Undernews is the online report of the Progressive Review, edited by Sam Smith, who has covered Washington during all or part of one quarter of America's presidencies and edited alternative journals since 1964. The Review has been on the web since 1995. See main page for full contents

May 13, 2009


Bankers' capo Geithner leads the charge

Washington Post - The financial health of the Social Security system has eroded more sharply in the past year than at any time since the mid-1990s, according to a government forecast that ratchets up pressure on the Obama administration and Congress to stabilize the retirement system that keeps many older Americans out of poverty.

The report, issued by the trustees who monitor the government's two main forms of help for the elderly, shows that 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 report says, the health insurance program will be unable to pay all its hospital bills.. . .

In announcing the results of the trustees' annual forecast with other Cabinet members, Treasury Secretary Timothy F. Geithner said, "The president explicitly rejects the notion that Social Security is untouchable politically." Still, he reiterated that the administration intends to "work to build a bipartisan consensus to ensure the long-term solvency of Social Security" only after it collaborates with Congress to slow health-care spending and enable more Americans to obtain medical insurance.

Administration officials said that if Congress were to act immediately, the impending gap could be filled three ways: by raising workers' Social Security payroll taxes by 2 percentage points, from 12.4 percent to 14.4 percent; by reducing benefits by 13 percent; or a combination of the two approaches. The officials briefed reporters on the condition of anonymity on the technical aspects of the trustees' findings.

Note the lack of mention of raising the income cap on Social Security taxes

Medicare's financial health, the report shows, deteriorated less sharply in the past year than Social Security's, but it remains the more urgent problem. The trust fund that pays for hospital care under Medicare is now predicted to run out of money in 2017, two years earlier than forecast a year ago. That fund does not involve the parts of Medicare that cover doctor's visits or coverage for prescription drugs. . .

Some key lawmakers in both parties have said they want to devise a plan to keep the retirement program solvent by increasing the retirement age, slowing the growth in the size of retirement checks to wealthy Americans and bringing in new revenue.

William Greider, Nation, March 2, 2009 - Governing elites in Washington and Wall Street have devised a fiendishly clever "grand bargain" they want President Obama to embrace in the name of "fiscal responsibility." The government, they argue, having spent billions on bailing out the banks, can recover its costs by looting the Social Security system. They are also targeting Medicare and Medicaid. The pitch sounds preposterous to millions of ordinary working people anxious about their economic security and worried about their retirement years. But an impressive armada is lined up to push the idea--Washington's leading think tanks, the prestige media, tax-exempt foundations, skillful propagandists posing as economic experts and a self-righteous billionaire spending his fortune to save the nation from the elderly.

These players are promoting a tricky way to whack Social Security benefits, but to do it behind closed doors so the public cannot see what's happening or figure out which politicians to blame. The essential transaction would amount to misappropriating the trillions in Social Security taxes that workers have paid to finance their retirement benefits. This swindle is portrayed as "fiscal reform." In fact, it's the political equivalent of bait-and-switch fraud. . .

Obama is playing footsie with the conservative advocates of "entitlement reform" (their euphemism for cutting benefits). The president wants the corporate establishment's support on many other important matters, and he recently promised to hold a "fiscal responsibility summit" to examine the long-term costs of entitlements. That forum could set the trap for a "bipartisan compromise" that may become difficult for Obama to resist, given the burgeoning deficit. If he resists, he will be denounced as an old-fashioned free-spending liberal. The advocates are urging both parties to hold hands and take the leap together, authorizing big benefits cuts in a circuitous way that allows them to dodge the public's blame
. . .

OMB Watch 2008 - At its peak in 2030, Social Security will cost 1.7 percent of GDP more than it does today - keep in mind, too, that in 2030, Social Security is still solvent. That's not pocket change, but it's not the soul-crushing, economy-killing, puppy-eating monster that Entitlement Crisis Henny Pennys make it out to be. To put into perspective, if President Bush's FY 2008 war supplemental request is fulfilled, that $196 billion would represent about 1.4 percent of current GDP. And while the war is an expensive project, it's hardly bringing the economy to a halt.

Dean Baker, Prospect, 2007 - The Social Security tax is very regressive. Its regressivity can be justified by the progressive payback structure of the program. However, if the benefits are cut, at a point when the program can still easily afford the benefits (e.g. 10-20 years), then the government has effectively stolen from the people who paid Social Security taxes. There are many people who want to do this - effectively default on the government bonds held by the Social Security trust fund.

David R. Francis, Christian Science Monitor, 2006 - Social Security's chief actuary, Stephen Goss, admitted at a meeting six or so years ago with the staff of Sen. Tom Harkin (D) of Iowa that the politically appointed trustees set the assumptions for Social Security projections, recalls economist Dean Baker, who attended the session. "It is such a secretive process," Mr. Baker complains. . .

One factor alone points up the difficulty of long-term forecasts: The trustees assume that annual productivity growth in the US will average 1.7 percent over the 75-year planning period. Both the Congressional Budget Office and the Office of Management and Budget assume that rate of growth will be 2.1 percent

Progressive Review, 2005 - From the beginning of the Social Security scare, one journalist has gotten it right: Doug Henwood of the Left Business Observer. In the most recent issue, Henwood points out that "The ludicrously dire projections for Social Security's future only make sense when they're considered as part of a massive propaganda campaign to promote the privatization of Social Security, a long-standing obsession of the U.S. right largely unshared by the broader population.

Fair Economy - A new report finds that CEOs of Wall Street firms supporting the partial privatization of Social Security effectively pay into the system for only a few days a year. That is because Social Security tax payments are capped. The CEO of Charles Schwab, David Pottruck, finished paying his Social Security taxes before the end of the Rose Bowl on January 1st.

While 94 percent of workers effectively pay 12.4 percent of their annual income, including employer's contribution, these CEOs pay an average effective rate of 0.16 percent of their annual income toward Social Security taxes. The average taxpayer pays an effective rate that is more than 201 times the effective rate of the average CEO in this group.


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