Not Likely To Work

From the Associated Press:

Social Security, Medicare and virtually every other federal program would face the budget ax under legislation unveiled Tuesday aimed at forcing Congress to dramatically cut spending over the coming decade.

The bill, co-sponsored by Sens. Claire McCaskill, D-Mo., and Bob Corker, R-Tenn., would phase in a federal spending cap of just more than 20 percent of the size of the economy, which they said would wring almost $8 trillion from the budget over the coming 10 yearse eee

The legislation doesn't actually propose cuts but instead sets spending caps and enforces them with the threat of automatic, across-the-board reductions.

McCaskill's idea went over like a lead balloon with fellow Democrats. She is the sole member of her party who's backing the legislation.

But What If Other Offices Are Also Getting Lots Of Calls?

From the Bolivar Commercial:

The Social Security Administration offices in Cleveland have received an upgrade this week.

Patrick Goins Jr., a Cleveland native now working with Avaya Government Solutions, had workers take out the old phone lines in the building and replace them with a new system. ...

The new system uses Enterprise Voice over Internet Protocol technology.

“What was a completely independent system is now a network within the Social Security Administration that they own,” Goins said. “They don’t have to pay long distance or call charges. It’s basically run at almost no cost to them.”

Additionally, the interlinked system means that if there are ever problems at a particular office, calls can easily be re-routed to other offices. ...

This process also works in situations where hold times are long. If an office is experiencing a huge number of calls and is having to keep people on hold for a long period of time, calls can be quickly sent to another office.

Scary Prospects

On this slow news day, let me give a summary of where we are with appropriations and the federal debt ceiling. I will start with the appropriations process which is dangerous for the Social Security Administration and then go on to the debt ceiling which is even more dangerous. Fiscal Year (FY) 2011 began on October 1, 2010. To this point, the only appropriation for Social Security and other agencies has been a Continuing Resolution (CR) that allows Social Security to continue spending at the FY 2010 rate. The CR is bad for Social Security since the agency's workload is increasing with the aging of the Baby Boom generation. The CR ends on March 4, 2011. If nothing else is passed by then, Social Security and other agencies shut down.

Agreement between Congress and the President on a real FY 2011 appropriation seems unlikely at this point. Republicans in the House of Representatives are insisting on rolling back appropriations to FY 2008 levels. This would be disastrous for most agencies. It would be catastrophic for Social Security. There would be mass layoffs of Social Security employees. The agency could not function. The Republican base and Fox News are insisting upon confrontation with Democrats over appropriations yet it seems clear that any government shutdown would be extremely unpopular with the public.

I can only speculate that we will continue to see CRs for the rest of FY 2011 but a government shutdown is not out of the question. Agreement between Republicans and Democrats is possible but hard for me to envision.

At the moment, this situation has caused Social Security to discontinue virtually all hiring. I think the agency has discontinued most if not all overtime. This will hurt more and more as time goes on.

Congress has set a ceiling on the gross amount of federal debt. Because the federal government is running a large deficit, it needs to keep borrowing money. We will reach the debt ceiling sometime around the end of March or early April. If the debt ceiling is not raised, much of the federal government must shut down. It is not at all clear how this would affect Social Security. We have never gone there before. Undoubtedly, there are contingency plans but it would be best if these plans just gather dust.

Raising the debt ceiling requires a majority vote in the Republican controlled House of Representatives. Many Republicans have pledged to vote against an increase in the debt ceiling unless they obtain something dramatic such as huge reductions in appropriations and Social Security benefits. Some have pledged to vote against an increase in the debt ceiling no matter what is offered. Again, the Republican base and Fox News are demanding confrontation but a failure to raise the debt ceiling could have terrible long term consequences since it would shut down much of the federal government and bring into question the nation's creditworthiness.

At best, I think we are going to the brink on the debt ceiling. The chances of going over the precipice are very real.

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.