Entitlements
| Wed Jan. 7, 2009 12:08 PM PST
ENTITLEMENTS....From the New York Times account of Barack Obama's press conference this morning:
Changes in Social Security and Medicare will be central to efforts to bring federal spending in line, President-elect Barack Obama said on Wednesday, as the Congressional Budget Office projected a $1.2 trillion budget deficit for the fiscal year.
"We expect that discussion around entitlements will be a part, a central part" of efforts to curb federal spending, Mr. Obama said at a news conference. By February, he said, "we will have more to say about how we're going to approach entitlement spending."
This comes at about the 6:20 mark of the linked video. "We will have some very specific outlines in terms of how it's going to be done," he said. Now, maybe this is just me zoning out, but I don't recall Obama saying anything quite this unambiguous about Medicare and Social Security reform before. And I haven't read any leaks along these lines either.
On the Medicare front he may just be talking about the impact of his overall healthcare plan, but I don't have a clue what he might have in mind for Social Security. At a guess, though, he's got something typically Obamian in mind, a mixed bag of moderate tax hikes (maybe increasing the payroll tax cap, which I think he's talked about before) and moderate benefit cuts (maybe increasing retirement age a year or two) that will get bipartisan support. Wait and see.
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Here's the real kicker. From the article:
But one reason that the [CBO's] deficit estimate was higher than those of outside analysts was that it added in hundreds of billions of dollars in spending tied to the government's existing bailout programs, which the Bush administration has thus fare treated as "investments" it would recoup rather than "spending" or "costs" that are down the drain.
For example, the budget office estimated that the present-value cost of the Treasury Department's $700 billion bailout program for financial institutions ? known as the Troubled Assets Relief Program ? would be $180 billion in 2009. The agency said that estimate was based on its judgment of the program's risks and probable losses over time.
So what to make of this. Are the CBO's estimates realistic, and the $700B TARP is even a bigger handout than I feared? Or is this politics, and Obama is using the $1.2T number as a scare figure to give him a fig leaf for being a Republican?
MESSAGE TO EVERY MEMBER OF CONGRESS:
When counting the electoral votes, either Congress finds by 1/8/09 that Obama ? not being an Article II "natural born citizen" (father Kenyan/British, not American, citizen) ? fails to qualify as President whereupon Biden becomes the full fledged President under 3 USC 19 (free to pick his own VP such as Hillary) or thereafter defers to the Supreme Court to enjoin Obama's inauguration with Biden becoming only Acting President under the 20th Amendment until a new President is duly determined.
The preferable choice, at least for the Democrats, should seem obvious.
SPECIAL AUDIO LINK MESSAGE TO JOHN MCCAIN:
JUST ONE DAY BEFORE CONGRESS VOTES ON ELECTORAL 'VOTE' CHIEF JUSTICE ROBERTS HAS DISTRIBUTED FOR CONFERENCE DR. ORLY'S LIGHTFOOT CASE!
MESSAGE -- NOW RENEWED AS AN ALERT -- TO EVERY MEMBER OF CONGRESS:
When counting the electoral votes, either Congress finds by 1/8/09 that Obama ? not being an Article II "natural born citizen" (father Kenyan/British, not American, citizen) ? fails to qualify as President whereupon Biden becomes the full fledged President under 3 USC 19 (free to pick his own VP such as Hillary) or thereafter defers to the Supreme Court to enjoin Obama's inauguration with Biden becoming only Acting President under the 20th Amendment until a new President is duly determined.
The preferable choice (especially for the Democrats) -- IN WHAT WILL BE THE MOST IMPORTANT AND HISTORIC CONGRESSIONAL VOTE SINCE THE AMERICAN CIVIL WAR -- should seem obvious.
*SPECIAL AUDIO LINK MESSAGE TO JOHN MCCAIN:
Tom Geoghegan is running for Rahm Emanuel's seat in Congress on a platform of increasing Social Security to make up for private pensions lost in the economic crisis. Having just seen a trillion dollars wasted in Iraq, and hundreds of billions handed over to banks with no accountability, the claim that there is not enough money for Social Security (or health care, etc.) is simply ridiculous.
