Making Sense

The Challenge

From the moment that President Franklin D. Roosevelt signed the Social Security Act on August 14, 1935, conservatives have attacked and tried to dismantle the program. Alf Landon, the 1936 Republican presidential candidate, based his entire campaign on attacking Social Security and vowed to "repeal" it.

Today Social Security enjoys overwhelming popular support due to its success in alleviating poverty and providing income security to millions of Americans. Nonetheless, conservatives today are still bent on dismantling Social Security, claiming that the program is adding to the federal deficit and is essentially bankrupt. Neither claim is true, but that has not stopped conservative politicians from proposing such “solutions” as privatization—trading the stability of Social Security benefits for the roller-coaster of Wall Street. Others call for raising the retirement age, a way to mask significant cuts in benefits. Meanwhile, a White House commission on deficit reduction has also targeted Social Security for “reform,” even though Social Security shouldn’t even be on the commission’s agenda.

Social Security is not an “entitlement” that needs to be “cut”; it is a vital lifeline for millions that needs to be strengthened.

The Argument

Social Security is the federal government’s most successful and most appreciated anti-poverty program. It offers a secure retirement for most Americans as well as disability insurance to families in the event of the death or disability of a breadwinner. Its benefits, though modest, lift millions of Americans out of poverty. And, its administrative costs are less than one penny of every dollar spent.

Fears stoked by conservatives about a long-range funding gap are overblown. Currently, the Social Security trust fund has a $2.6 trillion accumulated surplus, which will grow to $4.2 trillion by 2025. Social Security could finance itself just fine – if the economy grows, people get back to work, and wages rise with rising productivity.

But if the economy continues to falter, the system could face a financing gap far in the future – more than a quarter of a century from now – and the gap would be very modest, the equivalent of the costs of maintaining the Bush tax cuts for the top 2% of Americans. We don’t have to raise the retirement age or otherwise cut the benefits of future retirees to close that gap.

Social Security is a promise to all Americans that has withstood the test of time and represents the best of American values – rewarding hard work, honoring our parents and caring for our neighbors. Its benefits should be increased, not cut.

The Obstacles

By law Social Security cannot borrow any money. By law Social Security cannot contribute to the deficit. But conservatives still target Social Security for cuts while ignoring the real causes of the federal deficit, such as the 2001 and 2003 Bush tax cuts for the wealthy.

Conservatives are using a disinformation campaign to justify turning Social Security into a bonanza for Wall Street. Several high-profile conservative politicians have embraced privatization, which would gamble America’s retirement savings on the stock market. It’s essentially the same plan that almost all of the Republicans in the U.S. Senate voted for in 2005, even if it is couched in different rhetoric because polls show the idea to be highly unpopular.

Social Security is also potentially threatened by the outsourcing of policy making to a White House National Commission on Fiscal Responsibility and Reform. This closed-door commission is loaded with conservatives, and public statements made by many of its members show an unjustifiable obsession with gutting Social Security. Its deliberations are designed to produce a document that, if 14 of its 18 members agree, would be sent to Congress for an up-or-down vote with no amendments during Congress’ post-election lame-duck session. This sets up the potential, as The Nation's William Grieder puts it, to "offer Social Security as a sacrificial lamb to entice conservative deficit hawks into a grand bipartisan compromise" on deficits and taxes.

Progressive Solution

With many Americans having lost savings and investments in the financial collapse and more than half relying primarily on Social Security for their retirement, the last thing we should do is cut Social Security benefits.  With over 20 million people looking for full-time work, and many older workers displaced, raising the retirement age makes no sense.  Social Security should be strengthened, not cut.

If the economy remains stagnant and unemployment continues to be high, any projected shortfall in the Social Security trust fund can be covered almost entirely by requiring high-income workers to pay the same percentage of Social Security taxes as the rest of us (by lifting the cap on wages subject to the Social Security payroll tax, now $106,800). There's no rush to impose a Draconian solution.

Fast Facts

Social Security did not cause the federal deficit.

• Social Security has not contributed one dime to the federal deficit. In fact, Social Security has a $2.6 trillion surplus today that is projected to increase to $4.2 trillion in 2025.
• The primary causes of the nation’s recent large deficits have been President Bush’s tax cuts in 2001 and 2003, the economic downturn and the costs of the Iraq and Afghanistan wars.
• The government’s long‐term deficit challenge comes almost entirely from health-care costs. Medicare and Medicaid costs are projected to grow slower than private health-care costs, but still rise from about 5.3% to 17.2% of gross domestic product from 2009 to 2081, according to the Congressional Budget Office. Social Security costs are projected by actuaries to grow only from about 4.8% to 6.1% by 2035, and then decline to 5.9% of GDP in 2050 and remain there after that.

