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Hey, Let's Fix Health Care Print
Written by CEPR   
Tuesday, 22 May 2012 15:15

Former White House adviser Ezekiel Emanuel offered in a recent New York Times column his bipartisan solution to Medicare, Medicaid and Social Security reform: Graduated eligibility for Social Security and Medicare, or linking "the age of eligibility to lifetime wealth." The idea, according to Emmanuel, is that "[t]he richer you are, the older you would have to be to be eligible for Social Security and Medicare."

As Dean Baker notes over at Beat the Press, there are two problems with this approach. First, the budget deficit is a health care problem, not a Social Security problem. Lumping Social Security in with Medicare and Medicaid certainly makes it look like a problem, but if you replace "Social Security" with "muffins," suddenly we are experiencing explosive growth with muffin costs.

Second, Emanuel's proposal states:

People in the bottom half of the lifetime earnings distribution would become eligible for normal retirement benefits at age 65 for Medicare and 66 for Social Security, just as they are today. But people in the next quarter of the lifetime earnings distribution would become eligible for the respective programs at 67 and 68, and those in the top quarter would become eligible at 70 and 71. All eligibility ages would increase over time, as they are scheduled to now.

Dean points out that "Emanuel's proposed cuts in these programs would hit people with average lifetime earnings of $40,000 and above."* Dean and Hye Jin Rho wrote a paper about means testing last year, which you can find here.

* See Social Security data on Average and Median Amounts of Net Compensation.

False Dilemmas in the Social Security Debate Print
Written by CEPR   
Friday, 18 May 2012 15:20

Matt Miller, in a recent Washington Post column, talks about the need for a third party to change the boundaries of debate in politics. OK, but let's read a little more. One of his reasons includes "reallocating public resources from outsized projected spending on programs serving seniors to big investments in the future." Miller writes:

If you think we should not guarantee the next generation of retirees a 30 percent real increase in initial Social Security benefits (as we do today) before we’ve first guaranteed that every child in America has access to high-quality pre-schools and great teachers (in part by recruiting top college students to careers in the classroom and paying them up to $150,000 a year), which party represents your voice?

But why is it one or the other? As Dean Baker writes on Beat the Press, "Since workers pay for their Social Security benefits with a designated tax, his sentence makes no more sense than saying we should not pay interest on the government bonds held by wealthy people like Peter Peterson before guaranteeing decent eduction for our kids. Those of us familiar with the projections know that there is no reason that we cannot do both."

Letter to Sen. Isakson: Social Security Is Not 'Going Broke' Print
Written by Dean Baker   
Thursday, 03 May 2012 11:45

The Honorable Johnny Isakson
131 Russell Senate Office Building
United States House of Representatives
Washington, DC 20515

Dear Senator Isakson:

In a recent appearance before the Fayette County, GA Chamber of Commerce, you said “…Social Security and Medicare are contracts with our government. They are contracts, not gifts. They should not be invalidated but they must be reformed. Social Security is going broke in 2034 and we have to fix it.”

While the program does face a shortfall in the 2030s, the reality is that Social Security benefit payments will not ‘go broke’ in 2034. While the Social Security trustees report shows that the program only be able to pay full scheduled benefits through the year 2033, at which point the trust fund would be depleted, there will still be an enormous amount of revenue coming into the system each year. (The projections of the Congressional Budget Office are more optimistic and show that Social Security will pay full benefits through 2038.) After that, even if Congress makes no changes to the program whatsoever, Social Security will still be able to pay over 75 percent of the full benefit. The payable benefit after the projected date of trust fund depletion will still be higher than the benefit received by retirees today, so the system would be far from broke. 

As you continue to discuss Social Security, I hope you and your staff will have the opportunity to further review the design and finances of the program. If you would like any additional background on this, I would be happy to assist you.

A Shortfall of Accurate Reporting on the Trustees Report Print
Written by CEPR   
Wednesday, 25 April 2012 15:30

Now that the latest Social Security Trustees Report is out, it's time to dig through the misinformation that passes as reporting. Thankfully Dean Baker already does this for us over at Beat the Press. Here are some highlights:

  • A Washington Post article on the report attributed Social Security's "bleak outlook" to "the ever-larger numbers of people in the baby boom generation entering retirement."  As Dean notes, this isn't a new development. The Greenspan Commission in 1983 knew they would be retiring, too. Has the Post already forgotten about our high unemployment rate, which has resulted in fewer contributions to the program?

  • CNN had a rather amusing article about the "burgeoning" costs of Medicare and Social Security, but right below the headline they posted a graph showing Social Security costs, measured as a share of GDP, as basically flat. Medicare spending, on the other hand, climbs well above Social Security. This is what Dean has been saying all along: The problem is our health care system.

  • In an interview on American Public Media's Marketplace, Olivia Mitchell, executive director of the Pension Research Council at the Wharton School, trotted out the old line about how the trust fund "has been spent." Dean explains why that's simply false.
Social Security Shortfall Revised to 2033 Print
Written by David Rosnick   
Monday, 23 April 2012 15:37

The Social Security Trustees' report released today finds the projected shortfall in the financing of Social Security over the 75-year planning period is 2.67 percent of taxable earnings, compared with 2.22 percent in last year's report. By far the largest factor in this change is the Trustees' assumptions regarding the current and future economy, which accounted for nearly half of the total change. In particular, the Trustees revised down their projections of average hours worked. Last year, the intermediate assumption was that average hours would not change over time, while this year they are assumed to fall 0.05 percent per year. Over the 75-year planning period, this implies an eventual fall in hours by about 4 percent. As a result, growth in average annual earnings was similarly revised downward.

