonathan Chait have already covered that issue top-to-bottom. But Hatch’s less colorful distortions have been absent from the media. In his opening statement at Tuesday’s hearing, “Perspectives on Deficit Reduction: Social Security,” Hatch parroted the frequently deployed–and frequently discredited–canard that the Social Security trust fund is “just a bunch of IOUs.”
For many years, the Social Security Trust Fund ran surpluses. Under the unified budget, those surpluses masked the size of the deficits the federal government was running. By law, the trust fund is made whole by the issuance of Treasury IOUs to the trust fund to reflect the surpluses and interest. In the late 1990s, under a Republican Congress and Democratic President, that trend reversed briefly, but returned back to normal under Congresses and Presidents of both parties. … To be sure, those IOUs sitting in the Parkersburg, West Virginia offices of the Treasury’s Bureau of Public Debt are claims against the federal government. They’ve got to be paid. How will they be paid if the trust fund comes to rely on them?
Hatch’s remarks are confusing. On the one hand, he concedes that the trust fund’s treasury bonds are “claims against the federal government” that have “got to be paid,” but then he refuses to call them United States Treasury bonds, opting instead for the belittling “Treasury IOUs” and “IOUs.” (A cursory look at the Social Security Administration web site clears up any doubt about the status of the trust fund bonds. “By law, income to the trust funds must be invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government.”)
If Hatch seriously only considers United States Treasury bonds “IOUs,” then he was casting aspersions on the full faith and credit of the United States government, and the ability of our government to honor any of its debts. He might as well have been speaking at a hearing on a trade agreement with China, referring to the bonds the United States owes its largest trading partner as IOUS. Somehow I think Hatch would be reluctant to say it in that context. The American business community would be none too pleased. No, it is more likely that Hatch was cynically using the term “IOUs” to undermine confidence that Social Security will “be there” for coming generations, and perpetuate the common misunderstanding that the trust fund have been “raided” by the government.
In uncertain times like these, there is a thrill to be had in the occasional moment of moral clarity. Osama bin Laden’s death on Sunday was one such moment. Let’s hope it marks the close of an era lived in the shadow of September 11th, and the start of a period devoted to the more complex, but equally patriotic task of solving our country’s stubborn domestic problems–even if it rarely evokes the same sense of national unity as hunting a Bin Laden.
September 11th is a buried memory for me. But the shocking news Sunday night brought it vaguely back to life. We were still looking for that guy? Has it really been ten years?
September 11, 2001 was my second day of ninth grade at the Ramaz School in Manhattan. I was in the throes of freshman jitters, still getting used to waking up at 6 am for my school bus commute from Teaneck, NJ. Shortly after getting to school that day, though, the principal announced the attack on the World Trade Center over the loudspeaker. My adolescent anxieties were immediately supplanted by more pressing fears. Were we safe? Were our parents safe?
Bad news awaited me at home in New Jersey. The parents of two elementary school friends were missing. It would take months to confirm their deaths. The mood in my house was somber and anxious.
My friends’ loved ones are still gone. Nothing can bring them back.
I like to think of Bin Laden’s death not as closure for their deaths, but as the closing of a chapter in the country’s history. For nearly a decade we have turned our vast resources outward, pursuing enemies the world over—some real, some imagined. Even as our nation grew more unequal, Wall Street speculation steadily engulfed the economy, and the health and standards of living for most of our nation’s citizens deteriorated, we drew a sense of unity and pride, for a while at least, from our commitment to “defeating the terrorists” who had perpetrated 9/11. We were still a great nation, it seemed, because we could take it to the bad guys, and make them pay for their crimes.
Wellhead 6336 by Richard Milnes, on Flickr
The President said most of the right things in his deficit reduction speech last week. But when it comes time to negotiate, will he make the bipartisan the enemy of the good? Sadly, if recent history is any indicator, the answer to that is yes.
• Superb refutation of Republican approach to deficit reduction
• Best articulation of a progressive vision for government yet in his presidency
• Plan to cut Medicare spending by reducing underlying health care costs
• Promise to end Bush tax cuts for top 2% (Maybe for real this time?!)