Social Security is not in crisis.

• Claims that Social Security cannot pay its bills in 2010 are false. Social Security outlays will exceed tax revenues for the next two years, an unremarkable event that has occurred 15 times since 1956. Social Security will still run a $76.7 billion surplus in 2010 due to its investment income.
• Social Security can pay all its bills in full through 2037. Even if Congress takes no action to close the long‐range funding gap, Social Security will still be able to pay at least 75% of promised benefits after 2037.

Public Pulse

Broad majorities oppose cutting Social Security benefits in order to address the deficit:

• 81% oppose; 71% strongly oppose (Social Security Works poll by Lake Research)
• 85% oppose; 72% strongly oppose (AARP poll by GfK Roper)
• 68% oppose; 58% strongly oppose (CAF poll by Democracy Corps)

Raising the retirement age is rejected by a two-to-one margin:

• 64% oppose raising the retirement age from 67 to 69 years; 50% strongly oppose. (Social Security Works poll by Lake Research)
• 66% oppose raising the retirement age to 70; 52% strongly oppose. (CAF poll by Democracy Corps)

Privatization is opposed by overwhelming majorities:

• 79% percent agree Social Security should provide guaranteed benefits; only 19% favor making Social Security more like an investment account (Social Security Works poll by Lake Research)
• 68% oppose; 58% strongly oppose (CAF poll by Democracy Corps)

There is broad support for increasing revenue to secure Social Security's long-term future:

• Taxing the Rich:
  • 58% of Americans support taxing estates worth more $3.5 million as solvency or debt measure. (Social Security Works poll by Lake Research)
  • 59% of American support financial tax on Wall Street speculation as solvency or deficit measure. (Social Security Works poll by Lake Research)
• Raising the Payroll Tax Cap:
  • 63% of Americans favor lifting Social Security payroll tax cap on incomes higher than $106,800. (CAF poll by Democracy Corps)
  • 65% of Americans favor gradually lifting Social Security payroll tax cap on incomes higher than $106,800 as a solvency measure. (Social Security Works poll by Lake Research)
• Bush Tax Cuts
  
  • 54% of Americans supports letting Bush tax cuts expire for those making above $250,000. (CAF poll by Democracy Corps)

Resources

• CAF's Hands Off Social Security whip count
• Strengthen Social Security Campaign
• MoveOn.org Top 5 Social Security Myths
• PCCC: Stuff Alan Simpson Says

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The Argument

Conservative health care “solutions” don’t solve anything. The Bush Administration’s efforts to privatize parts of Medicare have made the system sicker. Only progressive reforms will ensure quality, affordable health care for all.

To protect health care coverage for all Americans, we must protect Medicare. Because it accounts for 17 percent of America’s health care expenditures, changes to Medicare have widespread impact. [Congressional Budget Office] It’s time to strengthen the program, not privatize, outsource, or cut it.

To reduce the increase in health care costs, we need basic reform. Cut the money that insurance companies waste on avoiding insuring those who get sick. Focus on strategies that insurance companies ignore, such as preventive care, promoting exercise and healthy eating habits, and computerized records. Building a healthier America will reduce expenditures on treating illness.

Progressive Solution

Guarantee quality affordable health care for all. Health coverage must be affordable, with premiums and out-of-pocket costs based on a family’s ability to pay. Progressive health care emphasizes consumer choice, affordability, and quality. Individuals could keep the coverage they have now, or could choose a public plan, or one of an array of private plans. Employers would be expected to cover their employees or pay into a fund for the public plan.

Join the fight. The Institute for America’s Future is a member of Health Care for America Now, the nationwide campaign for health care for all. IAF’s “op-ad” invites everyone to join the campaign. Help challenge the misguided power of the insurance and pharmaceutical industries. Help build a people’s movement to shape a health care system that works for all of us.

