A couple of well-heeled anchor-reporters for CNBC <http://www.latimes.com/topic/economy-business-finance/media-industry/cnbc-%28tv-network%29-ORCRP0000017186.topic>  -- the type of people who need never beg for lunch dates among Wall Street bankers -- Friday  batted around the supposed threat to the republic <http://cnb.cx/15OBrtL>  posed by hordes of seniors collecting Social Security benefits.

 

Unfortunately for them, their interviewee was Damon Silvers, policy director for the AFL-CIO <http://www.latimes.com/topic/career-workplace/unions/afl-cio-ORCIG0000037.topic>  and one the best informed and fiercest defenders of Social Security in Washington. If they listened, they learned something. The evidence is they didn't listen.

The segment began with Silvers explaining that 55% of Americans today fear they'll be economically insecure in retirement. "That's up from 33%  20 years ago," he says. Consequently, "the last thing we should do for our country is cut Medicare <http://www.latimes.com/topic/health/government-health-care/medicare-HEPRG00002.topic> , Medicaid and Social Security benefits." He explains that's why the AFL-CIO has told congressional Democrats that any of them who vote for reducing benefits will get no financial support from the American labor movement.

    

At that point anchorwoman Kelly Evans steps up to the plate.

"Nobody's saying that there's not a good rationale for having these programs in place," she says, charitably. "Of course people want to make sure that our citizens are taken care of. But that's almost not the point."

(It's not?) Evans proceeds to assail Silvers and the AFL-CIO for refusing to "negotiate" over seniors' well-being.

"We're not embarrassed about that whatsoever," he replies. "If you cut Social Security benefits or Medicare benefits to our seniors, to our most vulnerable people in the country, you are going to get no support on it."

Then anchorman Simon Hobbs breaks in to deliver what he thinks is the coup de grace, asking, "Are you as clear on the reality that if you don't cut entitlement benefits this country may well go bankrupt."

That's certainly one of the most baldly ignorant statements about the country's fiscal condition and the effect of the two big social insurance programs ever to be heard on CNBC (and that's a high bar), since (A) the U.S. can't go "bankrupt," and (B) the country has more than enough resources to pay for all its obligations to its seniors.

Silvers responds more politely than I would have.

"That's frankly not true," he says. "That's a lie put forward by billionaires who don't want to pay higher taxes."

 

(He might have mentioned, but didn't, Peter G. Peterson, the hedge fund billionaire <http://articles.latimes.com/2012/oct/02/business/la-fi-hiltzik-20121003>  whose network of Washington think tanks relentlessly pushes for "entitlement reform.")

"The only people who believe what you just said," he added,"are people who are worried that their very large incomes will be taxed."

Silvers is right about that: The promoters of the idea that the key to fiscal nirvana is to cut Social Security and Medicare benefits almost invariably are people whose wealth will protect them from having to rely on either program in their old age. That includes CNBC on-air talent like Evans and Hobbs, with or without their wardrobe allowances.

The truth is that without Social Security, more than 40% of elderly Americans would be living below the poverty line. Did that message sink in? Hobbs looked thunderstruck that anyone would dispute his threadbare and uninformed talking points about Social Security. So my Magic 8 Ball says, "Don't count on it."

Chained-CPI Supporters Believe

This Year's Tiny Social Security

Cost of Living Adjustment

(COLA) Is Too Generous

No one is getting rich from Social Security. Social Security beneficiaries have little flexibility in their household budgets. They paid into Social Security throughout their working lives, and have earned a COLA that should keep their benefits at pace with inflation.

 

Posted: 10/17/2013

By Nancy Altman and Eric Kingson

huffingtonpost.com

To ensure that Social Security benefits do not erode over time, they are adjusted every January.  Notwithstanding the annual adjustments, those benefits do not keep pace with inflation.  Shockingly, rather than make those adjustments more accurate, some politicians support making them more miserly, through a change, known as the "chained CPI" -- a cruel and deceptive benefit cut, hitting hardest the oldest of the old, the poorest, and those disabled at young ages, including our brave wounded warriors.  

The 2014 Social Security cost-of-living adjustment (COLA) is scheduled to be released soon by the Department of Labor, though the exact announcement date is uncertain because of the government shutdown. Although the precise COLA adjustment will depend on September's inflation numbers, it will reportedly only be about 1.5 percent.   This adjustment will be received by 57 million seniors, workers with disabilities, children who have lost parents and others.  This adjustment will also apply to Supplemental Security Income benefits, which provide income for the very poorest elderly and disabled, as well as to a variety of other benefits.  

