Social Security Affected By Weak Wage Growth And Rising Earnings Inequality

From a very thorough Briefing Paper released by the Economic Policy Institute:

The conventional wisdom is that the projected gap [in Social Security funding] is driven largely by rising life expectancy, and that the key to restoring solvency is raising the normal retirement age, the age when participants are eligible for full retirement benefits. ...

However, gains in life expectancy represent only a small part of the fiscal challenge facing Social Security. The increase in the normal retirement age from 65 to 67, currently underway, already offsets gains in life expectancy for workers born before 1960, and longevity gains for younger generations account for only a fifth of the projected Social Security shortfall. ...

The bigger problems are weak wage growth and rising earnings inequality, which account for more than half the projected shortfall that has emerged since the system was last restored to long-term balance in 1983. Earnings inequality has eroded Social Security’s taxable earnings because earnings above a cap are exempt from Social Security taxes. Likewise, slower wage growth increases the costs as a share of taxable earnings. Rising health care costs, which create a growing wedge between compensation and taxable wages, a falling birth rate, and higher disability take-up are also contributing to the projected shortfall.

Social Security And Its Vendors

Social Security has posted a 72 page inventory listing all the vendors with which it contracted in the last fiscal year. The vendors range from tiny to humongous.

FIT Not Working For Judge Posner

Social Security essentially requires that something it calls Findings Integrated Template (FIT) be used in drafting decisions for Administrative Law Judges (ALJs). FIT employs a lot of what lawyers call boilerplate to justify denials. Anyone familiar with FIT can tell that the FIT boilerplate is no longer working at the 7th Circuit Court of Appeals. It is particularly not working for Judge Posner on that Court. In case you are not familiar with him, Judge Posner is an extraordinary writer (although this opinion is not one of his best efforts). Other judges do not always agree with Judge Posner but they always pay attention to what he has to say.

Where The Social Security Subcommittee Is Heading

A statement posted by Sam Johnson, Chairman of the House Social Security Subcommittee:

We must secure Social Security’s future for its own sake, on a bipartisan basis with the full support of the President. I am committed to protecting benefits for today’s seniors, those nearing retirement, and those who count on Social Security the most, without raising taxes. It’s time to move past talk to action. The Subcommittee on Social Security will soon begin hearings to find lasting solutions to strengthen the program.

The math is simple. If you intend to "secure Social Security's future" but rule out any tax increase, you must make massive benefits cuts. Indeed, by saying that you intend to protect benefits for those who are already on Social Security or who are nearing retirement, you make it clear that you want to cut benefits for everyone else. Good luck on getting bipartisan support for that one.

I expect hearings to try to scare people about Social Security's future. I expect little or no attention by the Subcommittee to the functioning of the Social Security Administration itself.

Officially Sanctioned

From a press release:

After proudly serving the long-term disability insurance industry for 15 years, Attorneys Ann Marie Beaudoin and Victor Arruda, Managing Partners of The Social Security Law Group (SSLG) are pleased to announce that, effective January 1, 2011, SSLG became the captive affiliate of Social Security Advocates for the Disabled®, LLC (SSAD). ...

Social Security Advocates for the Disabled® is a service provider for disabled people with a primary focus of advocacy and overpayment collection services on behalf of clients in their pursuit of Social Security Disability Insurance benefits. The company has a nationwide presence with offices in Atlanta, Dallas, Denver, Los Angeles and headquarters in Norwell (Boston), Massachusetts.

Through our trademarked Consolidated Overpayment Recovery Service (CORS®), we assist claimants in repaying LTD insurers, and help insurers recover SS overpayments in a mutually-agreed upon, stress-free manner. Our CORS® program is officially sanctioned by the SSA Office of Income and Security Programs.

Closing Early Today?

The Office of Personnel Management has authorized Washington area federal employees to leave work two hours early today because of an impending snowstorm. It is not clear whether this applies to Social Security employees in the Baltimore area.

Give Them A Piece Of Your Mind!

A press release from Social Security:

Michael J. Astrue, Commissioner of Social Security, today announced a new way for members of the public to participate in open and transparent government. In response to President Obama’s executive order on improving regulations and regulatory review, Social Security is inviting people to provide direct feedback on its rules and regulations. Ideas and comments may be emailed to RegsReview@ssa.gov.

“Social Security values the public’s input and wants to provide a meaningful opportunity for people to participate in the regulatory process,” Commissioner Astrue said. “I invite the public to share their thoughts and I am excited to hear their ideas.”

Social Security’s program rules are available online and may be accessed at www.socialsecurity.gov/regulations. There, you will find complete information about Social Security’s laws, regulations, rulings, and employee operating instructions.

For information about what Social Security is doing to improve its regulations and how the agency will implement the President’s executive order, go to the Open Government website: www.socialsecurity.gov/open/regsreview/.

Let me make a suggestion. The Social Security Act says that the agency may "prescribe the maximum fees which may be charged for services performed [by an attorney or other person representing a Social Security claimant] in connection with any claim." Social Security wastes a lot of time now on petitions for approval of attorney fees in matters such as overpayments and disability benefits terminations where the fee agreement process cannot be used. The statutory language gives the agency the authority it needs to just set maximum fees for this sort of thing. Just have the attorney notify Social Security of the fee that he or she is charging. No approval required for individual cases. This would save a lot of time.

So, Why Is This A Tough Call?

From a poll by Public Policy Polling for Daily Kos:

Currently, workers pay social security payroll taxes on up to $106,800 of their salary. To ensure the long-term viability of Social Security, would you rather have people pay social security taxes on salaries above $106,800, or would you rather see benefits cut and the retirement age increased to age 69?

Raise
payroll cap/Cut benefits

All 77 10

Dem 84 4
GOP 69 17
Ind 77 11

Tea Party 67 20

18-29 80 0
30-45 69 17
46-65 82 8
65+ 75 13

$0-30K 79 5
$30-50K 75 11
$50-75K 79 7
$75-100K 78 13
$100K+ 72 18

Bad News For Social Security

The Associated Press reports that "A White House official says President Barack Obama will call for a five-year freeze in non-security, discretionary spending during his State of the Union address."

Don't Mug Social Security

From Bob Herbert writing in the New York Times:

When you see surveillance videos of some creep mugging an elderly person in an elevator or apartment lobby, the universal reaction is outrage. But when the fat cats and the ideologues want to hack away at the lifeline of Social Security, they are treated somehow as respectable, even enlightened members of the society.

We need a reality check. Attacking Social Security is both cruel and unnecessary. It needs to stop.