The Mythical Social Security Cost Of Living Increase

In the press the past few months one read regular, breathless accounts of how seniors were due - for the first time in nearly five years - a 2 percent increase in the Social Security cost of living allowance.  We both looked forward with great eagerness to this increase since, of course, the cost of living is going through the roof. Our home insurance alone has increased more than 70 percent the past two years, and the car insurance nearly 40 percent. So any real increase in Social Security payments would be welcome.

Thus it was I tore open the letter from the Social Security Administration yesterday afternoon, announcing with the first sentence of the first paragraph:

Your Social Security benefits will increase by 2.0 percent in 2018 because of a rise in the cost of living.

A- Your monthly amount before deductions is    $ X    +  0.02 X

B- The amount we deduct for Medicare medical insurance is Y  +  0.02 X

Okay,  'X' is the monthly Social Security benefit received, currently, 'Y' is what we are paying in for Medicare already or $104.00.   So if this was a REAL cost of living increase we'd be ahead of the game by the amount shown in (A) minus Y ( $104.00.)

BUT as you can see, the increment for the monthly COLA increase (0.02 X) is exactly the amount by which our Medicare deduction has ALSO increased.  Result?  COLA increase =  0.02X  - 0.02X  = $0

In other words, after the Medicare deduction there is no COLA!

Now before anyone starts the ridiculous thought process that I'm getting really cheap medical care, think again.  In Medicare, we all have to get an additional supplement plan (usually called "Plan F") which covers the balance of costs that Medicare doesn't, such as for specialized cancer treatments like my focal cryotherapy, or having a precancerous lesion removed from my back in May.  That cost for me has currently increased from $220 a month to $228 (as per a recent advisory letter from the insurer).

We also have to cover the costs of the Part D drug plan premium plus the cost of med copays. In addition, Medicare covers nothing for eyeglasses or dental care, which in the past two months has cost me:  $460 (eye exam, newly corrected glasses) and  $1,450, respectively (a crown, a filling and two periodontal cleanings). So don't anyone hand me any BS that I am getting an "entitlement".

What could make the COLA landscape much worse for seniors? Implementing a chained CPI, such as buried in the Senate version of the Repuke tax bill.  The brainchild of billionaire Peter G. Peterson,  the chained CPI reckons inflation (and hence adjustments) at barely one third of the regular COLA - based on the standard CPI or Consumer Price Index. Thus, most seniors in the country will find themselves either malnourished  or in the poorhouse after five years.

The use of the "chained CPI" assumes that as prices increase, consumers will buy lower cost alternatives, reducing the amount of inflation they experience via less costly choices. For example, if the price of stew beef or hamburger rises by 50 cents a pound, they'll opt for pork.  If pork prices increase by 50 cents a pound (say owing to the Chinese buying tons of corn meal for their own hogs) then consumers will move to chicken. If chicken prices rise too much they will move to cheap fish or canned tuna. If those prices rise too much....well, I guess there's always dumpster diving (Repubs have already cut the food stamp budget to the bone.)

Basically then, the chained CPI introduces a race to the bottom.

Look, I hesitate to employ charged words like "evil" to describe the chained CPI so let's call it barbarous. It is barbarous (and cynical) because it invokes the discredited concept of "Pareto efficiency". In so doing it regards the dollars of the wealthy and affluent as having more "utility" than the dollars of fixed income seniors, or the poor. This is why former Fed Chairman Alan Greenspan went on record in an appearance before the Senate Banking Committee (in 2003) to assert that "Social Security benefits need to be cut to pay for Bush’s tax cuts."

Was Greenspan mad or just your garden variety econ psycho? No, just  a victim of Pareto think, like too many ivory tower economists (e.g. Martin Feldstein). Social Security payments, especially with COLAs, did everything the Fed Chairman didn’t want. They poured more money into the economy, but not via productive labor or market indices, stock returns. S.S. beneficiaries  receive their monthly checks merely by existing and breathing day to day, and having paid into the system with FICA deductions. Even then, they receive far more in benefits than actually paid in, making a total mess of "utils" earned.