The 2014 COLA, the fourth smallest inflation adjustment since automatic COLAs began in 1975, will be of little help to seniors, people with disabilities, and survivors. Most are already struggling to make ends meet. Medicare premiums, out-of-pocket health and long-term care expenses, housing, food, and other costs keep rising.  Those fortunate to have savings have seen those savings shrink, and sometimes disappear. The Great Recession, stagnating wages, job loss, unindexed employee pensions, declines in the value of homes and diminished returns from investments have taken a heavy toll on the old and are contributing to the retirement income crisis facing working Americans. Having their Social Security benefits gradually but inexorably lose value because they do not keep pace with inflation makes it even harder for those on fixed incomes to make ends meet.

Today's Social Security COLA understates inflation experienced by the elderly and people with disabilities. The Bureau of Labor Statistics produces another measure geared to specifically measure the living costs of seniors, called the CPI-E, or experimental Consumer Price Index for the Elderly. It tracks the cost of the basket of goods seniors actually consume, taking into account, among other things, the higher health care costs for seniors. It rises about 0.2 percentage points more per year on average than the current CPI, thereby better protecting beneficiaries against inflation.  The higher rate is largely because seniors -- and people with disabilities -- have, on average, higher medical costs, and those costs have been rising more rapidly than other goods and services.

No one is getting rich from Social Security.  Benefits are extremely modest, by virtually any standard.  But they are vitally important.  About two-thirds of seniors rely on Social Security <http://www.ssa.gov/policy/docs/statcomps/income_pop55/2010/sect09.html#table9.a1>  for half or more of their income. As a group, disabled beneficiaries rely on Social Security <http://www.ssa.gov/policy/docs/rsnotes/rsn2008-02.html>  for a majority of their family income. In short, Social Security beneficiaries have little flexibility in their household budgets. They paid into Social Security throughout their working lives, and have earned a COLA that should keep their benefits at pace with inflation.

Many in Congress seem to think that the Social Security benefits that our seniors and people with disabilities receive today -- under $15,000/year on average <http://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/>  -- are too high, and have made cutting them one of their primary goals in Washington's serial budget crises. But as a recent survey <http://www.nasi.org/research/2013/report-strengthening-social-security-what-do-americans-want>  from the National Academy of Social Insurance shows, the American people strongly disagree.  Seventy-one percent would prefer a package of changes that includes changing to the CPI-E to more accurately reflect the level of inflation experienced by seniors. We wholeheartedly agree, and with the 2014 elections only a year away, Congress would do well to heed their will.

Although many in Congress talk about the need to cut "entitlements" -- an insulting reference to Social Security and Medicare, both earned benefits -- they do not seem to have the courage of their convictions. They propose cutting the COLA through the so-called chained CPI, a technical, hard-to-understand change, rather than say straight-out that they want to pull $127 billion dollars <http://www.cbo.gov/sites/default/files/cbofiles/attachments/Government-wide_chained_CPI_estimate-2014_effective.pdf>  out of the pockets of their constituents over the next 10 years.  And even though most politicians have promised not to cut the benefits of persons aged 55 or older, many are fully prepared to break their word.  

Fortunately, a growing number of representatives and senators understand that the chained-CPI doesn't pass the "smell test."  They aren't sitting back and doing nothing.  

• One hundred and twenty five members of the House of Representatives signed onto the resolution sponsored by Representative David Cicilline (D-RI-1) opposing the chained CPI.  

• Senators Bernie Sanders (D-VT), Senator Elizabeth Warren (D-MA), Representative Keith Ellison (D-MN-5), Representative Raúl Grijalva (D-AZ-3), Representative Jan Schakowsky (D-IL-9) and others are outspoken champions of an honest COLA measure.

• Senator Tom Harkin (D-IA), Senator Mark Begich (D-AK), Representative Theodore Deutch (D-FL-21) and Representative Linda Sánchez (D-CA-38) are sponsors of bills that would base Social Security's COLAs on the more accurate CPI-E.   <http://www.socialsecurityworks.org/wp-content/uploads/2013/09/113thBillFactSheet_update.pdf>

It's high time Congress enacted the CPI-E for Social Security and other programs providing benefits to seniors and people with disabilities.  Instead though, too many politicians think that next year's COLA, just 1.5 percent, is too high.  Everyone who disagrees should find out the position of those running in 2014 -- and make sure that those who don't believe in Social Security are voted out of office.

Nancy Altman, author of The Battle for Social Security <http://www.thebattleforsocialsecurity.com/> , and Eric Kingson, Professor of Social Work at Syracuse University, are Founding Co-Directors of Social Security Work and Co-Chairs of the Strengthen Social Security Coalition . The authors both served as staff to the 1982 National Commission on Social Security Reform (a.k.a. "The Greenspan Commission").

The media's complicity

in cutting Social Security

and Medicare

US media outlets are disingenuously claiming that social programmes are putting Americans in debt.

   

Dean Baker

aljazeera.com

22 Sep 2013

Dean Baker is a US macroeconomist and co-founder of the Centre for Economic and Policy Research.

