The Plutocratic Party and Social Security

The latest Republican budget plan has a section on Social Security. Ordinarily, I wouldn’t have read it, but Michael Hiltzik, a business columnist for the Los Angeles Times, wrote an article called “Paul Ryan Rehashes An Old Social Security Lie”. 

The lie in question appears in the second paragraph below. I think it’s worth reading the surrounding paragraphs too (all of which appear on page 66 of the Republican’s budget document):

An all-too-common reaction to the fiscal problem in Social Security has been denial that a problem exists. It is claimed that the Social Security Trust Fund will remain solvent for at least a decade, at which point the government could theoretically cover any shortfall by raising taxes. Others downplay the necessity for change, contending that sustained economic growth could take care of the problem all by itself.

Neither is correct. First, any value in the balances in the Social Security Trust Fund is derived from dubious government accounting. The trust fund is not a real savings account. From 1983 to 2010, it collected more Social Security taxes than it paid out in Social Security benefits. But the government borrowed all of these surpluses and spent them on other government programs unrelated to Social Security. The Trust Fund holds Treasury securities, but the ability to redeem these securities is completely dependent on the Treasury’s ability to raise money through taxes or borrowing.

Social Security is currently paying out more in benefits than it collected in taxes–in other words, running cash deficits–a trend that will worsen as the baby boomers continue to retire. To pay full benefits, the government must pay back the money it owes Social Security. In testimony before the House Budget Committee, CBO Director Doug Elmendorf stated that:

“Well, again, Congressman, on a unified budget basis, taking account of just the tax revenues, the dedicated tax revenues, and the benefits, [Social Security] is contributing [to] the deficit now. If one instead looks at just the balance in the Social Security Trust Fund, that balance is, the annual balance is positive now, but will be negative within about a half dozen years.”

Given how difficult it is to predict the future, it isn’t clear exactly when Social Security would have trouble paying 100% of everybody’s promised benefits. As Ryan’s document says, however, the government could “theoretically” raise Social Security taxes at some point to make up the difference. The “theory” in this case is arithmetic.

Not everyone knows this, but as of 2014, Social Security taxes are only applied to the first $117,000 of a person’s income. Here’s what the Center for Economic Policy and Research says about raising that threshold and thereby putting more money into Social Security:

There have recently been several pieces of proposed legislation to raise or do away with the payroll tax cap. Sen. Bernie Sanders and Rep. Peter DeFazio have sponsored legislation that would raise the cap to income above $250,000 while Sen. Mark Begich and Rep. Ted Deutch’s proposal  would fully eliminate the cap, with a small portion of earnings above the current cap going toward benefits. If enacted, proposals like these could almost entirely close Social Security’s projected long-term funding gap without reducing benefits nor increasing taxes on the vast majority of American workers.

Of course, applying the Social Security tax to the highest incomes would also partly address the problem of economic inequality in America, a worthy goal in itself.

The statement in the second paragraph that “any value” in the Social Security Trust fund is “dubious” is the one that Michael Hitzlik called a lie (it’s good that reputable journalists are finally getting around to using that word). I’ve heard this claim before – that somehow the Social Security Trust Fund doesn’t have real money in it – but never understood how such a thing could be true. As Hitzlik explains, the Trust Fund holds almost $3 trillion (not billion, but trillion) worth of government bonds. In fact, as of December 31, 2013, the Department of the Treasury said these bonds were paying an interest rate of 3.626% and were worth 2,765,212,571 dollars (give or take a penny).

So why aren’t these bonds worth anything, according to the Republicans? Their idea seems to be that since the Trust Fund paid cash for those government bonds, and the government used that cash for various non-Social Security purposes like watering the White House lawn and paying Paul Ryan’s salary, the government has already spent the money in the Trust Fund. So it’s gone!

