Social Security trust fund will be empty in less than 20 years

Medicare’s hospital trust fund will run out of money in 2029

The trustees include representatives of the Treasury Department, Health and Human Services, Labor and Social Security. They noted that the growth in national health spending in the U.S. has slowed in recent years. But they said it was unclear how much of that reflected the temporary effects of the economic downturn, as opposed to systemic changes in how health care is being used and paid for that could result in savings in years to come. The slowdown in growth helped keep the Medicare program solvent for an additional year longer than the last projection and helped avoid activating the Independent Payment Advisory Board, a 15-member board that is tasked with proposing Medicare cuts if spending grows faster than a target rate. "The trajectory is still alarming. That is why the trustees issue the warning that we do -- the same warning that has been issued for years now -- that Congress must act to ensure the long-term fiscal viability, sustainability and survival of Medicare and Social Security," said Health and Human Services secretary Tom Price. He said that the report is based on assumptions that reflect current law and that it does not factor in the possible repeal of the Affordable Care Act. "We haven't calculated that yet," Treasury Secretary Steven Mnuchin added. "But I hope that's in next year's report." The trustees said that both Medicare and Social Security face long-term challenges. They exhorted lawmakers to act soon to implement new policies to shore up the programs, while there is still time for the public -- particularly vulnerable populations -- to prepare. The disability insurance trust fund, part of the Social Security program, was projected to last until 2028. That's five years longer than last year's projection, due to fewer-than-expected people joining the program. Applications for disability benefits have been declining since 2010. Mnuchin stressed that the key to assuring the solvency of the trusts  --and the first priority for President Trump -- was growing the economy.   Labor Secretary Alexander Acosta pointed out that in 1960 there were five workers for every Social Security recipient. By 2035, there will be only two workers for every beneficiary. "By helping more Americans enter the workforce, and then also continue to work as long as they choose, we can increase the amount of growth and possibly impact the long-term fiscal health of the trust funds," Acosta said. The report comes as Senate Republicans have put forth a health care bill that has been criticized for its cuts to a different entitlement program, Medicaid, the health care plan for the poor. Some health policy experts have argued those cuts could increase Medicare spending, if older adults lose health care coverage and forego care until they are 65.

