"This is an impressive crowd,” he said. “The haves and the have-mores. Some people call you the elites; I call you my base."

Any questions?

Eight months later, President Bush delivered sweeping tax cuts to that patrician base. Given current hysteria over what a recent Washington Post article called “the runaway national debt,” it requires an act of historical memory to recall that the Bush administration rationalized reducing taxes on inherited wealth because paying down the debt too soon might roil financial markets.

Eleven years later, the Post warns in a ballyhooed article, reading like something out of Joseph Heller’s “Catch-22,” that Social Security—the 75-year-old bedrock of millions of Americans’ retirement hopes—has “passed a treacherous milestone,” gone “cash negative,” and “is sucking money out of the Treasury.”

Continue Reading...

This morning the Washington Post reported that the White House is offering to cut Social Security as part of a broader budget deal with the Republicans. At last we have the answer to the question everyone has been asking about the Democrats: How far can they go?

The financial collapse of 2008 has taught us to be skeptical of economic forecasts that simply spin trends out into an indefinite future. Most central bankers, economists and business leaders failed not only to foresee, but even to imagine, the colossal dimensions of that catastrophe.

Now, however, the very people who said that there was no way for regulators to recognize financial bubbles in advance predict budget gloom and doom. Scary charts of the time path of U.S. debt-to-GDP ratios -- many originating from the Peterson Foundation -- fill the media, along with specious arguments about how budgets affect national income.

Continue Reading...

Progressives are not amused, to put it mildly, at the prospect of a Democratic president unilaterally dismantling the social welfare state. Congressional Democrats are reportedly "anxious," "worried" and caught "off guard." Republican proposals to slash Medicare have proven to be a potent political weapon for Democrats -- and now Obama has gone over to the dark side?

Continue Reading...

Continue Reading...

The Wall Street Journal made some waves Friday morning when it reported that AARP -- the powerful lobbying group for seniors -- "is dropping its longstanding opposition to cutting Social Security benefits." According to the WSJ, the move could rock Washington's debate over how to revamp the nation's entitlement programs.

AARP has long been cast as the defender of entitlements for U.S. seniors, willingness to bend on the issue, according to AARP representatives, comes from a place of necessity as opposed to ideology (and was only decided after "wrenching" debate within the group).

"The ship was sailing. I wanted to be at the wheel when that happens," John Rother, AARP's longtime policy chief, told the paper.

According to the Journal:

"The group will accept cuts, but won't champion them, and it is particularly leery of certain concepts such as eliminating benefits for wealthier recipients. It wants tax increases to fill most of the program's financial hole, and it insists that a deal must be crafted apart from broader deficit-reduction negotiations."

Continue Reading...

One day, United Airlines sent me a card, along with some new luggage tags, offering congratulations on having flown 2 million miles. Quick arithmetic translated all those zeroes into the equivalent of flying from one side of the country to the other every single day -- Sundays, holidays, birthdays, sick or well -- for more than two years. Maybe the card from United should have offered condolences. It all added up to an abiding fatigue. And a question: Did I want to fly 2 million more miles over the next twenty-five years of my life?

Was I having a low-grade midlife crisis? I had no red sports car, reckless affair, or other obvious sign something was amiss. Instead, there seemed to be internal bleeding -- a sense that the energy and optimism were ebbing out of me. My hope was that a three-month sabbatical would cure all that, bringing needed rest and clarity. After ten years of running the non-profit organization I'd founded -- a think tank on boomers, work and social purpose -- I thought I might be able to arrange some combination of vacation and leave. My board, perhaps a little worried about me as well, was happy to oblige.

Continue Reading...

Although there is no short-term Social Security "crisis," there is a long-term Social Security problem. Last year the program began paying out more than payroll taxes brought in. The Social Security trust fund is projected to make up the difference for a quarter of a century, but around 2037 the trust fund will run out. Thereafter the gap between Social Security's revenue and spending is projected to be around 2 percent of U.S. GDP. This is less than apocalyptic but it is still a substantial amount of money. 

The inadequacy of payroll tax revenues sets the stage for today's vast number of Social Security plans. Almost all of them share the assumption that, from now until the end of time, Social Security can only be funded by a single tax. That solitary tax is the combined employer-employee payroll tax, which today is set at 12.4 percent of wages below $106,800.

Continue Reading...

Most of the Roadmap's prescriptions for Social Security cover the familiar conservative call for "personal accounts" in which workers invest their payroll taxes into funds managed by the U.S. government. George W. Bush's failure to get a similar proposal to the floor of a Congress completely controlled by Republicans suggests that it is unlikely any progress will be made in that direction in this Congress. But then comes this:

Continue Reading...

