How Do You Know The Good Guys From The Bad Guys In DC? Social Security Is The Key

When I was in elementary school in Brooklyn I was one of the only ones in my neighborhood who used to take the subway-- most of which was elevated-- in to "The City." Parents worried "The City" would turn you into… whatever they feared most. But they would warn the neighborhood kids that they went on the subway, they might be killed by the third rail. Wikipedia defines the third rail as "a method of providing electric power to a railway train, through a semi-continuous rigid conductor placed alongside or between the rails of a railway track. It is used typically in a mass transit or rapid transit system, which has alignments in its own corridors, fully or almost fully segregated from the outside environment… The electrified rail threatens electrocution of anyone wandering or falling onto the tracks… There is also a risk of pedestrians walking onto the tracks at level crossings. In the US, a 1992 Supreme Court of Illinois decision affirmed a $1.5 million verdict against the Chicago Transit Authority for failing to stop an intoxicated person from walking onto the tracks at a level crossing and attempting to urinate on the third rail. The Paris Metro has graphic warning signs pointing out the dangers of urinating on third rails, precautions which Chicago did not have." Wikipedia also defines the third rail of politics:

The third rail of a nation's politics is a metaphor for any issue so controversial that it is "charged" and "untouchable"; any politician or public official who dares to broach the subject will invariably suffer politically. The term is most commonly used in North America. The "third rail of American politics" is often said to be cutting Social Security; the "third rail" of Canadian politics is said to be health care.

It wasn't difficult for me as a school boy to avoid the third rail on the D Train and pissing on a third rail never crossed my mind. I certainly hope American politicians never succeed in circumventing the third rail rule in regard to Social Security, as Obama, Boehner, Republicans and the corrupt Wall Street-owned New Dems are trying to do with Chained CPI.

The last time the GOP made a full-on, no-holds-bared effort to repeal Social Security, was in 1936 when Alf Landon was their presidential nominee and he campaigned as strongly against Social Security00 backed by his entire party-- as the GOP is campaigning against the Affordable Care Act today. They're too scared to come out against Social Security again unless corporate Democrats give them cover. Obama wants to. It's part of the reason why I refused to vote for him last year. In 1936, by the way, Landon lost his own state of Kansas and every other state save 2. He lost the electoral college 523-8. Republicans also suffered commensurate setbacks in Ciongress. They began 1937 with only 16 senators and 88 House Members. I suspect that still smarts even… nearly 80 years later.

Over the weekend, the editorial board of the Washington Post went all out for the anti-Social Security Grand Bargain. The wealthy Post editors worry that "Obama faces rising pressure from the left flank of his party to defend entitlement programs tooth and nail. That pressure comes although such programs represent the lion’s share of federal expenditure growth in the coming decades." And that's not all the wealthy Post editors are fretting over!

In recent days, those styling themselves “bold progressives” have been rallying support for a bill sponsored by Sen. Tom Harkin (Iowa) and Rep. Linda Sanchez (Calif.), both Democrats, that would increase Social Security benefits. Supporters tout it as courageous pushback against austerity; in fact, it’s a case study in how not to redefine liberalism for the 21st century.

The Harkin-Sanchez proposal would change Social Security benefit formulas to produce an average increase of $60 per month, plus a more generous annual inflation adjustment, than the program uses now. It also would extend the life of the notional trust fund from which benefits are drawn by 16 years. To pay for this, the bill would subject all wage and salary income to the 12.4 percent Social Security payroll tax, as opposed to only drawing from income up to $113,700 as is presently done. For someone earning $200,000 per year, this would mean a tax increase of more than $4,000 per year. For someone earning $1 million, the tax increase would be $58,700.

It’s a massive transfer of income from upper-income Americans to the retired. A tax increase is not, in itself, objectionable. Revenue is necessary to pay the costs of an aging society, and it should be raised progressively. With respect to Social Security specifically, the percentage of wage and salary earnings subject to the tax has shrunk in recent years, and there’s an argument for correcting that.

Yet even the rich have finite resources; government can only go to that well so many times. Why spend this gob of revenue on the elderly, who are already heavily protected by the federal government? The bill’s authors warn of a looming “retirement crisis” because of low savings rates and disappearing private-sector pensions. In fact, the poverty rate among the elderly is 9.1 percent, lower than the national rate of 15 percent-- and much lower than the 21.8 percent rate among children.

This suggests that Social Security is doing a good job of fighting poverty as is and that those gains could be preserved in any attempt to trim the program. But if anyone has a claim on a greater share of federal resources, it would seem to be the young-- and especially the poor young. Unchecked entitlement spending for the elderly crowds out spending on programs that might help them, as well as defense, research, infrastructure and law enforcement.

