And can the White House and Congress be trusted?
With the upcoming "sequester" in two weeks, there will be majorcuts to our safety nets. Howard Dean, the Democratic Party leader who once ranfor president, says the sequester is a "good thing", because for thefirst time in a very long time, it also allows us to cut defense spending. (Trytelling that to the poor, disabled and elderly.)
Will food stamps be traded for submarines? Will Medicaid be traded for themassive layoff of military personal? And even despite the fact that the mostvulnerable among us would be brutally harmed by these cuts? The CEOs in thedefense industry won't suffer much...if at all.
TheFederal Times reported that an analysis by the Project on GovernmentOversight found that the average compensation package of a CEO for the topfive Pentagon contractors is about $21.5 million. What "sharedsacrifice" will they have to make when millions of Americans are laid offfrom their jobs?
Most voters across the entire political spectrum oppose cuts to Medicare,Medicaid, and Social Security benefits. All polls show this. Obama ran on this.And all the Democrats in congress claimed they would protect theseprograms...that is, before the last election
President Obama just said in his State of the Union address, "Wereject the belief that America must choose between caring for the generationthat built this country and investing in the generation that will build itsfuture." But yet he also believes that COLAS for Social Security anddisability recipients should also be on the table?
When Obama won re-election, it was because of his promises not to cutMedicare, Medicaid, or Social Security benefits -- including raising theretirement age -- or cutting the cost of living adjustments. Over a million morevoters than Mitt Romney had agreed with President Obama, and that's why theyjust voted for him.
Now our newly re-elected president sounds like he's caving. I'vebeen getting petitions in my IN box every day, asking Obama and theDemocrats to NOT compromise with the Republicans on ANY cuts to Medicare,Medicaid, and Social Security --- especially forthose who have already made the most "shared sacrifices" duringthe Great Recession.
Show me the money!
As of two years ago, theSocial Security Trust Fund was supposed to have $2.6 trillion, according tothe Social Security trustees. So why is there an immediate plan to start cuttinghere? The trustees also said that the combined assets of the Old-Age &Survivors Insurance and the Disability Insurance Trust Funds (OASDI)will be exhausted by 2033 (a conflicting report says Social Security retirementbenefits could be exhausted by 2025.)
President Obama’s budget director at the time, JackLew, had explained in USA Today that “Social Security benefits areentirely self-financing. They are paid for with payroll taxes collected fromworkers and their employers throughout their careers. These taxes are placed ina trust fund dedicated to paying benefits owed to current and futurebeneficiaries."
He said that "even though Social Security began collecting less in taxesthan it paid in benefits in 2010, the trust fund will continue to accrueinterest and grow until 2025, and will have adequate resources to pay fullbenefits for the next 26 years.”
But for me, this is the most immediate and most disturbing: The trustees alsoprojected the exhaustionof the Disability Insurance program in 2016. The trustees say that "theDI program faces the most immediate financing shortfall of any of the separateSocial Security trust funds; thus lawmakers need to act soon to avoid reducedpayments to DI."
With an aging population, the spike in disability claims is something that mustbe addressed very soon, or many of theBaby Boomers will be SOL.
Jack Lew explains that "for years, the surpluses in the Social Securitytrust fund have helped to mask our deficits elsewhere. Now that we are payingSocial Security back, the problem is not with Social Security, but with the restof the budget."
In 2001 and 2003 we had the Bush tax cuts for the wealthiest Americans; andlater Medicare was expanded without paying for it. Not to mention two unpaidwars that accomplished...
what?
Lew said that "blaming Social Security for our fiscal woes is likeblaming you for not saving enough in your checking account because the bank lostall depositors' money. The problem is not Social Security; the problem is themismatch between outlays and revenues in the rest of the budget. Closing thatgap and paying down our debt will take tough choices, and the president's budgetmakes them. Strengthening Social Security is an important, but parallel, issuethat needs to be addressed as quickly as possible. But let's not confuse it aseither the cause of or a solution to our short-term fiscal problems."
