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Tag Archives: Social Security

What the Heck, Huck?

Gov. Mike Huckabee has seized the no-changes-to-entitlements mantle from among the Republican wannabes and he’s set to run on it, aligning himself with people like Elizabeth Warren.

Politically, this is not such a dumb idea. There are a lot of seniors, including conservatives, who are understandably worried about their potential lack of gold to fund their Golden Years and fear changes to Medicare and Social Security. A barnstorming populist like Huckabee is particularly well suited to take the issue to his more buttoned-down rivals in the GOP.

Screen Shot 2015-05-07 at 12.58.10 PM“Let them end their own congressional pensions, not your Social Security!” Huckabee thundered Tuesday as he announced his candidacy. Washington, he said in a video, “has done enough lying and stealing. I’ll never rob seniors of what our government promised them and even forced them to pay for.”

Huckabee, as a matter of principle, is right. Government has promised these benefits and now can’t pay them. But that’s also the problem. The government can’t pay its obligations. It made promises it couldn’t keep. Because that’s what government does.

The latest estimate of the 75-year unfunded obligation for Medicare and Social Security is about $50 trillion

Now, let’s make this clear. That’s not the the government’s total obligation. That’s its unfunded obligation. It’s money it is supposed to pay out, but for which it hasn’t even assessed taxes or found spending cuts to get the cash.

THERE IS NO MONEY, HUCK.

People talk about when Social Security and Medicare will be bankrupt. I have some news. THEY ARE BANKRUPT RIGHT NOW. What else would you call a business running a $352 billion shortfall every year?

Those projected “bankruptcy” dates you hear about are accounting illusions. They presuppose that there are actually “Trust Funds” now being “tapped” to pay beneficiaries. But the Trust Funds, as you may know, don’t exist. The government collected your Social Security and Medicare taxes and spent it on other stuff. And now the Social Security and Medicare taxes it brings in aren’t enough, so it must plunder the General Fund that’s supposed to be for regular government spending.

According to the Medicare and Social Security Trustees:

The total General Fund requirements for Social Security and Medicare in 2014 are $352 billion, or 2.0 percent of GDP. Redemption of trust fund bonds, interest paid on those bonds, and transfers from the General Fund provide no new net income to the Treasury, which must finance these payments through some combination of increased taxation, reductions in other government spending, or additional borrowing from the public.

The annual deficit for Social Security alone, at $77 billion, is less than Medicare, but will rise quickly:

The Trustees project that this annual cash-flow deficit will average about $77 billion between 2014 and 2018 before rising steeply as income growth slows to its sustainable trend rate after the economic recovery is complete while the number of beneficiaries continues to grow at a substantially faster rate than the number of covered workers.

Nobody is realistically proposing taking benefits from current or even near retirees. But if the programs are to be saved, cuts to benefits for future wealthier retirees and an eventual increase in the retirement age, among other reforms, must occur. Otherwise, benefits for all will have to be cut, for rich and poor alike. That’s where Huckabee’s rhetoric is leading.

Because the money isn’t there. And every year we wait, as we have done under President Obama, the long-term shortfall gets worse.

Yes, it is breaking a promise to those who have contributed even a dime. It is not, however, as is sometimes suggested, taking people’s actual money away, since Social Security and Medicare are not savings programs. Your contributions fund current retirees, not yourself, and that’s the way it’s always been. If you are retired, current workers are funding you. So call your kids and thank them.

What entitlement reform does is try to set up a plan where those who can most afford the cuts get them. Because benefit cuts will have to happen. Unless retirees want payments as fictitious as the Trust Funds.

Another Sunday Show Prep Lie?

Former Treasury Secretary Tim Geithner appears to be alleging that the White House asked him to lie during an appearance on the Sunday talk shows, telling him to say that Social Security doesn’t contribute to the deficit, when it does.

From Geithner’s new book out today, “Stress Test Reflections in Financial Crises:”

I remember during one Roosevelt Room prep session before I appeared on the Sunday shows, I objected when Dan Pfeiffer wanted me to say Social Security didn’t contribute to the deficit. It wasn’t a main driver of our future deficits, but it did contribute.

