Social Security Now a National Pension Plan

“The Good Life for Less.”  That’s the title of an article in the latest issue of the AARP magazine.

Its focus is finding places to live where a couple can get by on their Social Security payments.  Bangor is one of the five featured places from across the country.

Living on Social Security and not much else has become common.  Two-thirds of retirees receive more than half their income from the federal retirement program.  About 35 percent get virtually all their income from it.

Social Security is the biggest single source of retirement income, well ahead of the combination of private sector and government pensions.

In effect, Social Security has gradually become this country’s universal pension program.  In light of the opposition to having single payer health care insurance, it may be surprising that the U.S. has a single payer retirement plan.

It didn’t start out that way.  President Franklin D. Roosevelt led the effort for Social Security, because the Depression had driven more than half the people over 65 into poverty.

In the 1930s, older people were expected to live only a couple of years after they reached 65.  So the plan would provide end-of-life support, when added to savings and pensions, rescuing older people from a poverty they could not otherwise escape.

Just like the Affordable Care Act, Social Security was attacked from by conservatives, who claimed it was big-government socialism.  So they challenged it before the U.S. Supreme Court.

The Court ruled that it was within the power of the federal government to create the program, because it was based on the government’s taxing power, which is almost absolute.

That’s exactly the same reasoning that the Court used to rule that the Affordable Care Act – Obamacare – is legal.

Perhaps someday the Affordable Care Act will become embedded in the American way of life and be considered just as essential as Social Security.  But, unlike its predecessor, the ACA is a hybrid public-private program and is far more complex.

At the outset of Social Security, nobody suggested the country was getting itself into a national retirement plan with the government as its source of finance and management.

Social Security has been financed out of the revenues from payroll taxes of current workers and their employers.  Except at the start, they have always exceeded outlays.

But that will not continue as there are more retirees and fewer contributors.  Because so many depend on Social Security, it is inconceivable that the program can be sharply reduced, meaning that at some point, general tax revenues would have to supplement the payroll tax.

Some believe that if Social Security funds were invested in the stock market, gains there would keep payments up without resorting to general funds.  They also would like to reduce the role of the federal government.

The problem with that proposal is that the stock market is not reliable enough to make it possible to count on the steady income flow needed to support fixed retirement payments.

But something needs to be done to make sure Social Security costs are manageable.

The retirement age used for full payments is already increasing, and it may have to go up even more as life expectancy grows.

It seems likely that Washington will change the method of calculating the inflation adjustment, which will mean lower annual increases and lower federal costs.

The payroll tax as a share of income has not been increasing as fast as have the incomes themselves.  The cap on the amount of employment income subject to the Social Security tax would have to be increased.

One way to do that would be simply to remove the cap.  The wealthiest people might never receive payments equal to what they had contributed, but it’s unlikely they would suffer a seriously adverse effect.

Or the payroll tax could be gradually eliminated and the income tax increased accordingly.  Lower income, employed people, who might not otherwise pay taxes, could be required to pay a minimum income tax.

And Congress should not add on new programs to be financed through the Social Security tax without ensuring they pay for themselves.  Today, both disability and Medicare operate at a loss and are eating into their reserves.

What’s clear is that the country has become dependent on Social Security.  That makes it imperative for Washington to deal with it before revenues become inadequate.

 
Social Security shows how single payer health insurance might work. But it also shows that any federal program needs constant effort to keep it financially viable.

Anti-terrorism vs. Privacy

Gen. Keith Alexander, the head of the National Security Agency, believes the threat of terrorism is so great that his agency can invade the traditional American personal right to privacy.

U.S. Rep. James Sensenbrenner, a Wisconsin Republican and one of the authors of the USA Patriot Act — used by Gen. Alexander as the basis for his agency’s actions — believes the NSA goes well beyond what Congress intended in reacting to the 9/11 attacks.

Between them, they reflect an historic battle over the role of government in protecting Americans and the rights of Americans to be protected from a powerful government.

The Patriot Act was an almost reflex reaction to the al Qaeda attacks in 2001. Congress gave the government unprecedented intelligence capacity, trying to make sure that terrorist attacks could be thwarted before they took place.

In the face of an external threat, the United States has a history of taking drastic action to show a sense of national resolve.

After Japan attacked American forces at Pearl Harbor, American citizens of Japanese origin were thrown into prison camps and their property was seized.

When the Soviet Union loomed as a dangerous rival for world power, American planners credited them with a vast military capability that required an even greater response in U.S. military spending. Other public goals were sacrificed to support that spending.

Eventually, some Japanese- Americans were freed and provided heroic military service in World War II.

And when the Soviet Union collapsed, Americans learned that we had greatly overrated its military capability.

Are we now sacrificing the rights of Americans, because we overrate the terrorist threat?

