Earl Blumenauer, the Portland-area Democrat who raised eyebrows with his story in the New York Times suggesting potential benefit changes to Social Security, again reiterated to Tim Fernholz that he never intended to call the Social Security Trust Fund a “Ponzi scheme,” as Bai interpreted. He also talked about his ideas for the budget in general and Social Security in particular.
Blumenauer is correct that Democrats have generally been far more responsible with the federal budget, though this responsibility has gotten them nowhere in opinion polls. And he’s right that Republicans increasingly favor “no government” whatsoever rather than limited government, which has narrowed the debate considerably. Then the conversation moves to Blumenauer’s budget solutions:
We as Democrats have not spent as much time comprehensively dealing with the big picture, and that was most of what Matt and I were talking about. We are going to have to look at how we spend money differently, in defense and agriculture and infrastructure. I support putting more money in the highway trust fund for roads and transit. I really do think that we can do things to get a lot more value out of federal spending. We ought to avoid lots of little piecemeal decisions on the tax side of the equation. I’m a voice that hopes that as we move forward, we can take a deep breath and look at the range of federal policies that deal with taxation and not have a lot of little rifle shots.
I don’t have much to argue with that in theory, though coming at a time of mass demonization of federal spending, it may be too subtle an argument. But I have no problem with efficient, responsible government that doesn’t hand money to bankers or defense contractors or Ag subsidies or fossil fuel prodicers or any of the other mindless giveaways that are a feature of our budgets (I will hold out there the fact that efficiency is less a priority at a time of insufficient demand than spending to increase that demand).
It’s when Blumenauer gets into Social Security that he ends up on shakier ground.
Establishing a long-term adjustment to protect and strengthen Social Security is one of the easier parts of the equation. There will be a concern of people who do more demanding jobs [if raising the retirement age is on the table]. They’re not going to work till they’re 70, and we can [work that into the system]. There’s recognition that particularly wealthier people should pay more. Why should I pay the same Social Security tax as A-Rod or Warren Buffet? You put those things together and let reasonable people talk about them, and I think you will come up with two or three approaches that not only would be accepted by Congress, they’d be accepted by the American public. And you would make sure that Social Security is there; particularly for most Americans it is the only guaranteed inflation-proof part of their retirement. We can drive a stake through the heart of the notion of privatization; we were right to fight it.
You’re more confident than most!
I’d be surprised if this is something that isn’t produced by the administration and Congress. What will kill it is that everyone is circling, and they want to hyper-politicize it, and they want to take the worst-case scenario they would imagine, and then they run with it to the extreme. Somehow you can’t look at reduction in benefits for wealthy people 30 years from now without threatening retirement security for middle-income people in the next decade. Well, that’s nonsense. But if everybody is going to have their worst case — “if you raise the tax, it’s going to be raised to some unacceptable level and shut down commerce and industry” — everything’s off the table and we lose a chance to move forward. Political opportunism and gridlock can win.
The first problem I have here is the notion that Social Security only needs protecting. Actually, it needs strengthening because all of the other areas of retirement income have cratered. We’re down to a one-legged stool for retirement security, and a creaky one at that. So focusing on protecting the status quo narrows the debate and assumes a crisis that only actually exists in the overall retirement security of older Americans.
My other problem is here: “Somehow you can’t look at reduction in benefits for wealthy people 30 years from now without threatening retirement security for middle-income people in the next decade. Well, that’s nonsense.” Actually, it’s math. Progressive-price indexing, which is what Blumenauer is talking about here, doesn’t work unless the indexing dips all the way down into the middle class. The type of policy Blumenauer describes – “reduction in benefits for wealthy people 30 years from now” – does nothing for long-term actuarial health. You would have to basically eliminate benefits at the high-end to provide the actual revenue savings necessary. Setting aside the dangerous ground of turning a universal benefit into a means-tested program for the poor, the only real savings can derive from making this a broad cut.
If Blumenauer wants to come up with a credible progressive-price indexing scheme that doesn’t dip into the middle class, he can show it. But until then, he’s just advocating for benefit cuts now to save us from benefit cuts later. There’s nothing wrong with having the debate, except it’s coming in an environment when the knives are out for Social Security, and Blumenauer won’t be writing the policy. Alan Simpson and Erskine Bowles will. And that’s dangerous.





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Some interesting facts about SS appear in my AARP magazine this month. Since 401(k)s have failed to safeguard american workers because of Wall Street risky business practices. I share with you the following: Who receives SS: 5%-spouses, 8%-children,8%-widows, widowers and parents, 64% retired workers. Including me and mine. How americans 65+ fund their retirement: 89% have SS, 44% have pensions and retirement svgs. And most of all, really important: 54.8% are in no danger of poverty thanks to SS. 35.5% are out of poverty because of SS and only 9.7% are in poverty.
