In the June 30th TIME article: '2030 - The Year Retirement Ends' - we are asked to believe the money will have run out for Medicare already (by 2026) and will be three years from doing so for Social Security. "Generation X-ers will begin moving out of work into their Golden Years" - but only to find out they don't have enough money to live on, and will have to return to work - if even as janitors or Walmart greeters. And as for those Boomers, well they will be getting the last of the good 'pickings' before the Trust Funds run dry.
All of which is nonsense. Indeed, the very thought the richest nation in the world could even allow a "retirement security crisis" to unfold such as TIME described, is absolute balderdash. The only reason it may come to that (since I am not discounting the greed and egos of our politicos) is the willingness to just sit and do nothing. Oh, and by the way, let's eliminate the 'blame the Boomers' bullshit right now. In that case politicos (actually Reagan and the congress) did do something by increasing the FICA taxes specifically to deal with the projected Boomer onslaught. So what happened? The additional money generated was most spent by the Bushies on their wars of choice and tax cuts! But that's not on the Boomers, it's on the Bushies!
The following data shows how much has been raided each year, the data from the Trust Fund administrators and GAO:
Year: ................Amount raided
2011.................$67.0 billion
2010.................$87.0 billion
2009...............$137.0 billion
2008...............$180.2 billion
2007...............$186.0 billion
2006...............$185.5 billion
2005..............$173.5 billion
2004..............$151.1 billion
2003.............$155.6 billion
2002.............$159.0 billion
2001.............$163.0 billion
2000.............$151.8 billion
----------------------------
TOTAL: $2.63 TRILLION
Now, any person with a single neuron for a brain would realize that it doesn't matter if you fill a one gallon bucket with a cup every day (equal to 6 oz.) if there are massive holes in the bottom that let out 12 oz. in the same time!
Thus, the worker-to -beneficiary ratio is a red herring meant to deflect attention from the REAL problem which is the yearly raids on monies received from payroll taxes and intended to go to future beneficiaries! So long as these raids continue unabated, NO solution or "re-tooling" of the program will work, not raising payroll taxes, not making cuts, NOTHING! The raiding has to stop first.
Despite this, TIME proffers little but the usual, standard "solutions", including:
1) The government should force workers to contribute more to their 401ks
2) The "entitlements" (Social Security and Medicare) need to be "dealt with" and the system changed.
3) People most affected need to work longer.
4) The 401k needs to be re-tooled
Let's take (2) first and why it is wrong. In nearly all cases "entitlement reform" implies cuts (e.g. "chained CPI") not increased benefits, yet is the latter which is needed. First, Social Security and Medicare are NOT "entitlements" because workers have paid into them over 40 years or more. In many cases, the 6.2% payroll tax is the biggest tax hitting most of the working poor. But they do it because down the road, after their backs are nearly broken from toil and their hands can barely grasp a buck from arthritis, they will have some residue of dignity in their old age. Some semblance of financial independence. (TIME also admits that half of all those over 65 today would be poor if Social Security was eliminated.)
Even then, there are no gifts or freebies! The seniors still have to cough up nearly $100 a month for Medicare premiums, which are deducted from their Social Security, making it even less - say if it's the only income they have. Next, we know that Medicare premiums have risen over 136% the past ten years while Social Security cost of living adjustments have increased barely 30% over the same time. In other words, seniors are losing out by having to shell out ever more which one can consider a de facto cut.
Another support aspect the media conveniently forgets, which is dragging us toward a putative crisis, is the $244 billion lost because the payroll taxes were intentionally discontinued for two years. Incredibly, this move was engineered by the Democrats (mostly Neoliberals, to be sure). At the time I wrote several blog posts excoriating them for deliberately undermining Social Security and hence the retirement security of millions, given Boomers were piling into S.S. (According to TIME, by 2012, 13% of all Boomers had signed up for Social Security).