What did he mean by "tough choices"? For who? What did he mean"strengthening" Social Security? That sounds like something right outof the Republican play book.
The Republican rebuttal to Lew
Fox News' CharlesKrauthammer strongly disagreed with Lew and said, "The Social Securitytrust fund is a fiction. In other words, the Social Security trust fund containsnothing.”
Krauthammer asserts that "when your FICA tax is taken out of yourpaycheck, it does not get squirreled away in some lockbox in West Virginia whereit's kept until you and your contemporaries retire. Most goes out immediately topay current retirees, and the rest goes to the U.S. Treasury and is spent --- onroads, bridges, national defense, public television, whatever --- spent,gone."
He says those promises are like worthless pieces of paper, like I.O.U.s, andare nothing more than "claims on the Treasury" --- and that currentSocial Security benefits come from taxes and borrowing during the fiscal year.
So who do we believe? Supposedly the Social Security Trustees (under allpolitical administrations) have all been telling us the same thing...thatthere's a lock box somewhere (just like there's still gold in Fort Knox).
But even so, Social Security revenues have declined during the economicdownturn, because fewer people were working; so the government has been payingout more in benefits than it has been taking in, and hence needing additionalfederal revenues.
Forbes agreeswith Krauthammer, and says "the federal government has borrowed all ofthat trust fund money and spent it, exactly as Krauthammer asserted. And theonly way the trust fund can get some cash to pay Social Security benefits is ifthe federal government draws it from general revenues --- or borrows the money--- which, of course, it can’t do because of the debt ceiling."
Forbes also says that "if the budget crisis has done nothing else, it hasexposed the decades-long lie about the solvency of the Social Security trustfund. The trust fund may be backed by the 'full faith and credit of the federalgovernment', but did not hold any real assets."
Is this why the Republicans want more cuts to Social Security, and why Obama andthe Democrats just "appear" to want to save it?
The Social Security Administration says that "over the 75-year period, theTrust Funds would require additional revenue equivalent to $6.5 trillion inpresent value dollars to pay for all scheduled benefits." That would equateto $90.2 billion a year for the next 75 years.
A fair remedy
Currently, there is a staggering $1trillion in personal income that escapes Social Security taxes every year,partly because of the $113,000 "cap" on someone's annual income. Maybeif members of congress eliminated the $113,000 "cap" on SocialSecurity taxes for the very wealthy, and then just tax everyone 6.2percent on 100% of their total annual income, we wouldn't be having thisdiscussion about shortfalls in the Social Security Trust Fund.
Instead of allowing for more tax evasion with Swiss bank accounts and dummycorporations in the Cayman Islands, and members of congress caving in to theinterests of big business through lobbyists who advocate against a fair minimumwage, and allowing for the ridiculously low tax rates on capital gains --- maybethen congress could fairly tax the wealthy to fully fund the Social SecurityTrust Fund.
Also, if people earned better wages, they could also pay more into the SocialSecurity Trust Fund. Obama wants to raise the federal minimum wage to $9 perhour and peg it to inflation. John Boehner says, "When you raise theprice of employment, guess what happens? You get less of it." (Although20 years of studies by various economists have never made that correlation.)
Boehner and the Republicans also likes to parrot, "We don't have arevenue problem, we have a spending problem." He and all theRepublicans have always thought that spending on Medicare, Medicaid, and SocialSecurity was "a problem".
What probably concerns House Republicans, as well as the business lobby, mostabout Obama's proposal is not just the nominal minimum wage hike. It'sthe inclusion of a cost-of-living adjustment, which would tweak the minimum wageeach year to adjust for inflation. This would guarantee that workers on thelowest rung of the economic ladder don't lose purchasing power. It would alsomean fast-food companies like McDonalds and other low-wage employers likeWalmart would have to pay higher wages every year if there's higherinflation.
And with a raise, these American workers would also be paying more in federaland Medicare taxes too. That's why off-shoring jobs to places like China, to paypeople in China, only enriches the Chinese economy and China's national treasuryat the expense of ours.