Thus, in considering any option of whether to give more relief to fixed income seniors or the wealthy- who may use it to buy yachts, $2 million 'Billy the Kid' tintypes, 50 Lamborghinis or blood diamonds, it's always better to give the money to the latter while letting the former suck salt, or pound sand.

 Let's also note that the S.S. COLAs increase the non-productive payments each year, one reason why – back in 1997 – Greenspan demanded an artificially much lower COLA increase than had originally been proposed. (And which certainly doesn’t reflect seniors’ increased costs for medical treatments and prescription drugs).

That was never accepted, but the latest twist - to raise the monthly amount of the Medicare premium by exactly the same amount as the putative COLA, accomplishes something even better: it de facto wipes out ANY COLA increase. This, while making the less-mathematically inclined actually believe they're getting a real COLA increase.

What sleight of hand!

Spinning No Looming Retirement Crisis Attempts To Foist Social security Cuts

We've already beheld how the Repukes have lied through their teeth to try and get a shell of a health care bill passed (Graham-Cassidy) that actually would strip benefits down to the bare bones - even for those lucky enough to have anything. Now, the Goops are trying to peddle the nonsense that everything is just fine and dandy on the income scene - especially for retirement incomes.

First, let's deal with the retirement income scene which Andrew G. Biggs ('Memo To Trump: There Is No Looming Retirement Crisis', WSJ, Aug. 15) claims has now soared. He writes:

"The data show that in 2008 retiring households typically had incomes equal to 95 percent of their incomes just prior to retirement. The figures didn't differ significantly when households were broken down by education level or marital status. This helps explain why three quarters of retirees surveyed by Gallup last year said they had enough money to live comfortably."

Adding:

"In light of rising retirement incomes why do so many people insist on a coming retirement crisis?"

Well, maybe because there IS one. In this regard one wonders what planet Biggs is living on. It appears not to be planet Earth. Maybe it's part of a parallel universe where financial fantasies hold. Accoding to The Hill in a special report:

"The Insured Retirement Institute found that only 23 percent of the Baby Boomer generation and 24 percent of Gen X-ers are confident their savings will last throughout their retirement years.

Small wonder, as more than 40 percent of Boomers and over 30 percent of Gen Xers report having no retirement savings whatsoever.

Of those with savings, only 47 percent of Boomers and 27 percent of Gen X-ers have saved $150,000 or more. With only 25 percent expecting income from an employer-provided pension in addition to Social Security, these are very low levels of savings."

Personal finance specialist Jill Schlesinger supports the preceding take in her May 15, 'MoneyWatch' segment as part of CBS News:

"According to Fidelity Investments, the average 401(k) balance among its 11.8 million accounts increased to $74,600 at the end of the first quarter 2012, a 62 percent increase since the end of the first quarter 2009. While it's good news that balances are up, the number of accounts is alarmingly low for such an industry giant.

Older employees are better off, but not by much. Workers over age 55 have about $130,000 saved on average, and, for those over 55 who have been active in a plan for 10 years, that average jumps to approximately $230,000. That's certainly an advantage for plan participants, but even this group may not accumulate what is necessary to maintain their living standards.

The reason for the trend is obvious: The recession and market crash inflicted pain on retirement accounts, lopping off about a third of their total value. Additionally, as many families sustained job losses and lower incomes, they were forced to withdraw retirement funds or reduce contribution levels"


This comports with other data that have been available for years, including especially the stagnation of wages and the reason so many Americans are forced to live on Social Security alone. Thus, from one government economic site we learn:

"Social Security made up 50 percent or more of the retirement income of 66 percent of Americans age 65 and older in 2009, up from 64 percent in 2008. And more than a third of retirees (35 percent) receive 90 percent or more of their income as a monthly payment from the Social Security Administration."

