Obama Social Security Reform Ignores Data on Actual Living Standards of Seniors

This Real News Network segment does a very nice, compact job of explaining why chained CPI is such a disastrously bad policy for older Americans. I’m featuring it with the hope that it might prove useful in educating friends and family members who might not be up to speed on this issue.

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  1. JGordon

    So, when/if chained CPI goes through, I’ll be able to stop paying into Social Security, right? I mean, it’s only fair considering that it wouldn’t (and won’t) actually be around when I’m old.

    I have read that it is actually possible to opt out of Social Security. I’ll have to look into that.

    1. JB

      Besides the fact that you’ve been sold a bill of goods – since Social Security currently has a $2.5 trillion surplus and if payroll taxes remain current that surplus will not go away – are you a part of the 1% or on a military pension that you can afford NOT TO HAVE AN INCOME when you reach the age that no one will actually hire you?

    2. pws

      No. As an ideology Austerity means increasing taxes while eliminating (or rendering worthless) benefits. As the Social Security benefit is reduced, expect the Social Security tax to increase, as it just recently did just before these coming cuts.

  2. mojo.rhythm


    Not so. One of Ron Paul’s pillar campaign promises was to give people the option to leave the Social Security program. There isn’t really any point promising a policy if that policy already exists.

    1. William C

      It is much easier to deliver on a policy promise when that policy is already in place.This is something that here in the UK the politicians quite often use to their advantage in more obscure policy areas.It works as long as the media are compliant.

    2. JGordon

      Oh no, I definitely did look into it: all I have to do is become a priest of some sort and I’m exempt. Definitely worth considering.

    3. McMike

      Actually, you can opt out by entering government service. Many governments, teachers, and state cops participate in alternative retirement plans instead of SS.

      Then again, those funds will be underfunded, destroyed and raided eventually.

      1. Fed Employee

        Actually, not true for federal workers. In the mid-1980s, Civil Service for new fed hires was discontinued and about 4% of existing employees opted out of Civil Service as well. As a result, many if not most federal employees now pay fully into Social Security and will depend heavily on Social Security for retirement income. The new system covering most federal employees includes a defined benefit plan. When this system was devised, it was known that the benefits from this combination plan would be less generous than the old Civil Service plan.

    4. mac

      Ron Paul like many others who dream of being President can yap as he/they want but cannot do many things they yap about as the House and Senate must do them.

      1. Massinissa

        Lol Garret that made my day. I cant believe I never thought about saying that before. Good one man.

  3. from Mexico

    This study might help to flesh out some of what Teresa is talking about:

    “Poor experience higher inflation than rich”


    • Poorer households have experienced higher inflation on average than richer households over the past decade. This difference has been especially marked since 2008 (during the recession).

    • The poorest fifth of households faced an average annual inflation rate of 4.3% between 2008 and 2010, whilst the richest fifth experienced a rate of just 2.7% a year over the same period.

    • Pensioners, and in particular those dependant on state benefits, experienced higher rates of inflation than non-pensioners.

    1. harry

      Of course the poor experience higher inflation than the rich. The terms of trade has moved in favour of the rich – the value of the poors labour has been falling. Thus the cost of gardeners cooks, masseurs etc has been falling.

  4. Bruce Krasting

    Okay – the chained CPI is a bad idea. For the 60% of seniors who are dependent on benefit checks, this plan will hurt, that’s an unfair outcome.

    But what is plan B? I see only three:

    1) Increase payroll taxes for all workers about 2%.

    2) Raise the cap and change the benefit formula so that higher incomes do not get ever larger benefit checks.

    3) A means test that is based on both income and assets. This would substantially reduce or eliminate SS benefits for anyone with income of $200k and or assets in excess of $2m.

    #1 will not happen.

    So a combo of #2 and 3 seem to be the only options.

    A note to Progressives who love SS: If it is to be #2 and 3, then you can say goodbye to America’s love affair with SS. Socializing the program may be necessary, but it will also kill the popular support. SS will become a welfare check for those who did not save in their lives.

    I advocate a stiff means test. It would be cruel (and crazy) to starve seniors who do not have the financial resources. If you have $2m in the bank, no SS checks – period.

    1. washunate

      Bruce, what are you talking about? Can you show any data that Americans even understand that OASI and DI taxes are regressive, let alone that people like that?

      Quite the contrary, I would suggest that taxing all wage income at the same flat rate would be more popular than the current arrangement.

    2. Jim Haygood

      ‘So a combo of #2 and 3 seem to be the only options.’

      The old ‘false alternatives’ sales close …

      SocSec either can increase its investment earnings, or reduce its expenses with lower payouts (such as chained CPI).

      SocSec has considerable scope for increasing investment returns, since it is currently stuck in low-yielding Treasury notes (a subject Bruce Krasting has written about).

      ALL pension funds, including those for government employees, invest in a mix of equities and bonds. SocSec, with its antique, pre-CAPM 1935 design, does not. This is one of the great ironies of the US: it’s world’s leading financial innovator, yet hasn’t got round to incorporating Nobel Prize winning portfolio management insights from 50 years ago that form the basis of all modern pension investing.

      Unfortunately, politicians have zero interest in modernizing SocSec’s investment options for higher returns and more generous benefits. The reason is simple: SocSec’s trust fund contains no marketable assets whatsoever. Its non-marketable Treasuries only can be redeemed via fresh federal borrowing.

      To put it in plain words, the SocSec Trust Fund has been looted by a gross, simplistic accounting fraud carried out over decades. In comparison to that enormity, chained CPI is a mere penny-ante fiddle. It’s like remaining silent about losing your fortune to Bernie Madoff, then calling the cops because he stole your lawn ornament.

      Honor among thieves, comrades. When we’re dealing with proven fraudsters, the only question is what fresh abuse they have in mind for us. As beaten spouses are advised, don’t negotiate or plead. JUST LEAVE.

      1. Bruce Krasting

        Jim – If you think that SS should divert some of its holdings of Special Issue Treasury bonds to higher yielding private sector bonds or stocks, you are out on a limb.

        There is no way in hell that Wall Street will get a dime of the SS Trust Fund. There is next to zero support for this approach.

      2. jrs

        false alternatives but that 3rd alternative would be even worse. What can’t be considered I guess:

        1) raise income taxes, SS was borrowed from to fund the general government all these years, why not have the general government pay it back, it gets it revenue well from money printing and borrowing yes, but also from income taxes.
        2) reduce other government spending in order to better fund SS
        3) could some of that money banksters are getting (QE3) be used for SS instead?
        4) do something to get medical costs which are otherwise bankrupting the government under control – this is probably realistically socialized medicine. Even if we didn’t get that I would happily repeal Obamacare to fund a government program that unlike Obamacare actually works – that would be social security.
        5) I would choose a payroll tax increase over putting the money into Wall Street and means testing. I think raising the cap may backfire but in the exact same way means testing will. They are both the exact same thing, turning it into a welfare program. Interesting that what the original poster preferred is that which would hurt the middle class rather than that which would hurt rich wage/salary earners (of course the real wealth isn’t in working, we all know that).

        1. Don Levit

          None of those choices would have been necessary if the excess FICA taxes had remained in the trust fund. Treasury borrowed the money to pay for expenses to lower the deficits.
          Now, deficits have to be increased to redeem the bonds. It’s that simple.
          Government can be relied on to pay for current, annual expenses. It is not capable and/or willing to secure a fund for future purposes.
          Don Levit

          1. Min

            Crazy talk. Keep the Social Security money in the vault? What kind of insurance scheme is that?

            Or do you mean to imply that the U. S. will not honor its obligations to its own citizens? Give me a break!