Kevin Drum: I don't have a clue what he might have in mind for Social Security ... guess ... mixed bag of moderate tax hikes
If Obama does anything with SocSec now he's either an idiot or a shill. I don't think he's an idiot.
SocSec is in pretty good shape. If any adjustments are needed we can very comfortably wait years. So you think Obama and the Dems want to hike FICA (for which there is no current justification) while handing out billions in tax breaks to the likes of Citibank? (refunds from 5 years past profits). Unfortunately you may be right.
I'm starting to think like a conspiracy theorist. McCain was only a faux candidate so that a Republican like Obama could be elected (and no I don't think Hillary would have been better).
Next time I'm voting for Harry Truman. His being dead is less of a disqualification than the strikes against the other candidates.
Re "moderate benefit cuts (maybe increasing retirement age a year or two)"
That may seem "moderate" to someone of your tender years, Kevin, but dragging an aging body to work for an additional year or two (or more) is anything but moderate for many people.
I think he's talking about full-blown, George Bush type "You fricking people need to learn how to save up for your own goddamned old age!" type reform. That's what I think. It's always the hand you're not watching that performs the tricks.
I don't care what tax rate you have for FICA for the next 20 years. The "Trust Fund" can't help pay future benefits.
Like it or not, social security is "PAY AS YOU GO" since society will ALWAYS have to depend on the people actually working to support the people who aren't working, PERIOD.
The last time we elected a Democrat, we got NAFTA, the end of Welfare as we knew it, and a raft of financial industry de-regulation.
So far, this Democrat has promised entitlement reform, more gifts to the financial industry, and clean coal and nukes (?).
Swell.
steve duncan: George Bush type "You fricking people need to learn how to save up for your own goddamned old age!" type reform
You mean the problem with Social Security is that we peons aren't asking for a big enough "handout" from the government? Or that we don't have a "free enterprise" fig leaf for it? That's how W got his retirement money - taxpayer handouts for the Texas Rangers.
Or does it mean that we should all have temporary government jobs that require no retirement contributions but pay half salary for the rest of our lives. I'd be good with a job like that, or would I be disqualified as competent?
neil wilson: Like it or not, social security is "PAY AS YOU GO" since society will ALWAYS have to depend on the people actually working to support the people who aren't working, PERIOD.
That's brilliant economic analysis. Similarly we can't rely on say bonds as a retirement investment.
I had no expectation that an Obama administration would seriously challenge the rule of corporations or the basic philosophy of government of, by and for America's Ultra-Rich Ruling Class, Inc.
I did hope that Obama might work towards a "kinder and gentler" sort of corporate domination, along the lines of the "compassionate conservatism" of Bill Clinton -- in which the American people would get some crumbs from the ultra-rich corporate oligarchy's table, rather than a kick in the teeth. Realistically, that's about the best we can hope for in America today.
But with pretty much each passing day since the election, those hopes have dimmed.
I may live in some type of fantasy world but every time talk of "controlling spending" comes up, it just shocks me that people ignore the nearly $1 trillion elephant in the room - defense/intelligence spending. The Pentagon misplaces more money per year than most federal agencies are allocated.
The other error in this thinking is that taking money from the lower classes is exactly the opposite what we should be doing in an economic crisis. As numerous economist point out, like Dean Baker, money to those who need Social Security has a much bigger economic bang than tax cuts to the upper middle class and rich.
I hope you are right Kevin that he is talking about removing the FICA cap and tying health care reform to saving money on Medicare. A cut in benefits at a time of an economic slowdown is bad policy.
Here's the real kicker. From the article:
But one reason that the [CBO's] deficit estimate was higher than those of outside analysts was that it added in hundreds of billions of dollars in spending tied to the government's existing bailout programs, which the Bush administration has thus fare treated as "investments" it would recoup rather than "spending" or "costs" that are down the drain.
For example, the budget office estimated that the present-value cost of the Treasury Department's $700 billion bailout program for financial institutions known as the Troubled Assets Relief Program would be $180 billion in 2009. The agency said that estimate was based on its judgment of the program's risks and probable losses over time.