For a more in-depth analysis, read our Social Security Byte.

Robert Samuelson Really Hates Social Security Print
Written by CEPR   
Wednesday, 11 April 2012 11:30

Seriously. Robert Samuelson really hates Social Security. Dean Baker already covered this on Beat the Press, but the amount of dishonesty in Samuelson's piece is mind-boggling. Paul Krugman and Jared Bernstein also picked up on it here and here. Samuelson pulls out every trick in the book to make Social Security look terrible, even the old "What would FDR think?" fallacy. Perhaps we should all send The Washington Post's Fact Checker, Glenn Kessler, links to Samuelson's column and the Beat the Press response with the note "Please read."

Esquire's War on Everyone Over 65 Print
Written by CEPR   
Tuesday, 03 April 2012 11:00

We don't make this stuff up. Esquire's recent article on "The War Against Youth" is shocking, but not for the reason you'd expect after reading that headline. It starts out with this statement: "The year Obama took office, older Americans made almost forty-seven times as much as the younger generation." As Dean Baker notes on Beat the Press, that would be wealth, not income. Wealth = total assets - liabilities. Or as Dean says:

This means that if we add up the home equity of the typical household over age 65, their 401(k) and all other savings, the value of their car and any other possessions they might have, it comes to just over $170,000. This is a bit more than the price of the median home.

If you used that wealth to pay off your mortgage, you would end up with very little leftover and dependent on Social Security benefits, which average a bit more than $1,200 a month. But Esquire has problems with that, too. According to the article, Social Security is a "boondoggle" that is "weighted heavily in favor of the older population." Esquire would also like us to think that Social Security benefits are going to "run out in 2036." Why? Maybe you remember the Esquire Commission to Balance the Federal Budget. Backed by the Committee for a Responsible Federal Budget, which includes Erskine Bowles and Pete Peterson on its board, it included recommendations like raising the retirement age to 70 and using the Chained Consumer Price Index for All Urban Consumers (CPI-U) to calculate cost-of-living adjustments. Dean Baker and David Rosnick have written about those very proposals here (and for more, check out our Social Security issues page). Spoiler alert: They're going to hurt people more than help.

Dean sums up the article pretty well:

"[It] is a shameful effort to transform the realities of class war, where the wealthy have been rigging the rules to secure themselves most of the gains from economic growth, into a generational issue. The combination of ignorance and dishonesty in this piece is truly extraordinary.


Letter to Paul Ryan: There was No Fiscal Commission Report Print
Written by Dean Baker   
Tuesday, 20 March 2012 13:09

The Honorable Paul Ryan
1233 Longworth House Office Building
Washington DC, 20515-4901

Dear Representative Ryan:

Your new budget plan repeatedly refers to the recommendations of the President’s Fiscal Commission, also known as the Bowles- Simpson Commission and officially as the National Commission on Fiscal Responsibility and Reform. This is surprising considering that as a member of the commission, you should be aware of the fact that there were no official recommendations from the commission.

As established by President Obama, the commission was created in February if 2010 under co-chairs Erskine Bowles and Alan Simpson and 16 other members. As you may recall, the commission was to issue a report on December 1, 2010. For this report to be adopted, 14 of the 18 members had to vote to approve it. The commission failed to produce a report that had the support of the necessary 14 members by its deadline. On December 3rd, it did take an informal poll of the 18 members on the report of the co-chairs, which received the support of 11 members (not including you). This meant that there was no official document agreed upon and adopted by the commission.

Just as a bill in the Senate needs at least 60 votes to get through a filibuster and most juries must reach unanimity to render a verdict, the rules establishing the National Commission on Fiscal Responsibility and Reform clearly specified that a commission report must get the support of 14 of the 18 commission members. The report of the co-chairs did not reach this target; therefore it is simply the report of the co-chairs, not the commission. I hope that you will clarify this point when discussing the report in the future and correct the wording in the on-line version of your budget plan.

Addressing the Problem of Retirement Income Print
Written by CEPR   
Monday, 19 March 2012 13:00
Bloomberg columnist Clive Crook wrote last week about the problem of retirees not having enough money to have a decent standard of living. But as Dean Baker noted over at Beat the Press, Crook's plan for Social Security going forward isn't exactly clear. Along with proposals for raising the retirement age and means-testing, he advocates a new, separate system of partial privatization. Even if it's not clear whether Crook wants to expand or privatize Social Security, at least he's talking about the issue of retirement income.
Looking Closely at Social Security's Projected Shortfall Print
Written by CEPR   
Friday, 24 February 2012 11:45
Fortune's Allan Sloan wrote in a recent column about Social Security's projected $300 billion shortfall and the need for reform. But as Dean Baker wrote on Beat the Press yesterday, there are technical issues with Sloan's analysis as well as one substantive issue: "[T]he first, second, and third priority of policymakers should be job creation." As we've said time and time again here at CEPR, the latest projections from the Congressional Budget Office (CBO) show that Social Security will be able to pay full benefits through the year 2038 and will be able to pay almost 80 percent of full benefits for decades afterwards. To quote Dean: "Relax."
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