If These Are Your Best Arguments, You're In Trouble

     Andrew Biggs, who was Deputy Commissioner of Social Security during part of the George W. Bush Administration, has written an article for the National Review giving reasons why the cap on wages covered by the F.I.C.A. tax that supports Social Security shouldn't be raised. Here are the arguments and my take on them:

• There's always been a cap on wages covered by F.I.C.A. So what? Full retirement age used to be 65. It's now 66 and heading to 67. Biggs would undoubtedly prefer it be raised to 70, if not 80. He's being selective about what changes he opposes. We have to change something.
• The cap is necessary so that Social Security won't be considered a "welfare" program. That's rich coming from Biggs who wants to means test Social Security. Why would increasing the wage cap make Social Security into a "welfare" program anyway? And what's wrong with programs devoted to improving the welfare of the American people?
• Raising the cap wouldn't solve the entire long term Social Security funding problem. No one proposal will. Biggs has no one solution for Social Security's long term funding problems. He favors a series of massive benefits cuts. Why does one proposal have to solve the entire problem?
• We ought to solve the problem of rising health care costs before we do anything about Social Security. What does that have to do with the F.I.C.A. cap? Anyway, Biggs undoubtedly opposes the Affordable Care Act which is actually doing something about health care costs.
• Most other countries have wage caps on the their Social Security taxes. Why is that important? I thought the right was big on American exceptionalism.
• It's a big tax increase. It will make U.S. tax rates higher than those is Scandinavia. It's a tax increase only for the wealthiest Americans, a group that has fared extremely well in recent years while the rest of the country has fared poorly. The wealthy can afford it. On Scandinavian tax rates, Biggs is citing income tax rates that don't include Social Security charges. Here's what I'm finding as the maximum tax rates in Scandinavia: Denmark 61%, Finland 61.96%, Norway 47.2%, Sweden 57%. I think we'd be well below those rates even if we remove the wage cap. Besides, Scandinavians have a high standard of living and much better social security than the U.S.. Why should we fear that?
• When we fix Medicare and Medicaid tax rates are going to go up. Glad to hear that Biggs supports higher taxes to support Medicare and Medicaid but how is that relevant to this discussion?
• An economic study shows that a rise in the wage cap won't generate as much revenue as predicted. That's not exactly what the study cited by Biggs says. In fact, the study makes no bold prediction about the effect of an increase in the wage cap. It suggests more study which is always the way with these studies. If anything, the study suggests the opposite of what Biggs is representing it to say. Anyway, here's what the report actually said so you can judge for yourself, if you can stay awake as you read it: "We have eight main findings. First, the workers who would experience an increase in marginal tax rates from an increase in the taxable maximum are mostly married males – a group thought to have relatively small elasticities. There are, however, a significant number of self-employed workers among this population which could suggest somewhat higher responsiveness. Second, the recent empirical evidence showing large behavioral responses to taxation is largely irrelevant to this question as it mostly focuses on broader concepts of income for which elasticities are likely to be higher and on demographic groups such as wives of high earners that are not particularly common in the subset of the population whose incentives would be altered by an increase in the taxable maximum. In the few studies that have also focused on narrower concepts, elasticities fall dramatically when the tax base is something closer to earnings. Third, the earnings distribution of workers around the current taxable maximum is inconsistent with a model in which people are highly responsive to the payroll tax rate. Fourth, this is true even for the self-employed, a group that is often thought to have significant control over its reported earnings. Fifth, in panel data on high-earnings married men, we see a tremendous increase in earnings over the 1980s and 1990s, but no break in the trend around the TRA86 or OBRA93 tax acts. Sixth, the rise in earnings for the high earners is so much greater than for other income groups that it seems completely implausible that the other income groups could serve as reasonable control groups for the high earners. Seventh, the overall weight of our evidence does not support the Eissa (1995) finding of a large behavioral response to taxation by wives of high earners. Eighth, we think there remains considerable uncertainty about the relevant elasticities for high earners – uncertainty that will be very difficult to eliminate without much larger samples of such taxpayers than are available outside the U.S. Treasury. Our policy simulations suggest that with an earnings elasticity of 0.5, lost income tax revenue and increased deadweight loss would swamp any benefits from the increase in payroll tax revenue. In contrast, with an elasticity of 0.2, the ratio of the gain in OASDI revenue to lost income tax revenue and deadweight loss would be much greater. Thus, knowing whether the elasticity is closer to 0.2 (or below) versus 0.5 is critical to deciding on whether this would be a wise policy."

