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Home Publications Blogs Beat the Press Washington Post Strikes Out in Attack on Joe Biden's Courage on Social Security

Washington Post Strikes Out in Attack on Joe Biden's Courage on Social Security

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Friday, 17 August 2012 17:54

The Washington Post once again confounded its critics who insisted that it couldn't get any worse. Yesterday the paper ran an editorial that criticized Vice President Joe Biden for his lack of courage when he committed the administration to a policy of not cutting Social Security. Biden repeatedly told an audience in Southern Virginia that he guaranteed there would be no cuts to Social Security in a second Obama administration.

The paper then laid out its case for cuts to the program and outlined its plan:

"Tweak the inflation calculator and moderately raise the income limit for applying the payroll tax, and you can shore up Social Security with no harm to the safety net."

Did you catch the cuts in that sentence? If not, that is what "tweak the inflation adjustment" means. It means reducing the size of the benefit by 0.3 percent annually. This cut accumulates over time to roughly 3 percent after 10 years, 6 percent after 20 years, and for those who collect benefits long enough, 9 percent after 30 years. Certainly many people might think that a 9 percent cut in benefits for 10 percent of retirees who rely solely on Social Security for their income, or the 30 percent of retirees who rely on it for more than 90 percent of their income, does some harm to the safety net.

The great part of this story is that in an editorial condemning Biden's lack of courage on Social Security, the Post used a euphemism for cuts that probably eluded most readers. After all, cutting benefits for retirees by 0.3 percent a year doesn't sound very nice, tweaking the inflation adjustment is much friendlier.

Only in the Washington Post.  

Comments (19)Add Comment
The best part
written by Paul, August 17, 2012 7:57
They explain how easy it is to solve any future funding issues.
A Tweak Here and a Tweak There ... Pretty Soon We're Talking Real Sledgehammers
written by Last Mover, August 17, 2012 8:12
After all Romney was just yelling into a microphone somewhere that he would make no changes in Medicare and leave it as is, apparently terrified of how the media has locked onto the plans of his VP Ryan to destroy it.

So where's the media tweak fix story on that one rather than a sledgehammer?
Romney and Ryan's proposal
written by AndrewDover, August 17, 2012 8:13


Mitt's proposal from his web site:

" Mitt Romney has laid out the approach he would take to modernizing America’s entitlement programs, guaranteeing their continued vitality for future generations. Mitt’s proposals will not raise taxes and will not affect today’s seniors or those nearing retirement. He proposes that Social Security should be adjusted in a couple of commonsense ways that will put it on the path of solvency and ensure that it is preserved for future generations.

•First, for future generations of seniors, Mitt believes that the retirement age should be slowly increased to account for increases in longevity.

•Second, for future generations of seniors, Mitt believes that benefits should continue to grow but that the growth rate should be lower for those with higher incomes."

_________________________

On the other hand, Paul Ryan(2010) had this proposal which raises taxes,


This plan would modify the basic benefit provisions of Social Security by

(1) Altering the primary insurance amount (PIA) benefit formula with progressive price indexing,

(2) Providing a low-earner benefit enhancement for workers with long careers at low earnings levels, and

(3) Indexing the normal retirement age (NRA) for increases in life expectancy.


The plan would modify the basic revenue provisions of Social Security by

(1) Applying the OASDI payroll tax to the total premium cost of employer sponsored health insurance,

(2) Providing for special General Revenue transfers as needed to assure trust fund solvency, and

(3) Providing for special transfers to the General Fund of the Treasury that would offset any prior General Revenue transfers as long as trust fund solvency is maintained.

2 The plan would establish voluntary, progressive individual accounts by

1) Starting in 2012, allowing workers who are under age 55 on January 1, 2011 (those born in 1956 or later) to have a portion of their payroll taxes transferred to a personal savings account (PSA),

2) Reducing basic Social Security retired worker benefits of individual account participants and any Social Security aged survivor or aged spouse benefits paid as auxiliary benefits of individual account participants, with the reduction reflecting the degree of participation over their entire career.

