Topic: Social Security

Social Security in the Red

Social Security is officially in the red.  The New York Times reports that the system will pay out more than it takes in this year.  Explains the Times:

The bursting of the real estate bubble and the ensuing recession have hurt jobs, home prices and now Social Security.

This year, the system will pay out more in benefits than it receives in payroll taxes, an important threshold it was not expected to cross until at least 2016, according to the Congressional Budget Office.

Stephen C. Goss, chief actuary of the Social Security Administration, said that while the Congressional projection would probably be borne out, the change would have no effect on benefits in 2010 and retirees would keep receiving their checks as usual.

The problem, he said, is that payments have risen more than expected during the downturn, because jobs disappeared and people applied for benefits sooner than they had planned. At the same time, the program’s revenue has fallen sharply, because there are fewer paychecks to tax.

Analysts have long tried to predict the year when Social Security would pay out more than it took in because they view it as a tipping point — the first step of a long, slow march to insolvency, unless Congress strengthens the program’s finances.

The crisis is now, since the vaunted “trust fund” is filled with non-recourse government bonds–essentially worthless pieces of paper.  There’s no there there when it comes to financing future benefits.  Either payments have to come down or taxes have to go up, unless we adopt real reform centered around personal accounts.  And the latter course seems ever more distant after Congress voted to expand federal control over every Americans’ health care.

Bush’s Third Term

With President Obama’s repeated attempts to draw distinctions between himself from his predecessor—and a widespread belief that he and Bush are polar opposites in nearly every way—it’s actually startling how similar the two men are. And if the policies match the rhetoric, it’s going to be another very long 4-8 years filled with ever more government intrusion and red ink.

Obama’s Quotes Bush’s Quotes
“So we face big and difficult challenges. And what the American people hope – what they deserve – is for all of us, Democrats and Republicans, to work through our differences; to overcome the numbing weight of our politics. For while the people who sent us here have different backgrounds, different stories and different beliefs, the anxieties they face are the same. The aspirations they hold are shared. A job that pays the bills. A chance to get ahead. Most of all, the ability to give their children a better life.”
–Barack Obama, 2010 SOTU
“We’re not the first to come here with a Government divided and uncertainty in the air. Like many before us, we can work through our differences, and we can achieve big things for the American people. Our citizens don’t much care which side of the aisle we sit on, as long as we’re willing to cross that aisle when there is work to be done. Our job is to make life better for our fellow Americans and to help them build a future of hope and opportunity, and this is the business before us tonight.”

–George W. Bush, 2007 SOTU

“In a system of two parties, two chambers, and two elected branches, there will always be differences and debate. But even tough debates can be conducted in a civil tone, and our differences cannot be allowed to harden into anger. To confront the great issues before us, we must act in a spirit of goodwill and respect for one another - and I will do my part. Tonight the state of our Union is strong, and together we will make it stronger.”

–George W. Bush, 2006 SOTU

“I realize that for every success story, there are other stories, of men and women who wake up with the anguish of not knowing where their next paycheck will come from; who send out resumes week after week and hear nothing in response. That is why jobs must be our number one focus in 2010, and that is why I am calling for a new jobs bill tonight.”
–Barack Obama, 2010 SOTU
“Americans who have lost their jobs need our help, and I support extending unemployment benefits and direct assistance for health care coverage. Yet, American workers want more than unemployment checks; they want a steady paycheck. When America works, America prospers, so my economic security plan can be summed up in one word: jobs.”

–George W. Bush, 2002 SOTU

“Now, the true engine of job creation in this country will always be America’s businesses. But government can create the conditions necessary for businesses to expand and hire more workers. We should start where most new jobs do – in small businesses, companies that begin when an entrepreneur takes a chance on a dream, or a worker decides its time she became her own boss.”
–Barack Obama, 2010 SOTU

“The way out of this recession, the way to create jobs, is to grow the economy by encouraging investment in factories and equipment and by speeding up tax relief so people have more money to spend. For the sake of American workers, let’s pass a stimulus package.”

–George W. Bush, 2002 SOTU

“Next, we need to encourage American innovation. Last year, we made the largest investment in basic research funding in history – an investment that could lead to the world’s cheapest solar cells or treatment that kills cancer cells but leaves healthy ones untouched. And no area is more ripe for such innovation than energy.”
–Barack Obama, 2010 SOTU
“And my budget provides strong funding for leading-edge technology - from hydrogen-fueled cars, to clean coal, to renewable sources such as ethanol. Four years of debate is enough - I urge Congress to pass legislation that makes America more secure and less dependent on foreign energy.”