We may be, according to a recent article in Scientific American magazine. The report summarizes several studies discussing the “myths” attached to our understanding of terrorism.

First, it reported that, despite fears of terrorism’s goal being the spread of “radical Islam,” Islamic extremists are motivated not by ideology but by their belief that the U.S. has targeted Muslims, or by revenge for American support of Israel and intervention in Iraq and Afghanistan.

Terrorism is not a “vast global network.” Instead, it is decentralized and based on social networks. In other words, it’s more about family and friends than some central mastermind.

And terrorists are not clever planners. After the top leaders are gone, they have shown themselves to be “incompetent fools.”

Terrorism is a lot less deadly that might be thought. Since 9/11, there have been about 13,700 homicides a year in the United States — with 33 deaths since then caused by terrorists.

Finally, terrorism doesn’t work. Terrorists have failed to achieve their goals. Their groups last an average of eight years and their leaders generally don’t survive.

Of course, these conclusions do not relieve the government of the responsibility to deter and prevent terrorists. But they suggest that the threat might be met without broad incursions on the privacy rights of Americans.

After 9/11, almost no member of Congress wanted to appear “weak” in responding to the terrorist threat. That sentiment produced the Patriot Act.

As tough as that law has been in limiting traditional civil liberties, government agencies have interpreted it to be even tougher. And the sole control has been the secret Foreign Intelligence Surveillance Act Court.

In that court, everybody from Google to the average citizen could be put under surveillance without even knowing about the proceeding or being able to argue against invasion of their privacy.

In other words, the post 9/11 mechanism of the federal government has said that, in order to protect Americans from terrorists, it would have to reduce individual rights — the very values at the heart of the country. And that trade-off has been made without a vote by representatives of the people.

Now, Sensenbrenner and Democratic Sen. Patrick Leahy of Vermont have written a bill called the USA Freedom Act, designed to somewhat rein in the NSA.

The bill would prevent the sweeping collection of data on American citizens and would create a Special Advocate to defend the “civil liberties” of those to be placed under surveillance. It would require more public information about the activities of the FISA Court.

Interestingly, the bill has the support of groups, ranging from the National Rifle Association to the American Civil Liberties Union.

Among the first 88 U.S. House and 16 Senate members sponsoring the bill is U.S. Rep. Mike Michaud. Many members of both parties — liberals and conservatives— have signed on, rare in this era of political polarization.

 
Sponsors take the position that if counterterrorism is meant to protect American freedom, it must also respect it.

Obamacare is far from “socialism”

Opponents of the Affordable Care Act claim it is a disaster for the country, mainly because it gets government into the health insurance business.

They say it amounts to “socialism” in the United States, just as supposedly exists in Europe and other places that use government as the lone insurer.

The system used in Canada, Europe and almost all other developed countries is not for us, they say, because government as the “single payer” displaces investor-owned insurance companies.

We should not let “big government” provide health insurance. We should leave that to the private sector, just as we always have. And Americans should protect individual freedom not to have health insurance, they say.

The facts are somewhat different from the opposition claims.

It’s true that Americans have traditionally had the right not to buy health insurance. When they fall ill and use health facilities, the rest of us get to pay their costs in higher health insurance premiums.

Health care grows more costly, because tens of millions remain outside the insurance system, most of them forced to do so.

The Affordable Care Act is not a single payer system and leaves private insurers in business. In fact, it produces more insurance buyers and relies on competition among insurers to keep costs down.

And it will not directly affect most people. The majority will continue to receive coverage through employer-sponsored plans, Medicare, Medicaid, the Veterans Administration and other existing plans.

Neighboring Canada has a national health plan, and nobody there thinks it is socialism. The current Conservative government has not tried to repeal or defund it.

It is worth comparing it with the Affordable Care Act, an exercise that was recently carried out by Antonia Maioni, a faculty member at McGill University in Montreal.

To start with, in Canada, government is the single payer, while in the U.S. there are many insurers.

In Canada, every legal resident is covered, Maioni notes. In the U.S., about 20 million people are expected to end up without coverage.

The Canadian system is truly national with coverage required to be the same across the country. In the United States, because some states have refused to expand Medicaid, despite a massive federal subsidy, the health insurance system varies. Major differences also result from different insurers operating in each state.

To keep premiums low, especially for young people, the American system provides a variety of coverages. The more you spend, the better the coverage.

In Canada, everybody is treated the same and nobody pays, because the system is financed by tax dollars. That provides “equal access,” not a feature of the U. S. approach.

The American law does little cost containment, especially when it comes to what Maiono calls “the administrative burden of multiple payers, providers and plans.”

In short, despite the charges made by its critics, the Affordable Care Act is far from the single payer system of much of the rest of the world.

