August 28, 2015

Posts on social security

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Thursday, August 27, 2015 - 11:00 AM

It has been easy for advocates of generationally responsible tax and spending policies to look at Capitol Hill with dismay for the past few years. A few consequences of inaction and lack of bipartisanship include:

  • A complete breakdown in the federal budget process.

  • Continued struggles to replace arbitrary, shortsighted caps on discretionary spending with smarter deficit reduction.

  • Total inaction on addressing the main drivers of deficits in the coming years, rising health costs and an aging population.

  • More than 30 short-term extensions of transportation funding and a failure to eliminate the growing shortfall plaguing the Highway Trust Fund.

  • Multiple debt-limit showdowns, each of which threatened the United States’ credit rating and roiled financial markets.

Yet in the past few months, I’ve been pleased to see at least a few positive signs.

In over two dozen staff and member meetings conducted over the first two months of my tenure at Concord, we’ve found that some lawmakers are coming back around to the fiscal realities facing them this fall and in the coming years. Part of the...

Monday, July 27, 2015 - 11:44 AM

The message from the Social Security and Medicare trustees last week could not have been more blunt: the two programs’ long-term costs “are not sustainable with currently scheduled financing and will require legislative action to avoid disruptive consequences for beneficiaries and taxpayers.”

This conclusion should take no one by surprise. The pressures on both programs from population aging and rising health care costs have been warned about many times by many nonpartisan sources.

What is surprising is that so few lawmakers seem to take these warnings seriously.

After all, Social Security and Medicare are not insignificant programs. In 2014, 59 million Americans received Social Security benefits, and Medicare covered 54 million. At a cost of nearly $1.5 trillion, the two programs alone accounted for 42 percent of federal program spending last year.

Given their size and importance for so many American families, the fact that Social Security and Medicare are on an unsustainable track should place them high on the legislative agenda for both...

Tuesday, May 19, 2015 - 10:52 AM

At a forum last week on Capitol Hill hosted by The Concord Coalition and the Bipartisan Policy Center (BPC), experts from across the political spectrum shared their thoughts about retirement security in America. While several different policy proposals were discussed, one area of broad consensus was that Social Security is a critical component of retirement security -- and that lawmakers must act to strengthen the program.

Sen. Kent Conrad, who co-chairs the BPC’s Commission on Retirement Security and Personal Savings, kicked off the event by pointing out that "ultimately, almost all of us will rely on Social Security for the base of our retirement income needs."

"Social Security has serious financing problems," Conrad also said. "We've not really grappled with these issues, and the longer we wait, the more draconian the solutions will have to be."

However, he suggested an even broader reform agenda: “While fixing Social Security will involve tough decisions on revenues and benefits, we shouldn't just be looking at this through the lens of making the program solvent. Social Security, many of us believe, also needs to be modernized...

Tuesday, March 3, 2015 - 10:58 AM

A hearing by the House Ways and Means Social Security subcommittee last week drew attention to the impending insolvency of the Disability Insurance (DI) trust fund in 2016. While there were some disagreements, there was also a clear bipartisan consensus that something must be done to shore up the finances of Social Security.

The hearing featured testimony from Charles Blahous, a public trustee for Social Security, Ed Lorenzen of the Committee for a Responsible Federal Budget, and Webster Phillips from the National Committee to Preserve Social Security and Medicare.

All three agreed that, given the limited time between now and the exhaustion of the DI trust fund, it would be impossible to avoid a draconian cut in disability benefits without reallocating some of the payroll tax from OASI (the retirement program) to DI. Congress last reallocated the payroll tax in 1994.

However, both Blahous and Lorenzen strongly advocated that...

Monday, January 12, 2015 - 10:27 PM

A looming crisis is facing Social Security’s Disability Insurance (DI) program: Unless Congress takes action, the DI trust fund will run out next year and beneficiaries will suffer an across-the-board cut of 19 percent.

Some advocates suggest that a “simple fix” would be for Congress to shore up the DI trust fund by reallocating a portion of Social Security’s payroll tax revenue from the Old Age and Survivors Insurance program (OASI). But this approach would ignore the fact that OASI has growing problems of its own. 

Last week, as part of a rules package marking the start of a new Congress, House Republicans included a rule that would prohibit reallocating payroll taxes from OASI to DI unless steps are also taken to strengthen both funds.

While House rules are easily waived, this one points policymakers in the right direction. Social Security as a whole is on an unsustainable course, with its larger piece, OASI, running a cash deficit that is projected to grow larger and larger as the population ages and workforce growth slows. 

Disability Insurance is depended on, primarily by workers over age 50 because they are more vulnerable to medical conditions that impede work. This demographic continues to grow with the aging of the baby boomers and now consists of almost three in four DI...

Tuesday, August 5, 2014 - 10:31 AM

For several years we’ve heard a familiar tune from the Social Security trustees: Its programs are unsustainable in their current form but insolvency is still years away. This time is different because the next Congress will face a deadline to act.

