Somewhere, mixed in with the invitations to share unclaimed bank accounts, lower your automobile insurance, and lose 60 pounds without dieting, there were letters of outrage, calling for all loyal liberals and progressives to call Sen. Charles Schumer (D-N.Y.) to say that cuts in Social Security were unacceptable.
Apparently the claim that Sen. Schumer would agree to switching the formula for cost of living adjustments in Social Security began with a report in the Jan. 25 issue of The Hill, a newspaper that covers Congress. The offending paragraph was, “The joint budget resolution could also call for Medicare reforms and using the chained CPI formula to curb the cost of Social Security benefits. These entitlement reforms combined with tax reform would give Republicans political cover to accept tax increases — or at least more cover than if tax increases were merely packaged as an offset to the sequester.” (The version now on The Hill’s web site has been updated to reflect Sen. Schumer’s strong opposition to cuts in Social Security.)
While the news reports have been dominated by people denouncing any cuts in Social Security, the very frequency of these reports implies that the topic has been discussed. The notion of any cuts in Social Security should have been blocked from the very beginning. If the Republicans think cuts in the defense budget would jeopardize the nation’s security, cuts in Social Security would sink our economy. The key is to look at the right set of numbers.
It’s important to understand the role of Social Security in both the lives of seniors and the overall economy. In May 2011, Jennifer Rubin, a right-wing columnist for the Washington Post, wrote a column which, if it didn’t call the 65-plus contingent “greedy geezers,” did state that seniors are well off. One of the statistics she offers is, “Far from being among the neediest, half the nation’s wealth is owned by people 55 and older (a third of the adult population).” Wealth is something of a variable, and a lot of that wealth may be in the form of real estate – people who have built up equity in their homes. Those who bought in long enough ago, well before the housing market crashed, may still have a great deal of equity in their homes. The Social Security Administration estimates that Social Security payments represent 39% of the income of the elderly. Under the present formulas, 10% of the elderly are living below the poverty level. While this is a smaller percentage of the population than the 15.1% of the total population and 22% of children in poverty in 2010, the elderly poor have no hope of ever escaping poverty.
Beyond that, most current Social Security recipients are members of the Greatest Generation. Many of these people worked at a time when employers provided pensions, and workers were able to save during the long bull market. Anybody who held a steady job, saved responsibly and put their money in conservative investments before 2009 is probably safe today. The people approaching retirement age are the Baby Boomers, who had to deal with different conditions. The Baby Boom lasted 19 years, and conditions eroded over time, so those reaching 66 may be better off than those who will hit retirement age a decade from now. Boomers were trying to accumulate retirement savings during a time when employers were underfunding pension accounts, and changing fixed benefit pensions to fixed contribution plans. The steady job became less so. There were more layoffs, more contract jobs that offered neither health coverage nor retirement benefits. Ms. Rubin and her colleague at the Post, Robert Samuelson, offered a snapshot of people over 65 just as the picture was about to change. According to a recent MFS survey, of respondents with eight years until retirement, only 12% had $1 million, the estimated current need for a secure retirement. The median savings level was $314,000. Other surveys sound even worse. One, from Life Insurance Marketing Research Association, reported that 49% of Americans aren’t doing any saving at all. For the next 20 years, people applying for Social Security retirement benefits will be progressively less prepared for retirement than those before them. Even those who saved responsibly are faced with such low interest rates they’ll be draining their resources.
Classic economics is based on the law of supply and demand, and a robust economy calls for the two forces to be in balance. Sellers can only thrive if there are enough buyers, and cuts in Social Security will inevitably reduce demand. Chained CPI doesn’t affect the base payments, but does cut the rate of increase, so that Social Security payments will be progressively lower just as the people least prepared for retirement are ready to retire. Call it advance planning for the recession of 2023 – cutting Social Security now is a good way to be sure the recession will actually happen.
Sam Uretsky is a writer and pharmacist living on Long Island, N.Y. Email email@example.com.
From The Progressive Populist, March 1, 2013
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