Democrats Introduce Plan to Fix Social Security

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“Democrats Introduce Plan To Fix Social Security, the way we fixed the cat,”

Commenter and Social Security Expert Dale Coberly assesses the latest plan coming out of Washington DC “Congress has a new plan to fix Social Security. How it would change benefits,” CNBC in the House. Dale was one of the creators of the Northwest Plan which was submitted to Congressman DeFazio who sent Dale Coberly’s Northwest Plan to the Social Security Administration – Karen P. Glenn, Deputy Chief Actuary, Office of the Chief Actuary In an email Social Security Deputy Chief Actuary confirmed this would work.

Today, Dale Coberly written explanation at Angry Bear explains why many of the points or changes proposed in the House plan may be bad ideas as depicted in the CNBC article. (edited 10/29/2021 to better establish author ownership).

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The Democrats have been so successful lately demonstrating how to turn a winning position into a losing one, they thought they’d try it out with Social Security.

Leave Social Security Alone has been a winning position for Democrats since 1936, despite their occasional efforts in the past to join the latest Republican stampede to fix Social Security by cutting benefits.Now they may have found a way to boot their advantage and lose by winning. The following is taken from an article in CNBC Life Changes ( Congress has a new plan to fix Social Security. How it would change benefits ). 

My comments follow each paragraph in indented type.

[THEM] House Democrats are reintroducing a Social Security reform bill popular with their party. This time, it features some changes aimed at attracting more support from Republicans.

[ME] note: “attracting more support from Republicans.” That should tell you something is up that won’t turn out good for Social Security or the people who depend on it. [that’s you, even if you don’t know it yet.]

The bill, known as the Social Security 2100 Act, is being brought forward by Rep. John Larson, D-Conn., chairman of the House Ways and Means subcommittee on Social Security.

Rep. Alexandria Ocasio-Cortez, D-N.Y., and House Ways and Means Committee Chairman Richard Neal, D-Mass., appeared with Larson on Tuesday to announce the reintroduction of the bill.

All good people as far as I know.  Maybe not as smart as Roosevelt, but they mean well.

Neal urged lawmakers to offset the concentration of wealth, which has become more prevalent in the U.S., by embracing this Social Security proposal and extending the expanded child tax credit.

“We have this rare moment to accomplish seismic achievements, and this is the time to do it,” he said.

Beware of seismic achievements;  this has been the Republican “Don’t miss this once in a lifetime opportunity” sales pitch for their last eight attempts to kill Social Security by saving it. or (when the wind changed) to save Social Security by killing it:

“it’s socialism,” “you’ll never get a penny back,” “It’s going  broke,” “it is broke, flat bust,” “it’s going broke (again),”  “The stock market will make everyone rich,” “Greedy old people are stealing from the young,” etc.

The new version of the bill, called Social Security 2100: A Sacred Trust, follows the Social Security Administration’s latest estimates that the trust funds that support the program will be depleted in just 13 years. At that time, in 2034, only 78% of promised benefits will be payable.

The bill proposes extending that date to 2038 to give Congress more time to come up with a long-term solution to the program’s solvency issues.

I think what this means is that Larson’s bill will not solve the program’s “solvency issues” but just push them back four years. In any case the Trust Fund was never intended to “support the program.” Social Security is “supported” by the payroll tax.  The temporarily largeTrust Fund was created to enable the boomers to pay for their own retirement, just all previous generations have done, but because of the unusual size of the boomer generation could not be done by the normal pay as you go financing. There is no mention in this article that 100% of promised benefits could be paid for by raising the payoll tax 2% each for the worker and the employer. Even though polls have shown that workers would rather raise the tax than “change”Social Security. There is no solvency issue if we just pay for what we need, just as our parents and grandparents did.

The measure would also incorporate proposals made by President Joe Biden during his presidential campaign.

“We have a person on Pennsylvania Avenue who knows and understands that Social Security is a sacred trust,” Larson said of Biden.

This new bill combines Biden’s proposals with House Ways and Means initiatives to expand and enhance Social Security benefits, he said.

Biden seems to be another good man.  But he would not be the first Democratic President who advocated doing something that would hurt Social Security and the people who depend on it.

“It’s got a lot that’s attractive, and nothing that I think should cause Democrats problems in an election year,” said Nancy Altman, president of Social Security Works, an advocacy group that promotes expanding benefits.

Unless making “the rich” and powerful mad at you would cause problems.

Like Biden’s plan, the Social Security 2100 Act would set a higher minimum benefit for low-income workers. Benefits would be set at 125% above the poverty line and tied to current wage levels.

There’s also a benefit boost for both new and existing beneficiaries amounting to about 2% of the average benefit.

Annual cost-of-living adjustments would be tied to the Consumer Price Index for the Elderly, or CPI-E. The argument is that this experimental index may better reflect the costs seniors face. Biden also included this change in his Social Security proposals.

These may all be good things to do.  But if they are to be done, the workers must pay for them. Not mentioned is that the proposal means paying benefits to people who never paid the payroll tax.  We have programs to help people who did not work, or did not  work long enough in occupations that paid into the Social Security system.

Notably, the Social Security 2100 Act proposed in 2019 had more than 200 co-sponsors, though all were Democrats. On Tuesday, lawmakers indicated that the new version of the bill has already drawn a similar level of support.

I am not sure what’s notable about this. If 200 people say a stupid thing, it’s still a stupid thing.

