More Falsehoods About Social Security And Medicare

By now everyone has heard the news:

WASHINGTON – The Medicare and Social Security trust funds are both on “unsustainable paths” — as they have been for years — and will be exhausted by 2024 and 2033, respectively, a trustee report released Monday said.

And by now maybe you have heard the misinformation.

Joe Scarborough said this morning that Social Security will be “bankrupt” three years earlier than projected last year and it will just keep ratcheting up until it will be no time until it is gone. “It’s going down,” he said. In fact, here was the graphic on the screen as the panel discussed the issue:

Social Security benefits to be depleted by 2033.” What tommyrot that is. Benefits, far from being depleted, will continue long after 2033, even if nothing is done.

But first, let’s look at Medicare. As the USA Today story noted:

The trustees have predicted the depletion of the Medicare Trust Fund every year since they first began issuing reports in 1970, and they ultimately extend the deadlines out a few more years.

Yes, look at this from the Congressional Research Service:

As you can see, since such reports have been created, the projections of insolvency have been fairly imminent. Consider this from Sarah Kliff at Wonkblog:

…the trust fund doesn’t really decide Medicare’s fate. Instead, it’s an accounting term. When we talk about the Medicare Trust Fund, we’re pretty much referring to where our payroll taxes to finance the insurance program get stored. If the Trust Fund runs out, that means it can no longer cover everything it’s supposed to pay for. But Congress could — and, many think, would — make up the difference by borrowing, cutting spending elsewhere and using the savings to plug the hole, or finding new sources of revenue.

“The fund is a fiscally neutral element in the goods and services of Medicare finances,” Theodore Marmor, Spencer Martin and Jonathan Oberlander wrote in one article on the topic. “Congress can change the taxes that finance Medicare if it has the will. Likewise, it can change the benefits and reimbursements of the program.”

So, you can easily see that Medicare won’t be “bankrupt” in 2024, even though there is a definite problem with its financing that has to be soon addressed (apart from just shifting the cost on to future seniors, as the Romney-Ryan budget plan does*).

Likewise, Social Security is not now bankrupt and won’t be in 2033. Why? It is simple, as John Harvey at Forbes pointed out:

It is a logical impossibility for Social Security to go bankrupt.

Here’s how the Social Security Administration explains it:

The current Social Security system works like this: when you work, you pay taxes into Social Security. The tax money is used to pay benefits to:

  • People who already have retired;
  • People who are disabled;
  • Survivors of workers who have died; and
  • Dependents of beneficiaries.

The money you pay in taxes is not held in a personal account for you to use when you get benefits. Your taxes are being used right now to pay people who now are getting benefits. Any unused money goes to the Social Security trust funds, not a personal account with your name on it.

Because wage growth has been slow, and because the economy hasn’t exactly been great, money going into the trust funds has slowed down, but Social Security is not—not—paying out more in benefits than it is bringing in. Payroll taxes, along with interest from the special issue Treasury bonds the program holds, plus taxes on Social Security benefits paid by high-income taxpayers, all add up to an increase in the Social Security surplus.

Get that? The program’s surplus is still growing.

But even though Joe Scarborough got it wrong about Social Security and bankruptcy, he did get something right. He said the program’s future finances could be fixed in about twenty minutes.

One way of doing that—without cutting benefits—would be to eliminate the Social Security tax cap, which is currently set at $110,100. Eliminating the cap would mean that those who make more than that (about 6% of wage-earners) would then have to pay Social Security taxes on all their wages. Just this simple move would guarantee payment of full benefits for at least 75 years.

So, although we will hear a lot of Republicans talking about the demise of the two most important social stabilizers we have, using trust fund projections as tools to severely weaken, if not destroy, our safety net, the truth is that the future of both programs can be fixed without dramatically altering their nature, if there is the political will to do so.

And it is up to voters to impregnate the Republican Party with that will.

_________________________________

* Sadly, Willie Geist, a fixture on “liberal” MSNBC from 4:30am until 8:00am, defended the GOP budget plan and Paul Ryan, saying,

He doesn’t do this because he likes throwing old people out on the street; he’s trying to make it solvent. He’s trying to save it in the long term…he’s trying to do something big…

Willie, of course, will never have to worry about surviving his old age on reduced Social Security benefits or worry about how he is supposed to come up with the thousands upon thousands of dollars to get health care when he is too old for television.

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17 Comments

  1. Jane Reaction

     /  April 24, 2012

    Good job on this subject. The fix is, as you said, very simple- eliminate the cap. And on this topic, how about the COLA freeze? Who thinks there is no inflation?

