The State of Social Security

The National Committee to Preserve Social Security and Medicare (NCPSSM) recently made three videos containing questions and answers about the state of Social Security. What follows are the notes I took while viewing these videos:

• The amount in the Social Security trust fund is 2.6 trillion dollars. It will grow to 3.7 trillion dollars over the next ten years. It is rock solid and has the full faith and credit of the United States government. The bonds are valid and will continue to pay full benefits.

• Those on Social Security did not receive a cost of living adjustment in 2010 and none in 2011. The formula did not allow it because it’s not based on inflation that impacts seniors but rather it is based on inflation that impacts wage earners. Those on Social Security need a different formula. One that will keep up with the costs of living, not one that ignores it. The new formula being considered by the right wingers does just the opposite. It actually says that the zero cola that seniors got in the last two years was too generous. The new formula is called the chained CPI and would mean a cut in benefits because the COLA is compounded.

• The wage cap or the amount of earned income that a worker pays into Social Security goes up a little each year. Today it is $106, 800, so the person who earns $106,800 this year pays the same as someone who earns $106,800,000. Is that fair? President Obama has proposed having those who earn over 250 thousand dollars pay more. The amount workers used to pay covered 90% of earned income but now, for millionaires and billionaires it’s only about 80%.

• All income is subject to Medicare tax. The wage base could be phased in like Medicare to lift the cap.

• Social Security has always run a surplus. It should not even be part of any discussion to lower the national debt. It should be taken off the table. It doesn’t need to be done right now but sometime in the next ten or fifteen years. It needs to be done in a thoughtful, responsible way.
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• Social Security is not an entitlement. It is entirely self funded and an earned benefit. Medicare is partially subsidized by the employer and medicaid is welfare. Some members of congress are saying they want to change the program for younger people and that it won’t affect older people. That is a lie. If younger people don’t pay, it would affect the trust fund. To say privatizing Medicare won’t affect older people is a lie as well. When people reach the Medicare age the voucher won’t be enough to cover  medical expenses.
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• People have to be in the United States legally to receive Social Security. Illegal immigrants cannot receive benefits. SSI is not Social Security. It’s just administered by Social Security. It’s paid out of the general treasury and is for a disabled child, but it doesn’t come out of the payroll tax.
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• The cola is compounded and over time a reduction in the COLA will have a negative impact on Social Security benefits.
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• The Chained CPI will probably be brought up in the “super committee”. The chained CPI is a target. If the cost of something goes up, you might change to something cheaper. The idea is that if the price of something goes up, such as gasoline, people may substitute and go to public transportation or bicycles or even walking. Absurd. It ignores health care costs and the kinds of services that seniors use.