The co-chairs of the fiscal commission, Erskine Bowles and Alan Simpson have released their draft of recommendations for the Commission. It is important to note that this is only the draft of the co-chairs, not the final Commission recommendations. The co-chairs have these recommendations for Social Security:
- Index the retirement age to longevity -- i.e., increase the retirement age to qualify for Social Security -- to age 69 by 2075.
- Index Social Security yearly increases to a lower inflation rate, which will generally mean lower cost of living increases and less money per average recipient.
- "Increase progressivity of benefit formula" -- i.e., reduce benefits by 2050 for middle, and, especially, higher earners, relative to current benefits.
- Increase the Social Security contribution ceiling: while people only pay Social Security taxes on the first $106,800 of their wages today, that's only about 86% of the total potentially taxable wages. The co-chairs suggest raising the ceiling to capture 90% of wages.
- From the White House: "The President will wait until the bipartisan fiscal commission finishes its work before commenting. He respects the challenging task that the Co-Chairs and the Commissioners are undertaking and wants to give them space to work on it. These ideas, however, are only a step in the process towards coming up with a set of recommendations and the President looks forward to reviewing their final product early next month," said White House spokesperson, Bill Burton.
- From Nancy Pelosi: This proposal is simply unacceptable. Any final proposal from the Commission should do what is right for our children and grandchildren’s economic security as well as for our nation’s fiscal security, and it must do what is right for our seniors, who are counting on the bedrock promises of Social Security and Medicare. And it must strengthen America’s middle class families–under siege for the last decade, and unable to withstand further encroachment on their economic security.
- From Senator Dick Durbin, a Democrat: "We're not going to have an up-or-down vote on this. There are proposals in there that are painful. I told them I said there are things in here which inspire me and others which I hate like the devil hates holy water. I'm not going to vote for those things."
- From Senator Tom Coburn, a Republican: "If we do the cuts, I'll go for it. We may have to go for some revenues at some point."
- From AFL-CIO President Richard Trumka: "The chairmen of the Deficit Commission just told working Americans to 'Drop Dead,'"
- From Ezra Klein: The co-chairmen have some interesting policy ideas for how to balance the budget, but as of yet, they've not made any discernible progress on the political deadlock preventing us from balancing the budget. And it's the deadlock, not the policy questions, that they were asked to solve.
11 comments:
Waiting on the so called smart republican response.
A good compromise is one in which every stakeholders sacred cow gets gored so the pain is shared as well as the long term benefit. This document is a good start and should provide material for a national dialogue. I read through the draft and was surprised to see nothing to restrain the fastest rising cost of Social Security which is SSDI.
OMG focus, focus, focus---SSA has nothing to do with the federal budget deficit--it is(supposed to be) a self-funding, stand-alone entity. All of this is just baloney. Congress did not pass a budget because they were waiting to see what these bozos on the deficit commission would come up with--really?? This is all they got? Note--I am a conservative Republican who opposes govt waste and excessive taxation.
A#1--This is the smart Republican response. No need to wonder about hearing another word.
A#2--Pain isn't good for anyone. Just ask someone who experiences it daily or has done. Try being positive for a change. It'll do you good.
A#3--Everyone opposes govt waste and excessive taxation and of course, also opposes corruption in business and government. However, like you, I don't know what Simpson and Bowles were smoking. You know, they're not going to get a gold star on their report cards for the highest score ever on pointless pain inflicted on the citizens of this country. Ya know, this ain't Donkey Kong. Nancy Ortiz
Folks:
As I've said before, the trust fund is merely an accounting mechanism that indicates the "draw" which the trust fund has available from the Tresaury.
It dosn't make a difference if the trust fund is $2billion or $100billion.
The trust fund makes it no easier to pay benefits than it does to get an appropriation for battleships (the appropriation for benefits is not needed as long as the trust fund hasa "Fund Balance with the Treasury."
All these adjustments have nothing to do with operating Social Security as it was intended to be designed - a self-funded, no general revenues needed, retirement/insurance plan - which is what any reform should be focused on.
Focusing on the trust fund balance and its expiration date is merely a trick to not focus on the real problem.
Would an insurance company loan its reservres to a sibsidiary in order to pay retirement benefits to its employees or its policyholders?
I don't think so.
I have links to back all this up if anyone is interested.
Don Levit
I'm not going to knock this attempt for a solution. Enough folks already are pounding it. But one thing it proves to me is that we are headed the way of some of those European countries because our debt load is going on its way to smothering us.
For SS solvency the solution is easy: no cap on wages subject to social security as to the employees contribution. You could even keep the employer's contribution to a lower threshold so that we are not interfering with "stimulation" of the economy.
So I would pay 7.5% on all of my earnings and my employer would pay 7.5% on lower capped amount. Then slowly raise the minimum retirement age for those making over an average of $100,000 per year. Redistribution of wealth, to quote the great (but unfortuntely, NOT late) Sarah Palin "You betcha!"
I would pay more tax and get less benefit under this plan, but I don't see anything wrong with it. If we don't start taking care of the less affluent and (my personal soap box) facilitate better birth control, education and child care, we are going to have a real mess on our hands in the form of too many people who will start taking what they want when they can't compete in the economy.
That's my rant for the day.
Anonymous:
Your suggestions will inflate the trust fund and delay solvency.
I gather you think that's a good thing.
Do you agree that paying for SS benefits is no different than paying for battleships - out of current revenues and debt?
If so, your plan simply continues that process.
The trust fund makes it no easier to pay benefits than if there wasn't a trust fund.
We just would need to get yearly appropriations.
