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Obama's Diamond-Orszag plan: catfood is back on the menu
Most of the reactions to the President’s statement that Romney’s plan is similar to his plan to change Social Security have been to say that it is not true. I believed what Obama said, so I went to the news article about Diamond-Orszag plan which Obama linked to on his election website. A link to the Diamond-Orszag paper here.
The plan involves benefit cuts and revenue increases. Social Security as a self-funding system, which never pays out more than it takes in. The D-O plan claims that Social Security has an actuarial deficit which will kick in way out in the future where accounting identities can be mathematically configured to paint a frightening picture. Despite recent use of the Social Security payroll tax as a piggybank for stimulus purposes, the myth of the conservation of Social Security revenues continues.
Our children and their children will get their Social Security benefits cut under this plan. The D-O plan rationalizes that those generations will live longer, so they divide total revenues over more years of retirement, and like “Good Americans” inflict the pain of cuts without any empathy, priding themselves on the ability to make ‘difficult’ decisions.
Current workers will be asked to pay increased payroll taxes under the D-O plan. This would be reasonable if expected benefit levels were maintained for future recipients. Instead, The D-O plan won’t pay out benefits under the same formulas. They change the structure of future benefits. D-O reduces the benefits for younger persons and their progeny (<55 year olds):
“Workers who are 55 or older will experience no change in their benefits from those scheduled under current law. For younger workers with average earnings, our proposal involves a gradual reduction in benefits from those scheduled under current law. For example, the reduction in benefits for a 45-yearold average earner is less than 1 percent; for a 35-year-old, less than 5 percent; and for a 25-year-old, less than 9 percent. Reductions are smaller for lower earners, and larger for higher ones.
Our plan combines its gradual benefit reductions with a gradual increase in the payroll tax rate. The combined employer-employee payroll tax rate would rise from 12.4 percent today to 12.5 percent in 2015, 13.2 percent in 2035, 14.2 percent in 2055 and 15.4 percent in 2078; it would continue to rise slowly over time thereafter. This gradual increase in the payroll tax rate slows the decline in replacement rates for any given retirement age.”
I am not skilled in economics, nor am I an expert in Social Security. I am writing today because this administration has been carefully hiding its proposed Social Security and social programs changes and cuts and has frustrated all of our calls for transparency. In addition to disrespecting a democratic belief in an open dialogue, this hiding behavior has frightened and humiliated people who are counting on these programs.
In my opinion, not discussing these proposals openly has been a blatant act of class war waged by big money and big business against the rest of us.
I refuse to be accused of misrepresenting the D-O plan because, frankly, the President and Diamond and Orszag have hidden it. Regular Americans should not have to buy the D-O book at Amazon in order to find out how this administration wants to change the structure of Social Security. Whether they were hiding behind the Bowles-Simpson plan, or the Diamond-Orszag plan and or various configurations of each, they have managed to disregard the wishes of the American people who overwhelmingly do not want changes made to Social Security.
58 Comments
It is immoral for a “Democratic” President to do any thing except draw a hard line in the sand. Like a good neoliberal dedicated to removing impediments to capital formation, he refuses to lift the cap on taxing higher earners, but is willing to inflict hurtful “tweaks” on the precarious middle class. The middle class has suffered flat wages in spite of record productivity and education. They’ve had their pensions raided by the top 1% and replaced with underfunded 401(k)s, and now businesses are replacing defined benefit health plans with defined contribution plans and told to buy their health insurance in the marketplace.
Keep screaming. I recommended this diary.
Forgot to post thislink.
Thanks BrianG. I recommend the comments thread in the March 2012 news link article written by Diamond and Orzag, especially PseudoTurtle’s comments. He’s been through a lot and he is not afraid to make a passionate case for Social Security. My parents both were eligible for Social Security and both died young. Does that mean that Libertarians should travel to the spirit world and give my parents, god bless them, their unclaimed Social Security payments?? Just joking.