SS is a successful “investment program” for the nation’s workers, it is in no way in danger of failing, unless the repugs etc… like Nero start fiddling with it. And with the employers now raking workers over the coals by passing on the higher health care insurance rates, it is more important than ever to secure, protect, defend SS from the wall street marauders and their allies in Congress and the business world. Listen to Trumka, he has the solutions and the real guts to lead.
Progressive Price index would start to cut benefits for those at the 30th percentile of benefits … that is less than $30,000 a year of income at the end of a lifetime of work.
That’s hardly Warren Buffet income.
The trouble with using the indexing formula to try an means test is that it targets the middle class. Everyone with and income of over $106,000 is treated exactly the same. That’s why it was created by a Republican (Pozen) to cut middle class benefits to avoid raising taxes.
Cut the deficit Commission it is the shame of the Obama Adninistration.
To grasp the meaning of the Orwellian term, “Progressive Price indexing” you must be familiar with the process of compound interest, then be able to reverse it in negative numbers and imagine a smaller benefit coming to a recipient over time. That’s generalizing I know, but it is a benefit cut.
Blumenauer is ‘backing and filling’ after allowing himself to be pimped by Matt Bai as a Progressive Democrat in favor of Social Security cuts. He has misread the public and has been caught with his filthy hands in the Social Security cookie jar.
He also spins himself and other cutters as “reasonable people” which implies that if you want to leave Social Security alone or want to increase benefits and lower the retirement age, or even removing the FICA cap on wages…..well, then in Blumenauer’s book you are an unreasonable person.
Unintended consequences: Anyone nearing retirement who hears Blumenauer and the Democrats talking about cuts will freeze their spending on any discretionary expenses until the future of Social Security is made more certain. This common sense reaction is no different from the spending freeze of those who fear that they may lose their employment. This freeze is going to negatively impact the economy.
Other topic: The proposed roll back of payroll taxes for Social Security and Medicare may reinforce the idea that Social Security won’t be there when it is needed.
Excellent article David. I also agree that this is dangerous ground, that being to make SS into a welfare program that the Republicans continue to try to plow. This is the inevitable result of means testing benefits. Where the attention to means should be applied is at the front end. by applying all SS tax to much higher income brackets, though I don’t see how it can be applied to the immensely wealthy as benefits are based on pre-retirement income.
The only thing at the benefits level that I could see having potential is perhaps offering the wealthy an option of full benefits or some kind of tax break on their personal pension savings.
Sadly, it is but one of many. Barack and Rahmbo’s Infinite Playlist.
Here’s a suggestion: Remove the ceiling on SS taxes.
Thank you.
I hope someone “elses” will note your cogent observation. FICA assessments are not in fact taxes. They are insurance premiums and you don’t stop paying your insurance premiums until bankruptcy.
On the general subject of spending, I was having an email discussion with a conservative and he railed on about Democrats and bad urban conditions. I asked him if Republicans did it any better and to my surprise, he came up with:
Texas & Indiana could be examples of large areas run by Republicans. Indiana,run by a Republican named Mitch Daniels, is illustrative of what happens when Republican leadership replaces Democrat leadership.
Daniels inherited a 5 billion dollar deficit 5 years ago from the Democrat administration of that state.,and this year Indiana has an 800 million dollar surplus. Coincidence you probably think but that’s not the case. Daniels achieved that remarkable turnaround by
1 Cutting drastically in state spending
2 Cutting significantly in state taxes
3. Creating significant private sector growth in Indiana ,as the result
Yes my dear friend taxes and spending do matter & do significantly impact on private sector growth
Texas is another example of the same policy by republican Gov Perry there.
————–
Unfortunately, I’m not really familiar with either example, so I’m going to have to google around and see what’s up with these.
Did anyone hear the President’s Saturday message? In passing I thought I heard him saying something about preserving SocSec….but I could be very mistaken.
Earl Blumenauer, as a member of the Democratic Leadership Council (http://www.ontheissues.org/house/Earl_Blumenauer_Principles_+_Values.htm), is a DINO in good standing and glibly repeats all of the Republican talking points. While I am no fan of MoveOn.org, their “Top 5 Social Security Myths” (http://pol.moveon.org/ssmyths/index.html) is worth a read and kicks Blumenauer’s talking points where they deserve to be kicked.
I don’t hear any people from Indiana talking about how wonderful things are for them. (Politicians don’t count for this: they lie too much.)
the official version is here
this is what these people are really about. Link
They operate on the premise that only rich white guys can create a civil society and that it is contamination of our culture by people of color that threaten it. It is out of the Cato Institute which claims that the rich nations will survive global h eating and especially the wealthy plutocrats. That is how they justify continuing the Wall Street binges toward disparity of income.
