Thursday, October 28, 2010

Obama on cutting Social Security

President Obama invited several progressive bloggers to speak with him at the White House. I wasn't there, sorry! But Oliver Willis was, and at his self-named blog, he provides the Full Transcript Of President Obama's Meeting With Progressive Bloggers 10/27/2010.

Here I want to highlight his comments on Social Security phaseout and his Catfood Commission, whose report is due December 1:

Q Mine is an easy question. Will you rule out raising the retirement age to 70?

THE PRESIDENT: We are awaiting a report from the deficit commission, or deficit reduction commission, so I have been adamant about not prejudging their work until we get it.

But I think you can look at the statements that I’ve made in the past, including when I was campaigning for the presidency, that Social Security is something that can be fixed with some modest modifications that don't impose hardships on beneficiaries who are counting on it.

And so the example that I used during the campaign was an increase in the payroll tax, not an increase — let me scratch that. Not an increase in the payroll tax but an increase in the income level at which it is excluded.

And so what I've been clear about is, is that I’ve got a set of preferences, but I want the commission to go ahead and do its work. When it issues its report, I'm not automatically going to assume that it's the right way to do things. I'll study it and examine it and see what makes sense.

But I've said in the past, I'll say here now, it doesn't strike me that a steep hike in the retirement age is in fact the best way to fix Social Security. [my emphasis]
This is disheartening, to put it in the most generous way. A Democratic President should be able to say straightforwardly, "I'm not going to allow an increase in the Social Security retirement age. I'm not going to allow a cut in benefits. The Social Security phase-out the Republicans want is wrong and I'll oppose to my last day in office and beyond."

It's hard to see Obama's actual response in any other way than that he's setting up to recommend cuts to Social Security, i.e., a phaseout of the program, though he and the Republicans who want this won't call it "phaseout". The pitch will be like we see here. We won't have a steep hike in the retirement age, just a small one, like from the current 67 to 69 or 70. We may boost the Social Social Security tax income level, but we certainly can't ask our hard-pressed billionaires to pay the same rate as the Small People do. After all, they might get discouraged and not invest overseas any more and create jobs for people in other countries. And of course, we won't touch current benefits for current retirees, though maybe we'll not allow any cost-of-living increases for a couple of decades or something. And for the twentysomethings, well, tough luck. The banksters want Social Security phased out and if it means a whole bunch of you will be living poor during your retirement, hey, we can't upset the megabanks and their CEOs by not doing what they want, now can we?

Am I exaggerating? Ronald Brownstein in A Misplaced Zinger National Journal 10/23/2010 tess off on a comment by Nevada Republican Senate candidate Sharon Angle to do a pretty good debunking of the argument that Social Security is in financial trouble:

In a year crowded with brusque and belligerent confrontations, Sharron Angle, the Republican Senate nominee in Nevada, may have delivered the most memorable barb of all last week when she taunted Senate Majority Leader Harry Reid—and by extension, the Democratic Party—to “man up” about Social Security’s financial challenges.

Angle’s zinger provided one of the few sparks in a lackluster debate and dominated the subsequent cable and Internet chatter. The problem is that almost everything Angle herself said about Social Security was upside down. She misdiagnosed the cause of the strain on the system. And the solution she offered might compound rather than relieve that strain.

In both her fervor and her confusion, Angle illuminated some of the ideological hurdles that will face any effort to craft a long-term Social Security plan after President Obama's debt commission [Catfood Commission] makes its report in December. Those ideological tensions could derail the real opportunity that exists to secure Social Security for decades—and not incidentally reassure disillusioned Americans that Washington can tackle big challenges. "It's quite a manageable problem," says Robert Reischauer, the former director of the Congressional Budget Office. "It’s a mere shadow of the problem associated with Medicare and Medicaid."
He takes on a favorite argument of the let-Grandma-eat-catfood crowd:

Social Security indeed faces a long-term imbalance between expected revenue and promised benefits. But that's not because of trust-fund money being diverted into other programs. Historically, Social Security has functioned as a pay-as-you-go system in which the benefits of today’s retirees are funded from the payroll taxes paid by today’s workers. The 1983 Social Security reform agreement between Ronald Reagan and congressional Democrats altered that approach so that Social Security would raise more money than it needs for years to accumulate surpluses before the baby boomers retire.

By law, Social Security can invest those surpluses only in U.S. Treasury bonds, notes Robert Greenstein, director of the Center on Budget and Policy Priorities, a liberal think tank that closely analyzes fiscal issues. Those investments are what Angle calls raiding Social Security. But the Social Security system still owns those Treasury bonds and can convert them to pay future benefits—unless Washington defaults on them, in which case the economy will have bigger problems. "If you argue that those bonds are worthless IOUs," Greenstein says, "then all Treasury bonds … are worthless IOUs, too." [my emphasis]
Since the alleged problem is so exaggerated - and in the case of that last argument, outright fabricated - what is Brownstein's solution to this "quite a manageable problem"? Citing a recent interview with President Obama, he recommends Social Security phaseout! As a moderate alternative to privatization, you understand.

... in an interview with National Journal this week, President Obama argued that was one of several reasons to keep the notion [of privitization] interred now. "Given the way Social Security is structured, you'd actually have to borrow a trillion dollars to make up for the money that was siphoned into the private accounts, and this would weaken the solvency of Social Security," he told me and a colleague. "Moreover, it's hard to imagine that anybody ... would feel real confident [about] putting part of their Social Security into Wall Street accounts after they've been watching what happened to their 401(k)s. ... So I think that that approach is a nonstarter."

Instead, Obama argued, the two parties could emulate the Reagan model and “arrive at a sensible solution that [doesn't] require an overhaul of Social Security's basic structure.” CBO recently outlined a plausible menu of options for doing just that. Their calculations found the program's long-term shortfall could be eliminated just by trimming benefits for the top half of earners, linking the retirement age to lengthening life spans, and imposing a partial payroll tax on earnings above $250,000.

Other combinations could work too; the gap between the system’s revenues and obligations, relatively speaking, isn't that daunting—less than 1 percent of the economy’s expected output over the next 75 years. Closing that gap doesn't require Americans to "man up" so much as to reach out in a spirit of modestly shared sacrifice that could stabilize the pillar of our social safety net for generations. [my emphasis]
Obama is making a pitch to begin Social Security phaseout when his Catfood Commission makes its report in December. And that's the White House's pitch to phase out the program that makes the difference for a huge percentage of the elderly between living in poverty and living with reasonable minimal security.

A bad, bad, seriously bad idea.

We sure need to be asking just who is going to be sharing in this "shared sacrifice" on the high end of the wealth and income levels? And let's remember Obama's modus operandi from the health care reform: start off from a pre-compromised position to get Republican support; Republicans refuse to support it; the White House compromises some more to get Republicans support; Republicans refuse to support that, either; Congress passes the newly compromised version anyway.

Obama is calling for "shared sacrifice" at time he characterized last night on Jon Stewart's show this way: "We've just gone through the two toughest years of any time since the Great Depression."

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