Jane Hamsher at Firedoglake:
Each time the Catfood Commission holds its secret meetings, Alex Lawson of Social Security Works has been outside with his camera, shooting video of the closed front door as FDL runs a live stream on our front page. The Washington Post wrote it up recently. As committee members go in and out of the room Alex asks them questions when he can, and yesterday he had an exchange with Alan Simpson that was…well, extraordinary.
Simpson is apparently a graduate of the Bobby Etheridge school of charm. Alex Lawson was incredibly respectful and polite as the crankly Simpson berated, interrupted and cussed him. Simpson has been a long-time supporter of rolling back the New Deal, and when asked about cuts he would recommend to the President and Congress on CNBC, Simpson said “We are going to stick to the big three,” meaning Social Security, Medicare and Medicaid. His sentiments haven’t changed.
CJR’s Trudy Lieberman recently ran down Simpson’s history of delicate statements on the subject of Social Security. He is equally decorous on camera with Alex, who clearly knows a great deal more about the subject than he does. Simpson starts from the premise that the Treasury will default on the bonds issued to the Social Security trust fund, because all the best people apparently know that it’s better to default on America’s senior citizens and plunge them into poverty than it is to default on, say, the Chinese.
Despite Simpson’s assertions, raising the retirement age to 70 IS a benefit cut. It would put an estimated 1.5 million senior citizens into poverty. After two years of watching billions of dollars in taxpayer money being paid out to Wall Street CEOs in lavish bonuses while the White House breaks every promise they’ve made to rein them in, that takes a fat load of nerve.
The commission is also looking into cutting Medicare benefits, because the deal guaranteeing no-bid Medicare contracts to the pharmaceutical industry by both Republicans and Democrats can’t possibly be abrogated. The committee claims it’s independent, but it’s not THAT independent. So, old people, too bad for you.
Erskine Bowles has returned to run the same play he ran during the Clinton administration, when he negotiated the secret deal between Bill Clinton and Newt Gingrich to cut Social Security benefits. Despite warnings from both John Boehner and John Conyers that the commission will report its recommendations to a lame duck Congress who could pass it before the end of the term. Both Harry Reid and Nancy Pelosi have promised to bring the commission’s proposals up for votes.
In the absence of any transparency coming from the committee about what transpires in its secret meetings, Simpson’s comments to Alex are the best insight we have into what is being discussed there.
Bottom line: bon apetite, Grandma!
ALAN SIMPSON: We’re really working on solvency… the key is solvency
ALEX LAWSON: What about adequacy? Are you focusing on adequacy as well?
SIMPSON: Where do you come up with all the crap you come up with?
SIMPSON: We’re trying to take care of the lesser people in society and do that in a way without getting into all the flash words you love dig up, like cutting Social Security, which is bullshit. We’re not cutting anything, we’re trying to make it solvent.
SIMPSON: It’ll go broke in the year 2037.
LAWSON: What do you mean by ‘broke’? Do you mean the surplus will go out and then it will only be able to pay 75% of its benefits?
SIMPSON: Just listen, will you listen to me instead of babbling? In the year 2037, instead of getting 100% of your check, you are going to get about 75% of your check. That’s if you touch nothing. If you like that, fine. You’ll be picking with the chickens yourself when you’re 65.
So we want to take care, we’re not cutting, we’re not balancing the budget on the backs of senior citizens. That’s bullshit. So you’ve got that one down. So as long as you’ve got those two things down, you can’t play with anymore, that we’re not balancing the budget of the United States on the backs of poor old seniors and we’re not cutting anything, we’re stabilizing the system.
LAWSON: Thanks for being so frank. My question is: raising the retirement age, is actually an across-the-board benefit cut?
SIMPSON: There are 15 different options being discussed in here today, and why nail one of them…[inaudible]…if you would like to get one of them that pisses your people off.
Jason Linkins at Huffington Post
Alan Simpson, co-chair of the White House Debt Commission, provides a full and frank engagement with an activist questioning him on the proposed reforms of the Social Security system. He doesn’t duck. He doesn’t hide. He doesn’t grab the guy around the wrist or neck. And the cry-babies at Huffington Post complain that he uses profanity.
I’m frankly amazed that Simpson spent 8 minutes, 20 seconds talking to some yahoo with a video camera. Regardless, the problems he describes are real. Social Security and Medicare are massive structural burdens, even compared to the spectacular cost of the wars in Afghanistan and Iraq. Those will soon go away whereas the entitlement demands will continue to skyrocket.
Now, Hamsher and Lawson are right: Simply raising the retirement ago to 70 won’t work, either. There are many occupations that are too physically demanding to work that long. And many people’s health declines much sooner than that. The ultimate solution is going to have to be some combination of means testing and raising the ceiling on the FICA tax. But that’s going to require an admission that Social Security and Medicare are subsidies for the less fortunate elderly rather than “insurance” programs wherein we fund our our retirement during our working years.