However, in the real world, when someone purchases a bond, whether the buyer is the Trust Fund or an individual investor, the bond pays interest (for example, 3.6%) and can eventually be redeemed (converted back into cash). That’s how investing in bonds works. Whatever the government did with the cash it got from the Trust Fund is irrelevant, so long as the government keeps paying interest and redeems its bonds when they mature.

The second “reason” they offer for saying all those bonds are worthless is that the government could stop paying interest on them and not redeem them when they mature. That’s what’s known as the U.S. government “defaulting” on its financial obligations.

As the Republicans say, the government’s ability to meet its obligations depends on raising revenue, either by taxing or borrowing (or selling stuff like national forests). But that’s what the government has been doing for more than 200 years. Is there any reason to think that the federal government will eventually become unable to pay its debts, including its debts to the Social Security Trust Fund? No, the United States is the richest country in the world. Investors all over the world, including foreign governments, believe our government’s bonds are very safe investments.

In fact, the only remotely likely scenario in which the government fails to pay its debts is if Republican extremists somehow manage to shut down the government again for an even longer period of time, which stops the government from levying taxes and selling more bonds! That’s what the Republicans recently threatened to do, many of them arguing that a government default wouldn’t be a very big deal. So on one hand, the Republicans claim to worry that the government won’t pay its debts to the Social Security Trust Fund, but on the other hand, they think it might be o.k. if the government didn’t pay its debts. (These people truly are amazing.)

The quotation above ends with the Republicans making the point that Social Security is running a deficit and the deficit is expected to get worse. That’s true, and that’s why raising the income cap would “theoretically” be a good idea. They then quote some testimony from the head of the Congressional Budget Office. I had to read that paragraph several times to see if it somehow supported the Republican contention that Social Security is in deep trouble. It doesn’t.

What the head of the CBO is saying is that Social Security is affecting the overall federal deficit now (since the government is paying what it owes to Social Security) and the Trust Fund itself will start running an annual deficit in about six years. What the Republicans don’t bother mentioning is that the Trust Fund is expected to have money in it until 2033 (and that’s if nothing is done in the meantime to put more money into the Trust Fund). Plus, even if the Trust Fund were to run out of money, Social Security would still pay about 75% of everyone’s promised benefit, since working people would still be paying Social Security taxes (reference here).

The Republicans go on to suggest limiting benefits for upper income Social Security beneficiaries (certainly a possibility) and hint that maybe the retirement age should be raised because people are living longer (which is a bad idea, because it wouldn’t save much money and lots of people – unlike politicians – can’t keep working or can’t find jobs by the time they reach 65 or so).

For all their fear-mongering, Ryan and his colleagues don’t offer a solution to this supposed crisis, except to suggest that the President go first by making some specific recommendations (which they can then use to attack him as an enemy of Social Security). The Republicans even suggest that benefits should be increased for low-income retirees (another good idea, but one more often made by us “tax and spend” Democrats). 

Michael Hiltzik thinks this budget document is evidence that Republicans don’t want the government to make good on its debt to Social Security:

When you hear people like Paul Ryan talk as though the country can’t afford to pay back the money by redeeming the bonds in the trust fund, what you’re hearing is the sound of the wealthy preparing to stiff the working class. If the income tax has to be raised to turn those T-bonds into cash for payment of benefits over the next couple of decades, that’s how the rich will be made to repay the people who lent them the money. Some people love to claim that the government has “stolen” the trust fund. The correct reply to that is: “Not yet.” But if Ryan has his way, yes, the money will be stolen. It’s up to you and me to make sure that doesn’t happen.

The idea would be, I guess, that if the Trust Fund doesn’t have any real money in it now, we won’t miss it when it’s gone. I’m not convinced that’s the Republican plan. But I’ve given up trying to understand whether people like Ryan are knaves (unscrupulous and dishonest) or fools or both. What’s clear is that their principal goal as politicians is to serve the needs of the wealthy. The surprising thing is that so many voters, in particular, the Tea Party types who don’t want the government messing with their Medicare or Social Security, continue to vote for the Plutocratic Party. 