Online Social Security Card Replacement Coming

     From today's Federal Register:

We propose to revise our regulations to allow applicants for a Social Security number (SSN) card to apply by completing a prescribed application and submitting the required evidence, rather than completing a paper Form SS-5, Application for a Social Security Card. We also propose to remove the word ``documentary'' from our description of certain evidence requirements. These changes would provide flexibility in the ways in which the public may request SSN cards and allow us, in the future, to implement an online SSN replacement card application system, which we are currently developing.

    Can this be done securely?

Mutually Exclusive Goals

     I watched today's hearing before the House Social Security Subcommittee on the impending shortfall in the Social Security Disability Trust Fund. I noticed that Republican members were insistent on two points. One was that Social Security disability recipients should know that Congress won't allow their benefits to be cut. The other was that there must be no transfer of funds from the Retirement and Survivors Trust Fund to the Disability Trust Fund. However, these are mutually exclusive goals, unless we increase taxes and I don't think the Republican members will agree to that. 

     So what is the Republican plan? They're the majority party in Congress. They can't just sit back and criticize the plans that others come up with. They need a plan of their own. I look forward to reading the plan that meets both their goals.

You're Not Likely To Get What You Want When You're Afraid To Even Say What You Really Want

     Here's the witness list for the 2:00 hearing today before the House Social Security Subcommittee on "the financial status of the Disability Insurance (DI) and Old Age and Survivors Insurance Trust Funds, and the available legislative options to ensure full DI benefits continue to be paid":

• Charles P. Blahous III, Ph.D., Public Trustee, Social Security and Medicare Boards of Trustees
• Ed Lorenzen, Senior Advisor, Committee for a Responsible Federal Budget
• Webster Phillips, Senior Legislative Representative, National Committee to Preserve Social Security and Medicare

     It's Orwellian for the Republican majority to talk about wanting to assure that "full DI benefits continue to be paid" when it's clear they want dramatic cuts in DI. I suppose this language suggests that Congressional Republicans realize that they don't have public support for significant cuts in DI.

Spending Too Much Time Reading POMS

     Laurence Kotlikoff has a list of 10 Social Security Rules That Are Insane, excerpts from Social Security's Program Operations Manual Series (POMS):

• “Even if we caused the (benefits) overpayment, you must show that you are without fault.”
• Cash benefits for disabled workers end “the month before the month you die.”
• “The lump-sum payment cannot be paid on the earnings record of a worker who dies in or after the month we receive notice of deportation or removal.”
• "What does ‘actually paid’ mean? Actual payment occurs when you are actually paid.”
• “Third parties may assist a claimant when completing the (online) application, but the claimant must be present to select the ‘Submit Now’ button.”
• “The illegality of an activity does not prevent it from being a trade or business. For example, professional gamblers, bookies, etc. may be engaged in a trade or business. If you’re in this category, you are considered self-employed and are required to report your income and pay self-employment taxes.”
• “We may always make a new initial determination whenever a change occurs in the factual situation despite how much time elapses from the date of that change.”
• “The fact that we determine that a claimant meets the requirements for entitlement does not preclude us from making another determination that the claimant no longer meets those requirements at some subsequent date.”
• “In a disappearance case where the body is not recovered, you must clearly prove the death of the missing person. Submit all available evidence, including: statements of persons having knowledge of the situation; (or) letters or notes left by the missing person that have a bearing on the case.”
• Social Security representatives are instructed: “Do not attempt to explain the rationale for any particular operational guidelines, nor go to any great lengths to justify them.”