But that was always the intent! They were poverty relief programs, designed to provide a safety net for people who couldn’t support themselves one they were no longer able to earn a steady paycheck. Most jobs didn’t provide retirement annuities and many people don’t earn enough to save for retirement, much less for fifteen years of retirement. I’m willing to kick in some money to help those people get by.
Instead, though, we’ve created a bizarre system where I’m paying a pretty nice chunk of change every month and being told that I’m paying for my own retirement. Yet, even if we were able to sustain the current setup, my return from Social Security will be so modest that, barring unforeseen circumstances, it’ll be a tiny portion of my income. And we’re bankrupting the system to keep up the illusion.
John Berry at Fiscal Times:
In the interview, Simpson maintained Social Security is already insolvent because it is paying out more than it is getting in tax revenue. It is not clear whether that will be true for the current fiscal year or the next few years, but it will be happening not too far in the future.
Then Lawson asked, “But what about the $180 billion in surplus that [the trust fund] brings in every year [in interest payments on the Treasury securities it holds]?”
“There is no surplus in there. It’s a bunch of IOUs,” Simpson said. “Listen. It’s two-and-a-half trillion bucks in IOUs which have been used to build the interstate highway system and all of the things people have enjoyed since it has been set up.”
Since Social Security finances were overhauled in 1983, tax revenues have far exceeded costs. That surplus went into the trust fund, was invested in Treasuries and has been earning interest for almost 30 years. Those annual surpluses meant that the government did not have to borrow as much from the public to finance whatever it spend money on. (However, interstate highways have not been financed even indirectly by Social Security surpluses, but rather by motor fuel taxes.)
Whenever tax revenues don’t cover Social Security costs, Simpson said, ” What do they do? They go to that trust fund and say, ‘We need the IOUs out of it.’ And they say, ‘You can have them, but you have to pay for them.’ So you’re taking a double hit on your own government. Makes no sense.”
Indeed, Simpson makes no sense. What is the “double hit”? The government didn’t have to borrow in the past, or pay interest on what it didn’t borrow. Now it has to borrow from the public and pay the interest. There’s no “double hit” involved.
Finally, Lawson said that his understanding was that part of the justification of the 1983 changes was “prefunding the retirement of the baby boom by building up that huge surplus.”
Simpson responded, “They never knew there was a baby boom in ’83.”
Well, Alan Greenspan, who headed the bipartisan commission that proposed the 1983 changes, would tell Simpson something different. The big demographic shift that began right after World War II was precisely why Social Security was expected to face a deficit as the number of workers relative to beneficiaries began to decline when the Baby Boomers began to retire. And that was why taxes were raised and benefits were cut then–to build up a trust fund surplus so benefits could be paid.
Simpson always likes to be outrageous in a cranky-old-man kind of way. It’s part of his charm. But as John points out, Simpson throws around a lot of claims that are just plain wrong and insulting to boot. Among other things, he talks about Social Security being for the “lesser people.” His comments threaten to undermine the commission’s credibility.
OK, the immediate problem is the statements of Alan Simpson, the commission’s co-chairman. And what got reporters’ attention was the combination of incredible insensitivity – the “lesser people”??? — and flat errors of fact.
But it’s actually much worse than that. On Social Security, Simpson is repeating a zombie lie — that is, one of those misstatements that keeps being debunked, but keeps coming back.
Specifically, Simpson has resurrected the old nonsense about how Social Security will be bankrupt as soon as payroll tax revenues fall short of benefit payments, never mind the quarter century of surpluses that came first.
We went through all this at length back in 2005, but let me do this yet again.
Social Security is a government program funded by a dedicated tax. There are two ways to look at this. First, you can simply view the program as part of the general federal budget, with the the dedicated tax bit just a formality. And there’s a lot to be said for that point of view; if you take it, benefits are a federal cost, payroll taxes a source of revenue, and they don’t really have anything to do with each other.
Alternatively, you can look at Social Security on its own. And as a practical matter, this has considerable significance too; as long as Social Security still has funds in its trust fund, it doesn’t need new legislation to keep paying promised benefits.
OK, so two views, both of some use. But here’s what you can’t do: you can’t have it both ways. You can’t say that for the last 25 years, when Social Security ran surpluses, well, that didn’t mean anything, because it’s just part of the federal government — but when payroll taxes fall short of benefits, even though there’s lots of money in the trust fund, Social Security is broke.
And bear in mind what happens when payroll receipts fall short of benefits: NOTHING. No new action is required; the checks just keep going out.
So what does it mean that the co-chair of the commission is resurrecting this zombie lie? It means that at even the most basic level of discussion, either (a) he isn’t willing to deal in good faith or (b) the zombies have eaten his brain. And in either case, there’s no point going on with this farce.
You don’t name an arsonist to co-chair your fire department. If Obama wants his commission to do anything, he needs to replace Alan Simpson with a reality-based co-chair.