Social Security’s financial forecast gets darker; Medicare’s outlook unchanged

Surging energy prices and a slower-than-expected economic recovery have worsened the financial outlook for Social Security compared with last year, while the picture for Medicare remains grim but essentially unchanged, according to annual forecasts released by the government Monday. The trustees overseeing Social Security reported that the program’s trust fund will be depleted by 2033 — three years earlier than projected last year. After that, incoming Social Security tax revenue will cover only three-fourths of the benefits scheduled to be paid out through 2086, requiring Congress to either increase taxes or reduce benefits. The fiscal health of Social Security declined even more precipitously according to another, somewhat technical measure. This statistic reflects the difference over the next 75 years between projected benefits and the expected annual income of the American workers whose taxes will finance them. This measure reached its worst level since the early 1980s, when the trust fund’s imminent insolvency prompted Congress to enact a variety of changes. At a news conference to release Monday’s reports, administration officials and program trustees took turns urging Congress to come up with the kind of bipartisan solution that has long eluded it. “Never since the 1983 reforms have we come as close to the point of trust fund depletion as we are right now,” warned Charles Blahous, one of the trustees for Medicare and Social Security. “Our window for dealing with [the shortfall] without substantially disruptive consequences is closing fairly rapidly.” Social Security’s bleak outlook is primarily driven by the ever-larger numbers of people in the baby boom generation entering retirement. And the trustees said a major reason that this year’s 75-year forecast was worse than the last was simply that they were measuring one year further into the future. They also pointed to two unforeseen economic factors: Rising energy prices necessitated a larger cost-of-living increase to benefits, and worker earnings — and the resulting payroll taxes used to pay for Social Security — were lower than than expected. In both cases, the impact will resound for years. The trustees projected that Medicare’s trust fund, which covers the part of the program that funds hospital care, will run out in 2024, the same estimate in last year’s report. At that point, incoming revenue from Medicare taxes will be enough to cover 87 percent of annual expenses. That share will decline to about 67 percent by mid-century, then rise to 69 percent by 2085. Those figures are slightly worse than last year’s projections. The trustees attributed the difference to changes in methodology that they adopted on the recommendation of a technical advisory panel. For the third year running, Medicare’s nonpartisan chief actuary, Rick Foster, attached a letter to the report warning that the program’s true long-term prospects are even more dire than projected because the trustees made the “unreasonable” assumption that Congress will not overrule substantial Medicare spending curbs in President Obama’s 2010 health-care law. As a result of those cuts, “the prices paid by Medicare for health services are very likely to fall increasingly short of the costs of providing these services,” eventually reaching less than half their level under prior law, Foster wrote. “Well before that point, Congress would have to intervene.” Monday’s reports came as government investigators recommended that the administration cancel an experimental Medicare program that they said is squandering billions of federal dollars. The program temporarily alters a provision in the 2010 health-care law that reduces the government’s overall payments to Medicare Advantage plans — privately run alternatives to traditional Medicare that critics charge have long been overpaid — while offering bonuses to those rated tops in quality. The demonstration program, which will be open to all Medicare Advantage plans through 2014, increases the amount of the bonuses and opens eligibility to lesser-quality plans. The report by the Government Accountability Office, a nonpartisan congressional agency, found that over the three-year period that the demonstration program will be in effect, the extra spending will wipe out more than a third of the savings from the law’s cuts to the Medicare Advantage plans. The investigators estimated that the project will cost $8.35 billion over the next 10 years, most of which will be paid to mediocre plans. They also determined that the program’s design is flawed, making it impossible to assess the effectiveness of the bonus structure it was ostensibly intended to test. “The Obama Administration launched this demonstration program to divert attention away from cuts to the popular Medicare Advantage program,” said a statement from Sen. Orrin G. Hatch (R-Utah), who requested the GAO inquiry. “The Obama Administration seems to be using a technicality to side step Congress and write itself a blank check to spend more money for political purposes leading into this year’s elections.” Health and Human Services Secretary Kathleen Sebelius, speaking at the news conference about the trustees’ report, countered that even with the demonstration project, the administration has cut overpayments to Medicare Advantage by half. And she said the bonus system has helped reduce the premiums charged by such plans, increase the number of plans being offered and draw more seniors toward high-quality plans. “I think it’s a basic win-win-win,” she said.

2030? Social Security’s financial troubles are here and now.

