The Chicken Little Squad is out in force in this election cycle. The latest information on Social Security and Medicare – this time from the Trustees – is that the programs are in worse shape than believed. It’s time for the GOP War Cry: Cut benefits and raise the retirement age! Sorry, people, but after seeing Koch Brothers: Exposed, I look at all the warnings on Social Security and Medicare with relative skepticism. There is indeed a conspiracy afoot, and it’s a vast right-wing conspiracy to eliminate both programs. Here’s a great Rachel Maddow video from 2011 that shows how both sides of the aisle are playing political football with the programs:
The most annoying part of this video is that both sides are playing politics on the backs of the middle class. Clearly, it is not just the GOP. Our own president, a Democrat, offers these programs up to the GOP as a compromise to reduce the federal deficit. While they are called “entitlements,” these programs are not “entitlements” in any sense of the word. The American people have been paying taxes to fund these programs for years. In fact, I’m sitting here right now looking at my latest pay stub. I’m paying them alright. There they are in black and white. (But, as you will see, only some of us pay these taxes.) The Democrats invented these programs – federal programs that really work – and they should be defending them to the death, not using them to play footsie with the GOP. Neither one of these programs have contributed to the deficit, and they shouldn’t be raided to solve the deficit problem.
In their report, the Trustees do not say that the programs will be ‘insolvent’ in 2024 and 2033. Insolvent means bankrupt. What they are saying is that they won’t be able to cover all that they need to pay out. In fact, there doesn’t seem to be any alarm in the 2011 Trustees Report. Here’s what I’ll grant the Chicken Little Squad: Social Security is now paying out more than it is taking in. Period. However, the notion that the solution is to cut benefits and/or raise the retirement age for Social Security is absurd on its face. And privatizing Medicare, a pet project of Mitt Romney, is a disaster in the making.
If you listen to the politicians, pundits and talking heads funded by corporate America – known as the Echo Chamber – what you hear is a steady chorus of the programs being “broke” and how the only solution is to further burden the middle class by cutting and slashing.
There are other facts that are never spoken, and other solutions that are never considered by the Washington bureaucrats, particularly the GOP. Here’s something that I bet most Americans aren’t fully aware of: The government borrows money from the Social Security trust fund to finance other government operations. A 2009 Washington Post article offers this:
“The Treasury Department has for decades borrowed money from the Social Security trust fund to finance government operations. If it is no longer able to do so, it could be forced to borrow an additional $700 billion over the next decade from China, Japan and other investors. At some point, perhaps as early as 2017, according to the CBO, the Treasury would have to start repaying the billions it has borrowed from the trust fund over the past 25 years, driving the nation further into debt or forcing Congress to raise taxes.”
How about practicing some fiscal responsibility instead of raiding Social Security for things this country does not budget for? While Social Security is operating in the black, the federal government is operating in the red. The fact is that the government owes twice as much to Social Security than it owes to China and Hong Kong. As of last year, Social Security “owned” 18 percent of the federal debt, making it the largest holder of the debt. Pay it back, indeed. And then, stop stealing from the American taxpayers. If you weren’t aware of this, that’s because nobody talks about it. Let’s just say it’s not part of that whole Echo Chamber strategy.
There’s another little factor that plays into Social Security that nobody wants to talk about. Back in 1983, the Greenspan Commission supposedly ‘fixed’ Social Security for good with a gradual increase in the payroll tax and by raising the retirement age. According to Robert Reich, there’s one little thing that the commission missed: Inequality. It just happens to be that little thing that also contributes to the deficit. Funny that.
As with income tax, the middle class and low-income earners pay a disparate proportion of social security taxes compared to the top 1% earners. It just so happens that there is a cap on social security taxes. That means when workers reach $110,100 in earnings, they no longer pay Social Security taxes. If they earn $220,200 a year, they’ll stop paying around mid-year. For the top 1%, or those earning 12 times the cap, they’re done paying taxes in the first quarter of the year. What does this mean? Essentially, those with the highest income pay a lower Social Security tax as a percentage of their income, even though they may be eligible for higher benefits upon retirement. By the way, Social Security taxes don’t apply to investment income and capital gains, and we know for sure that the wealthiest Americans benefit financially from both.
And now, another of the GOP’s favorite topics: Privatizing Medicare, or the final joke on the middle class. Matt Taibbi of Rolling Stone has an excellent take on this topic, by the way. This is a pet project of GOP presidential nominee, Mitt Romney, a true member of the 1% who only pays about 15% on his income taxes and hides a lot of his money in the Cayman Islands. Under the Romney plan, seniors would receive vouchers to buy coverage through private insurers. As if this would benefit seniors. The only thing Mitt’s Let-Me-Screw-You-Over Plan would fatten are the coffers of private insurers. Seniors would get less for more, and it seems that’s the American way these days.
What we’re assuming here is that Medicare is the problem. According to Robert Reich, it’s not. The real problem is the rising cost of health care, with Americans paying 2-1/2 times more on health care than people in other advanced nations. Why is that the case? Reich asserts that there’s a lot of incentive in this country to spend on unnecessary testing, drugs and procedures, but little incentive to keep people healthy. In America, we spend $30 billion a year fixing medical errors, while administrative costs suck up 15-30% of health care spending. Funneling money into for-profit insurers is a simple equation to figure out: Americans would get less health care. What’s the solution?
Medicare for all, regardless of age. Medicare’s administrative costs are in the range of 3%. Yes, let me spell that out: three percent. Even better, Medicare and Medicaid combined could use their leverage on doctors and hospitals to retool the incentives driving our current health care system. Estimates of how much could be saved range from $58 billion to $400 billion a year. Of course, Mitt Romney (and the rest of the GOP) doesn’t want to back such a plan because it doesn’t appeal to the for-profit providers.
In all fairness to the GOP, the Obama idea for Medicare is slightly better, but it still assumes that Medicare is the problem. It isn’t. It’s the system underlying Medicare that is the problem.
So, the next time you hear the GOP propaganda on Social Security and Medicare, or GOP supporters want to discuss these issues with you, you can reference this excellent chart supplied by The National Committee to Preserve Social Security & Medicare.