So what to make of this. Are the CBO's estimates realistic, and the $700B TARP is even a bigger handout than I feared? Or is this politics, and Obama is using the $1.2T number as a scare figure to give him a fig leaf for being a Republican?
OMan mentioned raising SSA contributions before around a doughnut hole. The issue here then is that it really is a tax increase among the wealthy (which I am OK with) but it undermines the philosophy of the system and in fact encourages non SSA expenditures on SSA revenues. As stated above- the actual long term actuaries are not that off balance. I would worry about Healthcare reform first. (What about raising the Medicare contributions around the doughnut hole!) As to raising the age of retirement-1- people will avail of the earlier retirement (which means you are screwing the elderly-great) and 2-
67 year old hamburger flippers? Is this the best we can do in the richest country on Earth? It would be horribly unpopular- even 1-term written all over it and do you really want your cheeseburger with scaly decaying epidermis as a topping?
Submitted by Annie (not verified) on Wed Jan. 7, 2009 1:59 PM PST.
There is rampant age discrimination, and older workers (read 40 and up) are being fired and laid off in much higher proportions with very little in the way of job prospects. Medicare doesn't kick in until 55 at the earliest, and so these people are out of the running for any reasonable healthcare except what they can pay out of pocket. Commercial insurers won't cover them (almost everyone by this age has pre-existing conditions or co-morbidities), employers won't hire them, and they aren't disabled -just ostracized. Obama better start thinking about propping up this age group because without health care and job protections, they will have decades of life in poverty and impoverished.
raoul: It would be horribly unpopular- even 1-term written all over it
That would only be true if there were a more desirable alternative. I held my nose and voted for this Republican-Lite as an alternative to the Republican-Heavy. I doubt the choices will differ much in 2012. If only America still had a Democratic party ...
It's true that SS and Medicare are essentially pay-as-you-go (AKA Ponzi Schemes). Working people pay in for the benefits received by retirees. There are looming problems, however. The ratio of workers to retirees is going down. Fewer workers are supporting more retirees. Elderly medical care is getting more and more expensive (and better and better.) People are living longer, in part because of the better medical care they can now afford.
A retiree today might well receive $20,000 - $40,000 per year in SS benefits and Medicare benefits. The ratio of workers to retirees is headed to go below 2 to 1. At today's prices, that means each worker would have to pay $10,000 to $20,000 per year just for SS and Medicare. That's more than most workers now pay in total federal income tax. In short, SS and Medicare will gobble up more and more of the federal budget. The current benefits are not affordable in the long term.
If Obama adds government paid medical insurance for all Americans, that will obviously make the financial problem that much worse.
MESSAGE TO EVERY MEMBER OF CONGRESS:
When counting the electoral votes, either Congress finds by 1/8/09 that Obama not being an Article II "natural born citizen" (father Kenyan/British, not American, citizen) fails to qualify as President whereupon Biden becomes the full fledged President under 3 USC 19 (free to pick his own VP such as Hillary) or thereafter defers to the Supreme Court to enjoin Obama's inauguration with Biden becoming only Acting President under the 20th Amendment until a new President is duly determined.
The preferable choice, at least for the Democrats, should seem obvious.
SPECIAL AUDIO LINK MESSAGE TO JOHN MCCAIN:
David: It's true that SS and Medicare are essentially pay-as-you-go (AKA Ponzi Schemes).
Anyone who describes pay-as-you-go as a Ponzi scheme lacks any credibility. Here's a start for you: read up on what a Ponzi scheme actually is. Potential drawback: you may be embarrassed by your parroting of Talking Points.
If Obama adds government paid medical insurance for all Americans, that will obviously make the financial problem that much worse.
Right. Obviously adopting a scheme used by every other developed country in the world, and by which they save at least 1/3 over American costs, will make the financial situation worse. Hey, I'm a little tight this month. Do you think I can improve my finances by spending 50% more than I do now? Should I also eat chocolate cake to loose weight?