The fiscal predicament facing the U.S. government is a double one: how to bring taxes and spending into rough long-term balance while ending the squeeze on non-entitlement spending enshrined in current law. It’s not an easy task. It won’t get any easier if progressives define progressivism as opposition to budgetary realism.

Fighting back against this way of thinking is what we expect-- or at least used to expect-- from Democrats. But not from the Clintons and not from Obama. With careers almost entirely financed by Wall Street, they've been the best thing that's ever happened for those who would wreck, incrementally, Social Security. And it's why Bernie Sanders (I-VT) is talking about running for president in 2016, presumably against shills Hillary and whatever monstrosity the GOP pukes up for the occasion.

It is essential, he said, to have someone in the 2016 presidential campaign who is willing to take on Wall Street, address the “collapse” of the middle class, tackle the spread of poverty and fiercely oppose cuts to Social Security and Medicare.

Also, addressing global warming needs to be a top priority, not an afterthought, Sanders said.

“Under normal times, it’s fine, you have a moderate Democrat running, a moderate Republican running,” Sanders said. “These are not normal times. The United States right now is in the middle of a severe crisis and you have to call it what it is.”

…In the last week, the name of Sen. Elizabeth Warren, D-Mass., has been floated by some progressive Democrats as an ideal prospect to seek the party’s nomination against the expected candidacy of former Secretary of State Hillary Rodham Clinton.

Sanders said he would be comfortable with a Warren presidential bid.

“I like Elizabeth Warren very much,” he said. “Her beauty is that she is very smart. She speaks English. She can explain economics in a way that everybody can understand.”

Our political elites really should be divided in two camps-- those looking to chip away at Social Security and keep pushing the widening wealth gap to astronomical levels and those committed to strengthening Social Security and Medicare. It's relatively easy to define. Every Republican is on the bad side and so are almost half the Democrats, the New Dems, Blue Dogs and unaffiliated conservatives who avoid labels and try to fly under the radar as their serve their corporate masters. Cheri Bustos (D-IL), Raul Ruiz (D-CA), Nick Rahall (D-WV), Bill Enyart (D-IL), Tammy Duckworth (D-IL), and Ann Kirkpatrick (D-AZ) aren't fooling anyone who tracks congressional voting records. Social Security Works is working tirelessly to strengthen Social Security and fight back against the deprecations from Big Business, Wall Street banksters and the political hacks on both sides of the aisle who do their bidding.

The current Washington debate over Social Security in the context of deficit reduction has a discordant ring for the vast majority of Americans, according to multiple polls. Having paid into Social Security throughout their working lives, workers know it is an earned benefit, not a government giveaway. They recognize that its benefits are modest but vital. And they also know from their own experience that America is facing a formidable retirement security crisis in the coming decades. What would resonate with voters is acknowledging the retirement income crisis and presenting Social Security as the solution that it in fact is. This paper briefly sketches the scope of the crisis and explains why increasing Social Security is the solution.

The Center for Retirement Research at Boston College has estimated that, prior to the so-called Great Recession, 43% of households will not be able to maintain their standards of living during their retirement years. The percentage rises to 61% when the costs of health care and long-term care are taken into account. Since the Great Recession, that 43% figure has increased to 53%.

The Center also estimates that the country as a whole faces an aggregate “retirement income deficit”-- the gap between what we have saved through Social Security, employer pensions, 401(k)s, home equity, and other forms of saving and what we will need to maintain our standard of living in retirement-- of $6.6 trillion.4This deficit can be traced to four factors:

Employer-based solutions provide significant income to only a fraction of the elderly

In 2011, less than half (48.8%) of all private sector workers worked for an employer sponsoring a retirement plan, leaving 55.5 million workers without the option of even enrolling in one. Among the minority of households who had a 401(k) plan in 2010, the median household headed by a person aged 55-64 had a combined 401(k)/IRA balance of only $120,000-- enough to purchase an inflation-indexed lifetime annuity of less than $600/month.

Moreover, the distributional dynamics of these private sources of retirement income are extremely skewed towards the top quintile of the income spectrum. Even if we look at data from before the Great Recession, the average annual benefit (pension and 401[k] combined) for the highest income quintile (top 20%) was 150 times as large as that of the lowest quintile: those in the top quintile received about $16,000 per year, those in the lowest quintile about $100 per year. Three-fifths of retirees across the income spectrum received less than $142/month in employer-based pension benefits.

