Commission Co-Chairs Rob the Poor, then Cover it Up
December 1, 2010 - 9:10pm ET
Fiscal Commission Co-Chairs Erskine Bowles and Alan Simpson released their final report today, and they have once again been caught loading the dice. The Social Security cuts that Bowles and Simpson unveiled are virtually indistinguishable from their initial proposal a few weeks ago—save for one clever new distortion. In an effort to conceal the cuts its proposal would inflict on poor workers, the Co-Chairs are now vastly inflating the effects of their proposed “hardship exemption” to the increased retirement age.
What exactly do I mean? Hang on, because this is going to get a little wonkish. In their first proposal, Co-Chairs Bowles and Simpson stipulated that their proposed increases in the retirement ages—both the Earliest Eligibility Age (EEA) of 62, and the Normal Retirement Age, which is still rising to 67—would exempt those engaged in “back-breaking” labor, who, even under the hawkish assumptions of Bowles and Simpson, will not be able to work longer than they already are. This “hardship exemption” was meant to quiet critics who have been pointing out for months that raising the retirement age would be especially harmful to workers in physically demanding professions. (Never mind for a moment that these workers are more the exception than the rule, or that older workers also have trouble finding new work when they are unemployed, or that workers in the lower half of the earnings distribution have seen scant gains in life expectancy.)
The criteria and process that would permit someone to qualify for such an exemption were left mostly undeveloped. Instead, the Co-Chairs gave the SSA ten years to develop a system that would evaluate a person’s eligibility for the hardship exemption. Because the criteria for exemption were not yet decided, its potential palliative effect on benefit cuts was rightly absent from the SSA’s estimates of how the proposal would affect earners across the economic spectrum.
The Co-Chairs' recommended hardship exemption has not become more detailed or robust since then. The language remains equally vague. But the SSA’s estimates of the new plan count the exemption as an offset of the cuts to “low” earners (those with average annual lifetime earnings of $19,388), and “very low” earners (average annual lifetime earnings of $10,771) retiring at age 65. Apparently, the Co-Chairs--or more likely, their staff--instructed Stephen Goss, the Chief Actuary of the Social Security Administration, to factor the exemption into his new calculations of the plan's effects. Goss, seeking a realistic model for evaluating who would be affected by the exemption, assumed in his estimates that all workers earning 250% of the federal elderly poverty level would qualify for the exemption. Lo and behold, “very low” earners retiring at 65 went from seeing benefit increases of 18.6% to increases of 38.5%, and “low” earners went from seeing benefit cuts of 12.4%, to increases of 5.9%.
Take a look at these two before and after graphs: “Low” earners’ benefits, before the Commission whitewashed them with the hardship exemption; and “low” earners’ benefits, after the whitewashing.
In fact, the "before" graph, which shows the massive benefit cuts lifetime earners of $19,388 would suffer under the Commission's report, ought to be called, the correct graph.
Equating earnings level with physical inability to continue working is ignorant nonsense. Cops and miners, for instance, are not the lowest earners, but they risk their lives and exert themselves every day on the job in ways that could prevent them from working past 62. Poorer workers may well be more likely to work in physically demanding professions, but there are workers that experience physical "hardship" at all ends of the economic spectrum. If qualifying for the new hardship exemption would be anywhere near as hard as qualifying for disability benefits, many poor workers would be left out--and their benefits would be cut as much as Goss's first estimates assume.
Mr. Goss is not to blame here. Absent more detailed information, he was positing an estimate of how the hardship exemption might take effect. It is instead the fault of the Fiscal Commission Co-Chairs and their staff, who thought that adding a nebulous calculation that conceals their cuts to the benefits of the working poor would be a smooth PR move.
Is there a low to which these people are unwilling to sink in order to hide the truth from the American people?
This will have been the third time that Bowles and SImpson have distorted their own benchmarks or deadlines to improve their proposal's "image." As Dean Baker has pointed out, the Commission's charter explicitly requires its members to vote on a proposal by the December 1 deadline. Today, the Co-Chairs announced that they would be delaying a vote on the final proposal until this Friday, December 3. The delay is no doubt in order to give them—and, yes, sadly, the White House—extra time to browbeat and cajole Commissioners who are on the fence about the proposal.
But today’s announcement came on the heels of an even greater sleight of hand. Bowles and Simpson have now lowered the standard of “success” for their report from a supermajority of 14 votes, to 10 or even 5. Apparently, even the lower goal of 5-10 yesses wasn't enough to get them to vote on time.
I guess if you are deficit-alarmist elites who cannot win according to the rules, you just have to make yourself some new ones.
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