August 14, 2010

Obama Demagogues Social Security in Radio/Net Address; AP and Erica Werner Take It Further

ObamaRadioNetAddress081410Don’t they usually wait until after Labor Day to do this?

Ten days ago, I asserted that that the administration’s cynical use of Andy Griffith for a patently political promo on behalf of Medicare (“This year, as always, we’ll have our guaranteed benefits, and with the new healthcare law, more good things are coming: free check-ups, lower prescription costs”) was “the foundation for the biennial Democratic scare-the-seniors campaign.”

Well, the Social Security portion of that scare campaign kicked in this morning.

President Obama used his weekly radio and Internet address to glorify Social Security’s accomplishments (he “somehow” forgot to mention the program’s $7.7 trillion unfunded liability) and to rip unnamed Republicans for proposing to privatize the program. The President, who has used so many straw-man arguments in the past 19 months that he ought to have a scarecrow sitting next to him every time he speaks, framed active GOP proposals as all-or-none privatization (“You shouldn’t be worried that a sudden downturn in the stock market will put all you’ve worked hard for, all you’ve earned, at risk”), when they’re not. For example, what President Bush proposed five years ago involved giving those who wished the opportunity to invest 2% of their pay — out of the 12.4% of their pay that currently goes into the system — in one or more of a limited number of investment funds.

But wait until you see how the Associated Press and Erica Werner fanned the flames even further. I found the headline that follows at both the AP’s main site and at the same story at USA Today, so what you’re about to see is clearly their preference:

APheadlReObamaSocSecAddress081410

APatUSATonObamaSocSec081410

I watched (i.e., endured) the President’s address at the White House web site (the transcript is here). The President was in full demagogue mode, but he never used the word “destroy.” It’s also not in the transcript.

So here’s a question for Ms. Werner: Where did the word come from? Did co-worker Ben Feller suggest that this is what the President Obama was going to say, or that it’s what Obama would like to see written, after he (Feller) participated in that disgraceful off-the-record lunch with the president (covered Friday evening at NewsBusters; at BizzyBlog) earlier this week?

Werner’s writing, as would sadly be expected, also did nothing to dispel the false impression that what Republicans want is full privatization. As you’ll see in the final excerpted paragraph below, she also perpetuated the Trust Fund myth while failing to note that the program is already running cash deficits:

President Barack Obama used the anniversary of Social Security to trumpet Democrats’ support for the popular program and accuse Republicans of trying to destroy it.

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.

Ryan’s idea is similar to a proposal pushed unsuccessfully by former President George W. Bush.

… Unless Congress acts, Social Security’s combined retirement and disability trust funds are expected to run out of money in 2037. At that point, Social Security will collect enough in payroll taxes to cover about three-fourths of the benefits.

As a result of Congress’s inaction and the Obamanomics-prolonged recession and weak recovery, Social Security has in two short years gone from running a string of $180 billion-plus surpluses (from 2006-2008) to cash deficits. Benefits paid and administrative costs have been have been outpacing taxes collected. The Congressional Budget Office says that there will be Social Security deficits during the current fiscal year and the next few to follow.

As to the status of the allegedly “almost sacrosanct” program, let’s explain the fiction of the “trust funds” once again for Erica Werner’s and the AP’s benefit:

  • Iinstead of being a separate, untouchable stash of cash and investments (i.e., instead of being run like a normal pension plan), Social Security’s Trust Funds have been raided by the rest of the government for decades. The politicians have done this by continually borrowing from them.
  • Until recently, by including Social Security in a “unified” budget and raiding its surpluses, Uncle Sam has been able to paper over typically huge deficits in all other government operations. Now that the system is running cash deficits, the days of papering over are gone.
  • The Social Security “Trust Fund” balance of $2-plus trillion is, except for very nominal amounts, nothing but a pile of IOUs from the rest of the government — which is otherwise (excluding its debt to the Trust Fund) over $10 trillion in debt.