I can provide excerpts and links to back what I am saying.
Would you like for me tp do so, or do you wish to continue to believe the trust fund is a store of wealth?
Can you provide good objective material as to why you think I may be mistaken?
Aren't you tired of personal opinions, and how others feel, if it's not based on reality?
Don Levit
Don,
I will readily admit that if inlay (via uncapped wages subject to ss witholding) and reduced outlay (pushing the retirement age back for a signficant portion of the population) would delay insolvency. I can see where it would increase (your word inflate is telling) the trust fund and allow for a further "drop dead" date. I don't see a down side.
I am truly interested in your reply because I cannot figure out how this is any difference from any account, that is if you put more in and take less out you will end up with longitudinally more withdrawals.
Educate me please.
Call me Anon Alice
Anon Alice:
Thanks for your reply.
The trust fund is more of an accounting mechanism, than it is a store of wealth.
It is not filled with assets, as you and I would think of a checking or savings account, or even a retirement account.
They are merely numbers, indicating the "draw" the fund has available from the Treasury.
But all federal expenses are paid out of the Treasury, some from trust funds, some from general funds, some from special funds, and some from revolvong funds.
But all expenses are paid out of the Treasury, with current revenues and debt.
From a paper entitled "Analytical Perspectives, Budget of the U.S. Government, Fiscal Year 2009:"
Page 183 "Why are Social Security and Medicare not shown as Governmental liabilities in Table 13-1?
There is no bright line dividing Social Security andf Medicare from other programs that promise benefits to people, and all the Government programs that do so should be accounted for similarly.
Furthermore, treating taxes for Social Security or Medicare differently from other taxes would be highly questionable."
Page 187 "To assess the overall financial condition of the Government, it is nercessary to examine the future prospects for all Government programs including the revenue sources that support Government spending. Such an assessment reveals that the key drivers of the long-range deficit are Social Security, Medicare, and Medicaid."
Page 195 "The trust fund surpluses could have added to national saving if overall government borrowing from the public had actually been reduced because of the trust fund accumulations. At the time Social Security or Medicare redeems the debt instruments in the trust funds to pay benefits not covered by income, the Treasury will have to turn to the public capital markets to raise the funds to finance the benefits, JUST AS IF THE TRUST FUNDS HAD NEVER EXISTED."
Go to: http://www.gpoaccess.gov/USbudget/fy09/pdf/spec.pdf.
From a paper entitled "Federal Debt: Market Structure and Economic Uses for U.S. Treasury Debt Securities," issued by the Joint Economic Committee of the U.S. Congress:"
"The U.S. Government is both the creditor and the debtor for Treasuries held in intragovernmental accounts. President Bill Clinton explained this point in his Fiscal Year 2000 Budget: 'These balances in intragovernmental accounts are available ... but only in a bookkeping sense. Thus, an increase (or a decrease) of Treasuries in these accounts is merely a bookkeeping enytry that does not affect financial markets or the broader economy. Placing Treasuries in an intragovernmental account is similar to loaning money to yourself. You may increase your loan balance infinitely, or pay it off entirely, but neither action can change the amount of money in your pocket." Go to http://www.house.gov/jec/fiscal/debt.pdf.
Don Levit
Anon Alice:
Thanks for your reply.
The trust fund is more of an accounting mechanism, than it is a store of wealth.
It is not filled with assets, as you and I would think of a checking or savings account, or even a retirement account.
They are merely numbers, indicating the "draw" the fund has available from the Treasury.
But all federal expenses are paid out of the Treasury, some from trust funds, some from general funds, some from special funds, and some from revolvong funds.
But all expenses are paid out of the Treasury, with current revenues and debt.
From a paper entitled "Analytical Perspectives, Budget of the U.S. Government, Fiscal Year 2009:"
Page 183 "Why are Social Security and Medicare not shown as Governmental liabilities in Table 13-1?
There is no bright line dividing Social Security andf Medicare from other programs that promise benefits to people, and all the Government programs that do so should be accounted for similarly.
Furthermore, treating taxes for Social Security or Medicare differently from other taxes would be highly questionable."
Page 187 "To assess the overall financial condition of the Government, it is nercessary to examine the future prospects for all Government programs including the revenue sources that support Government spending. Such an assessment reveals that the key drivers of the long-range deficit are Social Security, Medicare, and Medicaid."
Page 195 "The trust fund surpluses could have added to national saving if overall government borrowing from the public had actually been reduced because of the trust fund accumulations. At the time Social Security or Medicare redeems the debt instruments in the trust funds to pay benefits not covered by income, the Treasury will have to turn to the public capital markets to raise the funds to finance the benefits, JUST AS IF THE TRUST FUNDS HAD NEVER EXISTED."
Go to: http://www.gpoaccess.gov/USbudget/fy09/pdf/spec.pdf.
From a paper entitled "Federal Debt: Market Structure and Economic Uses for U.S. Treasury Debt Securities," issued by the Joint Economic Committee of the U.S. Congress:"
"The U.S. Government is both the creditor and the debtor for Treasuries held in intragovernmental accounts. President Bill Clinton explained this point in his Fiscal Year 2000 Budget: 'These balances in intragovernmental accounts are available ... but only in a bookkeping sense. Thus, an increase (or a decrease) of Treasuries in these accounts is merely a bookkeeping enytry that does not affect financial markets or the broader economy. Placing Treasuries in an intragovernmental account is similar to loaning money to yourself. You may increase your loan balance infinitely, or pay it off entirely, but neither action can change the amount of money in your pocket." Go to http://www.house.gov/jec/fiscal/debt.pdf.
Don Levit
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