“To have that social safety net isn’t just good for us individually for peace of mind, it helps us feel like we are part of a society that respects our elders and values our vulnerable.” Rep. Alexandria Ocasio-Cortez Democratic Congresswoman from New York

Ocasio-Cortez spoke about how Social Security benefits helped her family when her father died unexpectedly of cancer.

“Social Security checks helped my family through,” she said. “It’s why my brother and I were able to go to college.

It’s why I felt confident while I was at college that my mom would be able to have something to eat,” she added. “To have that social safety net isn’t just good for us individually for peace of mind, it helps us feel like we are part of a society that respects our elders and values our vulnerable.”

Absolutely. But this is true of Social Security, not true of the Larson plan.

The plan also integrates a couple of elements that might help draw support from across the aisle.

The new version would repeal rules that reduce Social Security benefits for public workers and their spouses, widows or widowers who also have pension income. These are known as the Windfall Elimination Provision and Government Pension Offset.

This issue came up at a recent House hearing on Social Security and has bipartisan support.

The elimination of one proposal — a higher payroll tax rate — may also help draw more support. The Social Security 2100 Act had previously called for gradually increasing contributions to the program from workers and employers to 7.4%, up from the current rate of 6.2%, over roughly 20 years.

The Windfall elimination program was intended to prevent relatively high paid workers who had a government pension from working a few years in Social Security covered employment in order to collect the enhanced benefits designed for people with very low lifetime earnings. It does not surprise me the relatively well-off “bipartisan” people would support having an opportunity to poach on a program designed for the very poor.

And they offer “as a good thing” getting rid of the gradual payroll tax increase, the only provision having d  chance of actually solving the “insolvency problem.”  Of course people, even poor people, are going to be against a tax increase .  .  . until they understand it is the only way to pay for their future needs. Without selling Social Security to the rich to do with as they want.

However, the legislation does call for increasing Social Security taxes paid by higher-wage earners. In 2021, those taxes are capped at $142,800 in wages, and in 2022 that will rise to $147,000. This proposal reapplies taxes on wages at $400,000 and up, which is also in line with what Biden has proposed.

 This is the killer.  Roosevelt very carefully designed Social Security to be not “the dole” . . . ”so no damn politician can take it away from them.  The Larsons and Altmans think that as long as they don’t call it welfare they can make the rich pay for it. The rich will just say, “okay.” The rich will only say “okay” if they see this as the opportunity to replace Social Security with welfare that they have always wanted.

 Because they know how to get rid of welfare.

At the same time, the bill would also raise the thresholds above which income including Social Security is taxed. The plan calls for changing that to $35,000 for individuals and $50,000 for couples, up from $25,000 and $32,000, respectively.

The tax on benefits is a normal tax on retirement income.  What is not normal, is that SS income is not taxed on people whose total income is below a certain threshold.  Raising the threshold might be a good idea, but the payroll tax will then need to be increased to pay for needed benefits.  This is a tax cut for the relatively well off, paid for by a tax on the less well off.

The bill would also prevent the reduction of benefits for certain beneficiaries if the National Average Wage Index declines due to unforeseen circumstances, such as events impacting the economy.

I assume this means that in the event of a recession and a loss of payroll tax income to Social Security, benefits will not be reduced.  This is the normal function of the Trust Fund [when the baby boom is not a factor].  Should a recession be deep enough or long enough to exhaust the Trust Fund, the answer would be to raise the payroll tax enough on those still working…to tide everyone through, and then to reduce the tax when good times return. The temporary tax increase would not need to be large .  .  .  less  than about five dollars a week for a very deep and long recession.  An amount the still working would be glad to pay knowing a time might come when they could be retired or disabled facing a cut in benefits.

It would also require the SSA to mail paper statements to all workers ages 25 and up, unless they request electronic delivery.

This is a good idea. The paper  statements were cut “to save money”…an insignificant amount of money . . . but really to keep ordinary people from seeing how much their future benefits are likely to be .  .  . something  that seems to always make them less willing to see “changes” in Social Security.

Other changes in the bill include extending benefits for students up through age 25, increasing certain widows’ and widowers’ benefits, boosting beneficiaries’ benefits after 15 years, eliminating a five-month waiting period to receive disability benefits, and creating caregiver credits so that the retirement benefits of those who take time out of the workforce are not reduced.

Eliminating the waiting period for DI benefits is a good idea, but the “other changes” are just welfare for people who did not pay into Social Security. There are welfare programs to help those people.  The whole point of Social Security is that it is NOT welfare.  “We paid for it ourselves.”

It remains to be seen how much attention this bill will get amid Congress’ busy legislative agenda and whether it will be embraced by Republican lawmakers.

However, advocates such as Social Security Works are optimistic.

“We’re all hoping that after they finish, however they finish the reconciliation and the debt limit and all these other things, that they will bring up Social Security,” Altman said.

The National Committee to Preserve Social Security and Medicare was also among the groups to support the proposal.

“There is good news for everyone in this bill, which is only fitting, since Social Security touches almost every American’s life,” said Max Richtman, the organization’s president and CEO.

“It is time for the full House to pass Rep. Larson’s bill and send it on to the Senate,” he said.

And here is the tragedy.  The people who have saved Social Security in the past from “bipartisan”   efforts to destroy it, have been seduced into selling it out for a promise of higher benefits paid for by the rich, “The Rich” couldn’t have come up with a better plan if they thought of it themselves

Dale Coberly