On The Chopping Block – Social Security, Medicare & Medicaid
By Stephen Lendman
Planned is death by a thousand cuts – aka “creeping normalcy,” defined as a way to make major changes seem normal if happen slowly, incrementally like boiling a frog unaware it’s dinner until cooked.
Social Security and Medicare are dinner. Yet both are insurance, not welfare, programs funded by (worker-employer) payroll tax deductions. They’re contractual federal obligations to eligible recipients who qualify. You’d never know it the way both programs are publicly discussed, explaining everything but the truth. More on that below.
On August 14, 1935, the Social Security Act became law, known as the federal Old-Age, Survivors, and Disability Insurance program (OASDI). It provides retirement, disability, survivorship, and death benefits. It’s still America’s most effective poverty reduction program that’s worked remarkably well since inception. It exists to provide secure inflation-adjusted retirement or disability income, unlike risking personal savings to create private wealth that may end up losing it.
Despite bogus claims, it’s not going bankrupt. When properly administered, it’s sound and secure, needing only modest adjustments at times to assure it.
On July 30, 1965, Lyndon Johnson signed the Social Security (Medicare) Act into law, enrolling Harry and Bess Truman as its first recipients.
Medicare.gov calls it “the nation’s largest health insurance program,” covering 40 million Americans. It’s a “Health Insurance program for people age 65 or older, some disabled people under age 65, and people of all ages with End-Stage Renal Disease (permanent kidney failure treated with dialysis or a transplant).”
America’s aristocracy wants Medicare and Social Security ended, citing the nation’s burgeoning debt and enormous unfunded liabilities for both programs. The web site usdebtclock.org lists them as follows:
(1) the US National Debt: nearly $14 trillion;
(2) Social Security Liability: nearly $15 trillion;
(3) Prescription Drug Liability: nearly $20 trillion; and
(4) Medicare Liability: nearly $78 trillion.
Total: nearly $113 trillion plus the National Debt.
Most important is that future liabilities mask today’s soundness that can stay that way if current programs are properly administered. That’s omitted from hyped scare tactics to convince future recipients to make unjustifiable sacrifices. Like them or not, they’re coming, major media reports promoting the idea as well as politicians from both parties.
On August 9, 2010, for example, a New York Times editorial headlined, “The Latest on Medicare and Social Security,” saying:
“Of course, neither program is sound for the long run. (Yet there’s) time for lawmakers to reform and strengthen both (for) the long haul. (Required is) a combination of benefits cuts and tax increases, which could be distributed fairly and phased in over decades.”
A May 13, 2009 Wall Street Journal report headlined “Social Security, Medicare Face Insolvency Sooner,” saying:
Medicare “will be depleted by 2017,” Social Security by “2037.” In fact, neither program is endangered as explained above. Yet the report continues:
“Any attempt to address long-term fiscal problems will require big changes to the way entitlements are funded or paid out.”
False, but don’t expect major media reports to explain or side with recipients about programs too important to be weakened or lost.
Yet in his January State of the Union address, Obama announced plans to “freeze government spending for three years,” starting in 2011, saying he’d form a bipartisan fiscal commission to cut the deficit and tackle entitlements by imposed austerity at a time massive stimulus is needed.
Called the National Commission on Fiscal Responsibility and Reform (NCFRF), it’s co-chaired by two deficit hawks, former Senator Alan Simpson (R. WY) and Erskine Bowles, former Clinton White House Chief of Staff. They headed an 18-member team, stacked with like-minded members, elitists knowing their futures are secure.
Their mandate: slash Medicare, Medicaid, Social Security and other social spending, continuing a decades long process of transferring wealth to America’s super-rich. On November 10, they issued their proposal. An earlier article addressed it, accessed through the following link:
Among other recommendations were:
– ending or capping middle class tax breaks, including deductions for home mortgage insurance and tax-free employer provided medical insurance;
– lowering income taxes dramatically to 9, 15 and 24%, down from six brackets ranging from 10 – 35%;
– slashing corporate tax rates from the top 35% to 26%;
– making deep Medicare cuts as well as increasing Medicaid co-pays; and
– raising the Social Security retirement age to 69 by 2075 as well as reducing annual cost-of-living increases.
A second Bipartisan Policy Center (BPC) commission co-chaired by former Senator Pete Domenici (R. NM) and Alice Rivlin, former director of the Office of Management and Budget and the Congressional Budget Office, issued its own proposal called “Restoring America’s Future.”