–George W. Bush, 2005 SOTU

“Since 2001, we have spent nearly $10 billion to develop cleaner, cheaper, and more reliable alternative energy sources. And we are on the threshold of incredible advances. So tonight I announce the Advanced Energy Initiative - a 22-percent increase in clean-energy research - at the Department of Energy, to push for breakthroughs in two vital areas. To change how we power our homes and offices, we will invest more in zero-emission coal-fired plants, revolutionary solar and wind technologies, and clean, safe nuclear energy.”

–George W. Bush, 2006 SOTU

“But to create more of these clean energy jobs, we need more production, more efficiency, more incentives. That means building a new generation of safe, clean nuclear power plants in this country. It means making tough decisions about opening new offshore areas for oil and gas development. It means continued investment in advanced biofuels and clean coal technologies. And yes, it means passing a comprehensive energy and climate bill with incentives that will finally make clean energy the profitable kind of energy in America.”
–Barack Obama, 2010 SOTU
“Good jobs also depend on reliable and affordable energy. This Congress must act to encourage conservation, promote technology, build infrastructure, and it must act to increase energy production at home so America is less dependent on foreign oil.”

–George W. Bush, 2002 SOTU

“I have sent you a comprehensive energy plan to promote energy efficiency and conservation, to develop cleaner technology, and to produce more energy at home. I have sent you Clear Skies legislation that mandates a 70-percent cut in air pollution from powerplants over the next 15 years.”

–George W. Bush, 2003 SOTU

“The idea here is simple: instead of rewarding failure, we only reward success. Instead of funding the status quo, we only invest in reform – reform that raises student achievement, inspires students to excel in math and science, and turns around failing schools that steal the future of too many young Americans, from rural communities to inner-cities. In the 21st century, one of the best anti-poverty programs is a world-class education. In this country, the success of our children cannot depend more on where they live than their potential.”
–Barack Obama, 2010 SOTU
“When it comes to our schools, dollars alone do not always make the difference. Funding is important, and so is reform. So we must tie funding to higher standards and accountability for results.”

–George W. Bush, 2001 SOTU

“Still, in this economy, a high school diploma no longer guarantees a good job. I urge the Senate to follow the House and pass a bill that will revitalize our community colleges, which are a career pathway to the children of so many working families. To make college more affordable, this bill will finally end the unwarranted taxpayer-subsidies that go to banks for student loans. Instead, let’s take that money and give families a $10,000 tax credit for four years of college and increase Pell Grants.”
–Barack Obama, 2010 SOTU
“We will help an additional 200,000 workers to get training for a better career, by reforming our job training system and strengthening America’s community colleges. And we will make it easier for Americans to afford a college education, by increasing the size of Pell Grants.”

–George W. Bush, 2005 SOTU

“That’s why we’re working to lift the value of a family’s single largest investment – their home. The steps we took last year to shore up the housing market have allowed millions of Americans to take out new loans and save an average of $1,500 on mortgage payments. This year, we will step up re-financing so that homeowners can move into more affordable mortgages.”
–Barack Obama, 2010 SOTU
“On housing, we must trust Americans with the responsibility of homeownership and empower them to weather turbulent times in the housing market. My administration brought together the HOPE NOW Alliance, which is helping many struggling homeowners avoid foreclosure. And Congress can help even more. Tonight I ask you to pass legislation to reform Fannie Mae and Freddie Mac, modernize the Federal Housing Administration, and allow State housing agencies to issue tax-free bonds to help homeowners refinance their mortgages. These are difficult times for many American families, and by taking these steps, we can help more of them keep their homes.”

–George W. Bush, 2008 SOTU

“By the time I’m finished speaking tonight, more Americans will have lost their health insurance. Millions will lose it this year. Our deficit will grow. Premiums will go up. Patients will be denied the care they need. Small business owners will continue to drop coverage altogether. I will not walk away from these Americans, and neither should the people in this chamber.”
–Barack Obama, 2010 SOTU
“Our Nation’s health care system, like our economy, is also in a time of change. Amazing medical technologies are improving and saving lives. This dramatic progress has brought its own challenge, in the rising costs of medical care and health insurance. Members of Congress, we must work together to help control those costs and extend the benefits of modern medicine throughout our country.”

–George W. Bush, 2004 SOTU

“Keeping America competitive requires affordable health care. Our Government has a responsibility to provide health care for the poor and the elderly, and we are meeting that responsibility. For all Americans, we must confront the rising cost of care, strengthen the doctor-patient relationship, and help people afford the insurance coverage they need.”