        2. Shirley

          Support would matter only if we were in a democracy where votes counted. That’s somewhere else, maybe.
          They’ll do whatever they please now and figure out how to spin it later.

    3. DWD

      There really is a much simpler solution.

      Raise the cap on the taxing of earnings and impose a benefit cap as well.

      If you think about it this is just about the same thing as is happening now. The rich stop paying SS Taxes after 110K or whatever and the rest of their money is untaxed (at least for SS)

      So, remove the cap and impose a benefits cap at a comfortable level and use the excess to shore up the system.

      1. banger

        This is the obvious solution. And like all obvious solutions to any of the major problems we face it is completely out of the question. Everything has become political–by political I don’t mean the BS that the mainstream media covers but the muscular contests between various power groups that have real power which is, for the most part, various factions of the oligarchy. In other words, the real political struggles going on in Washington are not reported on at all by anyone not even the left-wing because most segments of the population believe that Machiavelli’s insights only applied to the ancients.

        1. jrs

          Yea I’m not sure to what extent rich wage/salary earners are really the oligarchy though. Remember only such income is ever subject to SS taxes (not interest, not capital gains, not dividends, not stock options etc.) Sure a lot of rich wage/salary earners have their cartels and government protections (written right into the law, it’s what has replaced unions, and that’s not a good thing) but still are those peole really “the oligarchy”? I’m not sure.

          1. banger

            I can best describe the oligarchy as a emergent network of, increasingly, international billionaires, their servants, assistants and agents. It consists, at the top of the senior executives of major banks, international organizations and so on along with senior members of the security establishment (no guns no power). There is a caste of people addicted to power and what it brings. Or to put it another way, there is no such thing as American Exceptionalism which means that history continues and history has always had oligarchs act and the rest of the people get ordered about or stand looking. We are far more powerless than we imagine because we imagine that “democracy” cannot be gamed. It’s taken awhile but it most assuredly has been gamed, in part, this is due to communication systems that no one imagined a couple of centuries ago.

        2. Valissa

          Yeah, but even if someone or some group got the brilliant idea of publishing something like “The Power Report” or “Modern Machiavellian Times” to explain the real power games going on behind the scenes, how long do you think it would be before they were closed down?

          1. banger

            Depends on whether or not it was threat. As things stand there is no threat so I think such pubs would be just fine. The sad part is that the authorities know that the public does not want to know the truth, in fact, practically begs to be told lies to avoid pain and cognitive dissonance.

            You probably know the old Emma Goldman quote “if voting changed anything, they’d make it illegal.”

            We just need to start with simple awareness and all else will flow–it’s like realizing and fully accepting that abuse went on in your family–only until you do that and work through it can you stop having your life run by the past.

          2. Valissa

            Anyone who wants to try and understand the deeper power games at work have to work at it. I think this has always been true. People have to do things like read books, and search out thoughtful bloggers who write the occasional good article explaining some particular power game. All of this takes time and energy and it also requires remodeling one’s worldview a bit. Realistically speaking, how many people are likely to do this?

          3. Valissa

            @banger, my own experience is that people do not want to know those kind of truths. When I decided to learn more about power and money, then got excited about this new level of awareness I had developed, guess what happened when I tried to tell my friends about it? I become very unpopular until I shut up about it, and even lost some friends (over time). It didn’t matter how carefully, politely, or nicely I tried to express it, it was a NO GO. And these are all very intelligent, well educated people.

            OTOH, the are organizations like STRATFOR that, for a hefty fee, will let you read their power oriented news articles. I learned a lot form them! I’m sure there are other subscription services that offer this material as well.

        3. Don Levit

          No, that solution solves nothing on a cash flow basis.
          As long as the Treasury borrows the trust funds to pay expenses and lower the deficits, the trust fund monies can be redeemed only with new general revenues, borrowing, extra taxes, or lower spending.
          That would be the case even if the trust fund was invested in stocks and bonds. Numbers are simply, numbers. They do not fund anything.
          Don Levit

          1. Nathanael

            Printing money is what funds government operations. They have big fat printing presses, in DC and elsewhere, which print the money. You can visit them.

      2. Bruce Krasting

        A viable solution. But ask Progressives if they would vote for this. They would not. It would convert the program they love into welfare. SS would lose the shield of “What you pay in – you get out”.

        This “solution” is exactly the opposite of the “Roosevelt dream” for SS.

        1. jrs

          So Progressives would not vote for it because for once in their life they’re not suicidal. Good. For once in their life they won’t trade a narrow gain for a systematic loss and think systematically. Good.

      3. TedWa

        Isn’t it amazing that this NEVER comes up in discussions of “saving” SS? It would be the most fair cut

    4. p fitzimon

      Another option is to figure out how to employ the 25 million unemployed so they can contribute to S.S. and Medicare. Return to a saner and fairer income distribution so that 2 trillion in income doesn’t escape the SS tax.
      The bonus that comes with this option is that we save at least $500 Billion in welfare per year and people have enough income so that they are not totally dependent on S.S.

      1. TedWa

        You sound naive : The rich don’t pay income taxes, they pay capital gains taxes at 15% and lower.

        1. Nathanael

          THANK YOU! I’ve been trying to get this fact across to people — most people simply don’t realize this. Even though it’s right there in your IRS Form 1040 instructions. (Most people don’t read them.)

          It’s nice to see someone else pointing this out.

          For reference, the extremely low rates on capital gains and dividends have not always existed. There were actually two years (1986-88 IIRC) when capital gains and dividends were taxed just like everything else. Before that, they were taxed less than anything else, but still at rates up to 45%.

      2. Yves Smith Post author

        Yes, the part that is always conveniently omitted is that the SS “problem” is the result of the lack of labor bargaining power. If we’d had companies sharing the benefits of productivity gains with workers as they had in the past, and hadn’ thad a GFC that in large measure resulted from that (policymakers using easy access to debt rather than wages to preserve the illusion of rising living standards), we wouldn’t have a problem worth discussing.

    5. mac

      A fine idea would be to get rid of all the talk that is maybe a bit true, drop all the politics and see what/if there is a problem outside those used to position for votes.

  5. Chris-Engel

    Bruce Krasting,

    I got news for you, Social Security is already a socialized program with popular support.

    Raise the cap, problem solved. Except it should be from 500K+, not 100-500K (on top of what it is already up to 100K).

    Let’s see it lose popular support because it only forces the super-rich to pay a bit more :)

    There’s already extensive support not just for the SS retirement but also the SS disability.

    People used to say the same thing when Nixon introduced SSI — “people will stop liking Social Security because you’re lumping in unpaid disability stuff!” — never happened, SS has still always retained 80+% support against any cuts or other reforms (the life expectancy catch-up excluded).

    The Social Security brand will never be broken, it will never be unpopular. We just need to turn it into a responsible, good program that supports tens of millions of Americans in varying forms and nobody will ever hate it except jerkoff plutocrats.

    Plus you throw in the fact that so many of the new disabled are the veterans our oligarchs sent off to war? It’s political suicide to go after anything in the Social Security brand, that’s why even Obama is getting heat from the mainstream.

    In the end, we need an expanded Social Security, a fund we just all chip into to help support those who lost the game of capitalism or have been screwed in general in the game of life. That’s how proper societies operate. You work and do well if you’re able, and if not, you get help. Of course there’s safeguards to prevent abuse, but in general in the countries that have the policy, people don’t choose to be jobless and get a guaranteed minimum income that’s just enough to cover the basics. So it’s what we should want and need anyway. And such a thing always has popular support because every American knows someone who’s touched by Social Security, so putting the word “cut” in the same sentence as that is automatically bad even if we expand it more.

