Obama going after social security.

07 Jul

As I expected, it appears Obama is going after Social Security in a trade for some meaningless corporate loophole “tax increases”.  These loophole increases are nothing much to speak of and the Republicans are demanding that any changes to loopholes be “revenue neutral”; in other words, entirely offset by spending cuts elsewhere.  In other other words, while Obama is cutting SS in “exchange” for loophole changes, the loopholes will ALSO be offset by cuts elsewhere.  Furthermore, as revenue neutral actions, the corporate loopholes won’t, by definition, affect the deficit.  So it is now meaningless as far as the deficit goes.

The biggest error being made in these negotiations, however, is that Social Security cannot, BY LAW,  affect the Federal budget.
They will take your SS for no reason. Well, okay, for one reason: so that people will have to invest in 401’s and other privatized plans. (Read: Wall Street. Anyone remember what Wall St. did to the 401k’s? Anyone? Hello?)

SS cannot, by law, have any impact on the Federal budget. So they will dismantle it, or reduce benefits for the purpose of “deficit reduction” this year and next year they will casually say that we need more austerity measures because (surprise!) it turns out that reducing SS benefits did not have any effect on the “budget crisis”. I can only assume that they hope we will have forgotten in a year’s time exactly what reason they gave for reducing benefits. Or maybe by then we will be so overwhelmed with wars and other budget cuts, foreclosures (ramping up again), more job losses, a new proposal to end public education in America (watch for this – it’s coming), more oil spills, maybe a nuclear disaster or two in the Homeland, that we will see the loss of SS as a minor one.

Please read the following article in full (link at bottom provided) and pass it around.

From “Social Security and the Deficit Commission: Myths and Realities”, by Kristen Friend, staff US Supreme Court, Sept., 2010

…Here are the truths behind some of the more common Social Security myths.

1. Social Security adds to the deficit.

Social Security, by law, cannot add to the deficit. It is a separate program, paid into through FICA contributions, with benefits paid only from the revenue it raises. If the trust fund were to be exhausted and current contributions were not adequate to pay benefits, Social Security could not borrow from the general budget. Federal law prohibits Social Security from borrowing.

2. Social Security is broke, and there is no “Trust Fund.”

Conventional wisdom among Social Security skeptics is that the program is out of money now and that there is no Social Security Trust Fund. This is fueled largely by the fact that Social Security did begin to pay more in benefits than it received in taxes earlier than was projected due to the depth of the 2008 recession. Regardless of this fact, The Social Security Trust Fund currently runs a $2.5 trillion surplus. The Economic Policy Institute estimates the surplus will peak at $4.2 trillion in 2024 [7]

Trust Fund intact, with no changes to the program, Social Security is projected to be able to pay 100 percent of benefits until the year 2037. After 2037, Social Security will still be able to pay 75 percent of benefits. [8]…

5. Benefit cuts are needed

To the extent that there will be shortfalls in the Social Security budget in the future, they are minor in relation to other budget expenditures, and can be corrected without cutting benefits. In 1983, when Social Security actually did run out of funds, a “deal” was made with workers to put Social Security back in the black. Payroll taxes were raised, significantly, on middle and lower income workers. The tax increase was highly regressive, but, coupled with a raise in the retirement age, was responsible for building the large surplus Social Security enjoys today.

The increase in taxes on lower income individuals also allowed Reagan to cut taxes on those earning higher incomes. At the time, implicit in the deal was the idea that lower income workers would overpay their taxes for 30 years, at which point higher income individuals would pitch in to relieve some of the burden and cover any funding shortfalls. After a period of overpayment of payroll taxes, the tables would turn, and middle and lower income individuals would begin to underpay payroll taxes with the difference being covered by a raise in income taxes on higher earners. [10]

Thirty years later, the second part of that deal has been conveniently forgotten. Without cutting benefits, and in the spirit of Alan Greenspan’s 1983 recommendations, creating new sources of revenue could increase funds. The cap on Social Security taxed-income, currently $106,800, could be raised or eliminated… [Teri’s Note: This was a point made by candidate Obama during a debate. As President, however, he has reduced the amount paid by wage-earners and is suggesting a “holiday” on the employer side now as well. This has the effect of WEAKENING the SS fund, exactly the opposite of what we should be doing and the opposite of what he himself proposed on the trail.]

6. Social Security faces the same issues as Medicare and Medicaid.

Social Security often gets lumped in with Medicare and Medicaid as a problem “entitlement” program. It is true, Medicaid and Medicare do face funding problems, but much of this is due to the ballooning costs of health care. Social Security does not face the same problems as Medicare and Medicaid as payouts are not affected by rising health care costs…

Current and future retirees would be well served if politicians would stop confusing the distinction between cuts in Social Security and cuts in the national debt. Mounting deficits are a legitimate concern, but can in no way be attributed to Social Security…

Read the full article and pass the link around to everyone you know.

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Posted by on July 7, 2011 in austerity, Congress, economy


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