The link is the first in this post. Enjoy.
Thanks. David had a post (link) on Saturday about how the Obama campaign’s response to Obama’s “somewhat similar position” statement has been to trot out their preposterously-named “Truth Team” to say he and Romney do not share the same position on Social Security, while kicking up a lot of sand to prevent people from actually seeing his position. The catfood is out of the bag, so to speak.
So as a 50 yo who has contirbuted SS Premiums for 35 years, I am going to vote for Obama? He’s the same age as me but will retire & become the first billionaire ex-Presdient while I will enjoy lower SS payments or have to work year or two longer.
The guy I voted for and contributed to in 2008 is a jerk of the first order.
. . . and so?
Time to start calling Barry a lying SOB? instead of making “lesser of two evils” excuses?
I’m afraid it’s too late, and a viable Dem party protecting SS is a thing of the past. While some of the big boys (and girls) scream about protecting SS , behind the scenes the deal is all but done.
What nonsense. Don’t these idiots understand that the federal governemnt shares almost nothing, nothing with the financing/funding of a private pension plan? The federal governemt can quite literally never run out of money or become insolvent. In addition no one, I mean no one knows what will happen so far in the future. The threat to SS will come, if it comes at all, from the availability of real resources, not money. And that will affect everyone. That is what they should be thinking about. Finally, SS was designed to be an intergenerational plan, not to “quarantee” anyone so much income. SS is more than a pension plan. It covers disability, etc. Gawd, I can’t stand it anymore. I may change my vote now to escape this bullshit as it now appears it makes no difference.
And Hugo Chavez is a totalitarian “strong man” holding elections as only a way to mollify his people into thinking they have a say in their government.
He is, of course, friends with everybody who isn’t friends with US.
Venezuela eyes change
The comments are the best part.
I am scared to death of both of these men who are pretending to run for president. I figured Obama would “win” because the PTB like the irony of a democrat killing all the New Deal programs, but now, esp after that debate! I’m thinking maybe O won’t be quite fast and loud enough for them.
I wonder who is going to buy all the gas and oil,etc they want to turn America into Swiss Cheese for
Democrat party slogan: “We
suckcut less! Wesuckcut less! Wesuckcut less!”The assault on Social Security has been relentless and ongoing. The powers that be want the vast majority of Americans to live their lives on a knife edge as that makes us easier to control.
They will not stop in their pursuit. It is a shame that now the 98.6% of us now have no advocate in Washington DC to protect our interests as even the D’s have sold us out.
And remember, 2/3 of the Federal Debt we owe OURSELVES. Inter-governmental agency loans from one hand to the other. In spite of the hum-buggery claiming China owns us.
If you think Barry’s plan is bad, just wait and see what Rmoney will do. He wouldn’t cut SS, he would eliminate it.
I think at some point a repub will actually propose positions to the left of the dems–it wouldn’t be that hard.
I thought McCain could have been elected if he swore to end the Iraq war the day he was sworn in.
There were some points Mitt made during the debate that were to the left of Obama–yeah, I know he, I mean they, were lying.
How bad does Mitt want to be president? Announce tomorrow that he will do absolutely nothing to social security and trot out Diamond-Orszag as proof that Obama will make cuts on the sly.
Of course he doesn’t want to be president that bad, just sayin’.
It wouldn’t take much to be left of Obama since he is so far right of center. The Democrat Party is the same as the Republican Party of 30 years ago and the New Republican Party is bat-shit crazy.
I think Rmoney coming off left of center would just look so disingenuous. We didn’t want to believe Obammer was lying but at least he was in the ostensibly left party. So we know if Rmoney comes from the left it is a ruse so he can punch us in the gut with the right. It would be an obvious head fake.
Chavez actually did fulfill his campaign promises to reduce poverty since 2004.
Thank you.
I know. People will gripe about anything. I hear the roads aren’t paved well enough.
Face it, after 20 years in power, don’t you think even YOU might get a little corrupt? All that brown nosing goes to a mans’ head after a while.