    1. Carla

      “In the end, we need an expanded Social Security, a fund we just all chip into to help support those who lost the game of capitalism or have been screwed in general in the game of life. That’s how proper societies operate. You work and do well if you’re able, and if not, you get help.”

      This sounds so humane as to be Utopian, but I agree entirely. Why not just remove the cap on wages that pay the Social Security tax (because let’s face it, it is a tax) but cap the benefits at some suitable level for wealthy recipients so the well-off could continue to “buy-in” to the program and it would not be regarded as “welfare.”

      I’ll bet 70 percent of Americans would agree, and since they vote for their Representatives in Congress and that’s what really counts — Oh, wait.

    2. Bruce Krasting

      Chris – I agree with you when you say:

      “a fund we just all chip into to help support those who lost the game of capitalism or have been screwed in general in the game of life.”

      But please accept that when you say this, you are destroying the basic tenets of SS. You want to turn it into a program that supports those who did not get rich in the American Dream. Those that did benefit, have to pay (or not get any benefits).

      This is a plan that will end SS as we now know it. Try to sell your idea to Progressives like Dean Baker. He would not support you at all. I do support you – but I admit – I want to end SS as it is now configured. You can’t have it both ways.

      1. Chris-Engel

        We already fund SSI that carries the Social Security brand where the wealthy (who pay most taxes) are funding the disabled and invalid. The bottom 60-65% of SS recipients receive more in benefits than they have paid in. So, as I said, the taboo is already broken!

        SS is socialized, SSI has incorporated the Social Security brand, and people are still happy even though it’s a progressive social safety net program where we’re funding a disabled and other people who don’t pay into it.

        Dean Baker agrees with me 100%, as evidenced here:

        The shortfall that remains is equivalent to only about 0.6 percent of our GDP, which could be easily made up with common-sense solutions, such as applying the Social Security payroll tax to income above $113,700.


        I hope you weren’t being purposely dishonest by claiming that Dean Baker would not suggest making SS more progressive by taxing the wealthier more…

        tl;dr “The basic tenets of SS” have not been violated, it has been progressive for a looong time, and it still has retained massive support.

        1. jrs

          Eh no, the wealthy don’t fund SS. That’s partly why they’ve left it mostly alone until now. Wage/salary earners closer to the higher end of the SS tax fund SS while the wealthy go about not working for a living as always.

      2. jrs

        You probably could have it both ways. Keep SS as is, funded out of income taxes and start floating the idea of a guaranteed minimum income for anyone who falls between the cracks. The oligarchs play both sides afterall.

  6. washunate

    That does seem to be the common theme. Evidence about how the world works simply isn’t relevant, because the Administration isn’t making policy in the best interest of the public.

    It has also been interesting hearing discussions about this, because as an age group, seniors are the wealthiest Americans. Younger age groups are in even more trouble.

    1. john

      Many, many Seniors don’t have much money and even the ones who get a small pension often struggle to pay the bills.

      So the fact that seniors as a group have the most wealth in this country just shows how far our wages have gone down in the past 30 years and how much the rent extraction from us has gone up.

    2. Carla

      I know boomers who lost their jobs in the last 5 years and slipped from the middle class, and it is terrifying. They have spent down their savings, lost their homes, their cars are wearing out, they are hanging on by their finger-nails until they reach 62 and can get sharply reduced early Social Security BECAUSE THERE IS NOTHING ELSE FOR THEM.

      The luckier ones were in their 60s when the ax fell and have been able to wait until almost the full retirement age of 66 to get a Social Security check that a poor person could almost live on.

      The people making these policy decisions in Washington have absolutely no clue about what regular American citizens face in this economy. They are cruel, heartless, and their actions are indefensible.

      But our fearless leaders do know who they’re working for, and it AIN’T US.

      1. washunate

        yep, no argument here. What I think is taking time to sink in is that there are a lot of younger people who have never had a good job, never had savings, never had a pension, never had a house, don’t have a car, don’t have healthcare…

          1. Susan the other

            That’s a really good place to start. Just think if the pension funds had not been conned by their fund managers and the banksters all that money would be available to invest not just in their retirement but in the future. Pension funds could have invested directly in the future by funding scholarships, research, affordable housing projects, permaculture projects and various other green, long-term investments. Obama is simply up to his old tricks here. It definitely is not a question of “unintended consequences” with Obama suggesting it. He knows exactly what he is doing and he’s playing for an angle for the banksters to move in and middleman us all to death. Time will reveal the scheme I betcha.

          2. different clue

            Start by making visibly clear how many old are not very rich, and how many of them worked until they couldn’t work anymore. Try demonstrating the difference between “boomer” and “yuppie” and show how the MSM work to confuse that difference on purpose so that yuppie-envy can be re-engineered into boomer-hatred.

          3. Jessica

            Link pensions and education, two phases of life most of us go through and that most of us need help during.

        1. jrs

          It’s worse than that. I mean unless there are 10 year olds posting here, we’ll all never be kids again, and if we can support whatever kids we might have, we don’t think about it the way we think about our risky future old age. But as for the “Actual Living Standards of Seniors” it’s nothing compared to the living standard of children. Which makes me so sad I want to donate to a save the U.S. children fund. I don’t think children are any more valuable than seniors or vice versa, human life is valuable all throughout the lifespan or not at all. But it’s just so sad that children are going to bed hungry and having their entire lives ruined.

      2. Kokuanani

        Another nasty feature that no one seems to talk about is the “if you take SS early, you’ll get less, so wait until you’re 66 or 70 and get MORE.”

        The main people who can “wait until 70” and thus will get significantly more in benefits are those who a) don’t NEED social security; they can get by just fine from their other investments, working spouse, part time work themselves, and are just waiting for that jackpot @ 70; or b) have relatively easy jobs, so can continue to work until 70, again waiting for the “jackpot.” How easy is it for a mine worker, loading dock worker, waitress or other person involved in physical labor to hold out until 70 for that “bigger benefit”?

        This is just another FEATURE to assure that more money goes to the rich and undeserving.

      3. Otter

        Carla says: (April 13, 2013 at 8:52 am)
        “The people making these policy decisions in Washington have absolutely no clue about what regular American citizens face in this economy. They are cruel, heartless, and their actions are indefensible.”

        Which is it? They cannot be cruel and heartless unless they have a clue.

        Why does it matter whether they are ignorant, or heartless, or believe adversity is good for our souls? Their actions are not indefensible. They are hostile toward us.

        Lambert Strether says: (April 13, 2013 at 9:53 am)
        “How to make an alliance between young and old, that is the question….”

        Not the question… only one of many… for example, what else to do, as alternative, or supplement, while contemplating or pursuing an alliance?

    3. TK421

      “Evidence about how the world works simply isn’t relevant, because the Administration isn’t making policy in the best interest of the public.”

      That’s the bottom line, to me. Obama sucks.

  7. docG

    The most important thing to understand is that Social Security as it stands is a hugely unfair, highly regressive and in fact opressive tax on our lowest income citizens. Admittedly, it is better than nothing and I certainly would never advocate its elimination. But it’s badly in need of major reform. As I see it, chained CPI is, or ought to be, a relatively minor side issue.

    For one thing, if you are what is euphemistically referred to as an “independent contractor,” or a professional consultant, or author, or the owner-operator of a small business, or in many cases a temp worker, you wind up paying the full payroll tax, NOT just half — that’s 12.4 % of your earned income! And that is NOT subject to the sort of deductions that can be applied to income tax, you wind up paying the entire 12.4% regardless.

    Moreoever, it’s naive to assume employers don’t take their SS obligations into account when determining wages, so even when the employer is ostensibly contributing his 6.2% share, that too is in effect being taken out of the employees paycheck.