3) Investing individual workers’ PSA assets through a central administrative authority operated by the Personal Social Security Savings Board (PSSSB), with a default lifecycle fund that is expected to be about equivalent to a lifetime portfolio allocation of 65 percent in broad indexed equity funds and 35 percent in corporate bonds, and

4) Providing that each worker participating in the PSA would be guaranteed that the account balance, as of the month prior to the month that the annuity begins, would be at least as large as the participant’s total contributions accumulated with increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).


Estimated Financial Effects of Title IV of "The Roadmap for America's Future Act of 2010"—legislation introduced as Title IV of H.R. 4529 (111th Congress) on January 27, 2010 by Representative Paul Ryan (PDF version)
http://www.ssa.gov/OACT/solven...00427.pdf
No Cuts?
written by TK421, August 17, 2012 10:30
"President Obama particularly believes that Democrats do not receive enough credit for their willingness to accept cuts in Medicare and Social Security"

http://www.nytimes.com/2012/08/08/us/politics/obama-is-an-avid-reader-and-critic-of-news-media-coverage.html?_r=1

No cuts to Social Security? We'll see about that.
...
written by Kat, August 18, 2012 8:07
Courage? This was a campaign stop.
Who's Wrong?
written by Jeff, August 18, 2012 9:45
The post above is just wrong. Changing the inflation adjustment cuts nothing. It slows the rate of increase. Also, the idea that it amounts to 0.3% per year is also wrong. In the last three years, the difference would have been zero. That's right, no difference. It only kicks in when there is high inflation, something that is not really on the horizon at the moment.
Jeff is Who's Wrong
written by coberly, August 18, 2012 11:03
Jeff,

you are the kind of man the Republican Party is looking for. They want people willing to work for wages that don't "increase" with inflation. After all that wouldn't be the same as having your wages cut, would it?

Meanwhile what you and others can't seem to get is that THERE IS NO REASON FOR ANY CHANGE WHATSOEVER. Workers can continue to pay for their own Social Security as they always have, under the present rules, and they will STILL GET A PENSION LARGER IN VALUE THAN RETIREES GET TODAY.

Of course they'd be smarter to pay a little more... about one tenth of one percent per year... in order to keep up with the rising standard of living and their own longer life expectancy.

But no, somehow the idiots have convinced themselves that living longer is a horrible tragedy if they have to pay for it.

One tenth of one percent is eighty cents per week. While wages are going up over eight dollars per week... in real value.

But hey, why bother to understand this stuff when it's so much more fun to have opinions that you can make up yourself.
complexities
written by coberly, August 18, 2012 11:19
There are some complexities in the "no change at all" idea that are hard to untangle in a short comment and really don't change the point, but just so you know i know:

"no change" would result in a "necessary" cut in benefits of about 25% in about 2033 or so [or a sudden increase in the "tax" of about 2% on the worker and on the boss]. the cut benefit would still have a real value higher than today's, but would be a lower replacement rate (that's why it's a cut) compared to the workers (former) wages, which will have grown about 60% in real value by the... according to the same trustees report we are assuming here.

at that point workers could either accept the cut or accept the increase in tax.... they really wouldn't notice the tax increase, however much they howled... because even after a 2% cut,they'd still be taking home a lot more "real" money than workers do today.

the point is that the basic reason for the "shortfall" is that those workers will be living longer than past workers. there is no reason on god's green earth that workers should not pay for their own longer retirement. they will want the retirement without waiting until they are too old to enjoy it. they will have enough money to pay for it without even noticing the difference in their paychecks. and they won't want to depend on the kindness of the rich to pay for their retirements. and of course the rich won't pay for it anyway without finding some way to make the poor suffer for it... lower benefits, means testing, higher retirement age.

a higher cost of retirement is no different than a higher cost of groceries. it's just part of the cost of living.

but they've got you talking like its a goddam tragedy and running around in circles looking for a magic way to avoid it. for chrissake stop and think. harder.
getting there from here
written by coberly, August 18, 2012 11:28
The "sudden" tax increase or benefit cut in 2033 or so would result in some consternation. It would be better to do the tax increases a little at a time, starting now... or no later than about 2018. By starting now, because of the interest effect the ultimate tax increase would be put off until about 2060.

