DEBT CEILING AND SOCIAL SECURITY
Treasury Secretary Tim Geithner warned Congress that unless it raises
the debt ceiling, the U.S. will default on its debt. That, he said,
would have "catastrophic economic consequences." It is plainly not true.
Stan Collender, a known budget expert in Washington, even wrote a
column entitled "Don't Believe the Scary Words You Hear About the Debt
Ceiling."
If the ceiling weren't raised, the government still takes in by far more
money than it must spend on interest payments on the debt. It can pay
interest on debt and limit some other payments so there will be no
default. Our Congress obviously has no intelligence and integrity to
make spending cuts. That's why, in all likelihood, Congress will raise
the ceiling. Meanwhile these politicians scare seniors by claiming that
if the ceiling weren't raised, the government will immediately stop
payments to Social Security. Obviously, the debt ceiling has nothing to
do with Social Security. At present Social Security takes in more than
it spends and it currently generates surplus money. Yet, President
Obama's debt commission has identified Social Security as the
significant cause of federal debt and called for Social Security benefit
cuts. And President Obama let the scary propaganda capture public
emotions.
WRONG POLICY
In 2008, Barack Obama promised to reduce the debt, balance the budget
and strengthen Social Security. The electorate was impressed and Barack
Obama was elected. Campaign rhetoric notwithstanding, Obama's fiscal
policy remains similar to the Bush policy, mimicking symbiosis with
fraudulent Wall Street, which infested the entire planet with U.S.
subprime mortgages, created huge financial liability, and clearly does
not understand the consequences of its actions. But Wall Street has been
deemed by our president a fiscal redeemer and President Obama has kept
huge financial institutions afloat and profitable on a stream of
taxpayer money. Wall Street has now identified Social Security as the
principal source of our debt. Paying the full Social Security benefits
is bad strategy because this "entitlement tsunami," as Ben Bernanke put
it, has been undermining our economic system. It follows that if
government collects Social Security tax (12.4 percent) but pays no
benefits, it would bring stability to our economic and political
system.
In 1802, Thomas Jefferson said: "I believe that banking institutions are
more dangerous to our liberties than standing armies. If the American
people ever allow private banks to control the issue of their currency,
first by inflation, then by deflation, the banks and corporations that
will grow up around the banks will deprive the people of all property --
until their children wake-up homeless on the continent their fathers
conquered." Clearly Barack Obama is not Thomas Jefferson.
LONG-TERM SOCIAL SECURITY FUNDING PROBLEM
The ratio of the dependent to the working has been steadily rising.
Americans are living longer and the extra funding required to take care
of the surge in beneficiaries is sufficiently large to raise questions
about long-term solvency of the system. The trusties of the Social
Security system argue that we need higher taxes and lower benefits.
Others claim, however, that the projected shortfall is not real.
The Center for Economic and Policy Research says that "Social Security
is more financially sound today than it has been throughout most of its
history." They point out that Bernanke's frequent statements about
insolvency of the program have no credibility. Paul Krugman, ridiculing
what he called "the hype about a Social Security crisis," wrote that
"there is a long-run financing problem, but of modest size. Extending
the life of the trust fund into the 22nd century, with no change in
benefits, would require additional revenues equal to only 0.54 percent
of G.D.P. That's less than three percent of federal spending - less than
we're currently spending in Iraq. And it's only about one-quarter of
the revenue lost each year because of President Bush's tax cuts." James
Roosevelt, former associate commissioner for the Social Security
Administration, stated that the "crisis" is more a myth than a fact. And
U.S. Senator Bernie Sanders vehemently denied any funding problem and
stated that the word "reform" only masks the attempt to dismantle this
system for ideological reasons.
The fact is that in a long term the system might not be self-financing.
In the future it may require special subsidy, albeit a modest one.
Nevertheless, sustaining Social Security requires reform, i.e., putting
the Social Security funds (still in surplus) off budget for accounting
purposes, and also having the remainder of the federal budget balanced.
Unfortunately, congressional leaders and President Obama would not cut
federal spending and balance the budget. Instead they prefer Social
Security benefit cuts. They call it Social Security "reform." Such
"reform" will, of course, destroy the Social Security system.
SERIOUS EROSION OF BENEFITS
In the past, we had numerous Social Security benefit cuts branded as
"reforms": increasing payroll tax, moving the date of receiving benefits
into the future, postponement of cost-of-living increases and taxing
the benefits. The erosion of benefits for poor elderly is especially
heartbreaking. It happened under the fully funded program which gives
the beneficiaries of means (like the oracle of Omaha - Warren Buffett)
as much as to the needy. The program has given birth to huge bureaucracy
and yet it can hardly help people who depend on it. As of 2008, Social
Security is paying an average of $12,948 a year to individual retired
workers receiving old age benefits. The poverty level for an individual
is $10,400.
Moreover, benefits should automatically rise with increases in the
Consumer Price Index. For unexplained reason, government started to
automatically exclude food and energy costs from inflation knowing that,
in fact, the energy and food prices keep going up the most. For
example, the gasoline index has risen 9.5 percent with the food index up
1.4 percent during the past 12 months. The retirees do not purchase a
wide range of products and buy regularly such things as food and
gasoline. The index for all other items, less food and energy, has risen
only 0.6 percent, and Social Security benefits were not adjusted for
inflation.
The Social Security system has come to be so much campaigned against
that benefit cuts are hardly questioned any longer. In essence, it seems
that society was fooled into allowing the set of measures that is
socially unjust.
MORAL RESPONSIBILITY
President Obama and Congress have a moral obligation to make the
necessary reforms soon, to avoid later major disruptions in people's
lives. The nation is slowly retiring and the time cannot be worse to do
just that especially for the elderly poor. Balancing the budget and not
raising the debt ceiling is the only measure leading to fiscal solvency
of Social Security. Raising the debt ceiling will deplete our shrinking
resources. It will bankrupt the Social Security program and increase our
overall economic and political instability.
Matthew Jarosinski lives in Waitsfield.