    On top of this, SS is a payroll tax, meaning income from anything other than wages and salaries, e.g., investment income, isn’t subject to the tax. And finally, there is a cap, protecting ALL income over and above roughly $110,000 from being taxed at all. In other words SS is in effect a poor tax, literally a tax on low income workers. And a hefty one.

    What we SHOULD be debating at this juncture, when the damaging effects of inequality are becoming increasingly obvious, are proposals to make this tax more progressive and more equable by: 1. raising or eliminating the cap; 2. including all forms of income, not just wages; 3. making the tax progressive, so the higher your income the higher the percentage you pay; 4. significantly increasing the monthy stipend.

    Reforms of this sort would have the effect of drastically lowering SS taxes for those with lower to moderate incomes, and placing the bulk of the burden on those who can afford it. It would also enable much higher monthly payments for all retirees, something badly needed in this age of what could be called “hidden inflation,” the skyrocketing cost of food, fuel, medications, health care, etc.

    When I read all the brouhaha over minor issues such as “chained CPI,” I cringe, because this tells us the meanest of the mean spirited conservatives have won, not because their reasoning is superior, but because they have succeeded in altering and in fact trivializing the terms of the debate itself. Classic misdirection — and as we can see from the above interview, it’s working.

    1. banger

      Indeed, any issue discussed in the mainstream media is either a lie of a matter of misdirection all to keep people from understanding the real nature of American politics. Issues are not “discussed” realistically in this country. The case and point was the health-care “debate” which featured a radical avoidance of facts, logic, science so it was easy to invent a square wheel when, in fact, various types of round wheels existed and have existed in other places for generations.

      I’ve noticed, in my country, that is someone comes up with a reasonable and elegant solution to a problem it is automatically ignored or savagely attacked as if actually bringing reason into the discussion is an act of treason.

      The culprits are the mainstream news outlets who are, at best, courtiers and at worst criminally negligent because they act as our information censors and set the discussion paramaters–even many in the “alternative” press accept the fundamental assumption promulgated by the mainstream and viciously exclude truly alternative narratives.

    2. petridish

      I was with you pretty much until your last paragraph. Chained CPI, the “grand bargain” and the push for “entitlement” reform is every bit as mean-spirited as you claim, but it is a PROGRESSIVE idea.

      Reread your “brouhaha.” Obama is trying to ram this down everyone’s throat and Obama is (ostensibly) on the “progressive” side.

      As James Carville said the other day, Obama is the guy who goes car shopping, and when told that the car costs $25,000 says I’ll give you $26,000.

      I never thought I’d say this, but I’m with the conservatives on this one. I fervently hope they hate Obama enough to block this “grand betrayal” but make no mistake, it is a PROGRESSIVE betrayal.

      1. scraping_by

        Obama and the rest of the Congressional Progressive Caucus are lifestyle liberals, taking ‘advanced’ positions on a handfull of private life wedge issues. They’re the Flaming Youth branch of the Washington Consensus.

        Not to be confused with social democrat, New Deal, humanitarian, economic progressives. Economics as if people mattered, money was made for man, not man for money. Government used to defend people from the money class. Some overlap, no causation.

        1. Nathanael

          Obama was never in the Congressional Progressive Caucus. He has never claimed to be a progressive. Well, that’s honest of him, because he’s not progressive.

          Some progressives were foolish enough to support Obama. The scales are falling off their eyes.

      2. rob

        Obama is not a progressive, and doesn’t play one on tv.He could in no way be confused as a progressive, as he has never done anything progressive.
        James carville is an establishment democratic voice who literally sleeps with the establishment republican voice.The faux two party trap is no better exemplified than by the carville/matlin household…Two schmucks who always seem to say something different ,yet go home to each other,share a bottle of wine,and who may or may not file taxes jointly.

    3. rob

      I agree that you have touched on the most important aspect of all .The shifting of perspective;away from what is important to that which is tangential.
      The points you make, would fix this problem.PERIOD.The fourth point of increased payouts would act as a stimulus.And would help the ‘quality of life factor’.Even if the third point were not to be included;the higher rates paid by higher income earners.The progressive taxation aspect.If your points that ALL income were subject to SS/medicare tax.Which really means all the higher incomes over 113,000@,and certainly on the really “high” incomes that aren’t called “earned” income.To cut through the crap and stop pretending people who make their livings doing different things should be subject to different taxes,would be a huge improvement.The soc.sec. problem would be solved.ANd as a society,america will be better off it it had a sense of security added to the population.

      For what is true, is that if there is a time for all this disinformation,which is now.Then there is a time to put everything on the table, and make things right.Which is now!

      1. different clue

        Well, perhaps successful prevention of CCPI would force discussion back to these other things.

      2. LifelongLib

        “people who make their livings doing different things”

        I agree, as long as you include “sitting on your ass while the dividends roll in” among those things.

    4. Carla

      “the meanest of the mean spirited conservatives have won, not because their reasoning is superior, but because they have succeeded in altering and in fact trivializing the terms of the debate itself”

      Thanks for a perfect description of the Obama presidency.

  8. Jim A

    Some state and local government employees are exempt from
    SS. But really, “SS won’t be around when I’m older” is a self fulfilling prophecy, NOT an actuarial inevitability. ISTR that the worst thing projected to happen to social security is that it might only be taking in enough money to pay out ~80% of currently promised benefits.

  9. clarence swinney

    I do not comprehend Gay Marriage.
    I am 88 and have met only on Gay person.
    Fowl and Fish do not have Gays.
    They mate Female/Male.
    I cannot comprehend me kissing another male no matter my love for him.
    I just do not understand 53% approving Gay Marriage.
    How can church pastors promote it?

    1. TK421

      Fowl and fish do not write on the internet, either. So what?

      “I am 88 and have met only on Gay person.”

      Irrelevant, and extremely unlikely.

    2. Lambert Strether

      if you’re not a troll, you need to get out more. And what’s this got to do with the thread?

      Adding… There are people who believe there is too much love in the world. I am not one of them.

    3. HotFlash

      Clarence, DOMA is not actually the topic at hand, but since you bring it up I have to tell you you are at most half right. Wiki article here https://en.wikipedia.org/wiki/Homosexuality_in_animals does not specifically refer to any documented homosexual behaviour in fish, but quoting
      Petter Bøckman, the scientific advisor of the exhibition Against Nature? in 2007

      “No species has been found in which homosexual behaviour has not been shown to exist, with the exception of species that never have sex at all, such as sea urchins and aphis. Moreover, a part of the animal kingdom is hermaphroditic, truly bisexual. For them, homosexuality is not an issue.”

      And gay giraffes — OMG!

      I doubt that another male would want to kiss you, either.

    4. scraping_by

      If you’re 88, you remember the young men wandering the country on the highways and especially on the trains during the Great Depression. They were looking for work in an economy that had little cash money, and everyone had to scramble for what their was.

      Social Security, like much of FDR’s New Deal, was about getting money into the hands of people who needed it and who’d spend it. Creating work for all these young men closer to home, so they didn’t have to go on the bum.

      By the way, we railroaders coined the term ‘bumfuck’ observing these young guys. There was a lot of sodomy in the hobo camps, not so much in the Hoovervilles. Long as they keep it among adults, I suggest live and let live. And keep Social Security keeping people alive.

    5. jrs

      That’s ok, we’ll defend to the death SS even for those seniors who hate teh gays, we’re nice like that.

    6. Massinissa

      “Fowl and Fish do not have gays”

      Untrue. There are gay flamingo’s. Gay Flamingo’s will do mating dances and form mating pairs with eachother, even though they cant reproduce.

      And why in gods name are you talking about homosexuality on an article about Social Security?

      1. NotTimothyGeithner

        “I cannot comprehend me kissing another male no matter my love for him.”