You could say the same about cutting benefits gradually, starting now... "to give people time to adjust." But this is bulls.. People aren't going to be able to "adjust." The benefit is already about as low as survival permits... that's to keep the tax rate down. And even if that benefit rises in "real" value as outlined above, it is not going to be any too generous... certainly not keep up with the jones's rising standard of living... so it's better to raise the tax... gradually... starting now or soon. But if you are going to cut benefits at least be honest about it, and don't call it "tweaking the inflation calculator."
Or the obfuscation (some would call it "damned lies") of the Romey and Ryan "plans."
In Time
written by Jeffrey Stewart, August 18, 2012 11:41
Did VP Biden mean there would be no SS cuts during the four years of a second Obama administration leaving open the possibility that SS cuts will be legislated, but only take place after they leave office? Or did he mean SS cuts are off the table in a so-called Grand Bargain?

There's no better sure fire electoral winner than explicitly and forthrightly declaring that Democrats will protect Social Security, Medicare and Medicaid from any cuts whatsoever now and in the future.

It's measure of how far through the looking glass we are that wealthy politicians and well remunerated capitalist, corporate journalists with no cares about retirement income and medical security are called "courageous" when advocating cuts to social programs helping the poor, elderly and working class have a decent life. That's not courage. That's bullying. Bullies pick on society's weakest, most vulnerable members in the name of "serious fiscal responsibility."
Jeffery Stewart.. not the other Jeff
written by coberly, August 18, 2012 12:25
Jeff

yes, it's also a measure of how far we have come that we can't trust our President to speak honestly. Not sure we ever could, but it seems to be the rule now that we have to look out for the "gotcha" in everything they say.

The answer I think... vain hope... is for the PEOPLE to TELL the President what to do.

Tell him that "yes, i would like to try having my payroll tax raised one tenth of one percent per year for a while and see how that works out." It should work out very well, but if for some reason I can't see that it doesn't, we could always stop doing it and try something else. There is NO reason we have to "fix" Social Security "over the infinite horizon." We CAN keep kicking the can down the road. That's called life. You do what makes sense today. You don't commit yourself to some "perfect solution" that will make life wonderful in the next century and then stick to it no matter how hard it makes life now.

Or, if I may try another metaphor.. it's the difference between driving to Chicago, using the steering wheel as appropriate, and just point the car toward Chicago, shutting your eyes, and gunning it.

But you have to tell the politicians... "hey, it's my social security, it's my retirement. i am willing to pay for it myself. it will only raise my payroll taxes about eighty cents per week each year for a few years."

but you have to tell them loud and in public so they know you know and everyone knows.
the 'tweek' is worse
written by Thomas D, August 18, 2012 12:26
Cuts compound. The .3 percent tweek doesn't become 3 percent in ten years. It's compounded so the cut is larger than that. No?
compound interest
written by coberly, August 18, 2012 2:09
Thomas D

true, but not enough to make a difference. the point really is not the size of the cut, it's the dishonest way of achieving it.

one of the "strategies" of the bad guys is to trap the good guys into endless arguments about points that don't matter.

the essential facts are : Social Security has NOTHING to do with "the deficit" and never will. Social Security is not going broke, and never will. Social Security is not welfare. It's a way for ordinary workers to put part of their savings into a program that protects it from inflation and market losses, while insuring them against various kinds of bad luck that can happen even to smart people.

The workers can keep paying for their own Social Security as they always have. They might need to raise their own tax a tiny bit from time to time to reflect the costs of living longer. Or they might need to adjust the amount they pay in the tax to adjust the ratio between what they need "now" and what they will need "later." This might turn out to be important if the economy does as badly as some say it will.

