Softer, Kinder, Simpson-Bowles, “The Lefty Humanitarians.” // Not!

10:42 am in Uncategorized by TomThumb

I. Wolves in Sheep’s Clothing.

The plan put forth by the Chairpersons of the President’s deficit commission held out a bit of hope for low-income elderly. Bowles and Simpson offered relief to those laboring under below-poverty benefit levels. A basic minimum benefit of 125% of the Federal Poverty Line.  O’ those lefty humanitarians!

Bowles & Simpson presented the basic benefit under the most cynical of motivations, because it was meant to be the “hook”, to get the consumer to buy into the severe cuts to the program on the other end, ….in decreased benefits for the middle income and high income recipients. A chart of the B&S plan shows that they flatten benefits so that by the time our children retire in 2070, the new, flattened range of benefits is between 8 and 14 K.

A chart 
II. A basic benefit is a good idea. People like the idea.

A basic benefit is a good idea as long as it does not entail hollowing out benefits for higher earners.

Americans agree  that taxes should be raised to guarantee the integrity of the Social Security system and desire to see increases in Social Security benefits. They would sympathize with the idea of guaranteeing a decent benefit for those stuck in the low income brackets. A NASI poll showed majority support for the program.

From the most popular packet of changes to Social Security:

“Raise Social Security’s minimum benefit so that a worker who pays into Social Security for 30 years can retire at 62 or later with benefits above the federal poverty line ($10,788 in 2011). Currently, lifetime low-wage workers are at risk of falling into poverty in their old age, even after paying Social Security taxes throughout their working lives.”

The problem with the NASI poll’s suggestion for a minimum guaranteed Social Security benefits is that it is half the size of what it costs for a single individual to live.

III. An expanded Social Security program.

A new plan for an expanded Social Security has just been released. It is a public program and would be paid for through new taxes on unearned income from capital gains and other sources. It creates a second, Social Security B to stack on top of existing SS benefits, which they call Social Security A. From the charts it looks like the plan offers generous benefits and retains many of the features of traditional Social Security at the same time. They fold in SSI recipients and general revenues. They claim that the lowest income group gets a much more progressive replacement rate under their formula. (Twice what Simpson-Bowles are suggesting.) See pages 21-22 for the charts.  If the authors could eliminate the favorable tax treatment of tax deductible retirement savings accounts, they could easily fund an expansion of Social Security. Using the leverage of cancelled tax expenditures (about 6.0% of GDP), they could move the world.

IV. Why not cover everybody? Go Big. Go all the way and cover the unemployed too.

I would support a basic guaranteed Social Security income at the higher 20 to 30K level. That level of income is consistent with salaries suggested for guaranteed employment programs. A decent wage is required when you have children to support and rent or mortgage to pay. Recalling that even on Medicare the elderly pay about half of their medical costs, a decent benefit is required when you have medical bills and medical insurance costs. What does not seem to work are continued high levels of unemployment and high levels of elderly poor. Half of the elderly live on less than $22K a year.  ShadowStats estimates true unemployment at about 23%.

Why not provide income security guarantees throughout the lifespan? Take care of the needs of the unemployed at the same time that you provide income security for the elderly. Why not provide a guarantee of a job/income for those who have none? Other countries provide these. Why don’t we Americans provide these essentials for each other?

V. We need a bigger template than Social Security.

FDR suggested a guaranteed jobs program in his Second Bill of Rights speech.  MLKjr spoke of a guaranteed jobs/income program when he addressed the burning issue of high levels of poverty in 1967.  John Kenneth Galbraith Sr. saw a guaranteed jobs/income as a solution to social and economic inequality.  The Declaration Of Human Rights stated that Everyone has a human right to a job or income so that they can live. (Articles 22 and 23).

Some thoughts about guaranteed income and/or jobs programs can be found here and here.  A guaranteed income might short-circuit some of the haggling over the merits of different age groups and competition for jobs. Here is a proposal for a Swiss program.