For more on Social Security (if you can stand it), there was a recent article at Salon written by a so-called “Millennial”. He rejects what most of his generation believe: that Social Security will go bankrupt before the Millennials can collect any benefits. He also argues that it makes no sense to be a “social conservative and economic liberal”.

PS — Ryan Budget Gets 69 Percent of Its Cuts from Low-Income Programs

Take This Job and Keep It!

It appears that Congressional leaders and the President are nearing an agreement to end the government shutdown and raise the debt ceiling. Rational people will applaud this development, even if the agreement merely buys some time until our next crisis.  

Then there are people like Rep. Tim Huelskamp, Republican of Kansas. He is reported to have said: “Anybody who would vote for that in the House as a Republican would virtually guarantee a primary challenger.”

Let’s see. Vote to end the shutdown and raise the debt ceiling, thereby putting thousands of people back to work and avoiding a possible financial meltdown and worldwide recession, or have competition in next year’s primary election. That’s a tough choice, all right.

Rep. Heulskamp was first elected to Congress in 2010. Nobody ran against him in 2012, not in the primary and not in the general election. He has a well-paying government job for life and nobody’s going to take it away, whatever happens to the rest of us.

But he isn’t a key player here. He’s one of the Tea Party radicals who is sure to vote against any reasonable agreement. It’s the Speaker of the House and the so-called “moderate” Republicans who have to decide whether to protect the general welfare, even if it means risking their jobs.

http://www.nytimes.com/2013/10/15/us/politics/seeking-deal-to-avert-default-lawmakers-to-meet-obama.html

The Fire This Time

la-na-tt-republicans-blame-obama-20131006-001

More from political cartoonist David Horsey of the Los Angeles Times here:

http://www.latimes.com/opinion/topoftheticket/la-na-tt-republicans-blame-obama-20131006,0,2739790.story

Jonathan Chait’s conclusion to a thoughtful article in New York magazine:

In our Founders’ defense, it’s hard to design any political system strong enough to withstand a party as ideologically radical and epistemically closed as the contemporary GOP. (Its proximate casus belli—forestalling the onset of universal health insurance—is alien to every other major conservative party in the industrialized world.) The tea-party insurgents turn out to be right that the Obama era has seen a fundamental challenge to the constitutional order of American government. They were wrong about who was waging it.

http://nymag.com/news/politics/nationalinterest/government-shutdown-2013-10/

What Would Boehner Do? A Political Cartoonist’s Answer

The New York Times doesn’t do political cartoons, except the ones on Sunday by Brian McFadden:

{Unfortunately, the link is broken, but you can see the cartoon by going to the address below and then using the arrow on the right until you get to the one for October 6, 2013}

http://www.nytimes.com/slideshow/2012/07/08/opinion/sunday/the-strip.html#1

There’s a long article in the Times today about how the right-wingers have been planning this crisis for months. It might be too depressing to read the whole article, so here’s a brief quote:

A defunding “tool kit” created in early September included talking points for the question, “What happens when you shut down the government and you are blamed for it?” The suggested answer was the one House Republicans give today: “We are simply calling to fund the entire government except for the Affordable Care Act/Obamacare.”

Boehner was on television this morning, trying to explain his position:

“We’re not going to pass a clean debt limit increase,” the Ohio Republican said in a television interview. “I told the president, there’s no way we’re going to pass one. The votes are not in the House to pass a clean debt limit, and the president is risking default by not having a conversation with us.”

Of course, there are enough votes in the House to open the government and raise the debt limit, which is why Boehner won’t allow a vote to take place. And, of course, Obama had a meeting with Congressional leaders, including Boehner, a few days ago. Senate Democrats have been requesting budget negotiations with House Republicans for months, but the Republicans have refused to meet. What Boehner means when he says “having a conversation” is “giving into our demands”.