With stagnating wages, many working Americans have been unable to save for retirement or even more pressing needs

Meager personal savings outside of employer-sponsored retirement plans are another reason why a majority of working Americans risk being unable to maintain their standard of living in retirement. Since the 1970s, real wages of all but the top 1% of U.S. households have stagnated, even as more and more women have joined the workforce. From 1979 until the eve of the Great Recession in 2007, the top 1% received almost two-fifths of all gains in household income, while men in the bottom 60% saw their real wages decline. The Great Recession of 2008-09 and the high unemployment that has persisted ever since have further undermined workers’ savings and net worth, through lost wages for the unemployed, declining home values, and the need to cash out or borrow from 401(k) plans. Today, about half of all workers have personal savings of less than $10,000. For Americans as a whole, household wealth (from all sources) has dropped 12% since 2007, even after the rebound of 2010/11.

Home equity is no longer as reliable of a source of savings for retirement as it once was

Homeownership is becoming less common. The official homeownership rate is now 65.5%, down from a peak of 69.2% in the last quarter of 2004. When one excludes homes that are in foreclosure or delinquency, the homeownership rate drops to 62.1%, the lowest it’s been since 1965. Home values have sustained losses that will last well into the retirement of today’s middle-aged workers. Moreover, over the last 30 years homeownership rates for 25-to-34 year olds and 35-to-44 year olds have declined 9.6 and 9 percentage points, respectively. Hence independently of the Great Recession, home equity’s role in retirement security can be expected to decline in the coming decades.

Social Security benefits will have declined 25% by 2030

Social Security benefits are modest, averaging just $14,900/year for retirees. The 1983 reforms cut Social Security benefits significantly by raising the retirement age to 67 by 2027, delaying the cost of living adjustment by 6 months, and taxing up to half of benefits for upper-income beneficiaries. Benefit checks will continue to shrink in the decades to come as the retirement age increase takes full effect, and Medicare Part B and Part D premiums continue to rise. By 2030, the share of pre-retirement earnings that Social Security checks replace at age 65 will be 25% less than in 1983.

How can Congress best alleviate the retirement income crisis?

“Incentivizing” working longer is not a realistic solution for most workers

Some believe working longer is a solution to the retirement income crisis. But this overlooks several facts. Even with legal prohibitions on age discrimination, it is hard for older workers to find employment, once they lose jobs. Indeed, Social Security already incentivizes working longer, not only because its benefits are so modest but also because its benefit formula reduces benefits for early retirement and increases them by 8% for each year of work beyond the normal retirement age, up to age 70. Even with these strong incentives and protections, the majority of workers retire at age 62. Working longer is not an option for many older low and middle-income workers. Forty-five percent of workers aged 62-65 and 46% of workers aged 66- 69 work in physically demanding jobs or under difficult conditions-- for example, as janitors, home health care workers, or cooks. Workers in these jobs often have difficulty continuing to work into their late 60s. Furthermore, 20-30% of older workers have work-limiting health conditions, and 20% provide care to a family member. In short, most of those who can work longer already do. While encouraging and supporting work at older ages is sensible policy, “incentivizing” it by reducing Social Security’s already modest benefits is unlikely to achieve the desired result and would punish the many older Americans who are already struggling to juggle multiple challenges in their lives. For this reason, politicians who advocate raising the retirement age risk being perceived as out of touch by a large segment of the electorate.

Expanding 401(k) and IRA plans is not cost-effective

Using scarce taxpayer dollars to further subsidize the highly unequally distributed benefits of 401(k)s and IRAs is not an efficient approach to the problem. Wealthier households can afford to contribute more and hence will continue to receive the bulk of 401(k) and IRA tax subsidies. Most middle class and poor households will not be able to afford to contribute enough to render them secure in retirement.

Expanding Social Security is the best solution

Social Security is more efficient, fair, universal and secure than its private sector alternatives are or could be, however constructed. Administrative fees are less than 1%, vs. the up to 30% creamed off 401(k) plans in profit and fees. Workers cannot withdraw this money early or cash it out in a lump sum (which most workers do with 401[k]s) at age 65 and spend it, leaving them without a secure income in their later years. And workers bear no risk of their investment tanking just as they need to retire. It also provides protection against disability or premature death. The majority of Americans who will be retiring in the coming decades will have been treading water economically during much of their working lives, often struggling to pay off a mortgage (if fortunate enough to own a home), paying rising tuition costs for their children, paying off their own student loans, and paying down credit card debt accumulated in an attempt to maintain their tenuous standard of living. Voters expect politicians to acknowledge this crisis and propose solutions. The crisis can be addressed most effectively by expanding Social Security and addressing its projected shortfall, not by cutting benefits, which would only compound the crisis. There are numerous ways to pay for currently scheduled and increased benefits, without cutting anyone’s benefits and without imposing large additional costs on anyone.

The first step is to reframe the debate to focus on retirement crisis. Once that is done, Social Security’s obvious superiority is easy to demonstrate.

If you'd like to see Bernie run for president, you can let him know here. And if he doesn't run, that's money he can use for his 2018 Senate campaign.