Its recommendations include:
– indexing Social Security benefits to life expectancy to reduce them as longevity increases;
– eliminating annual cost-of-living adjustments, bogusly claiming inflation is overstated, especially for retirees facing costly medical expenses;
– instituting a one-year payroll tax holiday for workers and employers to save $650 billion, supposedly to be replenished from future general revenues; in fact, it’s a way to help kill Social Security as discussed below;
– sharply cutting Medicare and Medicaid benefits;
– simplifying the tax code to two brackets (15 and 27%), favoring the rich;
– eliminating home mortgage and most other deductions and credits;
– taxing employer provided health insurance; and
– instituting a 6.5% national sales tax, hitting ordinary people hardest.
An earlier article providing more details, including on Obama’s planned austerity, can be accessed through the following link:
Nancy Altman is co-director of Social Security Works (strengthensocialsecurity.org), an “American coalition (representing over 50 million Americans) united around the simple proposition, Strengthen Social Security…Don’t Cut It.”
Its seven principles include:
(1) Social Security didn’t cause the federal deficit; it shouldn’t be cut to reduce it;
(2) it shouldn’t be privatized;
(3) it shouldn’t be means-tested;
(4) future revenues should come by raising the payroll tax ceiling, requiring those earning more to pay their fair share;
(5) the retirement age shouldn’t increase further;
(6) benefits shouldn’t be cut, including by reducing annual inflation-adjusted increases; and
(7) benefits “should be increased for those who are most disadvantaged.”
In short, Social Security (Medicare and Medicaid) should be strengthened to provide greater, not lower, future benefits.
Obama’s Destructive Payroll Tax Holiday
The proposed 2% worker earnings cut for one year is a stealth indefinite extension scheme to drain hundreds of billions from the Social Security Trust Fund. Doing so will irreparably weaken its ability to pay future benefits, the idea being to destroy the program altogether, perhaps first by privatizing it.
Social Security Works explained how the tax holiday “could unravel” the whole system as follows:
(1) “It’s easy to enact tax cuts – it’s very hard to end them.”
(2) Doing so results in a substantial tax increase – $2,000 on $100,000 a year earners, $400 for those making $20,000.
(3) “Restoring the 2% lost….would be a nearly 50% tax increase (for) 94% of all Americans….”
(4) House and Senate Republicans oppose any increases. So do many Democrats, especially in election years or when economic conditions are weak.
(5) Obama’s proposal undermines Social Security’s long-term solvency. Repaying what’s lost from general revenues is greatly impeded by the size of the deficit and planned austerity coming to reduce it.
(6) Maintaining the 2% cut indefinitely will cause massive benefit cuts and eliminate any chance for improving them, notably for society’s poor and disadvantaged.
(7) Middle class households will also be harmed, violating Franklin Roosevelt’s pledge that:
“We put those pay roll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program. Those taxes aren’t a matter of economics, they’re straight politics.”
FDR never met Obama or congressional Republicans and Democrats. What he gave, they’ll end, violating a government-mandated right.
(8) A payroll tax holiday is another step toward privatization, a sure way to kill it, the way 401(k)s destroyed private pensions, leaving workers at the mercy of marketplace uncertainties that can wipe out life savings during hard times.
Social Security Works concluded, saying:
“There are better ways to provide stimulus to the economy – and that do less harm to Social Security – than a tax holiday.”
According to the Center for Budget and Policy Priorities (CBPP), one way is by extending the 2009 Making Work Pay Tax Credit, adding much more stimulus than a payroll tax holiday. It gives workers a refundable tax credit, increasing the size of the paychecks. At 6.2% of earned income, it provides maximum $400 for working individuals, $800 for married taxpayers filing joint returns.
A payroll tax holiday is a bad idea any time, besides doing little to stimulate economic growth. “The most efficient way to boost consumer spending is to put money into the hands of people who will spend it quickly rather than save it.” It’s most effective when given to low and middle-income workers, not high-end ones who’ll save, not spend, their windfall.
“A payroll tax holiday does not score well on this front – too little of the benefit goes to lower-income households struggling to make ends meet and too much goes to higher-income taxpayers, who are likely to save a significant (portion) of any new resources they receive.”
Besides killing Social Security, that’s the whole idea, of course, transferring more wealth to the rich, what Republicans and Democrats endorse, including Obama.
In contrast, the Making Work Pay Tax Credit poses no threat to Social Security. The payroll tax holiday may destroy it. Republicans signing on as a concession masks their real intent, the same one they’ve had since Social Security’s enactment, a program they strongly opposed as well as Medicare in 1965. Now both parties oppose them.
A Final Comment
Obama’s payroll tax holiday will drive a stake into Social Security’s heart, or as Hall of Fame former baseball announcer Bob Prince used to call Pittsburgh Pirate home runs: “Kiss it goodbye.” Fans cheered. Deathly silence will greet Obama’s proposal once recipients know they’ve been scammed. Republicans and Democrats plan it unless an aroused public stops them.