It’s good to be back writing columns for The Post again. And what better way to mark my return than to discuss one of my favorite topics — the dire state of Social Security’s finances. And how the system’s serious problems are hidden by ridiculous accounting. I was off working on two projects and then went on a family vacation that included two of my grandchildren. Spending time with them got me thinking how important it is that Social Security be there for their generation. Social Security has shown signs of becoming an issue in the presidential race, and last week the system’s trustees issued their annual report. So after my grandkids went home, I took a look at the report. And, sure enough, on Page 163, I found the numbers I was looking for. They showed that the Treasury has had to borrow more than $200 billion from investors over the past three years to keep Social Security’s retirement and disability checks from bouncing. The report doesn’t say this outright. In fact, if you do a superficial read, it looks like the system is doing better than ever, because its trust fund — its supposed reserve to meet future shortfalls — is the biggest it’s ever been. But parse the numbers and you see that the system is taking in far less cash from Social Security taxes and from the taxes that higher-income people like my wife and I pay on our benefits than it’s spending. And the trustees warn that this trend is projected to increase, barring changes. The key to understanding why Social Security is in financial trouble today — not when its alleged trust fund runs dry in 2030-something, but today — is that the interest the trust fund collects on its holdings doesn’t help the government cover the cost of the benefits it shells out. That’s because the trust fund’s only assets are Treasury securities. And the Treasury pays interest on those — $93 billion last year, $294 billion over the past three years — by giving the fund Treasury securities, not cash. If you exclude that interest, as any competent financial analyst would, you see that the system collected $827 billion of cash last year and shelled out $897 billion. That’s a $70 billion shortfall. How was it met? Here’s how: Social Security redeemed $70 billion of its Treasury securities and got $70 billion of cash from the Treasury. How did the Treasury get that $70 billion? It borrowed the money in the financial markets. This means that even though Social Security showed a $23 billion surplus for budget reasons last year, the Treasury had to borrow $70 billion to keep the system afloat. Over the past three years, the trust fund has collected $294 billion of interest, but it has grown by only $80 billion. This means that the Treasury had to borrow a total of $214 billion to give Social Security to pay its bills. The way to fix this problem, of course, is for the system to take in more actual money, slow the growth of benefit payments, or use some combination of the two. Hey, I’m still a bit mellow from all that family time. So I don’t want to get into an argument about whether it’s rational or fair to eliminate the cap on Social Security tax, which is currently collected on salaries and other earned income up to $118,500. That’s a discussion for another day. I just want to show you that Social Security is a financial problem for taxpayers and our society now, despite the fact that the trust fund keeps getting larger. The problem will become more obvious in a few years, when Social Security’s cash deficit begins to exceed the interest it’s supposedly earning on its supposed trust fund. But the problem is upon us. Right now. And on that note: Happy summer.

Medicare isn’t going broke, but don’t celebrate just yet

Once again, it's the time of year when Washington confronts the same existential question: Is Medicare going broke? Today marks the annual release of the Medicare trustees' report, when those guarding the health-care program's finances make their best guesses about Medicare's fiscal future. This year's verdict: Medicare's hospital insurance trust fund will be solvent through 2030, which gives the program four more years of solvency than projected in the trustees' 2013 report. It's also 13 years later than the prediction issued by the trustees just before passage of the Affordable Care Act in 2010.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday The Medicare trust fund is backed by payroll taxes, so today's report essentially tells us for how long the trustees expect those revenues will be sufficient to foot the entire bill for Medicare's hospital bills. The trust fund is just one part of Medicare, though. It doesn't include doctors' visits and other medical services, which are covered by general revenues and beneficiaries' premiums. There's other good news in the trustees report. Per capita spending in the program grew just 0.8 percent over the past four years. Medicare premiums in the program covering medical services are expected to remain the same as they were in 2013 and 2014. The insolvency target for Medicare's trust fund has been shifting a bit over the past few years. Just three years ago, the trustees said the trust fund would reach insolvency in 2024 — five years earlier than their previous forecast. Last year, the trustees moved their insolvency projection back to 2026. They're now moving the target back to 2030 partially because of ACA changes and projections that per capita health-care spending will, at least in the short term, grow slower over the next several years. Now, some caution. There's a whole lot of uncertainty in what's behind the slowdown in health-care spending in recent years, whether it's due to the sluggish economy or structural changes in the health-care system. How long can the slowdown last? "No one knows," said Charles Blahous, Medicare's Republican public trustee. And the trustees' report highlights the truly difficult task of predicting Medicare's future: Another source of uncertainty for Medicare's future is the ACA itself. The law calls for $415 billion in reduced payments to care providers, while at the same time trying to encourage providers to adopt care models that cut costs and provide better outcomes. Whether care can be truly reformed is a question that Medicare's best prognosticators still can't answer, but they said recent signs have been encouraging. "Trustees are hopeful that U.S.health care practices are in the process of becoming more efficient as providers anticipate a future in which the rapid cost growth rates of previous decades, in both the public and private sectors, do not return," they wrote. However, they also don't want policymakers to get complacent in light of today's improved projections. "Some might be tempted to conclude from these good news trends that Medicare may be healing its financial maladies all by itself and that no further action will be needed," said Robert Reischauer, the Democratic public trustee. "That would not be a prudent conclusion."