And, with competing insurers, it isn’t “socialism.”

The complex system created by Congress to avoid a single-payer system has contributed heavily to the current disastrous start-up and its inevitable costs.

There is quite a bit wrong with the new health care law, so Congress, if both sides were willing, could make it work better.

When asked, not a single Republican senator thought the law could be repealed. So, there’s a basis for serious talk about improvement.

One problem is uneven Medicaid coverage. Some states, including Maine, have opted out of expanding coverage, even with federal support, because of GOP opposition and worries about future state costs.

Recently, some conservatives have suggested that Medicaid should become a completely federal program. That would relieve states of a huge burden, though it risks being called “socialism.”

But wouldn’t that make the program even more costly? Of course, you cannot extend health insurance coverage to millions more people without it costing more. It has been an illusion to claim otherwise.

Though it’s difficult to predict the trade-off accurately, a comprehensive, tax-financed system would reduce insurance premiums at least in large states. In states like Maine, with few competitors, premiums remain relatively high.

Increasing Medicare and Medicaid spending is becoming a huge and burdensome part of federal outlays.

Competition would have to work, if costs are to be pushed down. That may be beginning to happen in large states, but not for prescription costs.

If government cannot control costs by being the single payer, like Canada, Europe and our own Veterans Administration, it may need something like the regulatory authority it now has over utilities.

U.S. pays for shutdown, default crisis

Suppose you are the loan officer in a bank.  Today, you have three customers coming in.

Customer A arrives. This customer has a good and stable income, pays bills on time, has made debt payments reliably and is a community leader.

Then comes Customer B.  This customer has just had a pay cut, lives from paycheck to paycheck, has barely kept current with loan payments, but reassures you about future intentions to make loan payments a high priority.

Finally, here’s Customer C.  This customer has no job, has repeatedly threatened to halt loan payments and is inclined to think the bank could get along all right without the loan being paid off. 

Sound familiar?  It should, because there are people in Washington who fit each of these descriptions. 

The bank?  That’s the lender of all the previous debt on which payments are now due – the American people, financial institutions and foreign countries.  In short, the bank is the world.

Customer A represents the United States playing its usual role as the most powerful nation in the world, a country whose dollar is the standard by which all other currencies are measured.

The dollar is the world standard, because everybody believes that the United States will use all of the resources necessary to maintain its reliability.  In other words, America has always stood behind its debt.

The Washington leaders who have traditionally supported this view were both Republicans and Democrats, people whose politics differed but not to the point of weakening the country.

Customer B represents the members of Congress who said they were willing to shut down the government and to threaten defaulting on the government debt.  Some of them suggested using gimmicks to make loan payments for a few more days, giving them a little more time to try to change Obamacare.

This year, the group included every Republican member of the U.S. House and Senate.

Customer C represents the members of Congress who voted, even at the last minute, against reopening the government and letting it make debt payments.  They attacked others in their party who refused to go along with them.

This group included 144 Republican House members – three-fifths of all GOP representatives – and 18 Republican Senators.

For a while, Republicans in Congress gave a higher priority to “defunding” Obamacare and mandating the Keystone XL pipeline than to safeguarding the dollar and keeping the government in operation.

None of this means that the GOP was wrong on the issues it raised. While they do not control either the Senate or the presidency, they virtually had the obligation to offer their alternate policy views and fight for them.

But there are limits how far people should go in seeking to change national policy.  Finally, a majority of Senate Republicans and a minority of the House GOP came to that view.

Centuries ago, Robert Burns, the Scottish national poet, wished that some power would give us the gift “to see ourselves as others see us.”

Probably, every member of Congress wants the United States to be seen as the world’s greatest power, having the economic and military strength to influence events everywhere on earth to America’s benefit. 

Yet those who shut down the government and brought the country to the brink of default on its debt appear not to recognize that their strategy undermines the world’s confidence in the United States and weakens the American economy.

Countries with which the United States does business are openly worried about the value of the “full faith and credit” of this country.  Countries with which the United States competes could quietly sit back and let this country discredit itself.

Respected economists, including some of the most conservative, warned that the government closure and risk of default would harm the economy, especially the recovery from the crippling recession.  Polls reported that people do not dislike Obamacare to the point of being willing to pay this heavy a price.

Consumer confidence in the economic outlook plunged. That translates into less consumer spending and fewer retail sales, the backbone of the economy.

The pundits are already saying that we will face much the same government crisis in a few months.  The two sides will not agree on a budget, they say, and default will again loom.

If they are right, the cost could be a greater economic impact and more harm to America’s standing in the world.

 
The revival of the traditional GOP, determined to overrule the Tea Party, is the key to preventing this outcome.  Customer B will have to start behaving like Customer A.