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The Circle of The Vulnerable Is Wider Than They Think

9:23 am in Uncategorized by TomThumb

This is a reapplication of an earlier piece. You can skip to the Update:The Poor Would Be Forgotten, below if you wish.

We are all inside that circle. If they had thought through the implications of what they planned to do with the Chained-CPI-Social Security cuts and cuts to medical care, they would have realized that everyone is affected in the end. In the final analysis we are all connected (from StrengthenSocialSecurity):

 ”Some policymakers are considering accepting a grand bargain that includes the chained CPI for Social Security. This is no minor technical change – it is a benefit cut that compounds to become very large over time. The chained CPI would cut the annual benefit of the average earner (someone making $43,518) by $658 at age 75, $1,147 at age 85, and $1,622 at age 95.1 The cumulative cut for that individual would be $4,631 – more than three months of benefits – by age 75; $13,910 – nearly a year of benefits – by age 85; and $28,004 – more than a year and a half of benefits – by age 95.2 “

Policymakers (Gene Sperling) promise to exclude “vulnerable groups”. Three groups are most vulnerable: Veterans. The Poor. The Eldest Elderly. In 2011, Social Security paid almost half of its benefits to these groups.

 $58.3 billion to people who are poor or near-poor (excluding those aged 85 and older);15

 $131 billion to those who are aged 85 or above (including veterans);16 and

 $176.4 billion to veterans and their families17 (net of the above two groups).18

This means that if a chained CPI is put into place which leaves out those groups, it can only affect a 50% smaller group. What is the point of making these cuts?

There are two other groups identified in the piece which have not been identified as vulnerable but which are vulnerable. The disabled and those over 55.  Include those two groups and you have completely removed the purpose of making cuts through a chained CPI. There’s no one left. You can read the fact sheet HERE.

UPDATE: The Poor Would Be Forgotten

Now that the President has submitted the 2014 budget the details of the proposed chained cpi (Obama version) are taking shape. People who become 76 will receive a bump payment to compensate for the lost income due to the cuts in benefits which result from long-term exposure to a reduced COLA via the chained cpi. The disabled would be protected. Vets means-tested pensions would be protected too. The poor would be forgotten.

Since so few people are protected from the new chained cpi we can start to see how regressive this policy is. There are many people who do not receive SSI who are dependent upon Social Security and who are poor or near poor, who will be affected.

Minorities and women, who are underpaid as workers, and receive lower benefits will be punished under this scheme. Persons of color whose life expectancies are shorter than their white, affluent peers will take the losses on behalf of this policy. Women in particular will be harmed because they live longer on fewer benefits.

A Tax Just For Being Poor

There are no protections for the poor or near poor here. This policy amplifies income inequality at the end of life. Just because every writer cites the median Social Security income as something just above the poverty line, does not prevent a rational person from knowing that 50%, or those below that line,  are living in poverty or damn close by. Who gets hurt?

Those caregivers in our society, who have volunteered to care for children and aging parents and who have fewer years of earnings are poorly compensated by Social Security and Spousal benefits.  Minorities who earned less and receive less Social Security and live fewer years get no mercy under the new chained cpi. Those low-income earners whose final Social Security benefits don’t add up to much and who have few savings are not protected.

Where’s the forward thinking? What consequences will there be? Is there no one who can ask,  ”How will the chained cpi negatively impact society’s most vulnerable citizens?”, and,  ”At a time when rich Americans pay so few taxes, why won’t those receiving Social Security perceive this as a ‘broken promise’ and as a further tax on their meagre incomes?” A tax just for being poor. In the words of Dean Baker, “In this context, it is unfortunate that President Obama has proposed a budget that has substantial cuts to Social Security. The vast majority of seniors are already struggling. The proposed cuts would be a reduction in their income of more than 2 percent. By contrast, his tax increase last fall cut the after-tax income of the typical wealthy household by less than 0.6 percent.”

Chart of the impact of Obama's cuts on incomeWhat’s the point?

Is this policy meant to save money? Social Security does not even contribute to the deficit.  Is this policy meant to strengthen Social Security? If so, why not scrap the cap on FICA and make the Social Security program whole by insisting that affluent workers pay FICA on their income greater than the cap at 113K?

What’s the point?

Or, is this policy in place just to please President Obama’s fiscal friends, Mr. Orszag, Mr. Peterson (Mr.FixTheDebt), Ms. Rivlin, and all of their sock-puppet think tanks like CRFB and their phoney-baloney commissions, like Simpson-Bowles?

Arts of Magnification, Minimization, And Intimidation

7:25 pm in Uncategorized by TomThumb

Intimidation (“How Dare You Demand Special Consideration!”)

Seems like the enemies of Social Security and Medicare will pull out every trick they know to achieve their goal.  Today an otherwise astute economist told a reporter that disabled Vets had to take a cut in their benefits just “like everyone else”, in a scold, as if they were asking for special consideration. They said that they had already made sacrifices for their country and gave the answer that it is unfair to change the terms of the contract after you have already finished your side of the deal. She was firm, and insisted that there would be no carve outs for special groups. Did she miss the Gene Sperling memo?

A few weeks ago White House economist, Gene Sperling, was all over Reddit promising that the chained cpi would have special protective carve outs for the vulnerable: For Vets and disabled folks, and for the very elderly who would experience the deepest cuts from their Social Security benefits. (Then it turned out that every group is vulnerable because all are going to be hurt by cuts under the chained CPI.) Broken promises?


In an non-fact based Op-Ed in the NYTimes, Rattner claimed that a 1,ooo dollar benefit would hardly be hurt at all by the chained cpi. His graph showed the increasing impact of the chained cpi cut over a ten year period. So what’s the problem? The graph did not show how the cuts would  aggregate to 3% of benefits at ten years, 6% at twenty years and 9% at thirty years. And, the Social Security benefit cut needed to be multiplied by 12 to present the total of the cuts per year, and then compounded, over a specific period. That is what is wrong. And account for inflation through COLA. He made the numbers look small by only looking at a small looking number. The real impact of the chained cpi is larger. More like this:

Chart of SSI under CPI

Magnification (Exaggeration)

In the same non-fact based Op-Ed in the NYTimes, Rattner claimed that unfunded liabilities owed by this generation extended to “almost 60″ Trillion dollars.  He alleged that cumulative debts including the current deficit and future Social Security and Medicare unpaid for benefits meant that cuts had to be made: “now! now! now!” His numbers reflect the multiplication of a coefficient representing a guessed-at, actuarial gap in future projected revenues and benefit payments, over the almost infinite horizon of 75 years. No wonder his graph shot skyward at a 45 degree angle. He wrote as if there were no future revenues, production gains, wage increases, and maybe even a scrapped FICA cap so people like him can pay their fair share of taxes. Social Security would be perfecto if deadbeats earning more than 113K per year had to contribute their fair share to the Trust fund.

Medicare will require price controls to bring healthcare costs down, but beneficiaries of Medicare are not the problem, high prices are.

This is a graph of medical spending on retirees. Not bad. Most of the rise is due to “other factors.” And recent spending is down:

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