     Remember, it's his list, not mine.

Binder And Binder Struggling To Stay Afloat Even In Bankrutpcy

     This is an article on Law 360 dated February 11:

Social security disability firm Binder & Binder LLP asked for approval of a new $6 million loan on Tuesday as it navigates through the Chapter 11 process, claiming that its existing lenders would rather see the company liquidate than allow it to restructure. 

 Binder & Binder ... says that its existing loan has hamstrung its ability to intake new clients at a sufficient clip and keep the business afloat as federal disbursements have slowed under new government scrutiny. The firm asserts that new financing terms would be the only way for it to avoid liquidation, given the harshness of its current loan. ...

But the $6 million loan, which would be obtained from Stellus Capital Investment Corp., comes with the stipulation that Stellus gets the first lien position on all of Binder & Binder’s assets. The disability firm said it has shopped around and there is no “middle ground” in that regard. ...

Binder & Binder said that the slowdown in social security disability and veterans’ benefits has sapped its cash flow. It described the firm as being at a “critical juncture,” lacking the funds to pay its next payroll on Feb. 17, 2015. ...

Despite a prohibition on new advertising, one of the terms of its current loan, Binder & Binder said it is still handling approximately 1,000 new social security cases each month, and needs to keep its staff levels up to maintain the business. ...

Class Action On Old Overpayments

     From Accounting Today:

A group of plaintiffs are suing the Treasury Department, the Social Security Administration, and the District of Columbia, claiming the federal government is continuing to hold onto their tax refunds to pay for supposed overpayments of Social Security benefits decades ago. ... 

The Legal Aid Society and the law firm McKenna Long & Aldridge brought suit against the U.S. Treasury, the Social Security Administration and the District of Columbia government on behalf of three D.C. residents, Tina Heard, Pearline Snow and Carolyn Graham. They are seeking class-action status in the suit, and believe the case could affect up to 400,000 Social Security beneficiaries who had $75 million taken from their tax refunds. They claim the government confiscated the refund payments in violation of federal law and without the due process required under the Constitution. In most cases, the alleged debt to the Social Security Administration had been incurred by their parents or other relatives. ... 

Heard, Snow and Graham claim they originally learned of the debts they allegedly owed the government when some or all of the 2013 tax refunds they were expecting in early 2014 never arrived. They contend that they received no notice from the SSA before the Treasury Department seized their refunds. Only after they went to significant effort to determine why their refunds were withheld did they learn that the Treasury’s actions were based on the SSA’s findings that they had each been overpaid Social Security benefits decades before.

Despite multiple attempts to communicate with the agency, none of the plaintiffs has received a clear explanation of what exactly was owed or why, according to their attorneys.

Institute Of Medicine Reports Forthcoming

     The newsletter of the National Organization of Social Security Claimants Representatives (NOSSCR), which is not available online, reports that the Institute of Medicine (IOM), a division of the National Academies of Sciences, is working on three "consensus reports" for Social Security which may be coming out later this year. These will deal with:

• Psychological testing, including symptom validity testing;
• Mental impairments in children, especially autism spectrum disorder and attention deficit hyperactivity disorder; and
• Speech and language disorders in children.

     Whatever else it may be, the IOM in this instance is basically a beltway bandit, receiving large sums of money for reports that are always so tentative and hedged that they're useless. I wonder what they'll tell Social Security about symptom validity testing. Social Security has been resistant to using it because of questions about its validity. My understanding is that this sort of testing would only apply to claimants with brain damage or intellectual deficiency. Since the agency is approving so few with either of these problems, I doubt that using symptom validity testing would matter much anyway.