Pardon my French, but Boehner is what we used to call at work “a lying sack of shit”.  

http://www.nytimes.com/2013/10/06/us/a-federal-budget-crisis-months-in-the-planning.html?ref=politics

http://www.sfgate.com/news/politics/article/Weekend-in-Washington-yields-little-on-shutdown-4873299.php

P.S. – Pittsburgh 5, St. Louis 3. The Pirates now lead the 5-game series 2-1. It might be over tomorrow.

Professional Journalists Cover the Shutdown

Journalist Dan Froomkin, who has worked for the Washington Post and the Huffington Post, makes an excellent point about the responsibility of the press in situations like the government shutdown. The article is called “Shutdown Coverage Fails Americans”:

The political media’s aversion to doing anything that might be seen as taking sides — combined with its obsession with process — led them to actively obscure the truth in their coverage of the votes [in Congress]. If you did not already know what this was all about, reading the news would not help you understand.

Trying to be fair and balanced by splitting the difference between Democrats and Republicans when one side is doing something truly extreme is neither fair nor balanced.

Mr. Froomkin’s opinion piece is available at the link below and is definitely worth reading. It’s Al Jazeera America’s website. Al Jazeera, based in Qatar, recently started a news channel on American cable TV. It’s available in our area, but we would have to pay extra to watch it, even though CNN and Fox News are included in the package we already have. Based on the straightforward way they deliver news on their website, I’d rather get information from Al Jazeera America than CNN or Fox.

Note: At the end of his article, Mr. Froomkin puts in a plug for a new website he’s starting called “Fearless Media”, but that’s o.k. Self-promotion is an honorable American tradition.

http://america.aljazeera.com/articles/2013/10/1/reporting-governmentshutdowndemocracy.html

Nuts to You, Creep!

John Boehner represents the 8th congressional district of Ohio. It’s made up of suburbs and farmland and sits along the border with Indiana. The biggest city in the 8th district is Hamilton, with a population of 62,000. Republicans have represented Boehner’s district since 1939. He got elected in 1990 after he challenged the incumbent congressman, who had been convicted of paying a 16-year old girl $40 for sex. Boehner has been elected without significant opposition since then, twice with no opposition at all. 

This creep, who is now Speaker of the House, has decided to shut down much of the federal government in a vain attempt to interfere with implementation of the Affordable Care Act. Senate Democrats have been asking for negotiations on the 2014 budget for six months, but Boehner and his Republican colleagues decided it would make more sense to become extortionists. Go back and renegotiate Obamacare, you Democrats, or else we’ll send 800,000 Federal workers home, force another million to work without pay, close various government facilities and suspend programs like the Special Nutrition Program for Women, Infants and Children!

There’s common agreement that there are some relatively moderate Republicans who would join Democrats in voting to keep the government open, if Boehner allowed that simple vote to take place. But he hasn’t done that yet. He’s apparently terrified that he’s going to lose the support of the craziest Republicans and not be Speaker of the House anymore. He might even lose his seat in Congress to some Tea Party clown next time the Republicans in the 8th district go to the polls.

If Republicans who don’t represent places like the 8th district of Ohio were allowed to “vote their conscience” (something members of the House might want to do sometimes), this stupid shutdown wouldn’t be happening.

There are two good things about it, however. The Republicans look bad and might even lose some seats next year. And the Democrats are holding firm. If I were Senator Harry Reid or President Obama, my answer to Boehner would be a simple “Fuck you!”, or, a bit more politely, what General McAuliffe told the Germans when they demanded our surrender at the Battle of the Bulge: “Nuts!”

P.S. — For some history regarding the Republican concept of “negotiation”:

The Republican position has been clear for three years: they will refuse to negotiate if negotiation could mean having to give something up. But they will loudly demand a negotiation over something that is not open to compromise, namely a settled law from 2009…

http://takingnote.blogs.nytimes.com/2013/10/01/the-g-o-p-definition-of-negotiation/?hp