–George W. Bush, 2006 SOTU

“Now if we had taken office in ordinary times, I would have liked nothing more than to start bringing down the deficit. But we took office amid a crisis, and our efforts to prevent a second Depression have added another $1 trillion to our national debt. I am absolutely convinced that was the right thing to do. But families across the country are tightening their belts and making tough decisions. The federal government should do the same. So tonight, I’m proposing specific steps to pay for the $1 trillion that it took to rescue the economy last year.”
–Barack Obama, 2010 SOTU
“Many of you have talked about the need to pay down our national debt. I listened, and I agree. We owe it to our children and grandchildren to act now, and I hope you will join me to pay down $2 trillion in debt during the next 10 years.”

–George W. Bush, 2001 SOTU

“Starting in 2011, we are prepared to freeze government spending for three years. Spending related to our national security, Medicare, Medicaid, and Social Security will not be affected. But all other discretionary government programs will. Like any cash-strapped family, we will work within a budget to invest in what we need and sacrifice what we don’t. And if I have to enforce this discipline by veto, I will.
We will continue to go through the budget line by line to eliminate programs that we can’t afford and don’t work.”
–Barack Obama, 2010 SOTU
“Just as we trust Americans with their own money, we need to earn their trust by spending their tax dollars wisely. Next week, I’ll send you a budget that terminates or substantially reduces 151 wasteful or bloated programs, totaling more than $18 billion. The budget that I will submit will keep America on track for a surplus in 2012.”

–George W. Bush, 2008 SOTU

“In 2 weeks, I will send you a budget that funds the war, protects the homeland, and meets important domestic needs while limiting the growth in discretionary spending to less than 4 percent. This will require that Congress focus on priorities, cut wasteful spending, and be wise with the people’s money. By doing so, we can cut the deficit in half over the next 5 years.”

–George W. Bush, 2004 SOTU

“My budget substantially reduces or eliminates more than 150 government programs that are not getting results, or duplicate current efforts, or do not fulfill essential priorities. The principle here is clear: a taxpayer dollar must be spent wisely, or not at all.”

–George W. Bush, 2005 SOTU

“Now, even after paying for what we spent on my watch, we will still face the massive deficit we had when I took office. More importantly, the cost of Medicare, Medicaid, and Social Security will continue to skyrocket. That’s why I’ve called for a bipartisan, Fiscal Commission, modeled on a proposal by Republican Judd Gregg and Democrat Kent Conrad. This can’t be one of those Washington gimmicks that lets us pretend we solved a problem. The Commission will have to provide a specific set of solutions by a certain deadline.”
–Barack Obama, 2010 SOTU
“So tonight I ask you to join me in creating a commission to examine the full impact of baby boom retirements on Social Security, Medicare, and Medicaid. This commission should include Members of Congress of both parties, and offer bipartisan solutions. We need to put aside partisan politics and work together and get this problem solved.”

–George W. Bush, 2006 SOTU

“I’m also calling on Congress to continue down the path of earmark reform. You have trimmed some of this spending and embraced some meaningful change. But restoring the public trust demands more. For example, some members of Congress post some earmark requests online. Tonight, I’m calling on Congress to publish all earmark requests on a single website before there’s a vote so that the American people can see how their money is being spent.”
–Barack Obama, 2010 SOTU
“The time has come to end this practice. So let us work together to reform the budget process, expose every earmark to the light of day and to a vote in Congress, and cut the number and cost of earmarks at least in half by the end of this session.”

–George W. Bush, 2007 SOTU

“The people’s trust in their Government is undermined by congressional earmarks, special interest projects that are often snuck in at the last minute, without discussion or debate. Last year, I asked you to voluntarily cut the number and cost of earmarks in half. I also asked you to stop slipping earmarks into committee reports that never even come to a vote. Unfortunately, neither goal was met. So this time, if you send me an appropriations bill that does not cut the number and cost of earmarks in half, I’ll send it back to you with my veto. And tomorrow I will issue an Executive order that directs Federal Agencies to ignore any future earmark that is not voted on by Congress. If these items are truly worth funding, Congress should debate them in the open and hold a public vote.”

–George W. Bush, 2008 SOTU

Emergency Aid to Seniors? No Way

Social Security benefits are indexed for inflation, but because inflation has been roughly zero for the past year, the adjustment formula implies no increase in benefits this year. Nevertheless,

President Obama on Wednesday attempted to preempt the announcement that Social Security recipients will not get an increase in their benefit checks for the first time in three decades, encouraging Congress to provide a one-time payment of $250 to help seniors and disabled Americans weather the recession.