Alex, I'm an actuary. You are correct that a traditional Ponzi Scheme is a banking arrangement, not an insurance arrangment. However, for insurance policies in which the benefits are paid long after premium is collected, the same principle applies. E.g., an individual buying a pension must pay the full present value of his/her pension. It is illegal for any private insurance company to operate as SS and Medicare do. It's my job to make sure that companies are not operating to any degree on a pay-as-you-go syste,
It's true that America spends a lot more on health care than other countries on a single payer system. We also spend a lot more on health care than other countries NOT on a single payer system. Our health care is more expensive for many reasons, including higher pay for medical professionals, more medical tests, cost of malpractice (both premiums and the cost of defensive medicine), etc. A single payer system would save some administrative costs, but switching to a single payer system will reduce our health care costs to a European level. Also,
a single payer system might increase costs, depending on how the government acted to control claims.
Has it occurred to anyone that medicare is the new welfare? Medicare covers every age from babies to illegal aliens coming to this country to have their babies on their relatives medicare. Then add the fact that we have an out of control healthcare system that is frought with fraud and massive administration costs and the price can really get out of hand. When Bush added prescription coverage to medicare, he made a big mistake-Now we have everything from diabetic supplies to motorized wheelchairs as part of the system. Somebody has got to get this unweildy and inefficient system under control-wish Obama luck. He also needs to take a very serious look at our Defense Budget-Get Cheney's Contractors away from the Federal TEAT!
David: I'm an actuary.
I'm the Queen of England.
a traditional Ponzi Scheme is a banking arrangement
A Ponzi scheme is an investment scam. Describing it as a "banking arrangement" is interesting, though accurate in light of recent banking practices.
It is illegal for any private insurance company to operate as SS and Medicare do.
You mean governments can do things that are illegal for private companies? Really. Like enforce criminal law? Or have a navy? Or collect taxes? Who'd a thunk. Oh, do you have a point?
We also spend a lot more on health care than other countries NOT on a single payer system.
Tough comparison there. Overlooking that you substituted "single payer system" for the more pertinent UHC, for the UHC side we have countries like Canada, Japan, Australia, all of Western Europe, and every other country where most people aren't starving in the streets. For non-UHC we have the US and then a long list of countries like Somalia. Canada spends more on health care than Somalia? I guess UHC doesn't save money after all.
Coming fresh out of an election, the president declares he has the political capital needed to make tough but necessary changes to social security...wait, haven't I heard this script before somewhere?
Where do I go to sue the blogosphere?
JUST ONE DAY BEFORE CONGRESS VOTES ON ELECTORAL 'VOTE' CHIEF JUSTICE ROBERTS HAS DISTRIBUTED FOR CONFERENCE DR. ORLY'S LIGHTFOOT CASE!
MESSAGE -- NOW RENEWED AS AN ALERT -- TO EVERY MEMBER OF CONGRESS:
When counting the electoral votes, either Congress finds by 1/8/09 that Obama not being an Article II "natural born citizen" (father Kenyan/British, not American, citizen) fails to qualify as President whereupon Biden becomes the full fledged President under 3 USC 19 (free to pick his own VP such as Hillary) or thereafter defers to the Supreme Court to enjoin Obama's inauguration with Biden becoming only Acting President under the 20th Amendment until a new President is duly determined.
The preferable choice (especially for the Democrats) -- IN WHAT WILL BE THE MOST IMPORTANT AND HISTORIC CONGRESSIONAL VOTE SINCE THE AMERICAN CIVIL WAR -- should seem obvious.
*SPECIAL AUDIO LINK MESSAGE TO JOHN MCCAIN:
First of all, Obama essentially ducked the question. SS and Medicaid were part of the question, not specifically part of the answer. He said there will be specifics in February.
Second, the cut benefits/raise taxes was entirely Kevin's speculation, not part of Obama's answer at all.
For a presumed 8 years of an Obama administration SS will run a surplus every year. So any shortfall is still more than pay as you go. So any solution that specifically addresses this solves some other president's problem. I hope Obama is not so stupid as to squander political capital on this.
As for Medicare: the age is 65, not 55 for regular retirees. If you happen to be disabled and meet the categorical requirements for SS disability (having paid in to the system for 40 quarters) then you have a 2 year wait for Medicare coverage.
