Category Archives: Social Security

Social Security and Reflections on the Power Town by Gregory Hilton

"Bad Boy: The Life And Politics Of Lee Atwater" by John Brady, DeCapo Press, 352 pages.

Why is Reform So Difficult?
New York is the nation’s financial capital and Los Angeles has the entertainment industry, but Washington, D.C. is the Power Town. Over the past three decades I have been fortunate to know some of the key players. I admire all of them, and they are intelligent, hard working and have good intentions. Continue reading

After November: GOP Will Compromise But Liberals May Defeat Obama by Gregory Hilton

At 11 am tomorrow President Obama will announce the departure of White House Chief of Staff Rahm Emanuel. Emanuel described the “professional left” as “retards,” and denounced their unwillingness to compromise on issues such as health care reform and global warming. The departure press conference is being held in the East Room to provide maximum exposure for Emanuel’s campaign for Mayor of Chicago. The President will name a new Chief of Staff and is also seeing the departure of his top political aide (David Axelrod) and three of the four members of his economic team. Continue reading

Is It Wrong For Republicans To Compromise? by Gregory Hilton

In 1995 Republicans claimed control of the House of Representatives for the first time in 40 years. Many conservatives were urging the GOP to push its own agenda and not to compromise with Democrats. That same attitude has returned as GOP control of the 112th Congress becomes a more realistic prospect. A recent National Journal poll indicates 70% of Republicans are against legislative compromises, and I can understand their frustration. George H.W. Bush broke his “no new taxes” pledge in exchange for a promise to reduce government spending. Democrats immediately broke their promise. Continue reading

The Outlook for Social Security and Medicare Is Grim, Will Congress Continue to Ignore this Crisis? by Gregory Hilton

In 2005 Many Lawmakers Claimed There Was No Security Security Crisis

In 2005 Many Lawmakers Claimed There Was No Security Security Crisis

The Outlook for Social Security and Medicare Is Grim, Will Congress Continue to Ignore This Crisis? by Gregory Hilton–
Last week the Social Security and Medicare Trustees released their 2009 annual report and it contains plenty of grim news. According to the Trustees, the outlook for both programs is dire for a variety of reasons. The annual Social Security surpluses will disappear for good in 2016, and the system will then start paying out more every year than it takes in. Lawmakers will then have to raise taxes or slash spending on other federal programs to pay benefits.
In releasing the report Treasury Secretary Timothy Geithner said, “The longer we wait to address the long-term solvency of Medicare and Social Security, the sooner those challenges will be upon us and the harder the options will be. . . . The President explicitly rejects the notion that Social Security is untouchable politically, and instead believes there is opportunity for a new consensus on Social Security reform.” For many years George W. Bush tried to find that consensus. He devoted the first 60 days of 2005 to Social Security and Medicare reform, but no progress was made. President Obama can not meet with a similar fate because the consequences are so serious.
Spending on Social Security and Medicare totaled more than $1 trillion last year, accounting for more than one-third of the federal budget. Since 2004 the Trustees have been advocating an immediate increase in payroll taxes by 2.02 percentage points. The 2009 Trustees Report says that in “net present value,” Social Security has promised to pay out $7.7 trillion more in benefits than it will receive in taxes. “Net present value” means Congress would have to invest $7.7 trillion today to have enough money to pay all of Social Security’s promised benefits between 2016 and 2083.
That’s more than twice what the federal government will spend this year on everything it buys, and this investment would be on top of the funding Social Security will collect through payroll taxes. The Medicare situation is far more serious because future obligations exceed dedicated taxes by $89 trillion. Medicare’s liability is about 5 1/2 times the size of Social Security’s ($18 trillion) and about six times the size of the entire U.S. economy. An excellent editorial on the crisis in both Social Security and Medicare appeared in last week’s Washington Post:

You’d have to have been living under a rock to be surprised by this week’s news from the Social Security and Medicare trustees that the programs are in trouble. In a nutshell: The U.S. population is aging, health-care costs are spiraling upward and neither program has the money to cover promised benefits. In addition, politicians have known this for many years, and yet no progress has been made in fixing the programs.
The deteriorating economy has made things worse. The date when the Social Security trust fund will start running deficits has moved closer by a year, to 2016, and the date of trust fund depletion has advanced by four years, to 2037. The Medicare hospital insurance trust fund is already running a deficit and will be exhausted by 2017. Furthermore, the size of the Social Security surpluses has shrunk, posing a problem for the government since it relies on these funds to help plug its deficits. Over the next seven years, the cumulative surpluses will be $157 billion instead of the previously estimated $454 billion, forcing the cash-strapped feds to borrow even more than they had expected. Even in the face of such bad news, there are those who will argue against the urgency of reform, using the defensive arguments that the problems in Social Security are exaggerated by overly pessimistic assumptions (they are not); that Medicare can be fixed only by making changes to the entire health-care system (both Medicare and the system need fixing); or that those who advocate reforms are trying to secretly dismantle the programs (oh, please).

Social Security has long been debated on Capitol Hill and no progress has been made in recent years. It is a system that is currently broken, and it will go bankrupt by the time the eldest baby boomers retire. We need to act sooner rather than later to fix this program because every day we wait costs us more and more.
Once again, President Bush did not want to wait and issued repetitive warnings about the looming crisis. He tried to do something about it and in advocating social security reform Bush quoted John F. Kennedy, “If not us, then who? If not now, then when?”
However, every effort to reform entitlements was blocked. This is not some sudden problem brought on by the recession. This issue was identified years ago and ignored by the very same people who are now trying to lay blame elsewhere.
Over the next 25 years the number of people receiving Social Security is going to increase by 100 percent. Over the same 25 year period the number of people paying into Social Security is going to increase by only 15 percent. When Social Security began there were roughly 40 workers for every one retiree. During the 1950s it was 16 workers per one retiree. Today the ratio is three to one, and soon it will only be two workers per one retiree. Baby Boomers are filing for Social Security benefits at a rate of about 10,000 a day and this will continue for the next 20 years.
Below are several quotes from the 2005/2006 Congressional debate. As you will notice, liberal lawmakers repeatedly told us not to worry because Social Security would not become insolvent until 2052. They offered no alternative proposal. They just criticized Bush’s plan.

“Despite the White House scare tactics, Social Security remains sound for decades to come. The real threat to Social Security comes from Republicans, most of whom support and voted for privatizing Social Security.” – Senate Majority Leader Harry Reid, May 2006

“The President says the Social Security system is in crisis. He predicted last night that at a certain time the Social Security system would be bankrupt . But it is not in crisis, and it will not be bankrupt . He is simply wrong.” – Senator Byron Dorgan (D-ND).

“The President is barnstorming the country telling the American people that Social Security is a sinking ship and private accounts are the lifeboats into which we should jump. But the administration is manufacturing a crisis that does not exist in order to dismantle Social Security .
“Despite the administration’s claims, Social Security will remain solvent for nearly 50 more years. Even after that, Social Security would still be able to pay 70 to 80 percent of benefits. Modest changes to the system would enable Social Security to pay full benefits well beyond the next 50 years.” – Senator Jack Reed (D-RI)

“The good news is that Social Security is financially strong and will remain strong for decades to come. This year Social Security will run a surplus in the neighborhood of $150 billion. The cumulative Social Security surplus now stands in excess of $1.6 trillion. And guess what. Every single one of those dollars is invested in rock solid Treasury securities backed by the full faith and credit of the U.S. Government.” – Senator Tom Harkin (D-IA)

“The President says there is a crisis in Social Security, which seems to be a strange choice of words because Social Security will be solvent until George W. Bush is 106 years old. Let me say that again because this is important. Social Security will remain solvent until this President reaches age 106. But he and others in the administration have said there is a crisis, it is going to go broke, it is going to be flat busted.” – Senator Dick Durbin (D-IL)

“Your previous speaker said incorrectly that Social Security would be in the red in 2018. That’s simply not true. The more money going out than coming in doesn’t start until 2030. There’s time for us to do this right.” – House Speaker Nancy Pelosi (D-CA)

“The Congressional Budget Office, which is a bipartisan, has said that Social Security will be rock solid through the year 2052 without any changes whatsoever. There is no need to create private accounts. This is a non solution, it creates a problem.” – Rep. Dennis Kucinich (D-OH).

“I rise to help dispel the ridiculous myth that Social Security is in a state of crisis. If you listened to the President at the State of the Union or out on the stump, you have heard the President use words like ‘broke,’’ ‘busted’ or ‘bankrupt .’ Social Security is neither broke nor bankrupt . The program is certainly not in crisis. A crisis is an imminent problem. Yet, while the President cries ‘crisis,’ Social Security continues to bring in more than it pays out in benefits. According to the Social Security trustees, the program will continue to do so for the next 13 years, until 2018, when the trust fund will be tapped to help pay for benefits.’ – Rep. Gene Green (D-TX)

“The President says Social Security will be bankrupt in 2041. It will not be bankrupt ; it will pay 75 percent of promised benefits under very conservative economic assumptions into the indefinite future, or 2053 if we use the estimates of the Congressional Budget Office. So it would not be bankrupt in any sense.” – Rep. Peter DeFazio (D-OR)

“There is a shortfall that will exist in 2052, but the notion we are headed for bankruptcy, that this is the path for bankruptcy, is inaccurate.” – Rep. Sander Levin (D-MI)

“President Bush and Vice President Cheney have been trying to scare the American people into thinking that there’s some kind of a crisis facing Social Security. The administration is trying to convince us that somehow Social Security faces a fiscal collapse. Well, that is just bald-faced lies.” — Roger Hickey, Co-Director of the Campaign for America’s Future.

“Social Security isn’t a big problem that demands a solution. It’s a small problem, way down the list of major issues facing America, that has nonetheless become an obsession of Beltway insiders.” — Paul Krugman of The New York Times in November 2007. Krugman is the recipient of the Nobel Prize for economics.

“Women’s organizations, are opposing Bush’s social security plan. They include the American Association of University Women, the League of Women Voters, the National Women’s Law Center, the National Council of Women’s Organizations, the Older Women’s League. All of these organizations are opposed to these risky privatization plans.” – Rep. Jan Schakowsky (D-IL)

“There were no WMD’s and there is no social security crisis.” – Full page newspaper ads sponsored by According to their website, “Beating back George Bush’s plan to kill social security was the first major victory for the broadly defined netroots movement.”

“Yesterday while making remarks in Milwaukee, President Bush again distorted the facts on Social Security by saying that young workers were ‘paying into a bankrupt system.’ But, nearly all analysts agree that this is simply untrue. ‘Now, if you’re a senior you have nothing to worry about because it’s got plenty of money for you. But if you’re a young worker, a young entrepreneur, a young mom paying into the system, you’re paying into a bankrupt system unless the United States Congress decides to act.’
“Social Security now runs a surplus, raising more in taxes than it pays in benefits. In 2018, the Trust Fund will start paying out more in benefits then it collects in taxes and will need to begin drawing on its interest earnings and reserves to help pay for benefits. But according to the non-partisan Congressional Budget Office, the reserves in the Social Security Trust Fund won’t be depleted until 2052.” – Former Governor Howard Dean (D-VT), Chairman, Democratic National Committee

Many of the above politicians and pundits continue to believe that a problem does not exist. If you combine Social Security and Medicare then we have been paying out far more than what is being received from taxes and premiums. To cover that deficit, we are currently using 1-in-7 income tax dollars. By 2020, it will be 1-in-4, and by 2030, 1-in-2. According to John Goodman of the National Center for Policy Analysis: “Basically, elderly entitlements are on a path that will crowd out spending on every other federal program. Throw in Medicaid, and health care spending alone will crowd out every other thing the federal government is doing by mid-century!”

The Politics of Social Security and Medicare by Gregory Hilton

This 2008 AFL-CIO brochure said John McCain would destroy Social Security. The union offered no alternative to saving the system.

This 2008 AFL-CIO brochure said John McCain would destroy Social Security. The union offered no alternative to saving the system.

“Saving Social Security and Medicare” has long been a winning issue for politicians. Survey research has consistently shown seniors worrying about the security of their benefits, and campaign ads focusing on a threat to the system are highly successful. Ironically the lawmakers who claim they are saving the system have actually wanted to do nothing at all.
These politicians really want to ignore the problem and pass it on to another generation. This has meant no progress on Capitol Hill, no meaningful reforms to the system, and our lawmakers have been ignoring looming problems by claiming there is no crisis in Social Security of Medicare.
In past years politicians were eager to spend Social Security surpluses on other programs. We are now well into another spending spree, but beginning this year the annual surplus will start to shrink. Politicians often talk refer to the Social Security Trust Fund, but what they don’t tell you is that it contains no actual assets. The Trust Fund has no money. It is just an IOU from one branch of government to another. It contains government bonds that are simply IOUs, a measure of how much the government owes the system.
Why is nothing being done? Former Speaker of the House Tip O’Neill’s (D-MA) observation about the politics of social security has proven to be correct. O’Neill said Social Security was “The third rail of politics, touch it and you die.” A Social Security compromise was achieved in 1983, but it is hard to imagine a similar initiative being passed by the present Congress.
It is politically very popular to ignore this crisis, and the Social Security track record is well known to politicians in both parties. This was a major theme in the 1964 Democratic landslide when GOP nominee Barry Goldwater and his surrogate Ronald Reagan both suggested that Social Security could have “voluntary features that would permit a citizen to do better on his own.”
President Lyndon Johnson’s campaign ran a TV ad showing a pair of hands ripping a social security card in half as a narrator says: “On at least seven occasions, Senator Barry Goldwater said that he would change the present social security system. But even his running mate, William Miller, admits that Senator Goldwater’s voluntary plan would destroy the social security system. President Johnson is working to strengthen social security.”
A group of wealthy California conservatives purchased a half hour of national television time to show a Ronald Reagan speech during the last week of the 1964 campaign. Goldwater managers balked because Reagan repeated criticisms of Social Security. Throughout the campaign Reagan said “For years we have been told we are contributing to an old age insurance fund which is being set aside for our retirement years. In fact, there is no ‘fund’ at all. It is a compulsory tax producing revenues Congress produces for any purpose it desires while letting the reserves needed for future benefits fall in the hole.” Goldwater ended up receiving only 38% of the vote, but the speech launched Reagan’s political career.
It can be argued that Social Security was responsible for Reagan’s loss of the 1976 Republican presidential nomination. President Gerald Ford said Reagan’s proposal to make aspects of the system voluntary would be harmful, and he used this theme to narrowly defeat the Californian in the Florida primary. Ford received 53% of the vote statewide, and 60% among those 65 years and older.
President Jimmy Carter wanted to avoid a debate with Reagan in 1980. He agreed to only one joint appearance and this debate was held on October 28, 1980, just one week prior to election day. Social Security was one of the major issues. In his memoirs Reagan said “The debate went well for me and may have turned on only four little words. They popped out of my mouth after Carter claimed I had once opposed Medicare benefits for Social Security recipients. It wasn’t true and I said so: ‘There you go again . . .'”
Carter said Reagan “began his political career campaigning around this nation against Medicare. . . Although Governor Reagan has changed his position lately, on four different occasions he has advocated making social security a voluntary system, which would, in effect, very quickly bankrupt it.”
Reagan responded by saying he supported the alternative Medicare which was being debated in 1964:

Now, again this statement that somehow I wanted to destroy it, and I just changed my tune, that I am for voluntary social security, which would mean the ruin of it.
Mr. President, the voluntary thing that I suggested many years ago was that a young man, orphaned and raised by an aunt who died, his aunt was ineligible for social security insurance, because she was not his mother. And I suggested that if this was an insurance program, certainly the person who’s paying in should be able to name his own beneficiaries. And that’s the closest I’ve ever come to anything voluntary with social security.