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    • A bill was submitted that would change the current CPI-W (used to mete out SS increases) to a proposed CPI-S (a specific index for seniors), which would better reflect “the real-world conditions senior citizens endure each and every day,” according to a sponsor, Lou Barletta (D-PA). The bill only has twelve co-sponsors and is languishing, where else, in committee.

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  2. ansonburlingame

     /  April 24, 2012

    To all,

    More obfuscation from the left. The balance sheet of SS and Medicare must ultimately follow the balance sheet of the federal government.

    Sure it is financially “simple” to fund SS and Medicare out of the general fund when the trust funds run out of money. That is a political decision to be made by Congress and the President (with veto power). But taken as a whole in the total government financial structure, the general fund heads closer to bankruptcy each year with $ Trillion plus deficits as far as the eye can see.

    Both programs CAN be made sustainable, meaning money in each year for various forms of taxation equals money out, year by year. Removing the cap, increasing the retirement age and means testing both programs might well do the trick and it could be done in “20 minutes”, given the political will.

    Today the federal government takes in some $2.4 Trillion in revenues and spends on the order of $3.8 Trillion. You can shift those revenunes around to enhance or cut back indiviudal line items in the buget, but once that budget goes over the revenues coming in, each year we dig ourselves a bigger and deeper hole.

    Given progressive views THAT is one job that is shovel ready, each and every year, deficit spending and deeper into debt until……

    anson

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  3. To put it in a nutshell, and to borrow from James Carville, it’s the assumptions, stupid!

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  4. ansonburlingame

     /  April 24, 2012

    No Herb, it is the hard cold facts of money in and money out.

    If I make the correct “assumptions” I could fly to the moon on a bicycle! But I would NEVER get to the moon, other than on paper!

    Anson

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  5. Scott

     /  April 26, 2012

    this issue is completely laughable. Anson, if we are incurring deficits every year, as far as we can see, and the country is also about $16 trillion in debt, then for all practical purposes, we’re broke…insolvent…which essentially means all gov’t programs are ‘broke’…

    So, pray tell, what’s the worry about a program said to be in trouble some 25 years down the line??

    this is a ruse.. it’s just more propaganda, hogwash, from the radical right to bust down the middle class of America, turn us into a third world status country.. to brainwash people into thinking with a gold standard mentality, while the fatcats operate on a fiat system to fatten their pockets further. what a joke… a disgusting joke that has made me seriously consider moving to a new country.

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    • Scott,

      I hope you stay and fight, although I share your frustration. Sunday’s New York Times had another depressing story about Apple and other companies doing everything they can to not pay taxes that support things like community colleges. Apple has shrewdly (and greedily) created subsidiaries out of state and offshore to avoid taxes and rob California and the federal government of much-needed tax revenue.

      And the sad thing is that one of our political parties (with occasional help from the other one) essentially approves of such behavior and is hell-bent on the revenue stream shrinking so much that government really can be drowned in Grove Norquist’s bathtub.

      Duane

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  6. Jane Reaction

     /  April 27, 2012

    You are correct Scott.
    If you can find another country, please let Jane know.

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  7. Scott

     /  May 3, 2012

    Duane, how do I fight? can I matter? I really don’t know…does even larger scale concerted efforts such as OWS matter? I really have doubts now. I don’t know that we’ve not reached a point where more revolutionary actions would be necessary to truly make fundamental change.. preferably of the non-violent type..

    Then again, we’re talking about a very gun-happy culture…and the right makes sure they let us know that we’d better watch our step by trotting out the 2nd amendment.. and we’ve all seen the reaction by ‘security’ forces throughout the country in response to those savage beast protestors. Now I hear the RNC convention goers will be allowed to carry their guns with them to protect against the savages in Tampa this year. That’ll be interesting.

    I thought that at least I could engage people through things like Facebook and try to get people to see things.. but the grip, the brainwash effect of money is so strong…so pervasive and deep. Even very bright, educated people are in its grips, and often moreso.
    I just wonder if there’s a culture out there where it’s not like that. I wonder how life would be?

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    • Oh-my-God, Scott! You sound just like me at times!

      I wonder about all of the things you expressed here and sometimes I get a little–well, sometimes a lot–down about it.

      I have told my wife often that I wish I could live in the Northeast, where at least every person I run into would not be a freakin’ teapartier. We’ve got a damn Tea Party Express (or something like that) rally today here in Joplin with a GOP candidate for Senate, Sarah Steelman, proudly announcing her attendance. It makes one sick.

      In any case, the only comfort I can give is this: Demographics is destiny for the Republican Party. Just look at Arizona this year. While I don’t think Obama can win that state, things are looking up for Democrats there because of demographics.