The plan is part of a package of tax cuts and extended unemployment benefits that Obama negotiated with Senate Republican leaders. It would cut workers' share of Social Security taxes by nearly one-third for 2011. Workers making $50,000 in wages would get a $1,000 tax cut; those making $100,000 would get a $2,000 tax cut.

The government would borrow about $112 billion to make Social Security whole. Advocates and some lawmakers worry that relying on borrowed money to fund Social Security could eventually force it to compete with other federal programs for scarce dollars, leading to cuts.

Social Security taxes "ought to be held sacrosanct," said Rep. Earl Pomeroy, D-N.D., chairman of the House Ways and Means subcommittee on Social Security.

"When you start to signal that the (Social Security) tax levels are negotiable, you end up in long-term trouble, I think, in terms of making absolutely certain that the entitlement funding streams are secure," Pomeroy said.

Continue Reading...

For supporters of the program, the use of Social Security tax reductions for economic stimulus is a dangerous political precedent. The tax holiday plays directly into the "Starve the Beast" strategy that conservatives have pursued since the 1980s. After Ronald Reagan's election in 1980, Republicans learned that directly attacking domestic programs was hard to do. When Reagan pushed for cuts in Social Security in 1981, he faced a massive backlash that forced him to back down. President George W. Bush encountered the same fate in 2005 when he tried to spend his political capital on Social Security reform. The lesson was learned. Republicans instead focused on a strategy whereby ongoing tax cuts would gradually leave the federal government with less revenue for new programs and make existing programs susceptible to attack as a result of deficits.

Continue Reading...

And that's good for the taxpayers, and it's incredibly positive news if you're worried about a federal government that has been growing at a dramatic pace over the past eight years and it has been.

In other words, the tax cuts were an example of the classic "starve the beast" psychology -- most often associated with GOP strategist Grover Norquist. By depriving the federal government of revenue, the tax cuts would encourage Congress to be more thrifty.

As everyone knows, Bush's straitjacket restricted nothing. Bush's tax cuts busted the budget, turned Clinton's surplus into a deficit, and left the government unprepared to pay for war, recession or spiraling healthcare costs.

Continue Reading...

It still seems far-fetched to imagine that anything close to the plan put forward by commission co-chairs Erskine Bowles and Alan Simpson will end up being put into effect -- indeed, past history has shown that one of the best possible ways to rally beleaguered Democrats is to launch an attack on Social Security -- but that doesn't diminish the potential negative fallout. Even as Obama was touring the country arguing that the Bush tax cuts for the wealthiest Americans should be allowed to expire, his own debt reduction commission was cooking up a plan that further lowers the maximum tax rate for the wealthiest Americans. Conservative critics of the administration will wield these recommendations as a club to pound the White House with for the next two years.

Continue Reading...

Progressives are predictably outraged at the cuts to social welfare programs but there is something here for everyone to hate.

Which, in theory, in an alternative universe might be almost OK. Getting the federal budget under control will require shared sacrifice. Everybody should hate something recommended in the report. The fact that, according to Bloomberg, the only members of the 18 person commission willing to endorse the draft are the two co-chairs, Erskine Bowles and Alan Simpson, is weirdly encouraging in that regard.

Continue Reading...

The Social Security Administration said Friday inflation has been too low since the last increase in 2009 to warrant an increase for 2011. The announcement marks only the second year without an increase since automatic adjustments for inflation were adopted in 1975. The first year was this year.

The cost-of-living adjustments, or COLAs, are automatically set each year by an inflation measure that was adopted by Congress back in the 1970s.

To make up for the lack of a COLA, the House will vote in November -- after congressional elections -- on a bill to provide $250 payments to Social Security recipients, House Speaker Nancy Pelosi said. But even if Pelosi can get the House to pass the proposal, it faces opposition in the Senate.

The absence of inflation will be of small comfort to many older Americans whose savings and home values still haven't recovered from the recession. Many haven't had a raise since January 2009, and they won't be getting one until at least January 2012. And the timing couldn't be worse for Democrats as they approach an election in which they are in danger of losing their House majority and possibly their Senate majority as well.

Continue Reading...

Though the decision wasn't made by politicians, it could have an impact on Election Day if seniors blame Democrats for it. Older people are the most loyal of voters, and their support is especially important during mid-term elections, when turnout is lower.

Everett Rawlings, a 73-year-old from Boca Raton, Florida, says the decision affects him and everybody else who's retired, but he understands the rationale behind it. Retired 69-year-old state worker Paul McNeil of Warwick, R.I., is more blunt, saying he thinks the decision not to increase benefits is "disgusting."

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

WASHINGTON (AP) -- As if voters don't have enough to be angry about this election year, the government is expected to announce this week that more than 58 million Social Security recipients will go through another year without an increase in their monthly benefits.