Pfeiffer said the line was a ‘dog whistle’ to the left, a phrase I had never heard before. He had to explain that the phrase was code to the Democratic base, signaling that we intended to protect Social Security.

In fact, taxpayer funds from general revenues – not just the payroll tax – are NOW being used to pay Social Security beneficiaries. Pfeiffer surely knew this.

But if one wanted to be charitable – one doesn’t, but if one did – one would speculate that Geithner corrected Pfeiffer and Pfeiffer said, “Oh, I didn’t know that.”

Pfeiffer
The White House claims Pfeiffer bends over backwards to tell the truth

But judging by the White House response today, we have a he said, he said on our hands.

White House Press Secretary Jay Carney said Pfeiffer surely told Geithner to say Social Security is not a main driver of the deficits. But Geithner is pretty clear that this is exactly what Pfeiffer did not say.

Reporting on Fox News a few minutes ago, Ed Henry said a “source close to Geithner” said Geithner didn’t mean to say the White House was sending him forth to mislead people on the Sunday talk shows.

Sounds like reeling it back in to me.

What’s more, of course, there seems to be a bit of pattern about these prep sessions. My suggestion is, next time an administration official appears on a Sunday talk show, go make a mimosa and do the crossword puzzle.

Obama Debt: Over 8 Percent of $1 Quadrillion

The longterm U.S. debt under President Obama’s latest spending plan is far worse than his budget suggests, reaching a total of about $84 trillion – that is, 8.4 percent of a quadrillion dollars, or $0.084 quadrillion.

Yes, it’s time to start using the quadrillion number, because with trillions getting added to the debt at an accelerating pace, the numbers are starting to become meaningless again unless put in the proper perspective.

The Obama budget forecasts a startling federal debt of just over $25 trillion. But that’s only the beginning of the frightening story of the government’s longterm obligations.

Over future decades, Medicare – before taking into account Obama’s “cuts” – has an unfunded liability of close to $43 trillion, according to the most recent Social Security and Medicare actuaries report. That is what the government is currently obligated to pay out to this and the next couple of generations – but for which it has no method on the books of raising money. It just owes that amount, and would currently have to borrow to pay it.

Similarly, the unfunded liability of Social Security is about $20 trillion. And the government has about $6 trillion in unfunded obligations for federal worker pensions. All told, we’re in the hole for about $94 trillion, or nearly $0.1 quadrillion.

Obama’s budget makes cuts to Medicare over the next decade totaling about $370 billion – as you can see, a minuscule portion of the total obligation. And the cuts are mainly to health care providers, which doesn’t amount to the type of serious “reform” needed to save the program. What’s more, the reductions are unlikely to be fully realized because of the lobbying muscle of doctors, hospitals, and other providers.

Obama’s call for chained CPI is, however, a serious proposal that could reduce Social Security’s imbalance by 20-25 percent. So let’s assume under Obama’s plan, Social Security would have an unfunded mandate of about $15 trillion. And let’s be generous and lop $5 trillion off the longterm obligations of Medicare, bringing its shortfall to about $38 trillion.

We’re still at $84 trillion, or $0.84 quadrillion, in total indebtedness.

Now you understand why Republicans are demanding Obama get serious about reducing the debt and enacting entitlement reform, and why his current plan doesn’t seem very serious at all.

Social Security Official: Program Now Imperiled

One of the Trustees of the Social Security program is warning that the nation’s retirement system is on the cusp of becoming impossible to rescue because of a failure of leadership during the past few years to fix what ails it.

Social Security Trustee Charles Blahous, in an article published today in the economics journal e21, implicitly lays a portion of the blame directly at the door of President Obama, who has not even proposed major entitlement program reforms. Blahous writes that there has been “a failure of national policy leadership” during the past few years. While he notes that it is Congress that has not enacted a legislative fix, it is clear the leadership on such a controversial issue can only come from the White House.

Blahous, who as a Trustee is one of six officials tasked with overseeing the program, is also a former adviser on Social Security issues to George W. Bush. But the article is not partisan in tone and mostly urges action rather than any specific cure.

Blahous’s main goal is to ring the alarm:

Social Security’s future, at least in the form it has existed dating back to FDR, is now greatly imperiled. The last few years of legislative neglect — due to a failure of national policy leadership coming just as the baby boomers have begun to retire — have drastically harmed the program’s future financial prospects.