Robert J. Samuelson: Trust funds are least of Social Security, Medicare problems

The just-released annual trustees’ reports for Social Security and Medicareare supposed to keep the public well informed about these popular programs. In reality, they do just the opposite: They confuse and mislead. Worse, they allow politicians to duck the hard issues surrounding both programs. What we ought to be debating is how much spending on retirees will dominate government. Instead, we focus on the actuarial soundness of the trust funds, a baffling subject only tangentially related to the basic choices facing the country. The trust funds should be abolished. In the public mind, the trust funds suggest that Social Security and Medicare are quarantined from the rest of government. As long as the funds remain solvent, promised benefits can be paid. So policy focuses on strengthening the trust funds. Against that background, it was inevitable that the trustees’ latest reports would be cast as good news. Slower-than-expected increases in health-care costs have extended the life of the Medicare trust fund until 2026, two years later than last year’s estimate. The Social Security trust fund is projected to pay promised benefits through 2033, the same as last year. This seems comfortably distant. Headlines were upbeat. “Medicare’s future appears brighter,” said The Post. The New York Times was almost identical: “Report Shows Better Outlook for Medicare.” Be skeptical. Dive into the reports — prepared mainly by Social Security’s and Medicare’s actuaries — and there’s precious little cause for optimism. As the baby boomers age, the costs of these programs will mushroom. Millions of Americans believe that Social Security is a stand-alone program whose spending is covered by the payroll taxes cascading into the trust fund. Many others, though fewer, think the same of Medicare. Neither assumption is true. Here’s what we learn from table V.F1 on Page 225 of the Medicare report. In fiscal 2012, Social Security and Medicare benefits totaled $1.323 trillion. Payroll taxes, Medicare premiums and other fees came to $920 billion. On a cash-flow basis, this left a deficit of $403 billion, $243 billion for Medicare and $160 billion for Social Security. The deficit had to be covered by general revenue from the Treasury and represented 37 percent of the overall 2012 federal deficit of $1.087 trillion. The numbers debunk the notion that Social Security and/or Medicare don’t affect the deficit. Payroll taxes cover only some of their spending. This has long been true of Medicare; now it’s also true of Social Security. All the mumbo jumbo about trust fund balances (which are, in an accounting sense, boosted by interest credited to them by the Treasury) obscures this. Choices exist. A dollar spent on Social Security or Medicare can’t be spent on border control, highways, school lunches, financial regulation, military readiness or the Forest Service. The prospect is for much more of the same. In table V.F2, which projects the outlook for Social Security and Medicare over the next 75 years, the actuaries estimate that payroll taxes, Medicare premiums and other dedicated taxes and fees will total $73.2 trillion. Unfortunately, projected spending is more than 50 percent greater at $112.8 trillion. Somehow, the gap will have to be closed by squeezing other programs, raising taxes, borrowing or cutting Social Security and Medicare benefits. (All these estimates reflect “present value,” with future dollars converted into their worth today.) Well, couldn’t the health-care spending slowdown rescue us? Maybe. After surprising many experts, it might continue to surprise. But Medicare’s actuaries think that the opposite is more likely: Projected health-care spending will understate costs. One unrealistic assumption is that Congress will reduce doctors’ Medicare reimbursement rates by 24.7 percent in 2014. That’s “implausible,” writes Paul Spitalnic, Medicare’s acting chief actuary, in an appendix to the report. Congress has repeatedly overridden similar scheduled cuts in the past. Likewise, the projections include lower Medicare reimbursements for hospitals and other providers mandated by the Affordable Care Act (“Obamacare”). Spitalnic also thinks these are unrealistic and ultimately likely to be overturned by Congress. “The financial projections shown in this report for Medicare do not represent a reasonable expectation for actual program operations,” he writes. We need to modernize Social Security and Medicare to reflect longer life expectancy, the growing economic wealth of the elderly, health care’s high costs and the burden these programs impose on the rest of society. The obsession with the solvency of the trust funds is a madness that  bewilders the public and  distracts attention from the larger issues. Of course, the trust funds won’t be abolished, precisely because the political class doesn’t want to face the larger issues. _Read more fromRobert Samuelson’s archive._ **Read more from Opinions:** Drew Altman and Larry Levitt: We still have a health-care spending problem Robert J. Samuelson: Taming the health-care monster The Post’s View: Repairing Medicare Bryan R. Lawrence: Health care threatens to crush U.S. growth