Continue Reading...

But Paul, speaking during the first televised debate of the general election season with Democratic opponent Jack Conway, said he doesn't want to change those benefits for older people already receiving them. The debate was aired on "Fox News Sunday."

"But we do have to admit that we have the baby boom generation getting ready to retire, and we're going to double the amount of retirees," Paul said. "And to put our head in the sand and just say we're just going to keep borrowing more money is not going to work. There will have to be changes for the younger generation."

Major issues of the race thus far have been spending, taxes and the size of government.

Paul is a favorite of the tea party with his positions for smaller government and a balanced budget. Conway, the state's attorney general, has also appealed to conservatives, describing himself as a fiscally responsible Democrat who understands why voters are frustrated about rising federal spending.

Paul and Republican leaders have tried to paint Conway as a clone of the Obama administration.

Continue Reading...

It's nice that Simpson has apologized for his uncouth, unprofessional and highly patronizing e-mail. But the real outrage isn't his use of the word "tit," nor is it his remark about how "people like you babble into the vapors about 'disgusting attempts at ageism and sexism' and all the rest of that crap" (a line far more offensive than the bovine reference, I'd say). No, the problem here is that the president appointed Simpson as co-chair to his Deficit Commission knowing full well that he has a political ax to grind against Social Security. Make no mistake, this is a feminist issue.

Continue Reading...

"I and the majority of my fellow Nevadans are sickened by the passage of the recent huge tax increase bill. With YOUR help the quality of life in America has taken another step into the pit of economic collapse. Clinton's mother-of-all tax packages is the world's biggest tax increase ever. It increases government spending by $300 billion, increases the national debt by $1 trillion, it is retroactive to January 1, and probably the most offensive, it schedules 80 percent of the promised spending cuts to take place after the next Presidential election. What a joke, and not a very funny one at that!

"Under your new bill, I and the rest of us (including my children and yours) will work from January 1 until July 31 to cover our tax liability. How much more can you suck out of the taxpayers before everything collapses? It is evident that you have caved in with our President and the rest of those tax-and-spenders in Washington that voted for this disgrace.

"The answer to this mess is clear. STOP FUNDING THE WASTEFUL SOCIAL AND ENTITLEMENT PROGRAMS. MAKE THE DIFFICULT CHOICES THAT WILL KEEP OUR COUNTRY STRONG. THAT'S WHAT YOU WERE ELECTED TO DO! I beg you not to support taxpayer funded national health care which is the next hit we are in line for. I also request that you end the spending (of) tax dollars to support pornography and perversion through continuing grants from the National Emdowment for the Arts.

"In closing, I want to reaffirm my total dissatisfaction with your support for the tax bill. I will be expressing my dissatisfaction in the voting booth in the next election.

"Please take the following words of Professor Alexander Tyler to heart. He said, 'A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves a largess from the treasury. From that moment on, the majority will always vote for the candidates promising the most benefits from the public treasury, with the result that a democracy always collapses over loose fiscal policy.' ...

"I hope you receive thousands of letters like mine. Maybe then you will understand the impact of your tax bill on America, and the outrage of its citizens."

Continue Reading...

By providing a guaranteed income to all Americans in retirement, Social Security has made utter destitution among the elderly all but forgotten, like the poorhouses for the old that 21st-century Americans know only from history books. By lessening the burden of caring for their aged parents, Social Security has freed American families to invest more in their children.

Social Security has important macroeconomic functions as well. During economic downturns like today’s Great Recession, it acts as an automatic stabilizer, slowing the collapse of aggregate demand. And in good times as well as bad, by contributing to the purchasing power of the elderly, Social Security helps to maintain the mass consumption on which a modern industrial economy depends.

Continue Reading...

Seventy-five years after President Franklin D. Roosevelt signed Social Security into law, Obama said in his weekly radio and Internet address Saturday: "We have an obligation to keep that promise, to safeguard Social Security for our seniors, people with disabilities and all Americans -- today, tomorrow and forever."

Some Republican leaders in Congress are "pushing to make privatizing Social Security a key part of their legislative agenda if they win a majority in Congress this fall," Obama said.

He contended that such privatization was "an ill-conceived idea that would add trillions of dollars to our budget deficit while tying your benefits to the whims of Wall Street traders and the ups and downs of the stock market."

Most Republicans, in fact, are wary of touching that idea, because Social Security is virtually sacrosanct to voters, particularly seniors.

Nonetheless, Democrats have been able to seize on the issue because of a proposal by Rep. Paul Ryan of Wisconsin, the top Republican on the House Budget Committee, that would allow younger people to put Social Security money into personal accounts.

Continue Reading...