        Love between men is on his mind. Sooner or later these culture warriors reveal themselves.

  10. Theo

    This is a very clear exposition of the problem. I believe though there was some cost of living chicanery in the past, perhaps more than once (forget the administration), which I wish she had gone into as well, as it of course was a way to decrease benefits and did. The whole way COLA is measured is not an accurate reflection for any age group, much less the elderly. It has become just another way to keep wages down. As to her belief that this policy was not devised deliberately to hurt people (mostly women in this case), I disagree. Why must we forever give our “leaders” the benefit of the doubt. Whether due to narcissism, ideology, self-interest, lack of empathy or even full fledged psychopathy, they mean to do the things they do, and they do not care. It’s mentioned on digby’s site this morning that Obama loves to upset liberals. Why not? He is just another nasty conservative. That’s how they roll. If we know nothing else about this man, we know his incredible stubbornness and identification with the rich. I cringe now when I see photos of him with his chin held high as if daring us to knock it down and those where he is smiling broadly in the presence of Brennan and other psychopaths of the national security state (revelling in the power he now has over life and death? It is truly sick and a reflection of a sick country.

    Underpinning this latest Social Security chicanery, is the idea that citizens do not have the right to design collective solutions to collective needs with respect to global warming, education, health, retirement security, the environment, utilities, voting rights, women’s rights (including therapeutic abortionworkers’ rights, and the rights of so-called minorities and every other human need, free of rent seeking by corporations, is outrageous and turns common sense on its head. Yet our combined political class has been and is continuing to destroy the public sector and turn it lock, stock, and barrel over to corporations who are accountable to no one, not even their shareholders.

    This is off topic, but what Obama is doing re the environment and food and other biodiversity issues is criminal. Don’t we have enough proof to call him a psychopath? A high-functioning one that amends his behavior briefly to garner votes but then reverses himself. There isn’t a reason in the world for someone like that to look after the common good now or in the future. This was also true of his recent predecessors of both parties.

  11. Ché Pasa

    If I understand the Grand Scheme correctly — not saying I do, as it’s couched in all kinds of obfuscations — the idea is to link Chained CPI cuts at the higher end of SS benefits to significant increases in the lower-end benefits received by millions. Ie: bringing the lowest SS benefit level up to at least the poverty line for an individual — which means doubling or even tripling benefits (or more) in some cases.

    This will undoubtedly be marketed as “strengthening Social Security.”

    Of course it may never happen given the way these things work in Washington, and at this point, it’s not even being mentioned as a possibility in the mainstream, but it’s apparently part of the overall package of reforms being entertained among the ruling class as a way to make the benefit cuts and working and middle class tax increases that are fundamental to the agenda (as it were) more palatable to the restive masses.

    After everybody exhausts themselves on fighting the superlative CPI issue, I guess the plan is to introduce Strengthening and Improving SS by substantially increasing lower-end benefits — who could be opposed to that, right? — while cutting the higher end benefits “just a little” to make it possible… see?

    When Mark Shields opined on the NewsHour last night that poverty among the old had been reduced by 20% during the past decade while child poverty had increased 30% in the same time, and suggested that this is an untenable situation the answer to which was Chained CPI (among other things), it was obvious where this is going among the elites.

    Balance, don’t you know.

  12. clarence swinney

    The “Grand Bargain” is about hurting regular people (“shared sacrifice”) who have been sacrificing since Reagan. The rich have gotten tax cut after tax cut. Their corporations get breaks and subsidies. Wages have been stagnant since Reagan broke the unions, but prices have gone up. People used up their savings, then went into debt. Meanwhile government services for We the People have been cut, cut, cut. Our infrastructure is crumbling. Our transportation and electrical and other systems are just a mess. The safety net has collapsed. College has become unaffordable. Poverty is soaring and the middle class is disappearing.
    So now regular people have to “sacrifice” to pay off the money the government borrowed to give the rich their tax cuts and subsidies. That’s the “Grand Bargain” in a nutshell.
    The top 10% now own 73% Net Wealth—83% Financial Wealth—Get 43% Individual Income and pay 15% or less Tax Rate. We rank 4th on Inequality in OECD nations—We rank #1 in percent of workers earning a low wage—44 million earn minimum wage—46 million need Food Stamps..

  13. Capo Regime

    Spot on. As a retrieee and recovering economist I hear and take some interest in CPI estimates–all obfuscatory nonsense. For 20 years have been a board member in an organization which develops housing for seniors. Anecdotally, I like to talk with the residents (this is low and mod income) and they are more stressed and they simply cannot keep up–as it is the understated CPI has made it that they are poorer and poorer as their SS check grows 1.8% and inflation is really 7%, after 4 or 5 years the difference is palpable. They are already sicker, more stressed, eating more low nutrient staples and gettig out less. Lack of plazas or other public spaces keeps em isilated so that works well for the powers that be. The u.s. has become such an awful place for the vulnerable.

  14. petridish

    I suppose it’s too simplistic to suggest that we actually control inflation instead of expending so much energy deliberately and consistently finding creative ways to understate it.

    While we’re at it, we might also try making it possible again to actually save our own money toward retirement. But, of course, that would involve banks giving up their free money to earn their profits by paying interest to savers. I think that used to be called “the magic of compound interest.” (And it would require a job that provided enough income to support savings.)

    Never mind. Too simplistic.

    1. scraping_by

      Ah, Mythology. Greek, Roman, and Right Wing.

      Inflation can’t be entirely controlled. Ignoring the Milty Myth of being only demand-driven, even if we controlled the artificial causes (monopoly, speculation, sabotage, etc.) there would still be natural, uncontrollable causes. During a drought, the price of food’s going up even if we keep speculators from grabbing the whole harvest.

      The hope of creating a supply of capital that can generate interest to live on is a good story. But it’s not possible for anyone who lives paycheck to paycheck, and the neoliberal success of the last thirty years has put most wage earners in that category. Even those who get some put back never get to the magic number that keeps them for life. Most analyses for the automatic millionaire type have people saving and spending the same dollar, or having people only work and save.

      Throughout history, anyone who made it to an age past working have been supported by their children, their village, and/or their chieftan. Though those last two are pretty much the same. Not being villagers, we’ve gone with large bureaucratic substitutes for family and friends. Best we figure out how to do it right.

      1. jrs

        Maybe but give petredish a little more credit they did say “And it would require a job that provided enough income to support savings.”. Ie not your current job market and employment relations or one we have had for a few decades.

        The current system wants to screw people both ways. Constant yet again threats to cut the safety net and yet this will be followed with “well you should have saved more” and it will be followed in some people by an increased determination to save more, as they will reason it’s one thing they have control over (if they feel powerless over the current government, unless we get mass non-violent resistence, they are basically right), and yet the system is rigged to make that task near impossible as well. Not just “we’re not getting rich passively, like we should be! divine right of capitalist …” but more “it’s hard to even preserve the value of principle put away today for the future”.

    2. Nathanael

      Inflation is actually a good idea.

      Why? Hoarding money is bad. Using money in order to get people to actually build things, grow things, make things, and provide services, is good.

      This is putting it in the simplest possible way.

      You don’t want inflation to get so high that people give up on using money. But you want it to be high enough that people with money don’t just sit on the money and hoard it. You want it to be high enough that people’s debts slowly get easier to pay off.

      By the way? Right now, rich people are just sitting on their money and hoarding it.

      1. jrs

        “By the way? Right now, rich people are just sitting on their money and hoarding it.”