Now let's look at (1). This is a useless solution because in most cases the inability to max out or even contribute to the 401k is because disposable income isn't enough to allow it. After groceries, utilities and mortgage (or rent) all grab their share, workers find there isn't enough left to put aside - given the meager wages too many Americans earn. Hence, having the government force workers to contribute would merely compound the existing outrage of a pathetic national minimum wage. Unless the government -congress increases the minimum wage to a living wage it has no business trying to force workers to save more on any front - whether for health care, or S.S.
As for getting people to work longer (including delaying social security payments until the person turns 70), that's all well and good if they have a comfy job where their aging bodies can withstand more years without excess wear and tear. A writer, for example, will do ok, so will a taste tester, a 'mystery shopper', a librarian, or a food critic. A heavy laborer (e.g. coal miner), or even a custodian or trash collector, not so much. Hence, it is foolishness to expect any of the latter group to work to 70 or past it. Nor is there a need to ask them if the country infused its social insurance programs with the money needed - or at least stopped the incessant raids!
The last, re-tooling the 401k, is not much of a solution either - given the 401k is in large measure responsible for the whole retirement security problem. As the article notes (p.43):
"The fragility is in large part due to the massive shifts in the American retirement system since 1980. That's when the 401k plan was invented by a benefits consultant working on a cash bonus scheme for bankers, who had the idea to take advantage of an obscure provision of the tax code - allowing for deferred compensation of individuals to be matched by their company. The result was the 401k, a savings account that lets employees contribute pretax income from their paychecks. But unlike the traditional pension it doesn't promise a specific regular payment on retirement."
The last sentence is most important and what too many Americans fail to grasp. That is, in order to get regular payments per month which would be like the original defined pension - THEY have to create it themselves! That is, they'd have to have saved enough in their 401ks to generate an amount of money to purchase an immediate fixed annuity which in turn will pay them a steady amount monthly.
But let's understand why the 401k was created in the first place: in order to relieve companies of having to shell out defined pensions indefinitely for their employees - thereby cutting into their bottom lines. Thus, the 401k emerged as a deliberate device to shift risk from corporations to their workers. And hey, if the workers couldn't amass enough - tough luck!
Another factor: most Americans got into trouble with their 401ks by trying to use them as investment vehicles when they were always designed only for conservative savings. Because of this investment meme - pushed also by the companies - workers often lost money when each Bull market came crashing down (as it did in 2008 and as it will again) or when major corrections occurred.
The best expose of this was perhaps by William Wolman and Anne Colamosca in their book 'The Great 401k Hoax', (2002), which offered the best advice on recognizing real returns as opposed to the bubble variety. With their solid arguments they showed, for any given fiscal environment, what a realist investor could expect to make. As they noted, one needed to look carefully at the percentage profits returned by X, Y or Z company. If it is averaging 1.3% a year, then that is the real return you can expect. The stock hawkers bejabber of 10% annualized returns, or more often, 7 percent, is purely designed to lure the unwary into stock investment.
The authors' arguments were further reinforced about 6 years later in a London Financial Times article (‘A Metaphorical Proposal’, Mar. 13, p. 11A, 2008) by Michael Skapinker. He cited remarks by Joseph Berardino – chief exec of Arthur Andersen- who noted how the existing reporting system “failed to communicate essential information about the real risks facing companies” to the small investor.
Given that most workers already had problems navigating the complex investment choices most companies offered in their 401k plans, it was easily understood how they were set up to lose money. This suggests that the 401k either needs to be removed, or radically revamped.
If it is removed what will replace it? The best idea yet comes from legislation pushed through by Kevin de Leon of California which would guarantee a living wage to every Californian working in the private sector, on retirement. De Leon's approach, called the CSC or the California Secure Choice Retirement Savings Program, was signed into law in 2012 and combines the best aspects of defined benefit plans with what used to be the 401k.
Another option would be similar to the proposed MyRA of Obama, which would be expanded to let all middle class workers save in a fund administered by the U.S. Treasury. Such a fund would be 'safe' - meaning the risk factors that we now see dogging 401k plans would be eliminated.