If the economy does that badly, private markets will not do any better than Social Security.. probably worse, because the losses will not be spread "equally."

Try to focus: it is just your own money you put aside for your own old age. The government does not "pay for it." All the government does is provide a plan... called pay as you go with wage indexing... that protects it from inflation.

There is nothing stopping you from investing the rest of your savings on the market if you think that is a good idea. The Ryans talk as if they are giving you a great opportunity by "allowing" you to invest on the market. No. They are taking away your insurance so you can gamble ALL of your savings on the market. That might work out great for you. Or it might work out very very very bad. The difference between "more than enough" and "not enough" can be the difference between life and death... or at least grinding poverty.

Also, if you are healthy and happy with your job when you are sixty five, there is nothing in SS that forces you to retire. You can work as long as you like. You won't lose anything. But if you hate your job, or are sick (but not dying), or just want to do something else with your life than work for the boss, SS allows you to retire... after all, you paid for it.
ten years after ...
written by David, August 18, 2012 2:29
A 0.3% cut per year amounts to a 3.96% cut, let's call it 4%. So somebody raking in $20,000 this year, would get $19,200 ($67 less per month), in inflation adjusted dollars. Due to rising health care and prescription costs, we know those $67 will be sorely missed.
David and compound interest
written by coberly, August 18, 2012 3:05
David

I don't check your arithmetic and I don't understand your point.
compound interest and other interesting things
written by coberly, August 18, 2012 4:47
i think the "cut" ends up less than 3% after twenty years, assuming exactly .3% cut each year. because each year the .3% applies to a smaller number than the starting number.

but as i said above, it isn't enough different to make a difference. the roughly 9% cut over 30 years could be a killer. but more than that is the dishonest way of reaching it by calling it a "tweak," a "more accurate" measure of inflation. it's a cut.

there is no reason the taxpayers would care about a "more accurate" measure... even if there was such a thing. what they need to care about is how big will their benefits be compared to their needs in retirement. and how much will it cost them "now" compared to their needs now.

the answer is still that a one or two or even four percent rise in the payroll tax will be almost impossible to feel. while a ten or twenty percent cut in benefits will be staggering. the difference arises because first, of the denominator, and second, because of how much you have left.

a tax increase of 2% say, on a 4000 dollar a month income, leaves you with 3,920 dollars... and yes, you will spend some of that on "taxes." But you would have anyway. While a 10% cut in a 1000 dollar pension leaves you trying to live on 900 dollars a month.

the way a 2% tax increase saves you from a 10% cut is because with "2 workers" for each retiree (or each worker working for twice as many years as he expects to be retired... it's the same thing) that 2% or 80 dollars, becomes 160 dollars a month, and that's 10% of a 1600 dollar a month pension. or 16% of a 1000 dollar pension which is all too likely what you would actually end up with when your "average" wage and contribution are calculated.
Dean's numbers are right (duh)
written by wkj, August 19, 2012 6:10
Open an Excel worksheet.

For the 10 year calculation type

=.997^10

Hit Enter & you get 0.970401777

For the 20 year calculation type:

=.997^20

Hit Enter & you get 0.941679609


For the 30 year calculation type:

=.997^30

Hit Enter & you get 0.913807566
Deans numbers are right.
written by coberly, August 19, 2012 9:45
wiki

yes, that's what i got. but it's not awfully clear that you understood my point. i was not arguing with dean, but responding to david, and arguing that the tiny difference didn't make a difference. moreover it's in the "wrong" direction.

and it's the difference between 3% and (1 - 0.97040177) that doesn't make a difference. NOT the difference between CPI as we know it and the "new more accurate CPI" they are trying to sell us.

i'm saying all this because the ability to punch keys on a calculator doesn't always mean a person know what he is doing.
good information
written by filz, August 20, 2012 5:57
good information

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Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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