        Are they? Whose money is being speculated to drive up the stock market again? Little people’s 401ks? Maybe. What about all the investors and hedge funds that have now taken to buying up single family houses? (which is pretty absurd as far as investments – they are really not building businesses but buying rental units)

        See I don’t even kinda see the money being used for much that is productive anymore (half of the actual real productive investments in communities these days are almost charitable in nature), and I don’t think the rate of new business formation is great either. And yet money flows driving up stocks and housing and sometimes commodities etc.. That’s all it seems to do. This economy doesn’t seem capable of productive investment for return. Even when money doesn’t just sit in T-Bills.

  15. clarence swinney


    1945-1980, we taxed Wealth to pay down wwii debt.
    It will be necessary to pay down Conservative 16,000B Debt most incurred since 1980 by Conservatives.

    Reagan not Congress submitted 8 budgets
    Total-over 7000 Billion for 8 years.
    Prior 50 years we spent 6066 Billion
    Congress cut his total dollars requested by small amount.
    Reagan whined his budgets were dead on arrival
    All presidents budgets are adjusted in Congress.

    Carter last budget spent 575B and ended with a debt of 917B

    Reagan cut revenue by 750B across the board income tax cut.
    Larry Speakes his OMB director wrote in his book “Speaking out”
    the tax cut was a trojan horse to coverup Reagan 60% cut for the richest

    The 750B individual “income” tax cut increased “income” tax revenues by 140 Billion.
    That tax cut certainly did not pay for itself.

    Reagan Record
    Increased spending by 80%-deficits by 110% and debt by 189%
    He cut Carter 218,000 per month job growth by 24%

    Bush II
    Increased spending by 90% –debt by 112% (doubled)–deficit from surplus to 1400B
    Worst job creation since Hoover—31,000 per month—2 dumb wars–
    Since 1980 three Conservative presidents increased spending from 575B to 3500B(less wjc itsy bitsy)
    Deficit from surplus to 1400B—Debt from 1000B to 10,000B—Jobs from Carter 218,000 per month to 99,000. Initiated our involvement in 10 foreign conflicts.

  16. barrisj

    “Chained CPI”, SS “reform”, SS “going broke”, all of this is in aid of rebranding SS as an ENTITLEMENT, in the pejorative sense of the word – i.e., something for nothing, the “free lunch” connotation. Obama has signed onto this notion, and in fact making common cause with the Republican Right, who always have loathed the entire concept of an old-age state-sponsored pension. Hendrik Hertzberg had an excellent essay in the 8 April issue of the New Yorker on this very subject: the evolution of SS as “earned” into something akin to a “handout”. These are Reagan-Thatcher 80’s arguments about who is “deserving” and who is not, and The Mittster updated it with his “47%” bon mot; it’s a pernicious meme that even Tea Party seniors cashing their monthly check/automatic deposit have bought into, and is yet another Big Lie ploy to denigrate a social benefit and cause yet more divisiveness in an ever-fragmenting social order.

  17. Hugh

    The Social Security surpluses only ever existed on paper. The Chained CPI is the opening salvo to make sure in so far as is possible they stay that way. The surpluses represent a surtax on what was (because of the income caps and because so much of the income of the wealthy can be hidden, deferred, or converted into capital gains) already a highly regressive tax. They are money that was taken dumped into general revenues and spent.

    If the surpluses had never existed, we would still be facing the same funding gap in the next few years between Social Security outflows which was built into the system in the 1983 Social Security Reform Act. The trillions that American workers overpaid into Social Security over the last 30 years were in exchange for a promise to make good shortfalls in the system until around 2040.

    The government could have made the same promise even if there had not been a penny of surpluses, but then it would have not had all those free trillions to spend all those years and might have had to justify raising taxes overtly on workers and the middle class. Now that that promise is coming due, our political classes as a whole, Democrats and Republicans, are trying to welch on it. As I have written in the past, they are doing this for three reasons. First, money coming out of general revenues to cover shortfalls in Social Security receipts is money that the rich and our elites can’t loot or use to fund their imperial projects. Second, even with low tax rates and numerous dodges to reduce the income subject to them, because of the extreme wealth inequality in the country, the rich end up paying most of the taxes that end up as general revenue. This would result in the intolerable situation where money would flow from the rich to the 99% to cover the Social Security shortfalls. Third, equally intolerable and for the same reason, would be removing the income caps on the payroll tax and treating all income as the same for Social Security taxing purposes.

    1. Blurtman

      I agree with the welching part, but US Treasury bondholders may find it surprising to realize that the money is “not there” and therefore, will not be repaid. Corporate bondholders, as well, will be troubled to realize that the money “is not there” and therefore, they should have no expectation of repayment with interest.

      This whole argument of the Social Security surpus having been spent, and not being there, is aburd, and worthy of derision.

      1. Don Levit

        The money is not there. As explained previously, the excess FICA taxes were loaned to the Treasury to pay for current expenses, and lowered the deficits. To make the trust fund whole, the opposite will have to occur, raising the deficits.
        Please explain how the excess FICA taves can be 2 places at the same time.
        From a Fiscal Year 2008 Financial Report of the U.S. Government:
        P.33 “Each of the social insuramnce programs has an associated trust fund. The collection of earmarked taxes is CREDITED to the corresponding trust fund.
        If the collection from taxes and other sources exceed the payments to the beneficiaries, the excess is invested in Treasury securites or “loaned” to the Treasury’s generalfund. “THEREFORE, THE TRUST FUND BALANCES DO NOT REPRESENT CASH.”
        P. 96 “The government does not set aside assets to pay future benefits associated with earmarked funds. The cash receipts collected for an earmarked fund are deposited in the U.S. Treasury, which uses the cash for general purposes.”
        Don Levit

        1. Blurtman

          It is really a silly argument that I will not engage in, except to say that it is as much “there” as is the money owed to US Treasury holders, and as much as is the money owed to corporate bondholders.

  18. TedWa

    Social Security needs to be institutionalized again???

    Oh yea, TBTF is now institutionalized and there’s not enough room for both -says the Blankfein 1%



    Confirming my previous extended rant on Social Security and Chained CPI, that it is a deliberate policy in and of itself, and not even remotely anything any republican would touch with or without a 10ft pole: Grover Norquist has come out against Chained CPI as a tax increase, which means it is DOA for any beginning point of negotiations, much less a signal of anything other than a decision of the Executive Branch.

    “Americans for Tax Reform, the advocacy group that asks lawmakers to sign a formal “Taxpayer Protection Pledge,” said Tuesday that chained CPI violates the pledge.

    “Chained CPI as a stand-alone measure (that is, not paired with tax relief of equal or greater size) is a tax increase and a Taxpayer Protection Pledge violation,” the group said in a blog post.

    Anti-tax crusader Grover Norquist, leader of the organization, criticized the policy via Twitter on Wednesday. “Chained CPI is a very large tax hike over time,” Norquist wrote. “Hence Democrat interest in same.”

    The Congressional Budget Office estimates that chained CPI would reduce Social Security spending by $127 billion and increase tax revenue by $123 billion over 10 years.

    When asked Friday if chained CPI represents a tax hike on the middle class, White House spokesman Jay Carney said, “I’m not disputing that.”


  20. Eureka Springs

    Assuming for the moment we could end use of SS by the treasury for other purposes… Raising the minimum wage (thus increasing contributions to the fund and better/living returns later) to a living wage (18 an hour with single payer for all or 21.5 per hour with PPACA ha!) needs more consideration than just raising caps.

    Triple the minimum wage!