I do wish, however, that I had taken Spanish in HS, esp with where I live now.
“the wishes of the American people who overwhelmingly do not want changes made to Social Security”?
The Diamond-Orszag or Bowles-Simpson plans are only half the problem. If the ALEC lawyers get to write the bill, then it could be years before we find out how its vagueness and complexities (loopholes) will be interpreted. This could make it completely different than what we were told. Sort of like Obamacare and the FDIC version of Glass-Steagall.
I guess I should have put /s after that Chavez thing. of course, most people reading it should be able to see that, I think
How do you avoid this problem with real pensions? If they are properly funded (which I am not aware of any that were ever fully funded), they accumulate so much cash they become an attractive nusance to corporations, governments, unions, etc. They can be “raided” for several years before the impact shows up in the future. It is also easy to underfund them and claim unrealistic returns will make up the funding.
Right now the post office is being pushed to bankruptcy because by law it must fully fund it’s pension and it cannot recover the cost from its customers to do this. Do you think private corporations could fully fund a true pension for its workers?
They’ll get them cut under this or any other imaginable plan, unless someone figures out a way to make drastic changes in our demographics.
Lol, at first I thought you were referring to Obama, and I was going to say something about that.
No big deal. Probably most folks understood what you meant. Maybe they will teach me Spanish when I hide out in their embassy pleading for asylum!/s
Isn’t the USPS being required to fund its pension plan to some ridiculous period out into the future, like 40 years?
75 years
When you refer to “any imaginable plan”, you exclude any plan which would raise the payroll tax rate or increase the cap. Those are perfectly imaginable plans, though ones which have been excluded from discussion.
The problem with social security is always pitched as one where in 2037, benefits will only be 80% of promised benefits.
So, to “fix” that problem, the fixers have proposed to reduce benefits so retirees will get 100% of promised benefits by 2037–with the catch that those benefits will be, say, only 80% of what was earlier promised.
That’s not a fix. That institutionalizes the problem. Why do anything at all then? They could just as easily do nothing and reach the same 80% reduction by 2037.
I have read proposals that a 1 point percentage increase on both employer and employee contributions–phased in over the next 25 years would guarantee present benefits as far as the actuaries can see.
Of course, there is also the increase in the payroll cap.
But neither of those is “imaginable” by the inside the beltway crowd like yourself.
Even more absurd. The USPS workers retiring aren’t even born yet.
I haven’t read the paper, and my opinion of Orzag could hardly be any lower. But Peter Diamond is a fine and deceny economist–one of the few who truly deserved the Nobel Prize. I have confidence in his judgment. There has got to be something here that doesn’t meet the eye. Unlike Orzaf, Diamond isn’t ahired gun for the rich.
Diamond and Orszag first published this plan back in 2005 while at Brookings. So when the Dems were fighting Bush for planning to kill SS the Dem think tank was developing their own “kill SS” plan.
So the plan is to increase taxes for SS but give less in benefits ok where does the new money for SS go? I suspect another Dimon by the name of Jaime is hiding in the weeds somewhere!!
According to Dean Baker, demographics impact our future health care costs, not Social Security’s adequacy to pay benefits.
Here.
They keep saying that Americans are living longer than before and that is why the system must change. It’s a disingenuous argument because Americans are also paying more into the system then they used to and they are also retiring later. In the past you worked 20 -30 years before retiring. Now a person who starts working as an 18 year old can expect to work for over 40 years before even becoming eligible for retirement.
The Center on Economic Policy and Research is continuously researching issues related to Social Security and much, much more. I invite you to visit them and read anything there that strikes your interest.
It’s pretty rich that the same crew who utters “who could have ever imagined” on everything from war to handing over money to banks are now the resident experts on how to save a system that they’ve been pilfering from.
It boggles the mind. It’s almost like putting the guy who burgles houses for a living in charge of designing your household layout.
The question is less could they, and more will they on whether private business funds pensions.