• Reiteration of commitment to not “slashing” Social Security benefits for future generations
• Implicitly endorsed scope of deficit problem as laid out by fear mongers
• Committed to bipartisan deficit reduction
• More or less held out Fiscal Commission as model for bipartisan reform
• Did not repudiate Bowles-Simpson recommendations on Social Security
On the one hand, it was Obama at his finest. He made things like reducing tax loopholes and health care costs sound as compellingly American as mom and apple pie.
And for once the President pushed back against the Republican ideology of “Smaller government is always better,” with his own progressive vision of government. He made an incredibly cogent case for both using government to foster industrial growth, and ensuring basic security for Americans who have become vulnerable to poverty. It was his most moving defense of the modern social welfare state to date. He did it by putting those programs–Medicare, Medicaid, Social Security, and Unemployment Insurance, etc.–in the context of an “American belief that we are all connected.”
Likewise, the President ended his silence on the House Republicans’ budget, using it as a chance to juxtapose his vision of America with that of the Republicans. He said the House Republicans’ “vision” for America is one that says we cannot afford to fix our roads if they crumble, or preserve Social Security and Medicare, but can afford $1 trillion in new tax cuts for the wealthiest Americans. In particular, he harped on the GOP plans for Medicare, which he said would end the program “as we know it.”
You could hear the Republican bones snapping as he spoke. Who could vote for those monsters? If he and the Democrats keep up this line of attack, they have nothing to worry about in the 2012 elections.
Some of the President’s other rhetoric was troubling though.
There was of course the fact that the President seemed to endorse the scope of the deficit problem as laid out by the extreme budget hawks. He implicitly surrendered to those who think this is a bigger priority than economic recovery, rather than an outgrowth of economic recovery. After all, the same impassioned defense of government could have come in the context of a speech pushing for more stimulus. But by now, with the deficit drumbeat in full force, I know any calls for more stimulus are politically unfeasible.
We should all thank the President for refusing to include Social Security cuts in his 2012 budget. But we should not take the President’s decision for granted. Apparently, the White House was prepared to include specific cuts in Social Security benefits in the 2012 budget just to bring Republicans to the table, but a groundswell of progressive opposition helped stop it in its tracks, the Wall Street Journal reported on Friday.
The lesson is clear: What we are doing is working. But we are still facing a real threat to Social Security, and a White House whose idea of negotiating is conceding in advance to Republican demands. We must temper our current praise for the president with vigilance for the future. Cuts are not yet dead; we need to keep up the pressure.
Cutting Social Security to Invest in Infrastructure Isn’t Investing at All: the Case for Social Insurance in the 21st Century
The question remains as to whether Democrats’ 21st century vision will accord an appropriate role for the social insurance programs and protections that helped make America great in the 20th, as the President would like, or follow the oft-repeated Beltway truism that we must “invest, even as we cut,” which is code for investing in infrastructure at the expense of our modest social safety net. Rather than view the President’s competitiveness framing as a threat, we progressives must seize it as an opportunity to elevate and expand our social insurance programs, as well as enforce our labor and trade laws. We have a very strong case to make that from both a substantive and a political perspective, America will achieve economic greatness because of a robust social safety net, rather than in spite of one.
Tom Friedman—and nearly every other Washington pundit obsessed with the idea of “cut and invest”—just does not get how basic social insurance actually makes our society stronger and wealthier. The case we progressives need to make emphatically is that Social Security, Medicare and Medicaid are more relevant to American competitiveness than ever. Compromising on them is compromising on innovation.
Key policy talking points:
• In global economy where flexibility is essential, Social Security’s basic guarantees enable workers, investors and entrepreneurs to take greater risks and be more mobile
• It also lightens the pressure on employers to provide pensions, potentially cutting their costs and improving competitiveness
• Social Security’s benefit formula makes it a “social safety trampoline”: by providing benefits in proportion to earnings, rather than reducing or eliminating them as earnings grow, it encourages work and productivity
Key politics talking points:
• The center-left push for infrastructure development is dependent on defeating antigovernment ideology and deficit mania, rather than co-opting it
• The center needs the labor and progressive movements’ organizing prowess and funding to make infrastructure investment a political possibility