  21. kevinearick

    SS is already bankrupt, but keep pretending otherwise:

    Don’t Get Me Wrong

    I see… Of all the places I have been and all the people I have been around, it is the population of black homeless MEN in San Francisco that have afforded me the greatest respect and leeway to do what I have to do. And those little old ladies all dressed up with perfect make-up to match, I know they spent a lifetime going uphill against the current to put themselves together, stringing together one day at a time. And I see the guys who have no idea where they will be sleeping one night to the next, getting up at 5am to seek work everyday. And I see real homosexuals minding their own business, seeking companionship with which to share their lives. I see everyone who gets up everyday and makes the world just a little bit better than it was yesterday, because that is all that may be reasonably expected. Most of all, I see those who, by no fault of their own, are dealt the worst hand in the deck and make something out of what little God has given them in the form of common sense. The Warren Buffets, Gavin Newsoms, and Jean Quans are actors, on a treadmill to nowhere, to be replaced by the next vacant souls, on the same treadmill.

    My job is not to topple the empire, which will simply be replaced by the next mob and the next mayor that wants to get out in front of the parade. And it is not to pull back the curtain, so everyone can admonish everyone else for participating. My job is push back on the darkness that is the shadow of the empire, to make it just a little bit easier for everyday folks to get on with their day, so that the economy can regenerate, so kids can be kids. The majority does not raise family. The minority does. And it is from the bottom that they must climb to do so. Yes, many choose to forget where they came from, along with all of those who made their climb possible. I am not one of them.

    If you want to do something useful, keep pushing on the new currencies. Of course the JPMs of the world will lie, cheat, steal and kill to maintain their positions. Unless you want to do so better than they, let it go. I told you that the bear market in gold was coming. It didn’t take rocket science to look at the data objectively. Until legacy family banking law is dismantled, the global economy will continue to implode. When it is dismantled, labor will inject the necessary technology. The new currencies prevailing at the time will be the beneficiaries. Always have a three currency set, with associated bond to stock distribution, one legacy currency, PM, and one new currency to trade through, with your own unique algorithm so that the robot algorithms can’t see it, and don’t spend any more than 10% of your much more valuable time on this empire market stupidity. Get on with your life. That is the point, and it is that which the empire does not want you to see. The Chinese Railroad Company is not going anywhere, except to vacant cities filled with vacant souls.

    Until you change that first diaper, and realize that you are responsible to God for the life of another, you have no f-ing idea what life is about, and neither does the majority surrounding you. Until that time you just have to have faith in yourself. I don’t know what else to tell you. There is something your community requires that only you can deliver. Figure it out. I am a laborer and I know my function. What is yours?

    If you are a kid, don’t come to my elevator and tell me you want a job. Tell me what your function is and I will take you to your floor. I don’t need a female that can f-. They are everywhere. I need a grown woman who can carry her share of the load with grace and dignity. And if you “think” you can build better economic kernels than I can, come out here in the real world and show me, with something more than a mouthful of best business practice marbles placed there by empire propagandists. I’m old, I’m tired, I have scarce patience for b-lsh-, and you will find that my kind are all alike, which is why we serve you a double at 5am, to see if you can stand on your own two feet, before we load you up for the journey. If you want a known destination before you begin, a plan for your life, go work for corporate – public, private or non-profit, it doesn’t matter, and neither will you.

    It’s how you spend your time, not how you make your money. It’s your priorities that determine your outcomes. Only an empire fool thinks it takes money to make money, in pointless enterprise. Love is distilled forward; everything else is a sunk cost. Don’t waste your time on make-work in a make-believe empire world and expect anything other than to get recycled yourself. Kids don’t need Mr Buffet’s financial advice. They need parents. And, sooner or later, you are going to need them. Pension promises are pension promises, nothing more, to be inflated away at the discretion of capital. The majority always learns the hard way, when it’s too late. This time will be no different than any other time, and the majority will cry, like every other time, that they never saw it coming.

    The train to the future waits for no one, but it is always at your station if you build it. Get off the ground, or expect to part of the short.

    1. Nathanael

      Social Security has as much money as it will ever need.

      It will only be bankrupt if the politicians loot the trust fund.

      1. Don Levit

        So you would define loaning the entire trust fund to pay for other expenses, lowering the deficits, not looting the fund?
        What is your definition of the politicians looting the fund?
        Do you think because the money was borrowed that the promise to repay means the money was what, not spent for expenses other than Social Security beneficiaries?
        Don Levit

        1. kevinearick


          SS is already bankrupt. That money is coming from people currently earning it, who are rapidly learning how to escape the system with acceleration;

          The kid in NK has figured out, although not entirely, that if he installs a random algorithm, the anti-missile guidance systems will do his work for him to deliver the warhead;

          and, not only, but also,

          just after the security guy escalates the electronic warfare game by demonstrating an app to take over flights through the autopilot program, a brand spanking new Boeing 737 goes in the drink.

          It’s looking more and more like an asymmetric WWIII everyday, where you too can participate, on your own side. Crack me the f- up.

        2. LucyLulu

          I borrowed money from my bank to buy my home. I only wish I could have looted my bank instead.

          borrow != loot, as borrow implies the need to repay

          I believe this has been explained before. SS law has always required that any surplus FICA revenues be loaned to the US Treasury to be used for general revenues and replaced with interest bearing bonds backed by the full faith and credit of the US government. It also requires that SS be independent and self-sustaining. Funds can not used for purposes other than paying benefits (and administrative costs), nor can general revenues be used to pay benefits. Until and unless Congress passes new legislation, this is the law. Got it?

          1. LucyLulu

            I spoze we could declare that we are defaulting on the bonds in the trust fund. I suspect the markets would not respond kindly, causing our 1% corporate elite to become agitated.

            ………Alternatively we could default on the T-bills owned by private citizens, equally backed by the full faith and credit of the US govt. We could thus eliminate the majority (80% IIRC) of our national debt instead of $2.5 trillion.

            Just imagine, we could shave $10 trillion off our debt immediately! Makes $4 trillion over 10 years sound like raiding a child’s piggybank. Wouldn’t that make deficit hawks happy?

        3. Eric377

          Don, for goodness sakes man, the assets of the Trust Fund are bonds and notes. What leads you to imagine that the redemption of these debt assets is an insecure prospect. Think about it for even 10 seconds: the only reason to suggest something like chained CPI cost of living adjustments is precisely because their is unanimity that the Trust Fund assets will be redeemed fully. The obvious intention with this is to stretch the time over which the Trust Fund assets will be redeemed. even those with a strong financial interest in avoiding the general taxes needed to redeem these debts fish around for these ploys precisely since there is no chance that simply reneging on the bonds and notes would ever be acceptable to the nation.

          1. Don Levit

            I am not a prophet. I cannot predict if the bonds will be redeemed. But I can say with certainty that if they are redeemed, they will be redeemed with new general revenues (or their equivalent), raising the deficits. This is exactly what FDR did not want to occur – he did not want general revenues to be part of a separate self-sustaining fund. There is a difference between the excess taxes remaining in the fund versus their being lent to the Treasury to pay for other expenses. The difference is that instead of simply liquidating the pre-paid, intact trust fund, new general revenues must be raised to liquidate the fund. The difference is denoted in the very type of entity the trust fund represents – intragovernmental debt, not intragovernmental equity. Remember, the trust fund does not represent cash – those are not my words, but come from the 2008 report I cited.
            Don Levit

          2. different clue

            In theory, the SS bonds could be redeemed by raising general-budget taxes back to pre-taxcut levels rather than by selling yet more and other government debt instruments, could they not? At least in theory? (politics aside . . )

  22. financial matters

    To add what I would consider an MMT approach to this problem..

    excerpts from ‘Modern Money Theory: A Primer on Macroeconomics for Sovereign Monetary Systems” by L. Randall Wray

    “”President Obama frequently asserted throughout 2010 that the US government was ‘running out of money’, like a household that had spent all the money it had saved in a cookie jar”

    “Chairman Benanke was actually grilled about where he obtained all the ‘money’ to buy all those QE bonds from the banks. He (correctly) stated that the Fed simply created it by crediting bank reserves – through keystrokes.”