Obama endorsed the idea, which is expected to cost at least $13 billion, as the administration gropes for ways to sustain an apparent economic rebound without the kind of massive spending package that critics could label a second stimulus act.

This is outrageous on four levels:

1. If the president thinks the economy needs more stimulus, he should say that explicitly and have an honest debate.

2. This is the wrong kind of stimulus. Any further stimulus should consist of reductions in marginal tax rates, such as a cut in the corporate income tax (or better yet, repeal).

3. All Social Security recipients already have a moderate guaranteed income, and many have significant income beyond their Social Security benefits. This kind of transfer has no plausible justification as redistribution for the needy.

4. Sending checks to seniors is a blatant attempt to buy their support for Obamacare, which promises to cut Medicare spending substantially.

C/P Libertarianism, from A to Z

Frozen Minds on the Medicare Part B Premium Freeze

This week, Sen. Tom Coburn (R-OK) blocked an attempt by Sen. Max Baucus (D-MT) to move — without a recorded vote or CBO score – H.R. 3631, legislation to freeze Medicare Part B premiums. These premiums are automatically deducted from the Social Security checks of seniors, almost all of whom are enrolled in the Medicare Part B (Supplemental Medical Insurance) program.

Social Security recipients will not receive a COLA increase in their monthly checks beginning January 2010 because inflation between October 2008 and September 2009 was negative. But if Part B premiums increase, the dollar amount of their Social Security checks will decrease beginning in January 2010.

What would happen if the Part B premium were frozen for 2010? Seniors would get a double benefit. First they are gaining from a zero reduction in their Social Security checks even though inflation in 2008-2009 was negative. That means the purchasing power of their Social Security checks will be larger (assuming inflation remains low during the 4th quarter of this year).

On top of that, a frozen Part B premium would provide them with more generous Part B coverage because health care prices became more expensive during 2009 relative to other goods and services.

Senator Coburn’s action in blocking the premium freeze is courageous and correct. In a small but important way, it combats the busting of the federal budget by already generous Medicare Part B benefits that seniors receive — three-quarters of which are funded out of federal general revenues (that is, financed out of taxes paid by younger workers).

Note that the fiscal gimmickry this action prevents is not limited to seniors’ Medicare benefits. Some lawmakers on both sides of the aisle are intent on raiding the Medicare Improvement Fund (MIF) established in 2008 to offset cuts in future physician reimbursements. That fund is actually empty right now — it is not scheduled to receive monies until 2014. But an “advance funding” provision in its legislation would allow lawmakers to make transfers from the Treasury’s general fund as a stop-gap mechanism until MIF’s revenues become available.

Of course, when it comes time to deal with the issue of physician payment cuts, there will be zero dollars left in the MIF. They will have been used up to finance the 2010 Part B premium freeze — and Congress will turn to taxpayers and demand more money to bail out physicians.

Costa Rica’s Social Security System Will Go Bankrupt in 14 Years

An independent audit—the first ever—of Costa Rica’s social security system has found that the system will start eating up its reserves in just 6 years, and will see its finances “compromised” (read “go bust”) in only 14 years [story in Spanish here].

Just as in the United States, Costa Rica has a government-run Ponzi scheme called social security that sooner or later was going to become unsustainable due to demographic changes. However, the seriousness of the situation was hidden throughout the years by Enron-like accountability tricks that have been exposed by the external audit. For example, official records reported income to the system from public enterprises that never took place. It also estimated the sustainability of the pension fund based on unrealistic salary projections.

The consequences for Costa Rican workers are all too grave. This not only compromises the retirement of young workers, but also of those who are a few years from retiring. If we had only followed the example of countries like Chile or El Salvador that privatized their social security systems years ago….

Social Security Administration Bureaucrats Have a Party…and Taxpayers Pick Up a $700,000 Tab

With so much money being squandered in Washington, $700,000 does not even rise to the level of an asterisk. But when that much money is being wasted so that senior bureaucrats from the Social Security Administration can enjoy a party (oops, a training session) at a four-star resort in Arizona, it becomes a symbol of Washington profligacy. Kudos to ABC News for running a story on this travesty. Make sure to watch the embedded video of bureaucrats “reducing stress” at your expense:

… nearly 700 executives from the Social Security Administration (SSA) gathered for a lavish three-day conference in Phoenix, AZ last week, costing taxpayers about $700,000… . The conference, which included a performance by a motivational dance company that was captured on tape by Phoenix affiliate ABC15, was held at the Arizona Biltmore, a hotel described as the “Jewel of the Desert” with an oasis of 39 acres of lush gardens, swimming pools and a golf course. SSA executives were invited to join in the dancing.

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