It’d mean less money to shareholders and overpaid CEOs and board members so I feel fairly confident in saying, no private companies would not do any better in managing retirement funds.
Well, you’re correct in one respect. RICH and WHITE Americans are living longer.
Minorities and the poor face much lower life expectancies. Therefore, the cuts disproportionately affect those who need the program the most.
And knut. PLEASE, are you serious? “I have confidence in his judgment.”?
These are Obama shills. When will you people wake up to the fact that they’re just not that into us. And by us, I mean the American people.
Four years of this shit isn’t enough to wake you up?
Dear Editors, thank you for adding the photo and for various corrections.
Thank you for the post, TomThumb. There’s very little left to say about Obama and the Dems. They’ve embraced the framing and policy goals of the R’s, deficit hysteria as an excuse to cut the safety net. They’re no longer really even bothering to pretend to suck less, it’s just up to the rest of us to stop pretending as well.
That’s not something other people are requiring the Postal Service to do. It’s something the Postal Service union negotiated for itself some years back, and crowed about at the time, too. It was considered quite a coup for the workers. Now all of a sudden it wants to raid the pension to cover current paychecks.
Yes, aka real resources,not money. That is no problem. But the fact we have such high unemployment impacts our productive capacity, even the futures.
Thanks, TomThumb.
There are so many people just waking up to this, as if it hasn’t been right under their noses since…well, since right after the 2008 election.
Thanks for keeping the attention on it.
It’s also disingenuous because it’s just not true. I know many in the generation before mine who have lived well into their 80′s and 90′s with good health insurance coverage from their jobs and Medicare.
I also think that people are going to start dropping like flies with the continued destruction of our environment. Maybe they want to get the money before we all wake up and see that, indeed, we are either being worked to death, starved to death or poisoned.
Also the the entire medical system is falling part because the doctors care more about THEIR bottom line than their patient’s health.
AND I think they want the dough for more wars of empire and crackdowns on the civil unrest that is going to rise like yeast no matter who “wins” the presidency
You were the one who got the ‘ball rollin’!
(I wish I could figure out the details of their plans. )
Read Retirement Heist by Ellen Schultz. She detailed the process in which the laws were rewritten during the 1990s to allow the raiding of funded pension plans. This was a political choice not due to some unsustainable demography.
The middle class has been screwed out of its just compensation with neoliberal economics the past several decades, and Obama’s “Grand Bargain” is the same process in the governmental realm.
It’s swell that you cast the union as the bad guy but anyone who actually looks at the history would be more inclined to understand why unions would be worried that pensions would be raided and that the people they represent would be left out in the cold. As a matter of fact the reason the government created the Employee Retirement Security Act of 1974 was because there were problems with pensioneers being left in the cold as early as the 60s. And heck we’re STILL having conversations on pensions since we had a Pension Protection Act in 2006. We’re going to still be having them since in 2010 147 pension plans failed and the PBGC ended up with more liabilities then assets according to the Washington Post.
But hey you’re right, pretending it’s all the mean ol’ horrible unions fault is certainly an easier talking point.
In the debate, Obama ADMITTED he AGREED with Romney on:
1. Social Security.
2. Corporate Taxes. Both said they will cut corporate taxes further (as though corporations are suffering from high taxes and low profits, and there is plenty of money at the state and local levels.)
3. Bowles Simpson. Obama said he is going to PUSH FOR Bowles Simpson. And Romney in the debate praised B-S a few times. Imagine, a Democrat is going to push for this plan to undermine the social safety net on those who can least afford it, while reducing taxes FURTHER for the top income earners, who are already sitting on piles, and growing piles of money, while not creating jobs. A Democrat.
Just more proof that Firedoglake commentators have been the ones who have been correct all along, not New York Times, not mainstream media.
Obama has the same type of economic plan as the Republicans on the radical right; they just differ in degrees. Both will strangle you, one slower than the other.