But the Republicans may try to give Democrats some kind of wiggle room in theminimum wage debate, by "compromising" with them on the cost-of-livingpart of the package. But if that happens, then working Americans will only seetheir purchasing power declining again, year after year, just like it has fordecades.
Old People
We also have to worry about how congress wants to treat our elderly with theircost-of-living adjustments to Social Security and disability benefits.
Just recently the White House press secretary said that thepresident would be open to reducing Social Security's benefit structure aspart of a 'big deal' to avert sequestration. That proposal, known as chainedCPI, would alter the annual adjustment in how benefits are paid to SocialSecurity recipients, by using a less generous calculation of inflation.
In general, the Democrats (excluding most in the Progressive Caucus)are also now saying that by usingchained CPI we are able to reduce the Social Security cost-of-livingadjustments, which rises more slowly than regular CPI, because they probablythink that accounts for the way our elderly switches to pet food when theprice of people food rises.
Are the $174,000 annual congressional salaries also calculated in this wayevery year? Or did they get that fat all my themselves?
Is any 401k or pension fund really safe?
Because of the massive amounts of money allocated to pension funds, they arealways a ripe target for theft. Union bosses in the 70's were caught skimmingwhen the Mafia was once involved with the labor unions. And Bernie Madoff's PonziScheme instantly comes to mind too, but there are many others. Some arguethat the Social Security Trust Fund is such a scheme, but is it really? Ifor one certainly can't say.
The Republicans have always wanted to privatize Social Security, but most ofus aren't hedge fund managers or stock brokers, and couldn't possibly know howto properly manage a stock portfolio. Most of us feel safer and more comfortablewith having it automatically deducted from our paychecks...and kept in agovernment "lock box" called the Social Security Trust Fund(because, after all, it can be "trusted", right?)
But if our money isn't safe with the government, think again about trustingyour money with a money manager.
Institutional money is deeply tied up in hedge funds, and many are tied toour pensions. But whose interests do the CEOs and other corporate directorsreally have at heart? How many boards do they sit on simultaneously, and do theysit alongside other directors who are also serving on the same multiple boards?
Consider the two Bear Stearns funds that collapsed in the summer of 2007and served as harbingers of the eventual financial crisis. They shared not onlythe same fund managers, but also independent directors --- in this case, bothprofessional independent directors --- meaning they were affiliated with afinancial services company.
By way of the Mapping ShadowInfluence Project, according to the Foundationfor Fund Governance database, one of these directors from Bear Stearnscurrently sits on the boards of 120 other funds --- and the other sits on38.
Both directors were cited by U.S. courts for not performing their oversightduties adequately by approving 165 trades with other Bear Stearnsfunds... after those trades already happened. The trades allegedly allowed the BearStearns fund to hide investor's losses
According to the most recent data, both directors sat on funds with U.S. publicpension money invested between them and at least seven others --- including the PennsylvaniaPublic School Employees Retirement System, the Fairfax County RetirementSystem, and the California Public Employees Retirement System. Thedirectors serve together on several of these funds.
Indeed, many independent directors hold multiple directorships, sometimesnumbering in the hundreds. Moreover, many of these directors are interconnected,sitting together on multiple boards, as the Foundation database shows.
Just as many directors of the large corporations sit on each others board ofdirectors. The big banks, hedge funds, and private equity firms are the largestinstitutional investors of the corporations on the S&P and Dow Jones. Andthrough corporate raiders such as Mitt Romney, we know all too well how pensionfunds are treated by private equity firms.
In conclusion...
Getting back to the question: Is there is no money in the Social SecurityTrust Fund? And if the Wall Street bankers are still crooks, and theultra-wealthy and large multi-national corporations are still dodging taxes, andif congress refuses to eliminate the "cap" for Social Security taxes,and if the Republicans refuse to raise the minimum wage and index it to thecost-of-living, and if congress refuses to tax capital gains as ordinaryincome... then what other options are left for the disabled and/or those who'lleventually need a retirement savings?
Should they start collecting aluminum cans and stash their money under an oldmattress?
* Editor's Note: Alsoposted at the Daily Kos
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