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Letter to Gov. Rick Perry on Social Security Comments Print
Written by Dean Baker   
Monday, 29 August 2011 14:45

The Honorable Rick Perry
Office of the Governor
State Insurance Building
1100 San Jacinto
Austin, TX 78711-2428

Dear Governor Perry,

When asked about Social Security during a recent campaign stop in Iowa, you said:

"It is a Ponzi scheme for these young people. The idea that they're working and paying into Social Security today, that the current program is going to be there for them, is a lie," Perry said. "It is a monstrous lie on this generation, and we can't do that to them."

With all due respect, this is not true. The recommendations of the National Commission on Social Security Reform in 1983 led to the growth of a large surplus in Social Security. This surplus was used to buy bonds and now Social Security holds more than $2.6 trillion in government bonds. As a result, the Congressional Budget Office’s projections show that the program will maintain full solvency through the year 2038.

Even if Congress never makes any changes to the program, Social Security will be able to pay slightly more than 80 percent of scheduled benefits from then on. This means, for example, that if your children — currently 28 and 25, respectively — were to retire at age 67 and do as well as you have in their working careers, they would receive $38,145 and $39,410 (in 2011 dollars) each, every year, for the rest of their lives. It is clearly inaccurate to say that this program will not exist for young people.

With Social Security sure to be a topic of debate over the course of your campaign, 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 the program, I would be happy to assist you.

 
Letter to Sen. Rubio on Social Security Projections Print
Written by Dean Baker   
Thursday, 25 August 2011 14:40
The Honorable Marco Rubio
317 Hart Senate Office Building
Washington, DC 20510

Dear Senator Rubio:

During a recent speech at the Reagan Library, you took issue with several aspects of the Social Security program. With all due respect, many of your assumptions about the program are incorrect and fortunately there is little cause for concern.

For instance, you mentioned the fact that your mother has paid into the Social Security system and it would be difficult to tell her that she was being kicked off the program. However, you then say of your generation

"...that if we want there to be a Social Security and a Medicare when we retire, and if we want America as we know it to continue when we retire, then we must accept and begin to make changes to those programs now, for us."

Protecting the benefits of people currently receiving Social Security benefits is commendable. However, the assertion that Social Security will not be there by the time you are eligible for it is simply wrong.

The Congressional Budget Office's projections show that the program will be able to pay full benefits through the year 2038. If the projections prove accurate, and Congress never makes any changes to the program, then Social Security is projected to be able to pay slightly more than 80 percent of scheduled benefits in subsequent years. This means that you would be able to anticipate a benefit of $40,645 in 2038 and at least $32,516 in subsequent years (both in today's dollars). In other words, the projections show that you can expect to get a substantial benefit from Social Security as long as you live.

You also implied that the ratio of workers to beneficiaries has drastically shifted from a 16-to-1 ratio when the program began to a 2-to-1 ratio in the near future. In actuality, 50 years ago, there were just five workers for every retiree. In this same 50-year span, the tax rate for Social Security has more than doubled, from 3.0 percent for the employer and employee in 1960 to 6.2 for each at present. As well, the tax base has risen considerably from $4,800 in 1961 ($30,0,000 in today's dollars) to $106,800 in 2011.

As discussion of the budget and the future of Social Security continues, I hope that you will be able to present the situation more accurately in future public statements. If you would like any additional background on the program, I would be happy to assist you.

The Honorable Marco Rubio

317 Hart Senate Office Building

Washington, DC 2051

 

Dear Senator Rubio;

 

During a recent speech at the Reagan Library, you took issue wither several aspects of the Social Security program. Fortunately, many of your assumptions about the program are incorrect and there is little cause for concern.

 

For instance, you mentioned the fact that your mother has paid into the Social Security system and it would be difficult to tell her that she was being kicked off the program. However, you then say of your generation

 

“…that if we want there to be a Social Security and a Medicare when we retire, and if we want America as we know it to continue when we retire, then we must accept and begin to make changes to those programs now, for us.”

 

Protecting the benefits of people currently in these programs is commendable. However, the assertion that Social Security will not be there by the time you are eligible for it is simply wrong.

 

The Congressional Budget Office’s projections show that the program would face a shortfall beginning in 2039. If the projections prove accurate, and Congress never makes any changes to the program, then Social Security is projected to be able to pay almost 80 percent of scheduled benefits in subsequent years. This means that you would be able to anticipate a benefit of $40,645 in 2038 and at least $30,484 in subsequent years (both in today’s dollars). In other words, the projections show that you can expect to get a substantial benefit from Social Security as long as you live.