We are in the unenviable position of having to flush the corruption from our governance structures right down and including the city level given many, many revelations including that of muni CDSs.
My present wild theory is that last solvent Federal program, the SSTF, is about to be handed over to the GS-controlled hedgers (probably in Germany with France riding shotgun) on the condition that they do their thing within the EU and subject to the undisclosed new rules for them.
After the seminal Matt Taibbi reads, there are these:
“Goldman closing trading desk under reform rules,” Sept. 3, 2010
http://chicagobreakingbusiness.com/2010/09/goldman-closing-trading-desk-under-reform-rules.html
“Guest Post: Flight to Mystery,” Sept. 1, 2010 (keyword search on “Paulson,” “EU” and “hedge”)
http://www.zerohedge.com/article/guest-post-flight-mystery
“Philip D. Murphy: Ambassador to Germany from the US or GS?,” Apr. 19, 2010
http://firedoglake.com/2010/04/19/philip-d-murphy-ambassador-to-germany-from-the-us-or-gs
So the EU-based financial folks are staging “an intervention” for our failed State and without the input or consent of the American people? What, are we chopped liver? I’d like to be proven wrong.
Don’t trust anyone in a bow tie. Except for Chris Colfer.
The DLC of Joe Lieberman and Zell Miller and Clinton and Obama now bears no resemblance to the traditional Democratic Party. As long as we deal with them as Democrats the Conservative agenda is alive, well and going forward.
Slightly OT: A picture is worth a thousand words. Obama defined. Link
Please stop being PC the Left has been to nice even FDL.
Blumenauer is Lying Lying Lying!!! and you can Prove it.
The GOP and the Blue dogs lie all the time its time we stood up to the punks and called them out in public.
Time to Al Franken these toads with Fire!
Post a diary or give us an overview of you theory about all these links 4 links to read without a well explained theory is a bit much to ask readers. You might be going OT a bit to but thats not my call.
The rich nations survive global warming sounds like more self serving happy talk.
No doubt it’s been pointed out before, but they’re working this in the smartest way they could. Most of the people whose benefits are to be cut are in their 40s on down, and most of these people already believe that Social Security won’t be there for them – so why should they be in an uproar (so they think, if they are even aware of the Catfood Commission’s activity and intentions). To fight this, there’s going to have to be mobilization of that group, because the current constituents of AARP are basically safe.
You got it.
Then look at lifespans, infant mortality rates, crime, quality of school systems. Deregulate and you get more pollution. Don’t tax and you get lousy schools. Lousy schools might be counteracted with good jobs especially if the jobs are blue collar are they.
If not then crime increases and prisons and increased police budgets eat up taxes. Put it this way outside of Austin who would want to move to Texas despite the heat which I love, the Texas FirePups who are great and the barbecue?
Indiana I don’t know much about so I won’t venture an opinion.
That was my thought. “Yeah, y’all may have cut the budget, but how well is society functioning as a result?” Sounds like a valuable line of research.
Or put it this way we know Rural America is GOP land the GOP have been governing their way at least since Reagan.
http://seminal.firedoglake.com/diary/67857
Yet despite all that time under wonderful GOP control the kids are still leaving the farm.
Or put it this way would Texas and Indiana even in their cities have population increases without Hispanics legal and illegal. What would their rural population numbers look like.
Texas we can guess that answer Indiana I have no clue but a few points of population would be shaved and just how much business that needs low cost labor?
I don’t buy for a minute that repubs want “no government”. They’re control freaks! Ferret out what vision they’re seeing- private contractors for all limited gov’t services?
“Repubs Plan On Privatizing Government and Social Security seem like great democratic Offense arguments to me.” Do YOU trust private military contractors? Want them in your town?
Is this “Republican” someone you know? If so, do you think you might ask him to show you some respect by discontinuing his intentional belittling practice of using the term “democrat” to replace “democratic”?
Would he appreciate it if you always used the tern Repugnican to replace Republican? I doubt it, so why should be be let off for his intentional slight?
I suppose this makes me an unreasonable person, Earl:
1. Lower the retirement age at full Social Security benefits until the Jobs Emergency ends.
2. Eliminate the cap on Social Security taxation
3. Double Social Security benefits to rebuild the retirement stool.
These aren’t unreasonable; they are simply expensive. To rich people.
We could double the benefits and we would only be at 60% of our pre-retirement incomes. In Europe, the Social Security payment is 70% of income which is still more than if we doubled our Social Security! Ouch!