Most people in the United States have probably heard about the Wall Street efforts to cut Social Security and Medicare. There is a vast list of organisations such as Campaign to Fix the Debt, the Can Kicks Back, Third Way, and many more that have, as a central agenda item, cutting back or privatising Social Security and Medicare. When we hear one of these organisations tell us these programmes should be cut it is not a surprise.

The question is why do mainstream news outlets including the New York Times <http://www.nytimes.com/2013/09/18/us/congressional-budget-office-predicts-unsustainable-debt.html>  and Washington Post <http://www.washingtonpost.com/business/congressional-budget-office-study-warns-of-long-term-debt-woes-in-united-states/2013/09/17/e439caee-1fa1-11e3-9ad0-96244100e647_story.html>  use their news sections to tell the same stories? Last week, when the Congressional Budget Office (CBO) issued new long-range budget projections, both papers were quick to ignore the numbers and to tell readers that we have to cut Social Security and Medicare.

The reason why this coverage was so bizarre is that it is not news that Social Security and Medicare will cost more in the decades ahead. We actually have known about the rising cost of these programmes for about 50 years. The birth of a huge number of baby boomers in the years 1946 to 1964 pretty much guaranteed this outcome - barring a horrible war, famine or epidemic.

While the aging of the baby boomers may not have qualified as news, there was actually important news in the CBO projections that went unmentioned in both newspapers. The CBO sharply lowered its projections for health care cost growth, meaning that Medicare, Medicaid, and other government health care programmes are now projected to cost much less in the decades ahead than had been assumed in prior years.

Gargantuan savings

This change is substantial. The new projections <http://www.cbo.gov/sites/default/files/cbofiles/attachments/44521-LTBOSuppData.xlsx>  show that spending on Medicare will be equal to 4.6 percent of GDP in 2035. By comparison, last year, the CBO projected <http://www.cbo.gov/sites/default/files/cbofiles/attachments/43288-LTBOSuppTables_0.xls>  that the cost in 2035 would be 5.7 percent of GDP. Just two years ago, it had projected <http://www.cbo.gov/publication/41486>  that Medicare would cost 5.9 percent of GDP in 2035.

The difference of 1.3 percentage points of GDP between the 2011 projection of Medicare costs and the most recent numbers would translate into almost $220 billion a year in today's economy. In other words, this is a big deal. The change in the CBO's projections of healthcare costs certainly comes closer to standard definitions of "news" than the aging of the baby boomers.

However, there is more than a question of newsworthiness here. Both papers harped on the idea that Social Security and Medicare needed to be cut in order to bring the budget into long-term balance. Cuts to these programmes are usually put in the context of a "grand bargain" which would also involve some increase in taxes.

For a couple with an income of $500,000 a year, the tax increases put into effect at the end of last year would translate into a tax increase of roughly $3,000.

The CBO projections imply a substantial cut in spending on Medicare. In today's economy, the new projections would imply roughly $2,600 less in spending per year on each beneficiary, or a reduction in spending of $5,200 on a senior couple. This is for an age group with a median cash income of a little more than $20,000 a year.

By comparison, we heard endless sob stories about how the ending of the Bush tax cuts would hurt higher income people. For a couple with an income of $500,000 a year, the tax increases put into effect at the end of last year would translate into a tax increase of roughly $3,000.

If we had crafted a grand bargain three years ago, would anyone have suggested cuts in Medicare and Social Security that would have cost a typical senior couple more than $5,200 a year? In other words, the new CBO projections might imply that much of any needed cuts in spending on seniors have already been accomplished.

It's true that the lower projections are based on lower projected cost growth and not a reduction in services, but it's difficult to see why this would matter. There is an enormous amount of waste in our health care system which leads us to spend more than twice as much per person as the average for other wealthy countries. Do the grand bargainers have a scorecard where we only count cuts that lead to inferior care for elderly people, as opposed to the elimination of waste?

Turning to the revenue side of the picture, the new projections are striking in the extent to which they show the long-term problem is really a lack of revenue story. In the late 1990s, the CBO projected <http://www.cbo.gov/publication/12057>  that revenue would average 21.1 percent of GDP into the indefinite future. If revenue were actually at this level, the new projections show that the primary budget would be in surplus for almost two decades, and the debt-to-GDP ratio would be falling sharply.

The take away from these projections is that, if we had tax rates comparable to those of the 1990s, then the budget would pose no problem whatsoever long into the future. Even with current tax rates, the deficit is a relatively distant and minor problem. Unfortunately, the papers have endless space to tout the Wall Street agenda for the need to cut Social Security and Medicare. They seem to have no space whatsoever for discussing stimulus, a lower-valued dollar, or work-sharing - the policies that would address the real world crisis of mass unemployment.  

Dean Baker is a US macroeconomist and co-founder of the Centre for Economic and Policy Research.