 

You also implied that the ratio of workers to beneficiaries has drastically shifted from a 16 to 1 ratio when the program began to a 2 to 1 ratio in the near future. In actuality, fifty years ago, there were actually just 5 workers for every retiree. In this same 50-year span, the tax rate for social security has more than doubled, from 3.0 percent for the employer and employee in 1960 to 6.2 for each at present. As well, the tax base has risen considerably from $4,800 in 1961 (`$30,000 in today’s dollars?) to $106,800 in 2010.

 

As discussion of the budget and the future of Social Security continues, I hope that you will be careful to present the situation more accurately in future public statements. If you would like any additional background on the program, I would be happy to assist you.
 
Letter to Representative Lou Barletta on Social Security Print
Written by Dean Baker   
Wednesday, 24 August 2011 11:51

The Honorable Lou Barletta
510 Cannon House Office Building
United States House of Representatives
Washington, DC 20515

Dear Representative Barletta:

In response to your constituents, you recently explained your position on the budgeting process. In the course of your explanation, you make the commendable and seldom heard point that the strength of Social Security depends on a strong economy and the amount of money paid into it.

However, when describing your beliefs about the national deficit, you mention Social Security as a “driver of the debt.” I would like to point out that under the law, Social Security can only spend money that came from its designated tax or the interest on the bonds held by its trust fund. It has no legal authority to spend one dime beyond this sum. In that sense it cannot contribute to budget deficits or the national debt.

As a freshman member of the House of Representatives who has made budgetary concerns a top priority, I hope you and your staff will have the opportunity to further review the design and finances of Social Security. If you would like any additional background on the program in the future, I would be happy to assist you.

Sincerely,
Dean Baker

 
Washington Post Continues Assault on Social Security, Facts Print
Written by CEPR   
Tuesday, 23 August 2011 14:30
The Washington Post increased its attacks on Social Security over the weekend. One article stated how Social Security's disability program is "pushing the financially strapped system toward the brink of insolvency," while an op-ed by Eric Cantor blamed lack of economic growth on "unsustainable entitlement commitments." Over at Beat the Press, Dean Baker picked apart each piece. In a recent column, Dean asked "Why Is President Obama So Anxious to Cut Social Security?" We're starting to wonder the same thing about the Post.
 
Letter to Mitt Romney on Social Security Comments Print
Written by Dean Baker   
Thursday, 11 August 2011 15:25

Governor Mitt Romney
Mitt Romney for President
585 Commercial St
Boston, MA 02109

Dear Governor Romney:

While campaigning at the Iowa State Fair, you were asked by a member of the crowd if you support raising the cap on payroll taxes, so that the rich pay more into the system. You responded by saying "…When it comes to Social Security, Medicare, and Medicaid, the truth is that we need to make sure we can keep the promises we're making to 20 and 30 year olds. You may say we should just raise everyone's taxes. Do you know what the tax rate would have to be if we wanted to keep the promises we made? Right now those programs take a payroll tax out of earnings of 15.3 percent. That would have to rise to 44 percent. We're not going to do that."

Actually, according to the Congressional Budget Office, there is no need for an increase in Social Security taxes through 2038, a full 17 years after the last date you could possibly be in the White House. In 2050, when today's 20 and 30 year olds will be in or near retirement, the combined Social Security and Medicare tax rate would be 17.3; in 2085, the tax rate would be 22.5 percent, assuming that no changes are ever made in these programs and their costs follow the trustees' projections.

Neither of these rates approaches the 44 percent you mentioned at the State Fair. The necessary tax rate would be even less if the Social Security tax cap was set at 90 percent of wage income as suggested by the Greenspan Commission in 1983.

As a candidate for President of the United States whose decisions could have a tremendous impact on vital programs like Social Security and Medicare, I hope that you will be careful to present the facts more carefully in the future. If you would like any additional background on the program, I would be happy to assist you.

Best Regards,

Dean Baker


Dean Baker
Co-Director
Center for Economic and Policy Research

 
New York Times, NPR Go After Social Security ... Again Print
Written by CEPR   
Thursday, 11 August 2011 14:15
Now that the debt-ceiling debate is over, it's apparently time to focus on how much politicians should cut from Social Security, Medicare and Medicaid - at least that's what the New York Times and NPR would like us to believe. In a piece on Obama and the budget, the New York Times featured the opinion of a former senior adviser to Sen. McCain who wants to cut Social Security but (as Dean Baker pointed out in Beat the Press) not a single economist who will tell you the real problem with the economy: a lack of demand. NPR was a little more sneaky, explaining that the debt is actually $211 trillion, not $14 trillion! And it's Social Security, Medicare and Medicaid's fault! Before you panic, Dean debunks the methodology here
 
Letter to Senator Kerry on Social Security Comments Print
Written by Dean Baker   
Wednesday, 10 August 2011 12:25
The Honorable John Kerry
218 Russell Senate Office Building
United States Senate
Washington, DC 20510

Dear Senator Kerry:

In a recent interview you said that our nation's problem is one of "long-term debt." You described this debt as "...the structural debt of Social Security, Medicare and Medicaid measured against the demographics of our nation. That then juxtaposed to the lack of jobs and job creation and growth."