Mr. Biden falls flat

WHILE MOST PEOPLE were debating Vice President Biden’s infamous Tuesday commentary on shackling, we found ourselves more disheartened by his pandering comment on Social Security, delivered the same afternoon to little response — maybe because pandering is no longer news. As has been by now widely discussed, Mr. Bidentold a heavily African American audience that Republican Mitt Romney, if elected president, was “going to put y’all back in chains.” Mr. Romney read the remark as a reference to slavery and proclaimed himself to be highly affronted. Our view: The Biden comment was dumb and uncalled for, the Romney reaction tactical and over the top. On the same trip to southern Virginia, Mr. Biden wandered into the Coffee Break Cafe in Stuart. According to the White House pool report, when a diner there said, “I’m glad you all are not talking about doing anything with Social Security,” Mr. Biden responded: “Hey, by the way, let’s talk about Social Security. Number one, I guarantee you, flat guarantee you, there will be no changes in Social Security. I flat guarantee you.” Why is this so depressing? Because, as Mr. Biden knows, Social Security is going broke. If “no changes” are made, then by 2033 the program will not be able to pay benefits as promised. Is “going broke” too strong? Well, let’s ask the experts — the trustees of the Social Security Trust Fund, who include President Obama’s Treasury, labor, and health and human services secretaries. In their annual report in April — delivered, as it happens, to Mr. Biden, in his capacity as Senate president — the trustees noted that the disability portion of the trust fund “becomes exhausted in 2016, so legislative action is needed as soon as possible.” The overall fund, combining retirement and disability, will “become exhausted and unable to pay scheduled benefits in full on a timely basis in 2033.” That leaves Congress with four choices, the trustees explained: raise the payroll tax, reduce benefits, devote other revenue to Social Security or some combination of the above. “The Trustees recommend that lawmakers address the projected trust fund shortfalls in a timely way in order to phase in necessary changes and give workers and beneficiaries time to adjust to them,” the April report concluded. “With informed discussion, creative thinking, and timely legislative action, Social Security can continue to protect future generations.” Now, here’s the really depressing part: Everyone agrees that fixing Social Security is the easy one — far easier than reining in Medicare, Medicaid and other health-care costs. Tweak the inflation calculator and moderately raise the income limit for applying the payroll tax, and you can shore up Social Security with no harm to the safety net. In response to our inquiry, White House officials said that Mr. Biden’s “flat guarantee” was not meant to convey a change in administration position, which they said is best understood from Mr. Obama’s 2011 State of the Union address, which called for “a bipartisan solution to strengthen Social Security for future generations.” That speech was hardly a profile in courage: Mr. Obama opposed “slashing” benefits for future retirees. But that presumably (if tacitly) left room for trimming benefits. The president went further in failed negotiations with House Speaker John Boehner last summer, putting on the table changes in the way Social Security cost-of-living adjustments are calculated. By contrast, the vice president’s hearty assurances, like so much in this campaign, will make even more difficult the governing decisions that become more expensive and more painful with every year of delay. **More on this debate:** The Post’s View: The dangerous myths at the heart of political parties’ fiscal policies The Post’s View: The tattered safety net for the disabled The Post’s View: Paul Ryan’s dangerous, and intentionally vague, budget plan.