Fast Facts

Medicare proves the success of progressive health care policy. Before Medicare, approximately half of America’s seniors lacked health insurance; today, virtually everyone over age 65 is covered by Medicare. [Kaiser Family Foundation] Because Medicare is a health-care-for-all plan for the elderly, it allows the government to pool risk and lower costs. As a result, Medicare beneficiaries report a high level of satisfaction with the program. [Johns Hopkins Medicine]

Conservatives are wrong about the challenges facing Medicare. Conservatives argue that rising enrollment in Medicare is driving up costs. However, the Congressional Budget Office has reported that “the aging of the population…accounts for only a modest fraction of the growth” in Medicare costs. The main factor is the growth of health care costs—the extent to which the increase in health care costs has exceeded the growth of the economy. [CBO] In fact, health expenditures as a percent of GDP have more than doubled since 1970, growing from 7.0 percent to 14.8 percent in 2002. [CBO] So the solution is not to cut benefits or recipients but to hold down health care costs.

Conservative attempts to privatize Medicare have been disastrous. President Bush’s Medicare prescription drug plan forced seniors to deal with hundreds of private insurers and prohibited the government from negotiating lower drug prices. The plan’s “doughnut hole” saddled 3.4 million Medicare beneficiaries with high drug costs. [Kaiser Family Foundation] Its prohibition on drug-price negotiation costs the government an estimated $90 billion annually. [Center for Economic and Policy Research] In addition, costs in the Bush Administration’s privatized “Medicare Advantage” plans are rising twice as fast as costs in traditional Medicare, according to the Government Accountability Office, the Congressional Budget Office, and the Medicare Payment Advisory Commission. [Congressional Quarterly] Essentially, we are subsidizing insurance companies to help them compete against Medicare. Health care privatization simply doesn’t work.

Conservatives promise more attacks on Medicare. John McCain’s health care plan calls for almost $900 billion is cuts to Medicare over 10 years, an amount that roughly equals the program’s entire budget for nursing home care. [Center for American Progress] McCain’s cuts would require reductions in benefits, an increase in the Medicare eligibility age, or both, and would lead to higher costs for private insurance as well.

Resources

EPI Policy Center's The Bush Legacy: Rising Medical Costs

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The Challenge

Americans accept the need for taxation, but they don’t like taxes. And they never have—remember the Boston Tea Party? That’s why Americans are susceptible to conservative assaults on the federal estate tax. Progressives need to understand the public mood and change the conversation. Supporting a continuation of the 90-year-old federal estate tax does not mean we favor higher taxes, it means we support tax fairness.

The Argument

Repealing the estate tax is unfair to middle-income taxpayers. Eliminating the estate tax gives a tremendous tax break to the heirs of the very wealthiest Americans. None of us should be naïve enough to think that another tax won’t be passed to replace the missing revenue. Nor should we doubt that the weight of that new tax will fall, as usual, on the middle class.

Progressive Solution

A new estate tax law will have to be passed in 2009. It should be written to ensure tax fairness—not to extend unfair tax cuts for the rich. Barack Obama proposes freezing the estate tax at 2009 levels: a 45 percent tax rate on estates valued at more than $3.5 million.

Fast Facts

Conservatives enacted a warped estate tax law in 2001. The federal estate tax—which has been in effect since 1916—applies only to the estates of extremely wealthy people. In 2001, the Bush Administration and some of the richest families in America pushed to enact a law that has lowered the tax and will eliminate it entirely in 2010. However, to get around Senate rules, the entire law sunsets in 2011 when the tax will theoretically return to 2001 levels. [Public Citizen] As a result, Congress will have to pass a new estate tax law, most likely next year.

The federal estate tax doesn’t affect the middle class—it applies only to the very wealthiest taxpayers. In 2009, any estate worth less than $3.5 million ($7 million per couple) will be passed on to heirs and heiresses estate-tax free. [Center on Budget and Policy Priorities] In fact, only one of every 300 estates is subject to the tax. [Center for Economic and Policy Research]

The idea that the estate tax hurts farmers and small businesses is a myth. The Congressional Budget Office found that the estate tax threatens almost no farmers or small businesspeople. [CBO] In fact, the American Farm Bureau Federation has never cited a single example of a farm having to be sold to pay estate taxes. [New York Times]

We can’t afford this enormous tax break for the rich. The total cost of permanently repealing the estate tax would average about $110 billion per year (including increased interest payments on the national debt). [Center on Budget and Policy Priorities] That’s more than twice as much as we pay for everyone’s Social Security benefits. [Social Security Administration]

America’s wealthiest families lobbied hard to abolish the estate tax. The campaign to repeal the federal estate tax was financed by 18 of the richest families in America—including 23 billionaires—who spent nearly $500 million to enact this special interest legislation. That’s because these families, which include the heirs of fortunes from Wal-Mart, Campbell’s soup, and Mars candy, stand to reap over $70 billion from the estate tax’s repeal. [Public Citizen]

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