Both are out to radically restructure the progressive state that has been developed since FDR: undermine and curtail the social safety net, while restructuring taxes FUTHER in favor of the top income earners (proposed by Bowles Simpson, which Obama said he will push for). This is FURTHER redistributing income upwards, in favor of the top income earners. Reckless and irresponsible and unconscionable. But no one calls out George W. Bush II (Obama) on it.
P.S. The Obamabots are such that Obama now DARES to openly admit in debate he will cut social security, cut corporate taxes and cut taxes further for the high income earners beyond GWBush’s tax cuts for the rich (contained in Obama’s Bowles Simpson proposal), and Obamabots will still vote for Obama by the loadful. Something is wrong here.
By voting for Obama although Obama admits that he has a similar fundamental economic agenda as the Republicans, Obamabots are giving Obama a mandate to pursue those radical policies after the election, if he wins.
The Chinese.
Since Obama is for it, that means it is a nuanced position with substantial merit and deserves greater consideration and support than you would otherwise give it if came from someone else. Also, since we have been told that Obama reads Erasmus and the other great humanists of Western thought before arriving at difficult decisions, Obama is obviously taking this position only with the greatest reluctance. Furthermore, the Republicans are making Obama do it. Lastly, the Republicans would be much worse than Obama.
Telltale sign of straight-up bs: being given several excuses when theoretically any one should suffice.
…x 2
Actually, the post office had to fund its pension and health care 75 years into the future.
If you want a truely fully funded pension that is what you have to do. Postal employees can retire as early as 55.
I agree with that book and it demonstrates my point. A fully funded pension is a big wad of cash that is very attactive to individuals, corporations, and governments that need money. It is an attractive nusiance that does not move so many ways can be planned over time ot raid it. And the hidden raider of inflation is not even considered when doing overall economic planning.
DKOS had a post about this today October 9th. They don’t cite the Diamond-Orszag plan, but the post takes Obama at his word. Response to scorpios post range from “you are trying to get Romney elected, to “this is Obama’s ideological position” or his belief in the Grand Bargain as his Moby Dick, to genuine fear that this President intends to betray his Democratic base and is not afraid to tell them to their face that that is what he intends to do. Others think he is just signalling to his deficit hawk buddies.
Here.
Most people seem to be in denial about Obama’s intention to cut Social Security.
is there a link TT?
yes I agree; a lot of Dems and GOPers refuse to think that “their guy” will cut SS. I know a strong GOP supporter who told me Romney would never cut SS even when he said he would during the debate and this same person watched the debate!!
Yes. Sir. I usually hide the links under a highlighted word, like, HERE. But for you, here it is in all its Kossian glory:
http://www.dailykos.com/story/2012/10/09/1142006/-Obama-may-try-to-cut-Social-Security#comments
Today, I found a copy of George Orwell’s short essay: “How the Poor Die.” He had a severe case of bronchitis and went to a public hospital in Paris, I think it was around 1938. He found the most barbaric conditions, outdated treatments, indifference to the pain of patients, no anesthetics, no germ killing disinfectants, patients packed in together like a military hospital, cot to cot, toe to toe. He fled after several days of watching other patients die in agony, unwitnessed and missing those final expressions of love so crucial to departing the planet with grace. I reflect upon where we are headed with America’s version of austerity and shivered. I hope some of us can band together with a promise to take care of each other.
Dean Baker has reacted with considerable anger over Obama’s willingness to cut Social Security and I thought it deserved a link here:
HERE.
Here is Ian Welsh’s evaluation of the Diamond-Orszag Plan in 2009:
http://firedoglake.com/2009/02/20/social-security-the-diamond-orszag-plan-is-not-the-liberal-alternative/
From a macro perspective, Ian sees that this plan is a money grab by the elites. Perhaps we should just tax the corporations and businesses who have refused to match increased productivity with increased wages since 1970!! D-O plan taxes personal income when it should ask more from employers.
Thanks Ian, if only in retrospect!!