In reality, this is not the case. Social Security does not contribute to the debt in either the short-term or long-term. Under the law, Social Security can only spend money that was raised through the designated Social Security tax or from interest on the bonds purchased with this money. The latest projections from the Congressional Budget Office show that the program can pay full benefits through the year 2038 and slightly more than 80 percent of scheduled benefits in subsequent years.

However, this projected gap can only be made up by additional funding approved by Congress. If there are no legislated changes and this projection proves accurate, then less than the full benefit will be paid, and therefore Social Security will not be contributing to the deficit even in the years after it is first projected to face a shortfall.

While it is true that the lack of jobs and jobs creation is significantly impeding the growth of our economy, Social Security is not. And as the discussion over Social Security continues in Congress, 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 the program, I would be happy to assist you.

 
Letter to Senator McConnell on Social Security Reform Comments Print
Written by Dean Baker   
Tuesday, 09 August 2011 15:30
The Honorable Mitch McConnell
317 Russell Senate Office Building
United States Senate
Washington, DC 20510

Dear Senator McConnell:

A recent article noted that you called for significant entitlement reform. You went on to say of Social Security that, "We have to adjust the trajectory of these very significant entitlement programs, or they're not going to be there at all."

With all due respect, this is not true. The recommendations of the National Commission on Social Security Reform in 1983 led to the growth of a large surplus in Social Security. This surplus was used to buy bonds and now Social Security holds more than $2.6 trillion in government bonds. As a result, the Congressional Budget Office projects that the program will maintain full solvency through the year 2038.

Even if Congress never makes any changes to the program, Social Security will be able to slightly more than 80 percent of scheduled benefits from then on. There is little to debate about this. A program that is fully solvent for a quarter century and then is more than 80 percent funded in subsequent decades hardly seems like a major problem that needs to be addressed in an economy with 9.1 percent unemployment. Furthermore, it is clearly inaccurate to say that it "not going to be there at all."

As the discussion over Social Security continues, 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 the program, I would be happy to assist you.

 
Let's Play the Unnamed Sources Game! Print
Written by CEPR   
Wednesday, 03 August 2011 15:30
The Washington Post wrote in a recent story about the debt deal that "critics in China and elsewhere" have "complained that the last-minute agreement will not tackle the dangers that national health and retirement programs pose to the government’s long-term fiscal health." Dean Baker over at Beat the Press asks the important question: Who are these critics? And to that we add: Where exactly is "elsewhere"? Middle Earth? Tatooine? Well, we can play this game, too. Critics in Washington, D.C., and elsewhere disagree, stating Social Security does not now nor will it in the future contribute to the deficit.
 
Response from Representative Brooks to Dean's Letter Print
Written by CEPR   
Wednesday, 03 August 2011 14:15

"Congressman Brooks has stated that he knows of no Republican plans to reduce Social Security benefits people are getting right now. Proposals for changing the inflation measure for COLA’s could possibly reduce future increases in benefits.  We understand that many may consider this a “reduction” in benefits rather than “not increasing”. Either way, since it is a change in current policy, the point made by Mr. Baker is well-taken.  Congressman Brooks will consider this carefully as plans are made to move the country toward a more sound financial footing.  He stands by his fundamental position of doing whatever is necessary to protect the dependent, retired population.  Most importantly, this means preventing the government from going bankrupt.

The sad fact is, the latest budgeting agreement passed in Congress in conjunction with raising the debt ceiling is totally inadequate and keeps America solidly on the path to bankruptcy.  The plan cuts a mere $22 Billion in 2012 from a $1500 Billion dollar deficit .  If we go bankrupt, everything we care about is at risk.  Doubling everyone’s income taxes would not eliminate the deficit.  Removing the "Bush tax cuts for the wealthy" would raise only $80 Billion/year.  Both these results assume no impact on economic growth.  No, we can't tax our way out of this problem.  Congressman Brooks knows we have to grow our way out of this problem as well as cut unnecessary spending.  He will work to remove the roadblocks that prevent our people, the private sector, from creating the wealth we need to support our social programs."

Mark R. Pettitt, P.E. , Chief of Staff, Office of Congressman Mo Brooks

Read the original letter here.

 
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