Private Equity And Binder and Binder

     In June of last year, I posted that Binder and Binder, the largest entity representing Social Security claimants, had been acquired in 2010, at least in part, by HIG, a private equity firm based in Miami, in a leveraged buyout.

     At the time I knew essentially nothing about private equity firms. Since then, the publicity about Mitt Romney's involvement in Bain Capital, another private equity firm, has educated me a tiny bit on private equity companies. It appears that Bain was, in the main, acquiring troubled companies and trying to turn them around for resale at a tidy profit. Sometimes they were unable to turn the companies around and the companies were closed -- usually with Bain making a tidy profit despite the closure. 

     I suppose that there are different private equity models than those employed by Bain. Bain's operations were surely a good deal more complex than what has been described in the press. I have no idea how HIG operates or what triggered this acquisition or what has happened since HIG acquired at least part of Binder and Binder. Still, the involvement of a private equity firm in representing Social Security claimants still seems awfully weird and somewhat troubling to me.

     I am somewhat amused by the thought of HIG's MBAs digging deep into the guts of the business of representing Social Security claimants and being confronted again and again with roadblocks imposed by the Social Security Act and Social Security's regulations and policies. I have trouble imagining them actually reading client files and attending client hearings to truly educate themselves about this messy business. I wonder what those MBAs thought about those Wall Street Journal articles about Binder and Binder. Did they think they didn't matter since few Social Security claimants read the Wall Street Journal? Did they realize the problems those articles could cause Binder and Binder with Administrative Law Judges and Social Security in general -- problems that would inevitably affect the company's bottom line?As I say, the involvement of a private equity company in this business just seems awfully weird to me.

CBO Swings And Misses

     The Congressional Budget Office has put out a report on Policy Options for the Social Security Disability Insurance Program. The report deals mostly with the fact that the Disability Insurance Trust Fund is predicted to run out of money in about four years and how this fact might be dealt with.
     The CBO has a great reputation but I don't think this is one of their better efforts. Somehow, they fail to mention the option put forward by Social Security's Chief Actuary of temporarily raising the Disability Insurance program’s share of the FICA payroll tax rate from 1.8 to 2.2 percent for 2012 through 2024 and to 2.0 percent for 2025 through 2029. You would think that they would be aware of this proposal but it isn't mentioned. They list the people they consulted in producing the report and the Office of the Chief Actuary is not mentioned, which I find amazing. That should have been where they started.

     Here are some of the ideas that did make it into the report:

• Permanently raise the FICA tax by 0.2% -- which couldn't possibly solve the Disability Trust Fund problem in the short term
• Reduce all disability benefits by 15%
• Reduce disability benefits dramatically for those age 53 and older, an idea which is discussed at length
• Eliminate Social Security disability benefits entirely for those 62 and older, an idea which is linked with reducing disability benefits for those 53 and older.  CBO needs a reality check. Louie Gohmert may be the craziest member of Congress but I don't think even Gohmert would endorse this!
• Increase the waiting period from 5 months to 12-- another sign of a need for a reality check
• Introducing government representation -- indicating that CBO is unaware that this was tried in the past and did not reduce the number of people approved for Social Security disability benefits. By the way, as I have pointed out before, I can only link to an interim report on the government representative project. The experiment was such an embarrassing failure that Social Security quietly terminated it without ever writing up a final report! And yet, this idea keeps turning up in Very Serious Reports like this CBO study.

     By the way, the CBO estimated the effects of increasing the age ranges in the grid regulations by two years. That would only reduce disability benefit payments by 0.5% by 2022. This doesn't sound like something even worth considering since it would generate a ton of controversy and wouldn't save much money.
     The more you look at this, the more it looks like Steve Goss, Social Security's Chief Actuary, has a good handle on what is economically and politically feasible, regardless of who wins the 2012 and 2014 elections. CBO ought to be talking with him.

House Appropriations Bill Would Decrease Social Security's Administrative Budget

     A press release on the Chairman's mark of the House Appropriations Committee's Labor-HHS appropriations bill that would fund Social Security's administrative budget indicates that the agency's budget for fiscal year (FY) 2013, which begins on October 1, 2012, would be $10.7 billion, $287 million below FY 2012. This bill is to be marked up in subcommittee tomorrow.

     The Senate Appropriations Committee has already reported out its version of the Labor-HHS Appropriations bill and it provides $11.736 billion for Social Security's administrative budget, which was described as a $290 million increase over FY 2012. 

      Note that the difference in the amounts appropriated between the two bills is in excess of $1 billion yet if you add the $287 million decrease of the House Bill to the $290 million increase of the Senate bill you get a total difference between the two bills of $577 million. This is an excellent example of how bizarre and confusing the appropriations process is. I have no idea what accounts for the other $500 million of difference between the two bills.

Right On Ladies! I Love Your Signs!

     From the Napa Valley Register:

About two dozen women and their children gathered on the front steps of Napa’s Social Security office Monday morning for a “nurse-in” to raise awareness of their right to breast-feed in public.

Participants were upset that last Tuesday a security officer had told a breast-feeding mom to step outside to feed her baby, said Cherissa Lowgren, a mother who said she witnessed this event.

“I wasn’t even aware of what she was doing,” Lowgren said of the woman named Maria, who had started feeding one of her two children after the girl became fussy.

“The guard tapped her on the shoulder and said, ‘You can’t do that here,’” Lowgren said. “She didn’t speak English, so she looked confused and at the same time, humiliated.” ...

A spokesman for the Social Security Administration, Deogracias Santos, said the security officer was likely unaware of the law protecting breast-feeding. Guards are not employed by the administration, but are contracted through the Department of Homeland Security.
Santos said the administration is using the “unfortunate event” as an opportunity to educate all employees about the law that allows public breast-feeding. He said no one at the administration was notified of the incident when it happened and the woman would have been allowed to nurse inside had it been mentioned.

You Know It's A Hoax But You Still Have To Take It Seriously

     The Redding, California Social Security field office was evacuated yesterday when an envelope was opened that contained a white powdery substance.
     Update: The building has been reopened. The powder wasn't dangerous.

House Appropriations Markup Scheduled

     The House Appropriations Subcommittee that has jurisdiction over the appropriation for Social Security's administrative operations has scheduled a markup session for July 18 at 2:00. The starting point for the markup is called the "Chairman's Mark." I don't see a sign that the Chairman's mark has been released yet. Probably, that will be withheld as long as possible. By the way, last year's markup session was scheduled repeatedly and then delayed repeatedly for reasons that were never made public.

     Social Security is only a small part of the Labor-HHS appropriations bill, which is usually the most contentious of the appropriations bills. With the mandatory cuts required by last year's budget deal and the bloody-minded attitude of House Republicans, expect howls of pain and outrage once the Chairman's Mark is released. Just hope that Social Security is not too badly affected.

Annual Statistical Report On Disability

     Social Security has issued its Annual Statistical Report On The Social Security Disability Program, 2011.

Attack Of The Dismal Science

     Nancy Folbre writes in her Economix blog at the New York Times about the Social Security problems caused by low fertility rates in the United States. These low fertility rates are associated with economic development and the introduction of birth control. This is a real problem which deserves attention but Folbre's blog post reminds me of why economics has been referred to as the "dismal science." She talks calmly about  unrealistic solutions such as ending Social Security or offering dramatic economic support for families with children while completely missing an obvious and fairly workable solution for the United States -- more immigration.