You see, Erica and AP, the politicians in the ruling class have for all practical purposes already destroyed Social Security. Maybe someday you’ll break down and tell readers about it.

Cross-posted at NewBusters.org.

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8 Comments

  1. SS needs to be ended! Once again, here’s my plan:

    1. Those under the age of 41 are no longer eligible. They lose all the money they put in, but keep the wage increase equivalent to the personal and employer contribution, which they can accept as taxable income or direct to a private retirement account.

    2. Those over 41 can continue in SS, but are given a one time option to accept #1. The risk is for those that continue is that SS will increase withholding percentage, income caps, or retirement age.

    3. Disability will be carved out to a private insurance company by a bidding process. Those currently on disability will still be covered as per current law, but those who opt out can use part of their wage increase for a private plan.

    4. When the last person over 41 or their surviving spouse that continued in the program dies, the program is ended.

    Comment by Joe C. — August 14, 2010 @ 9:06 am

  2. #1, someone would have to run the numbers to see if it would work. The sad thing is that it would have worked out well 10 years ago, but now that the negative demography has had another decade to undermine it, it might not.

    Comment by TBlumer — August 14, 2010 @ 9:20 am

  3. Actually Tom, I put out a challenge to Cavuto yesterday after he had as his guest the grandson of FDR on his program talking about SS. I will also be sending it to Ironman as well at Political Calculations. It’s called Dollar Cost Averaging.

    The Challenge:

    As we all know, in 1983 the Democrat run Congress with collaboration of Republicans increased the base tax rate to bring the system into budget balance. However, the primary flaw of that reform was NOT to decouple the Trust Fund from the Federal Budget. The reason for not decoupling was that the politicians were looking for an easy revenue stream to pilfer while falsly claiming the annual deficit was not as big as it really was, the issue was never the actuarial soundness of the system.

    The grandson of FDR had it partly correct IF you count those IOUs as actual money that is “promised” to be returned with paltry interest. You and I know that there is NO money there, just pieces of paper saying the Federal Government has sold them special issue bonds at less than market interest rates. So here is the crux of the problem, IF the Trust Fund were to be operated as a bonified pension fund for the express benefit of the pensioners, then Congress would not be allowed to raid the Trust Fund nor use it to hide their spendthrift ways.

    The answer is not raising the retirement age or any other gimmick they have mentioned already since all this will do is give a temporary positive cash flow for Congress to misappropriate once again. The answer is a stand alone Social Security system with Trustees who are allowed to invest the pensioners (tax payers) pre-retirement savings in a manner that meets the actuarial requirements of the Fund. You don’t need individual accounts, although it would be nice. IF the $3.5 trillion currently owed to the Fund were actually invested in the economy as it is supposed to be, Social Security would be in the black even with the Great Recession. Why? Because of dollar cost averaging. Imagine if the Trust Fund were continually buying every month right through the 1987 stock market drop? Imagine if the Fund were buying through the 2000 Dot Com stock drop, the 2003 drop and now through the 2008 to 2010 drops? Imagine the fiscal strength of the Fund!

    In fact Neil, do us all the favor and have someone do a mock Trust Fund purchasing program using the SS net receipts from 1983 to present and tell us how much bigger than the $3.5 trillion in IOUs were really would have had. I think it is high time to name and shame the politicians for failing the seniors and taxpayers of this country.

    I for one oppose ANY change to the Social Security system unless and until Congress is no longer allowed to use SS Trust Fund receipts in ANY WAY. Right now as it stands, Congress is paying back the pensioners because the net receipts are negative and THAT’s A GOOD THING! They can no longer misappropriate funds nor can they hide part of the annual budget deficit, its a twofer!