Individuals now planning their financial futures, whether as taxpayers or as beneficiaries, should be pricing in a substantial risk that the federal government will not be able to maintain Social Security as a self-financing, stand-alone program over the long term. If Social Security financing corrections are not enacted in 2013, or at the very latest by 2015, it becomes fairly likely that they will not be enacted at all.

Blahous notes that arguments for delay, which have often been trumpeted by Democrats, are misleading. While Social Security is not officially “scheduled” to go bankrupt until 2033, the issue is nevertheless extremely urgent.

That’s because no Congress wants to touch the benefits of current or near-retirees, and the number of baby boomers retiring is expanding exponentially. This means that every year the cost of fixing the problem vastly increases and must be borne by a smaller number of workers relative to the entire population.

Blahous writes:

There is a huge disparity between the problem’s urgency and the rhetoric applied to it by substantial factions of the body politic. Even as time is running out for a workable compromise, some continue to play a high-stakes gamble: that if the urgency is downplayed and action delayed past the next few elections, it can be dealt with when the political alignment may be more advantageous to one side.

This gambit has now been extended to the point of imperiling Social Security’s long-term outlook. Too many key players, however, do not yet realize this.

What’s more, there has never had to be a political compromise on cuts of the magnitude now required. The last time one party controlled Congress and the White House was during the first two years of Obama’s administration, and he and the Democrats did nothing.

Today’s long-term problem, according to Blahous, is much worse than in 1983, when a bipartisan compromise was just barely achieved to rescue the program. Compromise in today’s polarized climate will be even tougher.

Perry is Right, Social Security is a Ponzi Scheme

It just is. Rick Perry is correct.

And it’s not because Congress is filled with nincompoops or the government is irresponsible, although both of these things are true. It’s because the program was actually designed as a Ponzi Scheme.

Many Social Security recipients are under the misimpression that they worked all their life, contributed their money to their Social Security savings, and now have a right to get it back.

That’s a mistake. Their money went to fund people who were retired. The money you contribute is not going to you, it’s going to grandpa.

When was the last time grandpa said to you or your parents, “Thank you for your money?” Did you know that grandma was using your money to buy the ingredients for those pies?

The first retirees covered by Social Security were not, in fact, told to go back to work until they were 100 so they could get their money.

No, they almost immediately started getting cash from current workers. And that’s how the system continued. A classic Ponzi Scheme in which new participants – that is workers – were needed to pay out benefits to those already signed up – Social Security recipients.

The reason this particular Ponzi Scheme is now crashing is that during the era – now ending – when the working population of baby boomers far outnumbered the retired population, and more money was coming into the system than needed to fund current retirees, Congress didn’t save the money.

IT SPENT IT.

Many people think there is a Social Security Trust Fund brimming with money to be dispensed to the elderly.

Well, there is a Social Security Trust Fund, but all that’s in it is IOUs from Congress. That’s why Social Security is headed toward bankruptcy. Because Congress doesn’t have the money, and will have to raise taxes or ask the Chinese for it, or just not pay up.

And that’s what Perry means when he says Social Security is a failure and why he accuses its creators of “violently tossing aside any respect for our founding principles of federalism and limited government.”

BECAUSE BY PUTTING THE GOVERNMENT IN CHARGE OF YOUR RETIREMENT FUNDS, YOU GAVE THEM TO SOMEONE UNTRUSTWORTHY WHO LOST YOUR RETIREMENT FUNDS.

Sure, Social Security is a lifeline to millions of Americans. But by putting the government in charge of it, its founders guaranteed that it would end up like most Ponzi schemes eventually do – bleeding cash and headed for bankruptcy.

Public Supports Entitlement Overhaul, but Not Cuts

Updated 4:09 pm

With Social Security and Medicare reform apparently in the debt ceiling talks mix, the Pew Research Center has just released a poll showing that the public indeed supports major changes to the programs – but not cuts in benefits.

This is approximately like saying you want to lose weight, but on the Kentucky Fried Chicken diet designed by Col. Sanders.