      Look, the GOP is not going to go away, but it will have to change in the future to survive as a national party. Right now it does an unbelievable job of selling its regional philosophy to the nation because it is able to capitalize on the cultural and religious angst among white folks and energize them to vote (often against their own economic interests).

      Hey, you think you get frustrated, I was president of my local union branch and I would bet that close to 60% of my members voted for the most conservative Republicans on the ballot–even Republicans that would, if they had the chance, kill their public-employee union! One member told one of my officers that he didn’t care if the GOP took his job, as long as we stop killing babies! When a political party can do that good a job of selling you have to marvel at it, even if it is wrong and pisses one off.

      And let’s face it, there is way too much apathy on our side. If folks who sympathize with the Democratic Party would vote in percentages comparable to those on the other side, elections wouldn’t even be close. But soon even the changing numbers will overcome the apathy.

      That’s the best I can do off the top of my head, my bro. But I know exactly–and I mean, exactly–how you feel.

      Duane

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  8. ansonburlingame

     /  May 3, 2012

    Scott,

    I am a conservative, but not a gun totting one. But I can tell you that there are those on the right that feel exactly the same way you do, except they seek a way to counter those on the left.

    There are a few on the left, like the OWS left wing nuts that just evidently tried to blow up a bridge in Cleveland. I HOPE you do not believe that is justified. There are others on the right with equally despicable ideas. I would fight them as hard as I would fight those jerks in Cleveland, assuming the FBI allegations are true.

    Only the nuts on both side believe that physical force is the answer. That is called a revolution or a civil war. Are we coming closer to that point. Maybe, but I believe we are still very far from a resort to force by most Americans to get “their way”. Any thinking American knows that in such an event “the way” is one towards far worse than what we have now.

    America is first and foremost a land of ideas, ideas never before tried in human history to govern a country. It has worked for 235 years with only one tumutuous period of Civil War. And even then we had peaceful transitions to power, one party to another in our federal government.

    The way to achieve your goals, your personal goals, begins with hard work and dedication starting at an early age and moving forward, primarily in you education. If you are an adult your education should not stop. And education is understanding and carefully considering BOTH sides of an equation.

    If you work an algebra problem only understanding what is on the left side, you will never solve such a problem. You have to clearly see both sides of the problem. When you do so, even in complex problems, if you follow the rules of math, a solution is found.

    How does that apply to your current and obvious political frustration, the same frustration felt by someone of your age and level of knowledge by others that oppose you, politically? Easy.

    Get to know, thoroughly the “other side” in all it strengths and weaknesses. BOTH sides have strengths and both have weaknesses. Great LEARN THEM, thoroughly before you go into your “attack mode”.

    You obviously see Duane as a leader, a man with ideas that you strongly support. Great. Read his blog every day. BUT don’t close your mind to dissent to his blog as well. Carefully consider each view when presented.

    THEN, after careful consideration, take your best shot at the comments herein with which you disagree. Try not to resort to name calling and ridicule. Use the power of your logic to support your ideas and see if they withstand rebutall.

    Go find someone your age and with a similar background that thinks “right” rather than “left”. Go have coffee with him, get to know him and his ideas. LISTEN, carefully. Then test your ideas on him, without any hint of a fight or argument, at least initially.

    Anerica today is split about 50- 50, like it or not. And all the folks not on your side are not like those depicted with glee it seems by Duane. Just like all the folks whom I oppose do not write and think with Duane’s polemics.

    Read Wheeler’s comment herein from time to time or go to HIS own blog. It is different from what you read herein but supportive by and large of the same issues with which you agree.

    I agree that we are in the process of tearing apart the politcal and social fabric of America right now and have been doing so for at least the last ten years, maybe more. This fight did not just start with Obama’s election. At least go back to Reagan to see a good start in the direction currently headed, maybe further back to FDR.

    I am a strong conservative, not a radical one, not even supportive of the GOP in all cases. But regardless of who wins in Nov 2012 I will congratulate the winner and hope for the best for AMERICA, not a particular party.

    But if that winner takes off in a political direction with which I disagree, then I will continue to voice dissent. If he does things with which I agree I will voice support as well.

    But using anything other than my voice or written words, no way, not force, not extraodinary political anger, not a call to “something” beyond what I already do, non-violently. THAT is wrong for either side, dead wrong.

    Stop looking for “other ways” is my advice. Just join the “gathering place(s)” like right here and see if you can convince someone like ME when I disagree with Duane.

    I will give you a hint. Calling me a liar, a Nazi, a racist, or whatever will NOT do you any good. It is the power of IDEAS that need to prevail, not name calling.

    Anson

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