A “death panel” for Social Security?

President Obama has appointed an 18-member National Commission on Fiscal Responsibility and Reform which is stacked with opponents of Social Security. It is scheduled to issue a report after this year’s fall elections to be voted on by the lame-duck Congress. Based on the makeup of the commission, it is likely that it will recommend cuts in Social Security benefits and increases in taxes.

”]”]

The rationale for cutting Social Security is that it is supposedly in deficit. More will be paid out this year in Social Security benefits than will be collected in taxes. But this is a phony issue. For decades, American workers have been paying extra Social Security taxes to build up a surplus which now will be drawn upon.

When I worked, I paid into an Individual Retirement Account. Now that I am retired, I draw money from my IRA.  When I worked, I paid Social Security taxes over and above what was necessary to support current retirees, and these taxes were invested in U.S. Treasury bonds. Now that I am retired, the government will cash in some of these bonds to support my Social Security pension.

After Social Security taxes were increased during the Reagan administration, the surplus in the Social Security trust fund was subtracted from the government’s overall deficit to make it appear the government was more solvent than it was. This was used to justify upper-bracket tax reductions. Now that the government is in deficit, partly due to these upper-bracket tax cuts, the so-called deficit hawks want to cut Social Security.  A cynical person might call this a bait-and-switch scheme.

Raising the retirement age is an especially bad idea.  It is proposed mainly by college professors, business executives and foundation staff members who don’t have to do heavy lifting or stand on their feet all day. One argument is that the retirement age of 65 was set by Bismarck when he set up the German Social Security system in the late 19th century because that was the average life expectancy during that era. The assumption is that people like me who are able to spend retirement years in good health are getting away with something. My answer is that there should be such a thing as progress. It is a good thing, not a bad thing, that I don’t have to endure some of the things my ancestors did.

The ironic thing about this issue is that the defense of Social Security will come mainly from people my age, who probably will be held harmless in any change in the system.  The people who will be hurt are people of the age of my niece and nephew, many of whom have been convinced by decades of propaganda that Social Security will not be there for them when they retire. This could become a self-fulfilling prophecy.

One common bogus argument is that the Social Security trust fund cannot be depended on because it consists only of “government IOUs” – that is, Treasury bonds.  But our whole monetary and currency system is based on Treasury bonds, not gold and silver. The day that Treasury bonds become worthless is the day that the U.S. dollar becomes worthless.

The current projection is that the Social Security trust fund can continue paying benefits at current levels for more than 25 years with no need for change, and indefinitely after that if the cap on taxable Social Security income is raised.  The solvency of the trust fund depends partly on the state of the economy overall.  There will be no problem with Social Security in a high-wage full employment economy.

Why would President Obama consider tampering with the Social Security system? Reportedly he believes it necessary to gain the “confidence” of the financial markets so as to keep interest rates low. In other words, the government is subject to the power of Wall Street rather than the other way around.

Click on this for an excellent analysis of the National Commission and its agenda by two champions of the Social Security system.  I copied the title of their article for this post.

Click on this for Kevin Baker’s 2009 article “Barack Hoover Obama” in Harper’s magazine.

Click on this for an excellent analysis and update [Added 8/16/10].

Tags: ,

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.


%d bloggers like this: