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 Post subject: Why Is President Obama So Anxious to Cut Social Security?
PostPosted: Tue Aug 23, 2011 5:39 pm 
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Why Is President Obama So Anxious to Cut Social Security?

by Dean Baker

We're screwed in 2012...regardless of WHO gets to occupy the White House for at least four years! :evil:

On his tour of the Midwest last week, President Obama again indicated his interest in cutting Social Security. He repeated a proposal that his administration first put forward in the debt ceiling negotiations: he wants to cut the annual cost of living adjustment by 0.3 percentage points.

This cut may sound small, but it adds up over time. A person in their 70s who had been getting benefits for ten years would see a reduction of 3 percent. By the time they were in their 80s, the cut would be 6 percent. And if they lived into their 90s, their benefit would be more than 9 percent lower as a result of President Obama's proposal.

For an average retiree who can expect to get benefits for 20 years, President Obama's plan would cut their lifetime Social Security benefits by roughly 3 percent. By comparison, his much feared tax increases on the rich would reduce the after-tax income of someone earning $300,000 a year by just 0.5 percent. In this case, a beneficiary who will be mostly dependent on their Social Security income in retirement will take about six times as large a hit relative to their income under President Obama's plan to cut Social Security than a couple earning $300,000 would from his plan to raise their taxes.

This cut to Social Security seems especially inappropriate since the near retirees who would feel the full impact of this cut have just seen most of their wealth destroyed by the collapse of the housing bubble and the plunge in the stock market. The typical near retiree (ages 55-64) has just $170,000 in net wealth, including the equity in their home.

This means that if they used every last penny in their 401(k) and other savings, they would have just about enough money to pay off the mortgage on a typical home. This would leave them 100 percent dependent on Social Security for their income. And of course, half of near retirees have less than this amount, meaning that they will not even be able to pay off the mortgage on a typical home. But apparently President Obama feels that these people need to make greater sacrifices.

The determination to cut Social Security is especially strange given the finances of the program. Under the law, Social Security is financed by the designated Social Security tax. It does not contribute to the deficit, since the law prohibits payments from being made if there is not money in the Social Security trust fund. That means that if the trust fund were drained, rather than contributing to the deficit, full benefits would not be paid.

And the date where this could be an issue is still relatively distant. The Congressional Budget Office just released new projections showing that the Social Security trust fund is fully solvent through the year 2038. Even after that date, the program would have enough money to pay 81 percent of scheduled benefits for the rest of the century. The folks who say that there will be nothing there for our children or grandchildren are just making it up or repeating the nonsense promulgated by some political hack.

Furthermore, this gap is not hard to close. Currently, the tax on the wages subject to the tax is capped at $107,000. The upward redistribution of income over the last three decades has caused a large share of wage income to escape taxation, as more money ends up in the pocket of CEOs and Wall Street types than ordinary workers. If all wage income were subject to the tax, then it would leave Social Security fully solvent for its 75-year planning period.

MORE OF THIS EXCELLENT ARTICLE AT THE LINK

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"Democrats work to help people who need help.
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That's all there is to it."

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 Post subject: Re: Why Is President Obama So Anxious to Cut Social Security
PostPosted: Thu Sep 15, 2011 10:17 pm 
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Obama Won't Include Social Security Reform In Recommendations To Super Committee

Jilted by Republican leadership during the deficit-reduction talks that accompanied the debt ceiling debate, the Obama administration is now pulling back an offer to put Social Security reform on the negotiating table.

The president will not include changes to that program in the series of deficit reduction measures that he will offer to the congressional super committee next Monday, administration officials confirm.

During talks with House Speaker John Boehner (R-Ohio) this past summer, President Barack Obama had discussed changing the way that Social Security benefits were paid so that a lower level of benefits were paid over time. Boehner walked away from that deal, which was part of a much broader package, because of concern over a corresponding tax increase. Now, Obama is putting off support for that idea of changing the inflation formula of Social Security to chained consumer price index (CPI).

“The president’s recommendation for deficit reduction will not include any changes to Social Security because, as the president has consistently said, he does not believe that Social Security is a driver of our near and medium term deficits," said White House spokeswoman Amy Brundage. "He believes that both parties need to work together on a parallel track to strengthen Social Security for future generations rather than taking a piecemeal approach as part of a deficit reduction plan.”

"There will be no Social Security in the recommendations," Brundage added.

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"Behind every great fortune lies a great crime."
Honore de Balzac

"Democrats work to help people who need help.
That other party, they work for people who don't need help.
That's all there is to it."

~Harry S. Truman


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