It appears then that something is rotten in Biggs account, maybe cherry picking data OR not telling the whole truth.  But, of course, for a would be "entitlements cutter" it serves his propaganda purpose. Thus he can use  his baloney to argue that since retirees are "so much better off " then Social Security can be cut.  Hence his message to Trump:

"Given rising retirement incomes the Trump administration should reconsider its pledge not to cut Social Security benefits"

But this is ignorant folly and worse, criminal, if two thirds of Americans have Social Security making up 50 percent or more of their income.   Consider an oldster living on $2,500 a month retirement income, of which half ($1,250) is from Social Security. His rent is $900 a month and utilities comes to $150 a month. Groceries amount to $400 a month, and that's assuming he's on a very abstemious kind of diet. Add in $104 a month for his Medicare premium, $ 140 a month for his Medicare Supplement insurance plan, along with $250 (conservative!) for his Plan D drug plan and you have: a total of $1,944 accounted for.

That leaves about $556 disposable income and if his Social Security is cut by 10 percent, what then? Well, that leaves him with $431 - not much in case the rent goes up, or his Medicare supplement plan premium or his electric bill!

It is clear from this that Biggs is peddling codswallop to try to prompt Trump to break his word not to go after Social Security.  Of course, given Dotard has already broken so many of his promises- including getting Mexico to fund a border wall, bringing jobs back to the USA, and getting a health bill that will be "the best you ever saw", one can legitimately wonder how long before he breaks this one all on his own.  Especially now that he's again on the warpath on learning his Secretary of State called him a "moron" and didn't retract it.

Stay tuned!

Neolib Hack Robert Samuelson: Determined To See Oldsters Eating Cat Food!

"What's happening is simple: Spending on the elderly is slowly overwhelming the rest of the federal government" - Robert Samuelson

Well, seems that columnist Robert Samuelson is at it again, beating the drums for elderly austerity and more money for the war machine. It seems this guy never gives up. He's thoroughly Neoliberal after all, having committed himself for years (even in a response email to me some 7 years ago) that no one ought to be receiving money just for breathing. (As most seniors do).

In his latest screed ('The Twisted Priorities of a Graying Nation') we're informed "government is being gutted" and "priorities are being skewed" by a reckless,  profligate over-spending on the elderly. Meanwhile, spending is behind on "vital activities" like defense and financial markets - he references their "regulation"- but if you've read any of his past articles it's really about their expansion, i.e. using further globalization such as the TPP. He and we know the GOOps will never allow more genuine financial regulation, especially as they already killed what was left of Dodd-Frank  in the 2014 end of year spending bill. (This was via a poison pill amendment that was stuck in the spending bill, enabling the banks to once again use FDIC monies to back up their risky trades - leaving us open to another 2008-style meltdown)

As usual he harps on the CBO projection that annual federal spending will grow by $2.6 trillion or 75 percent from 2104 to 2025 and "almost 90 percent of the increase comes from three sources: Social Security, health spending and interest on the federal debt."

Why he includes Social Security is mystifying for a number of reasons, including that Social Security. has never added to deficits given its payroll taxes essentially more than fund its outlays. Right now, in fact, the size of the S.S. Trust Fund is at $2.74 TRILLION which exceeds the $2.6 trillion Samuelson cites as federal spending for S.S., healthcare and interest on the debt! And we're not even including  as S.S. revenue  the taxes on Social Security income which none of these austerity nabobs factor into the mix. Namely, that up to one third of your Social Security benefits can be clawed back once you exceed a specific threshold. Why do none of the austerity fetishists mention that? Well, because it inveighs against their "entitlement" cutting agenda!

Meanwhile, a large part of health care spending is on prescription drugs, a little problem that could easily be remedied by allowing Medicare to do what the VA does, and bargain for the lowest drug prices with PhRMA.   As for the large federal interest on the debt, any moron could have informed Samuelson that the main reason for that is too little income, as in revenue - for all the spending that's being done - mainly on the military since 2001 (When ol' Gee Dumbya decided to cut taxes instead of increasing them when he commenced his "war on terror" - that's now sucked up 13 years and nearly $4 trillion)

Samuelson goes on to whine about "the degradation of government"  and points to the National Institutes of Health "losing nearly 25 percent of its purchasing power" in the last decade. Well, whose fault is that, Maestro? It's the fault of the Repukes who cut the NIH (as well as CDC) budgets which money they preferred to spend instead on military toys like the F-35!