Social Security pays the benefits of retirees and disabled workers through a combined 12.4 percent payroll tax it collects from wage earners and their employers. Of that, 10.6 percent is obligated to pay Old Age and Survivors Insurance (OASI) benefits and 1.8 percent is obligated for Disability Insurance (DI). Additionally, income taxes collected on these benefits are funneled back into the program.

In years when more money was collected through these taxes than was paid out in benefits, the respective Social Security trust funds were credited with surpluses. When promised benefits exceed tax revenue, Social Security is authorized to continue paying full benefits until those trust fund credits run out. For Disability Insurance, that time will be upon us in 2016 when its trust fund becomes “insolvent.”

According to the trustees, Congressional failure to act by then will lead to an automatic, across-the-board benefit cut of 19 percent for disability insurance beneficiaries. Such a steep cut would impose...

Saturday, June 28, 2014 - 9:58 AM

Short-term improvements in the federal government’s finances have led to widespread complacency in Washington about fiscal reform.

But a panel discussion this week highlighted the continuing need for such reform, with former members of Congress lamenting the sharp political divisions within the two major parties as well as between them that hinder constructive change.

“We have a fiscal challenge which is really a political challenge which really is a societal challenge. . . .the two parties are more polarized than ever before,” said Evan Bayh, a former senator (D-Ind.). “The Democratic Party has moved further left, the Republican Party has moved even further right.”

Mike Castle, a former congressman (R-Del.), sounded a similar theme, noting the pressures faced by moderates in both parties. “The Congress of the United States today,” he said, “is a difficult place.”

The panel discussion took place in Washington on Wednesday night, when The Concord Coalition honored Senators Dick Durbin and Tom Coburn with the 2014 Paul E. Tsongas Economic Patriot Award.

Joining Bayh and Castle for the panel discussion were former senator Judd Gregg (R-N.H.), former House member John Tanner (D-Tenn.) and Concord Coalition Executive Director Robert L. Bixby.

Castle and Tanner are Concord’s co-...

Monday, May 5, 2014 - 4:00 PM

A book titled “Dead Men Ruling” is not the place you would expect to find an optimistic message about our nation’s future. That is the case, however, with a new book from budget expert Eugene Steuerle of the Urban Institute. The critical connection he draws between renewed fiscal freedom and generational fairness casts the budget debate in a far more important context than deficit reduction for its own sake. This larger theme is one that The Concord Coalition has long embraced.

Despite the dismal fiscal outlook, which portends rising deficits and debt in perpetuity, Steuerle argues that “we no more live in an age of austerity than did Americans at the turn of the twentieth century.... Conditions are ripe to advance opportunity in ways never before possible, including doing for the young in this century what the twentieth did for senior citizens, yet without abandoning those earlier gains.”

The key to realizing these opportunities, he says, is “breaking the political logjam that…was created largely by now dead (and retired) men.”

As Steuerle puts it, “both parties have conspired to create and expand a series of public programs that automatically grow so fast...

Monday, February 24, 2014 - 3:52 PM

As we await the full release of the President’s Fiscal Year 2015 Budget, some important specifics have been slowly made public. It looks like this budget, as is usually the case, will contain a mixture of sensible reforms and politically expedient omissions.

The first bit of news is that this year’s budget will not contain a proposal -- included last year -- to switch the government-wide formula for measuring inflation to a more accurate index called the “Chained CPI.” 

Switching would save money in numerous spending programs, including Social Security, that provide cost-of-living increases. That’s because the government’s current formula, according to most economists, overstates inflation. The Chained CPI addresses this problem while ensuring that the value of federal benefits still keep up with citizens’ purchasing power.

Because tax brackets are indexed to inflation, switching to the Chained CPI would also increase revenue.

The President’s budget does not have the force of law and does not normally form the basis for the congressional budget resolution. It is a stylized world in which the administration proffers a multi-faceted policy course and projects where that would lead the nation fiscally.

In that world last year, the administration rightly identified that the country has a...

Monday, October 28, 2013 - 9:38 AM

Who says that Democrats and Republicans can't reach a grand bargain?

Harry Reid and Paul Ryan seem to have it figured out. If Democrats and Republicans don’t demand compromises from each other, everyone can get along. It’s the perfect political grand bargain: Do nothing.

Unfortunately, that could easily become a self-fulfilling prophecy.

The prospects for a real grand bargain – one that actually makes some headway on solving our fiscal imbalance – are not looking good right now. It is particularly disappointing, however, that already two key members of Congress are simply accepting the gridlocked status quo rather using their leading positions to figure out a better result.

In an interview with the Associated Press (AP), Ryan summed up his view this way: “If we focus on some big, grand bargain then we’re going to focus on our differences and both sides are going to require that the other side compromises some core principle and then we’ll get nothing done.”

That’s a bit like saying elected officials can’t do a grand bargain because it would require a grand...