Another solution to any future retirement crisis, is to simply raise the income subject to the payroll tax - say from the current $117,000 to $600,000. This would extend Social security's lifetime to at least 2075 and with a minimum of pain. (Doing the same for the Medicare FICA taxes, as well as increasing their absolute amounts - say to 4.4 percent would do the same.). Keeping the incomes subject to payroll taxes so low is a fool's errand anyway, given that so many of the wealthiest still insist on taking their 'cut' because they "earned it". So why not increase the income level to reflect that? It is pure political chicanery that it hasn't been done up to now!
Lastly, TIME cites experts (e.g. Paul Taylor) who insist communal living of different generations is the answer. Grandma and Gramps can live with their kids, John and Jill (in their 40s) and their own kids- Rudy and Trudy. Well, maybe - maybe not. It depends whether all living under the same roof can get along harmoniously, at least most of the time. But one thing we mustn't do is "force communal living", i.e. by forcing seniors to delay receiving their Social Security until 70 - so they are compelled to live with Junior and wife (and kids) til then. That draconian solution is so fraught with peril it doesn't need explanation.
What I don't subscribe to is Taylor's glib pronouncement that:
"There's a growing sense, for all the generations, that no one has been spared and everyone has to suffer to some extent".
But it doesn't have to be that way! If the country made the right choices and especially ceased to involve itself in stupid wars and wasteful nation building projects - there'd be enough money to cover the Millennials' student loans, Gramps' medical ills, and John and Jill's mortgage payment. Also, as I showed above, the less painful solutions are there - but we have to get our cosseted rich folks to sign on to them - in their own interest.
Would these rich folks really want to live in a nation that's being torn apart by revolution similar to what we see in the Ukraine or Iraq? If we aren't prepared to cut back our yen for empire, or elicit the one percent to contribute to the commonweal, we will see ever more suffering at home....and even....as author David Cay Johnston put it in a recent salon.com interview, civil distress so severe it might even incite a revolution that will be "the bloodiest the world has ever seen".
(See: http://www.salon.com/2014/05/22/bloodiest_thing_the_world_has_seen_david_cay_johnston_on_inequalitys_looming_disaster/
Instead of bitching about "socialism" and "takers", the richest need to see their welfare is as much at stake as those deluged by debt and job loss. As John F. Kennedy once put it:
"If a free society cannot help the many who are poor, it cannot save the few who are rich."
See also:
http://www.smirkingchimp.com/thread/richard-eskow/56585/a-secret-plan-to-close-social-securitys-offices-and-outsource-its-work
Showing posts with label Paul Taylor. Show all posts
Showing posts with label Paul Taylor. Show all posts
Monday, June 23, 2014
Tuesday, April 8, 2014
What PEW's Paul Taylor Doesn't Get: NO Social Security or Medicare Cuts Are Needed!
Paul Taylor is a scribe and authority attached to the Pew Research Center. Taylor is conferred a rousing set of kudos in a recent AARP Bulletin piece (April, p. 12, 'Battle of the Ages') noting Taylor's role in babysitting for his grand kids, and his wife providing elderly care for her parents - not to mention having one adult child live at home until 30 - and the thrust is that Taylor is "living the next American life".That is, one in which the generations are actively involved in caring for each other rather than warring with each other for scarce societal resources. Taylor himself is quoted as saying:
"A lot of this is the fruit of good news. More Americans are living longer, healthier lives. Who can be against that?"
Hmmmmm......well, perhaps Taylor himself!
Because when we then turn to the PARADE magazine of this past Sunday we behold the article 'Bridging the Generation Gap' in which Taylor has no problem - not one - proposing benefits cuts that could hurt ALL generations whose cooperation he so lovingly extols in the AARP piece.
While praising the inter-generational connections (emphasized in the AARP piece) he then goes on to write:
"All those intergenerational good vibrations might help with the hard political bargaining ahead. Social Security and Medicare are the purest expressions in public policy of the idea that, as Americans, we are all in this together. But the programs need to be brought into synch with the new demographics of the 21st century- and that means some combination of benefits cuts and taxes. Every generation will have to share in the pain."
