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article imageOp-Ed: Obama will agree to sell out seniors in changing Social Security

By Ken Hanly     Mar 8, 2013 in Politics
Washington - Obama will agree to a change in the Cost of Living Adjustments(COLA) for Social Security benefits that would slash $129 billion from payments over the next decade.
These changes would impact seniors who already often live on stretched budgets often hurt by increased prescription costs, utilities, and other costs. As reported earlier,in Digital Journal, the Obama administration is also considering cuts to Medicare as well but this article will consider just the issue of Social Security.
As Dean Baker points out in a recent article, the Social Security program is not part of the budget or part of the problem. Factors that increased the deficit were the collapse of the economy with huge reductions in government revenues, and then government spending and cuts in taxes, to help the economy recover. Social Security had nothing to do with the deficit.
Social Security is funded separately and pays for itself. However, the taxes paid into Social Security are not deposited into Social Security Trust funds: As a Congressional Research Service (CRS) report explained in 2000, “Contrary to popular belief, Social Security taxes are not deposited into the Social Security trust funds ... Along with many other forms of revenues, these Social Security taxes become part of the government’s operating cash pool, or what is more commonly referred to as the U.S. treasury. In effect, once these taxes are received, they become indistinguishable from other monies the government takes in.”
But the Social Security revenues are “accounted for separately through the issuance of federal securities to the Social Security trust funds … but the trust funds themselves do not receive or hold money. They are simply accounts.”
The bonds issued to the trust funds do earn interest that helps pay for benefits. Critics can talk about a shortfall in financing Social Security only because it is a separate fund. Any shortfall is decades away as yet. Yet critics worry about this and also claim that cuts should be made to help reduce the deficit even though the program has absolutely nothing to do with the deficit.
The bonds in the Social Security trust fund are a type of government IOU. What Obama with the cooperation of Republicans wants to do is collect the taxes that are to fund Social Security use that money and then pay back less than they collect, otherwise there seems to be no way in which giving out less benefits could save the government any money as far as I can see.
According to Baker, the change in the way the cost of living adjustment would be made would result in an approximately 3% cut to benefits for the typical retiree over his or her lifetime. Those who are oldest and poorest would be most impacted. The AARP has a site where one can calculate the impact of the change on your Social Security payments depending upon your situation.
At present, two-thirds of Americans over 65 depend for half of their income on an average annual Social Security benefit of slightly more than $15,000 a year. This benefit is paid for by a 6.2% payroll tax that is matched by employer contributions. Yet any earned income over $113,700 a year is exempt from this tax. There are 5.2% of working Americans who earn over this cap. Simply eliminating this cap would solve any financial crisis facing Social Security in the future. Polls show support for such a measure: When asked by the National Academy of Social Insurance whether Social Security taxes for better-off Americans should be increased, 71 percent of Republicans and 97 percent of Democrats agreed. In a 2012 Gallup Poll, 62 percent of respondents thought upper-income Americans paid too little in taxes.
The Congressional Budget Office estimates that the amount of new revenue required to balance Social Security funds over the next 75 years would amount to 0.6% of GDP. If the cap were lifted on contributions this would be equivalent to the amount needed for the next 75 years.The whole idea that there is some huge problem with financing Social Security is wrong and simply an excuse to cut entitlements by different methods such as increasing the age of eligibility to collect, means testing, or the Obama sleight of hand, the chained CPI.
The chained CPI has been in the works for several years as the appended video shows.
Some economists say that the present index based on increases over time of the price of a basket of goods actually overestimates the effect of inflation by not taking into account that as prices of an item in the basket rise consumers buy other items at lower prices. Other economists claim that the present index is not adequate because it does not include in the basket items that older people buy as they age and they point out as well that with some goods you cannot make substitutions. This is illustrated with some humour on the appended video. A switch to the chained CPI will also reduce veterans' benefits as well.
What is happening in the US is a bipartisan attack on entitlements. No wonder the stock markets are going up.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
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