According to the poll, 54 percent of Americans say Medicare – where the deficit reduction big bucks are – needs major changes or should be completely rebuilt, while 38 percent think it’s working pretty well. However, when asked which is more important, taking steps to reduce the deficit or keeping Medicare and Social Security benefits the way they are, only 32 percent choose reducing the deficit, while 60 percent say leave the benefits untouched.

According to Pew:

The public’s desire for fundamental change does not mean it supports reductions in the benefits provided by Social Security, Medicare or Medicaid. Relatively few are willing to see benefit cuts as part of the solution, regardless of whether the problem being addressed is the federal budget deficit, state budget shortfalls or the financial viability of the entitlement programs.

So here’s the question: Will our political leaders over the coming days take a political risk to actually reduce the deficit? Anyone who has studied the problem knows the money is in the entitlements.

Leadership on such a fundamental matter must come from the president, and the top Republicans must be close behind. So far we’ve gotten general statements from Obama on wanting to address entitlements. We’ll see if he backs up the words with real, politically risky proposals.

UPDATE: One of our readers, Susan, made a statement in the comments section that I think should be part of the actual story:

It all depends on how the question is asked. Pollsters know how to manipulate a question to get the answer they want. The question I would like to see asked: Do you favor a overhaul of Medicare, which may result in reduced benefits, as long as current beneficiaries and people 55 and older are not impacted by the reform? Bet you would get an overwhelmingly positive response if the question were posed that way.

This, in fact, is the only kind of reform being considered, and indeed, pollsters who leave this qualification out are not being responsible.

Bush Aide: Social Security Accounts May be Finished

Chuck Blahous, the former Social Security adviser to George W. Bush, told me in an interview that Bush’s signature initiative to establish personal investment accounts with Social Security taxes may no longer be possible.

Opposition to the accounts, as you may remember, became the rallying cry for Democrats as they scuttled Bush’s 2005 attempt to reform Social Security. But many Republicans, including Blahous, think the issue was a red herring and believe Democrats would have opposed Bush whether the accounts were part of the initiative or not.

The interview with Blahous was conducted as part of a piece I did for The Daily Caller, published today, on Blahous and new book he has written.

Blahous’s book, Social Security: The Unfinished Work, has a lot of interesting information on the program, its history, and various proposals for reforming it. And Blahous of course details his prescriptions for fixing Social Security’s financial shortfall without raising taxes.

Obama’s Inconsistent Messages

One of the oddest things about the current White House message machine is how inconsistent it is. Lines of attack and strategies for promoting the president are begun, only to be suddenly abandoned and dropped on the scrap heap.

You mean I'm not such a bad guy after all?

Remember Boehner the Boogeyman? Just a couple of weeks ago, Obama was framing Boehner as the world’s greatest jackass since Herbert Hoover. The press took the cue and followed up with some stories, like this one in the New York Times, about how Boehner heads over to K Street each morning to get the day’s marching orders from iniquitous lobbyists .

Then, suddenly, Obama decides maybe Boehner’s not such a good target, and voila, today’s piece in the Times about John Boehner, small town boy made good.

Earlier this year, it looked like the White House was going to start trumpeting the false charge that Republicans were fixing to privatize Social Security, when there are actually no real plans to do so. Obama even recorded a radio address trying to scare the crap out of seniors. And then, he just stopped.

There had been talk that Obama would spend the fall trying to sell the unpopular health reform law, and he’s done a couple of events where he’s tried to promote it. But without a consistent campaign, the whole PR endeavor makes no sense.

White House aides program new messages into Obama as he speaks

Vice President Biden had for months been regularly trying to use his limitless charisma to tout the stimulus bill, which of course resulted in the measure becoming more popular than Thanksgiving. Yes, that’s a joke. He rarely talks about it these days and has stopped going to many of those events where he showcases a new bridge, road, or sewer system, or whatever.

Oddly, Obama’s stopped bashing Wall Street and is barely promoting his financial reform bill, which is actually the most popular major piece of legislation he has signed.

And if you’re really looking for inconsistency, wait until after Election Day. Obama has to move toward the center to get reelected, and he’ll need some help from Republicans to make a few moderate, bipartisan laws. Evil Obama will be put to bed, and the inspirational leader with a soft spot for bipartisanship will arise anew.