But this is a false conclusion, since NO generation needs to "share in the pain". In addition, if Taylor's proposal to cut Social security and Medicare benefits was to get legs, all generations would be in a world of pain! Consider: as the AARP piece notes (ibid.) those benefits monies support nearly a quarter of preschoolers cared for by a grandparent and 1 in 10 who live in a household headed by a grand parent. Those benefits also help to support 4 in 10 Millennials who - for whatever reason - have to live at home because their job (if they have one) doesn't allow independence.
What the hell does Taylor think will happen if benefits cuts go through? What does he think will happen additionally to the 33 million receiving S.S. benefits who also are caregivers for sick or disabled children, or elderly parents?
In fact, Taylor has his "bringing in synch to the 21st century" prescription exactly opposite to what it ought to be: expanding both Social Security and Medicare benefits!
"But wait! Where's the money gonna come from?"
It's going to come from where neither Taylor or the other nattering Neolib nabobs like Robert Samuelson (pilloried in the AARP piece) have looked: The Military- Security state. While the nabobs bitch that Social security and Medicare are "gobbling" 38% of the annual budget, they are oblivious to the military-defense - security state gobbling up 58%. A graphic excerpted from an AARP April 2012 issue encapsulates what I am about:
Now, focus on that figure! With seven fewer F-35s that is what could be delivered: a tablet for every 1st grader. Now consider that the militarists want to build 2,335 of those F-35s at an individual cost now estimated at $150m each and rising - because of cost overruns.
Imagine - if you will - just the money we'd have available if assorted administrations, both Dem and Reep, hadn't plundered the Social Security Trust Fund the past ten years to conceal the size of deficits, so they could squander it on military bullshit (or the security state). In a previous blog post I did a year by year accounting from 2001 on the monies raided each year- up to 2008, e.g.
2001 - $163 billion
2002 - $159 billion
2003 -$155.6 billion
2004 - $151.1 billion
2005 -$173.5 billion
2006 -$185.5 billion
2007 - $186 billion
2008 $180.2 billion
-----------------------------
TOTAL: $1.353 trillion
It is estimated that over a trillion bucks of that went just for the neocon-inspired wars in Iraq and Afghanistan,
It would not only have ensured the longevity of Social Security and Medicare through the end of the century, but enabled us to expand benefits to more effectively help all the generations that depend on it. Think also of the money (perhaps $800m) that will get wasted if the U.S. remains in Afghanistan for another ten years - and then contemplate the savings if the national security state was paired down.
All of this constitutes the sharpest rebuttal to Taylor's claim that the generations need to "sacrifice" via benefits cuts. It also exposes his next comment for the codswallop it is:
"The longer political leaders shrink from this challenge the more the burden of any solution will fall on the young, who are already fated to get the worst deal of any generation from Social Security and Medicare. In tomorrow's America yesterday's math won't work."
Really, Paul? If that is so why are you not processing the cancerous malignancy of military spending run amuck, even as it uses Social Security monies to hide the size of deficits? Not to do so, is to portray a dishonest solution - that the only alternative is benefits cuts to seniors who are already struggling with multiple demands, including caring for preschoolers as well as college students who must live at home.
Taylor is correct that in tomorrow's America yesterday's math won't work, and by that I mean the math for military spending - as the inset box above shows.
Basically then, Americans have one of two choices: continue supporting a massive military interventionist and security state, or preserve future social insurance benefits. The math simply doesn't cover both unless Americans are also prepared to bring back tax rates of 50 percent or more.
As for the math as it pertains to Millennials and Social Security - Medicare, the solution to change the negative outcome is simple: stop raiding Trust Fund monies to spend in general revenues - and what you have taken, pay back!
And don't use it for the next ten years to support a stupid extension of U.S. presence in Afghanistan!
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