For those not aware, no one is currently able to retire at age 65 on full benefits. Full retirement age is already just short of 67 (IIR.) You can still retire between 62 and ~67 for a pro rata amount.
And just to make myself clear, should Obama pursue what Kevin has suggested, I would consider him to be too stupid to retain my support. Screwing every working stiff in the US while propping up Wall St. would be breathtakingly dumb. It would also fly in the face of fiscal stimulus logic. I would assume that SS would be akin to extended unemployment and Food Stamp benefits which have the biggest bang for the fiscal stimulus buck. So, I doubt what Kevin has suggested will come to pass.
And, as always, read Bruce Webb on these matters.
Considering the state of the economy and the need for the government to bolster the social safety in the coming days of high unemployment, as well as the need to act swiftly, I think there are five actions the President and Congress can do to help the economy by getting money to the people who most need it.
1. Extend Unemployment to two full years.
2. Expand welfare payments for people who have long ago dropped out of the jobs market.
3. Extend Medicare coverage to people on welfare and Unemployment.
4. Increase Pell grants to more fully cover current college costs. This will tighten the jobs market by getting people out of that market and into college.
5. Lower Social Security's minimum retirement from 62 to 60, or even lower. Again this gets people out of the jobs market.
Rising the age of retirement is foolish because people in their fifties and early 60s who get laid off are not going to find many jobs available, and it will be a long gap between they lose their jobs and will be able to retire.
With all the people who have lost their jobs or will be losing their job this year what Obama needs to do is find ways to support them until jobs finally appear. This is not the time to call medicare, social security, or employment "entitlements" that need to be cut.
Submitted by Jasper (not verified) on Wed Jan. 7, 2009 9:38 PM PST.
In short, SS and Medicare will gobble up more and more of the federal budget. The current benefits are not affordable in the long term.
Medicare spending is not "affordable in the long term" -- that's true, but it's certainly NOT true of Social Security. Kevin Drum has covered this issue exhaustively over the last few years, and the bottom line is Social Security can continue on without any changes whatsoever for a mere two or three additional points of GDP over the next half century or so.
Submitted by Jasper (not verified) on Wed Jan. 7, 2009 9:46 PM PST.
Rising the age of retirement is foolish because people in their fifties and early 60s who get laid off are not going to find many jobs available...
Beb: I think plausible arguments can be made either way as to the desirability of nudging up the retirement age; but if at some point we do take this course of action, there will surely be a very long lag (probably at least three decades) between the time the change is made, and the time it actually affects retirees.
I agree with Beb and disagree with Kevin on this one. Obama is likely to make the payroll taxes "restructured more progressively" than he is to implement "moderate tax hikes," although he will likely do both, with his usual cut-for-95%-of-payers arrangement. Perhaps hw will act to counter regressive state sales taxes by eliminating the payroll tax under the 95th percentile income level and hiking it for the upper 5% rich.
How is lowering the retirement age going to help the job market in the short run? There is no way I could afford to retire now with the continued increase in the cost of living and all the value I have lost in my 401k. If anything I will try to hold on to my job longer. I don't want to try and live on SS and a part time job as a bagger at my local grocery store.
I distinctly remember Obama commenting in the first debate, I believe, that he was going to have to address all aspects of the federal budget including entitlements; and he does. He needs to find all efficiencies where he can. There are no sacred cows if those cows are fat and bloated. You can't have one cow eating corn while the others forage for grasses amongst the sage.
simply drawing down in Iraq, even with substantial increases in Afghanistan, will save a lot of money in the Defense budget. Gates has already begun his own procurement reform of sorts, firing those who make stupid decisions.
Submitted by Jasper (not verified) on Thu Jan. 8, 2009 2:29 PM PST.
If there are no sacred cows, why has reducing the budget for the military not been advanced by the new establishment president?
I agree with Ga-Sen Watcher. To put it another way, the key here really is percentage of GDP. Although it would be nice to reap actual dollar savings from Pentagon cuts quickly, I'd happily settle merely for getting the military's share of GDP back on its pre-Bush downward flight path.
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