As Talking Stick says at 8
If Social Security is solvent, then Dems and Progressives must stop these lying scumbag republican and blue dog suckers dead in their tracks. “FICA assessments are insurance premiums. The workers of America BUY their Social Security Retirement Benefits. Period.
It sure is – tax (at least) 90% of income, and lower the retirement age back to 65. Better yet, 100% of income – no cheating with semantics, hedge fund managers and stock-funded CEOs – and lower the retirement age and raise benefits.
While you’re at it, build the ongoing funding level into the legislation so it doesn’t have to be revisited (so that 90% STAYS 90%). Does anyone doubt that bit was deliberately left out the last time, so that we’d have a fat trust fund yet still reach the point that MOTUs could scream ‘crisis’ and walk off with it?
I have trouble understanding the conservative argument that the 2.5 trillion surplus is in “worthless” government IOUs and it therefore isn’t really there.
Are the US government bonds in the trust fund a different type of bond than any other debt the government owes? Is that why conservatives think the government can just “choose” to not pay them when the system needs to start cashing them in?
If not, can we lower the federal debt even more by defaulting on US Savings Bonds held by individuals? Or, maybe we could pull this same trick on the Chinese and just claim that since we already spent the money on something else we don’t have to pay them either. This sounds like a GREAT plan as long as you understand you can only pull it off once and then don’t ever expect to borrow money from anyone ever again!!
Of course, if the conservatives are really going to propose this type of activity, it might be wise for them to stop warning our foreign debtors up front that federal bonds are “worthless”.
None of the cuts and destruction of social programs is necessary. It’s a matter of choice from the most powerful party.
Short version: It’s not so much a matter of Will, but of Won’t.
Heh! You oughtta see his first letter! Who-o-o weeee!!! This was someone who responded to my letter in our local paper with an “Here are some obvious and simple facts that you should be aware of!!1!” letter. He then made a “victor dance in the end zone”-type statement. I just calmly pointed out that he was completely wrong. His current use of “Democrat Party” is actually an improvement over his first communications.
Dems suck a little less than Repub not much as serve the rich and screw the rest is standard policy.
It has something to do with the idea that the US Government has been “raiding” Social Security to pay for other things. Supposedly, that means that money is now “used up” and the bond that represents that money is now worthless. Of course, if it really were worthless, the US would be declaring soveregn default, kind of like France waging war against England back in the 1700s and the king declaring “We can’t pay our bills.” Back then, everybody who sold cannons and gunpowder to France would simply have to eat his costs. Eventually, kings found they really couldn’t do this sort of thing and still keep fighting wars.
Sign me up for the unreasonable plan!
I agree.
“Progressive Price indexing” is not needed and has little effect unless 75% of the population of retirees is affected. It is a moderate and un-necessary screwing that ends participation in the increase in the standard of living that is you see occurring for those you are living with in this nation who are still working but younger. Why should seniors be cut out of the increase in the standard of living that we anticipate for the future? Early in 2005 Robert Pozen of Fidelity Investments sold G W Bush on his “Progressive Price indexing” via his membership on Bush’s Social Security Commission and Senators Lindsey Graham and Robert Bennett introduced bills to adopt it at that time to change the current system where a standard of living increase over the years is captured by using a wage index rather than a consumer price index in adjusting past salaries for us in the benefit formula. Under the proposal, low-earners would continue to receive the Social Security benefits promised under current law, which are based on a formula that uses “wage indexing,” while high-earners would have their benefits calculated under a formula that uses “price indexing” instead, with the result that their benefits would be reduced – with “average workers” getting a calculation that would be a mix of wage indexing and price indexing. There is a current post retirement annual adjustment is based on a price index – which is also on the table for reduction so as to make it reflect “seniors purchases” – another cut albeit tiny.
The benefit formula itself is progressive – it is a con job to avoid the only progressive option – ending the cap on wages used for the the tax and for the benefit calculation.
Exactly.
Actually some years ago they changed SS indexing on CPI to only half of the CPI. And that was a compromise. Moynihan and of course the Republicans wanted to end price of living increases all together.
Conservatives will lie to get anything they want. And that is the rich get richer and the poor get poorer. They have been after SS since it was enacted. They have no interest in a civil society.
Good point – and I apologize for the lack of a clear statement on what it means to go from wage index to “Progressive Price indexing”, or indexing via the consumer price index. What I wrote reads correctly only if you know all the words I forgot to type – its that sickness called OLD mind.
A Wage index captures the increase in the standard of living. A consumer price index does not. A wage index is normally higher than a price index because the increasing standard of living exists – usually – albeit in this society it is concentrated at the higher income levels and there has been little increase in the worker standard of living since 1973. For your retirement to reflect the increased standard of living one must use the wage index. If you do not your retirement becomes a smaller percentage of your final pay – and that is the objective of the Obama commission.