In the same breath he also reports:

"The Internal Revenue Service blames budget cuts and reduced staffing for delays in mailing refunds and responding to taxpayer questions"

But again, this wasn't incepted by Social Security but by the Repukes cutting the IRS budgets as "payback" for what they believed to be singling out right wing groups for greater scrutiny, i.e. when claiming any tax exempt status under Internal Revenue code 501(c)(4). As a result, the 'Pukes cut an additional $346 million from the taxman's budget - virtually tying the IRS' hands to assist taxpayers or to expedite refunds. See e.g.

http://brane-space.blogspot.com/2015/01/if-youre-late-getting-tax-refund-thank.html


Samuelson then rightly wails about the "national parks being hit..since 2010 their funding has decreased by 12 percent in inflation-adjusted dollars and the backlog of deferred maintenance has topped $11 billion."

Again, this awful, deficient funding situation has nada to do with Social Security but the same House Republicans and their cruel austerity punks who also de-funded the SNAP food stamps program in 2013 and want to do the same again now. Don't blame the favorite scapegoat of Social Security but rather a bunch that has its own priorities askew and would ten times rather spend on defense and war toys (now taking up 6.3% of GDP) than domestic programs - including out infrastructure which is falling apart.

Instead of lying his ass off about the need to cut Social Security - making it a red herring for Neoliberal austerity groups like "Fix the Debt" he ought to applaud the program's expansion which - if effected- could ameliorate the ongoing low aggregate demand problem that's keeping our economy down. The solution then is not less senior capacity to spend, but MORE! The more senior spending on goods, services - even health care- the more money infused to create more jobs!

But never mind, Samuelson and his ilk won't be satisfied until the elderly are on a permanent cat food (or kibbles) diet!

See also:

http://brane-space.blogspot.com/2011/05/is-robert-samuelson-for-real.html

and:

http://www.smirkingchimp.com/thread/richard-eskow/60951/the-republicanclasswars-new-front-social-security-for-the-disabled

Senate Budget Committee Takes Aim At Social Security Again!

Well, we knew it couldn't last long. That is, before the scurvy lowlifes in congress reprised their attacks on Social Security - with the objective to "save It" by cutting it.  Next week, the Senate Budget Committee is holding its first hearing on Social Security benefits. Their plan is to declare a "crisis" and insist the only way out is to cut benefits now. Of course, this is all the most transparent BS to anyone who really understands Social Security and especially that its enemies have been gunning for it for over 80 years now. 

This invented myth of impending and catastrophic insolvency is well-worn and predictable, but still dangerous. The new Republican majorities are emboldened and anxious to show their Koch backers that they are serious.  

Of course, Social Security is not going broke. In fact, it has a $2.8 trillion surplus. Yet seniors who depend on the system they paid into find their benefits failing to keep up with their real expenses. Indeed, a valid economic argument can be made that given the persistent specter of  too low aggregate demand, Social Security benefits should be increased - not cut. Those benefits, after all, pay for billions of dollars in goods and services that otherwise might never be transacted - with the result that the GDP would contract even more.
 

Hence, any successful effort at cuts is assuredly going to send the economy into the clinker again - where only the richest 1 percent will benefit. But this is exactly what the likes of the Kochs and Pete G. Peterson and other austerity fetishists want.

Of course, the enemies of Social Security - and there are many - continually go back to the same old tool box to make attacks- hoping that some of the shit will stick, and alas, a lot of it has- including that the Trust Fund is full of useless IOUs. But this is why smart people need to do themselves a favor and inform themselves on the facts. No better book can be found right now than 'Social Security Works' by Nancy J. Altman and Eric R. Kingson, which in their Chapters 8, 10 totally demolishes this "IOU" nonsense, showing these bonds carry the same weight as those dispensed to other countries, including China. In other words, they carry "the full faith and credit of the U.S. government" and - if ever betrayed - will show this nation can't be trusted to pay its just debts.