    “Monetary and fiscal policy can operate with combined force: deficits and net money creation when unemployment exists; surpluses and net money destruction when at full employment”

    “Government should use its budget to achieve what it perceives to be in the public purpose”

    Its hard to see problems with a good social security program as this would help alleviate financial inequalities and most of this money would be spent back into the real economy. I think the worst thing would be to let the financial system get it hands on this money in any way.

    The medical system is a different kettle of fish with many of the problems being caused by the insurance part of the FIRE sector. Here I think a transparent single payer would go a long way to cutting the many abuses and inefficiencies.

    1. Don Levit

      I assume you are tying in tie federal government’s ability to create infinite amounts of money to the solvency of the Social Security trust fund.
      There really is no logical response to that other than IF what you say is true, you are correct.
      Traditionally, the full faith and credit of the dollar was based on our history of excellence and our goodwill.
      Now, if you are saying the full faith and credit is based on the abiity to emit keystrokes, I would say that is a shallow, and very shaky foundation for full faith and credit.
      Don Levit

      1. financial matters

        Yes, agree completely. That’s why I mentioned inefficiencies in the medical system. The money has to be spent wisely.

        There are real limits to money creation such as inflation and currency exchange problems. But there seems to be a lot of policy space especially under conditions of less than full employment to put the money to better use than asset appreciation.

      2. lambert strether

        Based on the ability of the government to collect taxes, which gives value to fiat money. Of course, if the government is completely dysfunctional, and cannot collect taxes, fiat money has no value. As indeed it should not. Ergo, drowning government in a bathtub would destroy the dollar. Stupid conservatives (among whom I include Obama, who is drowning government in a bathtub, except with rhetoric like a “balanced approach”).

    2. Don Levit

      I get the part about the deficits and surpluses. It’s just that regarding surpluses, we have had 3 tiny surpluses in the last 45 years. The deficit theory has been overused to the point it makes no sense.
      Don Levit

      1. financial matters

        Deficits are just the origin of money. It’s where the money comes from for taxes and private savings. The ‘correct’ deficit would be the one that achieves full employment.

        Much of the deficit worry has to do with the self imposed political construct of a debt ceiling rather than real market forces of inflation and currency exchange.

        Sovereign governments have come to believe that they really cannot ‘afford’ to undertake desired policy as they might become insolvent.

        Or on a more cynical note they want the public to believe this as it is easy to view a sovereign budget as similar to a household budget although one is a currency producer and the other a currency user.

        1. Don Levit

          Deficits are the origin of money. The correct deficit achieves full employment.
          You seem to be granting excessive power to deficits.
          Whatever happened to American ingenuity and excess capital being the source and implementation of our productivity?
          Don Levit

          1. financial matters

            Unfortunately it seems that a lot of our ingenuity went into financial engineering lured by very high salaries and bonuses.

            Tax advantages to rentiers helped foster capital gains being much more lucrative than profits. Productive business was overun by leveraged buyouts which channeled profits into debt service looking to increase stock price rather than into new capital investment oriented toward better profits and wages. These new financially oriented CEOs also squeezed wages and raided pension funds leaving much of the industrial wasteland that we have today.

            Free markets are only free to the extent that we are letting central banks and the financial sector call the tune. I think most of the electorate would like to hear some different music.

  23. Bart Fargo

    If Republican obstructionism steps in to do some rare good by blocking Obomber’s plans, then it seems the best we can hope for is that Obama will get electrocuted by the court of public opinion for pissing on the third rail of American politics. Actually, scratch that, I hope he gets his junk blown clear off by a bolt of white-hot high-voltage electricity. The 1% keep that part of Obama in their back pocket anyway, and so if he loses his current pair maybe he’ll be forced to grow back a real set. Or else he’ll just be rendered less violent and greedy, like a neutered animal.

    1. jrs

      Even the Obama fans are beginning to see the harm he does. A day late and a dollar short. Why do you think I went through the whole election season grumpy Obama – Romney – Obama – Romney – F THE WORLD!!! The late awakening would be welcomed if I’m sure it would last, but no probably they’ll be all lined up for Hillary without a bit of skepticism next.

  24. kievite

    This time Real News just circulate hot air. The only relevant fact is that this measure will disproportionally hurt women.

    But I do not see any figures about what kind of damage we are taking about in comparison with the current method, 1% a year or 0.5% a year or 0.01% a year.

    So the question is: if a person retired in 2000 and got 30K a year SS, what will his/her pension in 2013 with the current method and with chained CPI.

    I heard that the damage will be around $83 a year for those who get initial 30K a year SS pension or 0.3% a year cut.

    I wonder is this true?

    1. jrs

      AARP says in 30 years it will be like losing one month of SS checks a year, so 8 and 1/3rd percent. Of course I could easily see the damage being worse, because government numbers are so slippery to begin with and it’s a choice to switch over to an even more slippery system than currently being used.

  25. traveler

    In L.A. it’s already like the Great Betrayal never happened. Unbelievable! Or maybe not. The Obots/Democratic Party true believers have the attention spans of gnats.

  26. Dave

    Oh come on people! Of course we have to cut SS…… we have to pay for the trillions we gave to Wall Street somehow. I am just happy my good looking Prez with the proper racial make up is doing me like this. It would have REALLY sucked if it had been some old white dude!

    1. beene

      Perhaps not, when you figure all those who died early because of health problems, accidents, or wars; plus we really need to support crony capitalism as it’s such a winning system for the nation. It taken the nation from the greatest creditor to the greatest debtor nation in only forty-three years.

      Remember, not only did you and I contribute to Social Security but your employer did, too. It totaled 15% of your income before taxes. If you averaged only $30K over your working life, that’s close to $220,500. Read that again. Did you see where the Government paid in one single penny? We are talking about the money you and your employer put in a Government bank to insure you and I that we would have a retirement check from the money we put in, not the Government. Now they are calling the money we put in an entitlement when we reach the age to take it back. If you calculate the future invested value of $4,500 per year (yours & your employer’s contribution) at a simple 5% interest (less than what the govt. pays on the money that it borrows), after 49 years of working you’d have $892,919.98.

      If you took out only 3% per year, you’d receive $26,787.60 per year and it would last better than 30 years (until you’re 95 if you retire at age 65) and that’s with no interest paid on that final amount on deposit! If you bought an annuity and it paid 4% per year, you’d have a lifetime income of $2,976.40 per month.

      1. Don Levit

        If you are suggesting that the government should have been more of a fiduciary for the funds, carefully safeguarding the principal and growth, I agree with you.
        Unfortunately, the FASAB, the accounting advisor for the federal government, views it a bit differently.
        From a paper entitled “Accounting for Social Insurance, Revised, Oct. 23, 2006:”
        Page 85 “Social insurance is not an employee benefit. The accounting methods for employee retirement benefits reflect the fact that employees voluntarily exchange lower wages during their working years to receive certain future benefits. Such an exchange does not occur with social insurance benefits.”
        Page 87 “A nonexchange transaction arises when one party receives value without directly giving or promising value in return. In regards to social insurance benefits the federal government gives value to beneficiaries without receiving value in return. The fact that benefits paid are not based on the amount of taxes paid confirms the nonexchange nature of social insurance.”
        Wow, it sounds like the federal government is doing us a “favor” by providing Social Security benefits in return for our contributions!
        Click on Exposure Drafts and Documents for Comment
        Don Levit

  27. LAS

    While the rich get compound interest and lower tax rates, the captive workers of America get get compound losses on their Social Security pensions and little/no opportunity of any other pension. It really is a simple and infuriating trade-off.

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