Social Security had eleven ‘deficit’ years between 1960 and 1980. At the start of his administration, with Social Security teetering on the brink of insolvency, Reagan attempted to push through a reform agenda. His first message to Congress on this subject in 1981 said: “As you know, the Social Security System is teetering on the edge of bankruptcy. Over the next five years, the Social Security trust fund could encounter deficits of up to $111 billion, and in the decades ahead its unfunded obligations could run well into the trillions. Unless we in government are willing to act, a sword of Damocles will soon hang over the welfare of millions of our citizens.”
In 1981 a bipartisan National Commission on Social Security Reform was established by Reagan and chaired by Alan Greenspan. The Democratic Congress blocked all reform proposals prior to the 1982 election when Social Security returned as a major issue.
The nation was coping with a recession and Democrats won 26 seats. Progress did occur in 1983 and the end result was a $165 billion tax increase over seven years which dramatically increased payroll taxes on employees and employers.
The payroll tax pays for Social Security and Medicare hospital insurance. For the first time, Social Security benefits on upper-income recipients were taxed, and the retirement age was raised from 65 to 67. These changes did not resolve the long term structural problems, but they bought time, which was unfortunately squandered. The public was told that the extra revenue would be used to build up a trust fund dedicated to the preservation of Social Security benefits, and the system’s future would be secured. This was the only substantive Social Security reform of the century.
President George W. Bush made Social Security and Medicare reform his signature issue in 2005 but all of his attempts to save these systems met with a stonewall of opposition on Capitol Hill. It was a smart move politically and combined with opposition to the Iraq war, the end result was a Democratic Party capture of both the House and Senate in the 2006 elections.

The Social Security Crisis is Almost Here by Gregory Hilton

Thousands of Protests Against Social Security Reform Were Held in 2005 and 2006

Thousands of Protests Against Social Security Reform Were Held in 2005 and 2006

In early 2005 President Bush mounted a 60-day, 60-stop public relations blitz. Its goal? To convince the public that Social Security is headed for bankruptcy and that immediate reforms were essential. He warned that tides of baby-boomers headed for retirement would cause an economic tsunami, and he advocated privatized investment accounts. The response from Capitol Hill was “Social Security funds are not in crisis. Claims that they are rely on unrealistic predictions about future economic conditions.” During Bush’s 2006 State of the Union address, Congressional Democrats wildly cheered their own obstructionism in blocking the reform effort.
The Trustees of the Social Security Administration are now telling us they are in a dire situation and will start running in the red in 2016. According to The New York Times, “The report shows Medicare has become more fragile as well and is at greater risk than Social Security of imminent fiscal collapse. Starting eight years from now the health insurance program will be unable to pay its hospital bills.”
This is a trillion dollar crisis. Without entitlement reform tax rates will have to be doubled. There was a serious effort to reform Social Security and Medicare in 2005 and 2006 and reports of impending insolvency of both programs have been made numerous times. The situation is now far worse.
In 2006, Senator Harry Reid (R-NV), the current Majority Leader, said:
“The so-called Social Security crisis exists in only one place — the minds of Republicans. In reality, the program is on solid ground for decades to come.” Reid had been responding to Bush’s warning:
“If we do not act now to avert that outcome, the only solutions would be dramatically higher taxes, massive new borrowing, or sudden and severe cuts in Social Security benefits or other government programs.” The Bush plan would have allowed people the option to manage 18 percent (one of six dollars) of their Social Security as an IRA (Individual Retirement Account) providing individuals the option of their investments, including stocks, bonds, mutual funds, gold or any other commodity to gain a higher percentage of return than the 2 percent annual return they would receive from the government. This would historically increase the amount of revenue into the program, which needs to hold funds separate from other government funds.
The reforms were blocked on Capitol Hill, no alternative solution was offered, and this was a major issue for the Democrats when they captured control of Congress in 2006.
They would never admit a problem existed. In both the 2004 and 2006 campaign, the Democrats made allegations that the Republicans were going to stop sending retirees their Social Security checks, attempting to use their scare tactics to gain votes from the elderly.
In March of 2000, Al Gore stated in reference to Social Security: “if it ain’t broke, don’t fix it. Shore it up the way we always have.” Senator Charles Schumer (D-NY) said Social Security should get “fine-tuning” rather than a replacement “with something completely different.”
In the meantime, Social Security has amassed $4 trillion of unfunded liability and if major changes are not made quickly, the government will only be able to pay 70 cents for each dollar of promised benefits. The Social Security Trust Fund contains no actual assets. Instead, it contains government bonds that are simply IOUs, a measure of how much the government owes the system.
According to Bruce Bartlett in “Forbes,” “The total unfunded indebtedness of Social Security and Medicare comes to $106.4 trillion. . . Thus federal income taxes for every taxpayer would have to rise by roughly 81% to pay all of the benefits promised by these programs under current law over and above the payroll tax.”