As to the staying power and importance of Social Security, we read (p. 23):

"Social Security transformed the nation. It eradicated what was once a primary anxiety for the majority of Americans: the terror of growing old penniless,  dependent and vulnerable. It provided basic economic protection previously not available to most households."

This basic economic security is exactly what drives Social Security's opponents nuts. They hate to see anyone collecting a check just for breathing. At the very least, they insist, the money ought to be "privatized" - put into special investment accounts (with the costs of administration vastly greater than the 1 penny per dollar rate for S.S.) and subject to the vagaries of the stock market. Well, we saw how that worked out with 401ks back in 2008 with the financial meltdown didn't we?

In a previous blog post I explained much of the reasoning behind Neoliberal economic thinking  (based on the Pareto distribution) and why it is convinced Social Security is a bad idea, e.g.

http://brane-space.blogspot.com/2011/06/modern-economics-its-evil-basis-pareto.html

For example, arguing that (as former Fed Chairman Alan Greenspan asserted in an appearance before congress in 2003): "Social Security benefits need to be cut to pay for Bush’s tax cuts."

The thinking being that tax cuts leading to re-investments are more critical than social insurance.

Then there have been the outright attacks on beneficiaries - among which the most vile have emanated from scumball former Reepo Senator Alan Simpson - who Obama (in some delirious haze- maybe a leftover from his "Choom gang" days) - actually appointed to be on his deficit commission. As the authors note (p. 39) Simpson referred to older recipients as:

"those greedy geezers...old cats 70 to 80, who live in gated communities who drive their Lexus to the Perkins restaurant to get the AARP discount"

Adding:

"They don't care a whit about their grandchildren...not a whit".

And believe it or not, this pig was taken seriously by many! Yet the facts of old age are not of glitz and luxury at all, as the authors also note (p.40):

"It is false that most older Americans are on "easy street". A very small percentage are, many more are poor or near poor, while some maintain a modest, middle class life style, often struggling to make ends meet."


In the graphic shown on page 47, the authors present the actual income distribution for the elderly which shows nearly three out of four senior households have incomes below $50,000 - which is not a princely sum. Not when a senior might be one bad fall from a nursing home stay  that will suck up $70k a year. Or,  one major medical catastrophe can savage  frugal savings. (Dunned by continuous zero interest rates for years.) These are problems the young don't have, and the young always have time to get back on their feet - most seniors do not  - say after a major medical calamity.

Anyway the income distributions are indicated a follows:

- 72.5% have less than $50,000 /yr.

- 18.5% have from $50,000 - 99,000

- 5.3% have $100,000 - 149,999

- 2.0 % have $150,000 - 199,999

- 1.9% have more than $200,000

In other words, barely 9 percent of elderly - or 1 in 11, has more than what is regarded as a middle class income.

Other objections to seniors' benefits as being "too much" I already skewered in this blog post, which I invite people to read:

http://brane-space.blogspot.com/2011/11/no-oldsters-are-not-gluttonous-uncaring.html

As the authors of 'Social Security Works' put it (p. 4), our politicos may have polarized us  on just about every issue - from immigration reform to taxes-  but on one we are fiercely united: we support Social Security. This unity forges our future security and is something the Neolibs and their conservo austerity cousins dare not mess with - as they learned back in 2005 when Bush tried his privatization scheme.  It is this unity we'd all do well to remember and also cultivate in gearing up for the next wave of attacks!
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  Further facts on Social Security:

1) Social Security's  Trust fund has historically taken in more money than it pays out in benefits. Currently it is at $2.76 trillion and continues to grow.

2) Without making any changes whatsoever, current projections show Social Security will be able to pay full benefits through 2033.

3) With just a minor tweak to the payroll tax cap - raising it to a mere $300,000, full benefits would be able to be paid through 2100.

4) The system could easily be rendered 100 percent secure, even with higher disability benefits paid out, if congress would cease raiding Social Security moneys for current expenses, including wars.

See also:

http://brane-space.blogspot.com/2012/08/of-fiscal-clifs-false-narratives-and.html

http://brane-space.blogspot.com/2014/03/social-security-medicare-unjustified.html