    Comment by dscott — August 14, 2010 @ 9:39 am

  4. From the bad news is good news department: SS net receipts will be all negative now no matter what the economy does.

    In more good news for the economy (sarcasm), distillate demand is cratering back to last year’s dismal consumption levels. The double dip is here:

    http://tonto.eia.doe.gov/oog/info/twip/twip_distillate.html#demand

    Comment by dscott — August 14, 2010 @ 9:55 am

  5. As I recall,I contributed to Social Security for my entire working life. My employer also contributed 6.2% of my annual income on my behalf. My wife did the same. So why is this an entitlement? We paid in. It is our money. Had I invested this on my own we wouldn’t be talking about this now. My wife and I would be retired and doing quite well,thank you. Remember the beauty of compounded interest and the rule of 7. This is where money invested wisely doubles every 7 years. Thank you…..U.S. gov. for this entitlement.

    Comment by Union Jim — August 14, 2010 @ 10:19 am

  6. #5, this country would be wealthy beyond imagination if we had fully privatized a quarter-century ago.

    Your “rule of 7″ is really part of the rule of 72. Your “money invested wisely” assumed a 10% return (72 divided by 10 equals 7). That seems a little aggressive, but your point stands.

    As to “it is our money,” the sad fact is that the Supreme Court ruled in the late 1930s that it isn’t. It should be, it has been promised that it would be, and politicians STILL want us to believe that it is … but it isn’t.

    Comment by TBlumer — August 14, 2010 @ 10:24 am

  7. “You shouldn’t be worried that a sudden downturn in the stock market will put all you’ve worked hard for, all you’ve earned, at risk.”

    Bullcrap. I am SO sick of hearing that tired old refrain. There are many types of private retirement plans that are stable and safe and can weather stock market downturns quite well. He also ignores the fact that money from private investments often give much larger returns than SS ever can and even if the stock market goes sour you will on net STILL have more money at the end of the day than the relative pittance SS give you. And having more money means you’d also be better able to weather weaker economies, of course. The idea that downturns in the stock market (even severe ones) automatically mean financial ruin is another simplistic static zero-sum liberal economic trope. Like all central liberal economic beliefs, it’s mired in a simplistic worldview akin to 8 year old children.

    I’d rather have my own choice, Mr Obama, as to how to use my own cash. After all, you shouldn’t be worried that a sudden downturn in the governments fortunes and/or plundering of the fund for political whim will put all you’ve worked hard for, all you’ve earned, at risk. Despite the rhetoric, SS was just another FDR bureaucratic scheme to garner more votes. FDR knew quite well that the earlier 1920′s recession had been even more severe (but brief) than the early years of the Great Depression, yet peoples retirement funds and the economy in general recovered quite nicely and eventually grew into the Roaring 20′s. (The reason why it recovered so quickly and deeply, unlike the Great Depression, is because the government didn’t meddle, which is the exact opposite of what Hoover and FDR did in reaction to 1929 and beyond. And the earlier 1920′s recession had the added benefit of not needing a war to get us out of it.) FDR knew those facts but ignored them, after all never let a recession go to waste when it can be used to increase federal power and pander for more Dem votes. The idea that the 1929 stock market crash proved that savings couldn’t be trusted to privatization was a lie and FDR knew it, but he used it as an excuse anyway. There is nothing sacred or even “almost sacrosanct” about SS. The idea of eventual total privatization of SS should not be run away from, it should be embraced. If anyone thinks SS is saving destitute and poorer seniors from total ruin (or even improving all seniors financial situation in general to any meaningful degree) they are sadly mistaken.

    By the way, did you know SS turns down one out of every three SS claims? And Medicare benefits are hardly guaranteed, Sheriff Taylor. In my own experience with the older members of my family I’ve run into plenty of times when benefits were denied and/or were much less than promised.

    Comment by zf — August 14, 2010 @ 3:14 pm

  8. #5, What you should say is that you, your wife and your employers were not given any choice but to contribute to SS.

    Comment by zf — August 14, 2010 @ 3:16 pm

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