Washington cannot seem to fix Social Security. Maybe you should try.

Social Security needs fixing. And we’re inviting readers to try their hands at it.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico So far politicians haven’t mustered the will to take on the job. Still, there is widespread agreement that it needs to be done and that there are plenty of ways to do it. And the need is growing greater. In July, the Social Security Trustees produced its annual report, warning of the consequences of inaction: “The urgency of addressing the financial challenges facing both programs is underscored by the fact that the financing shortfall in the … Social Security trust funds has now grown to a size substantially greater, even relative to today’s larger economy, than the shortfall corrected in the landmark bipartisan Social Security amendments of 1983.”    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico That was the last time serious steps were taking to put Social Security on a firmer footing, including gradually moving back the age at which retirees may collect full benefits to 67 from 65. The Trustees warned that the Social Security trust fund, where taxes paid by workers and employers are held when they exceed Social Security’s costs, will be depleted and unable to pay full benefits in 2033. At that point, Social Security would be able to pay only 77 percent of currently scheduled benefits with money still coming in from Social Security taxes. The main problem is demographics. As the baby boom generation continues to retire, there will be more beneficiaries receiving benefits from taxes paid by fewer workers. By 2033, there will be more than 77 million older Americans compared with 46.6 million today, and 2.1 workers for each beneficiary, compared with 2.8 today. And we’re living longer. In 1940, when Social Security was created, average life expectancy for 65 year olds was only into their late 70s. Now, according to  the Social Security Administration, a man aged 65 today can expect to live until age 84.3 on average, and a woman can expect to live to age 86.6. About one in four of today’s 65 year olds will live past age 90, and one in 10 will live past age 95. There are also economic factors. And the potential crisis coincides with a change in the pension landscape, with fewer retirees having a steady source of income from a traditional pension. Retirees whose savings fall short of what they need and those who have no savings depend on Social Security. For one third of elderly households, it is their only income. In 2013, the average annual income from Social Security was $15,528. And fixing Social Security gets harder the longer the wait. As the Trustees noted, doing it in a timely way makes it possible “to phase in necessary changes gradually and give workers and beneficiaries time to adjust to them. Implementing changes soon would allow more generations to share in the needed revenue increase or reductions in scheduled benefits.” So what’s the problem? Mostly it’s political. There’s no will to grapple with the real work of fixing Social Security in election years or in between. And as the ranks of retirees grow, so does their lobbying clout, which will make it harder to reduce any benefits. And it’s plenty strong now. Take the politics out, and it is much simpler. “The arithmetic of the problem is not very difficult,” former Director of the Office of Management and Budget and Senior Brookings Fellow Alice Rivlin told an annual meeting on retirement research last year. It requires “tinkering on both sides,” she said. That is also the premise for The Social Security Fix-It Book produced by Boston College’s Center for Retirement Research, which calls it a cheerfully narrated guide to “everything the earnest but over-burdened citizen needs to know.” As the book notes, the solutions are increasing revenue, cutting benefits or a mix-and-match of the two. We’re asking readers to solve the problem not permanently, but for 75 years, which is Social Security’s planning horizon.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico We’ve partnered with the Center for Retirement Research to bring you a list of potential solutions — and their pros and cons — to this looming crisis. So get to it, earnest citizens. Let us see what combination of steps you favor.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico

AARP: Please, let payroll taxes go up

The AARP thinks it's time for American taxpayers to pony up. The advocacy group for seniors opposes any further extension of the Social Security payroll tax holiday,  which is scheduled to expire on Dec. 31, when the rest of the fiscal cliff goes into effect. The tax cut was originally part of a 2010 deal to replace the stimulus' expiring Making Work Pay Tax cut with a payroll tax cut of two percentage points. Lawmakers extended the tax break by another year, with largely enthusiastic support from Democrats and more reluctant support from Republicans, to continue to support a flagging economy. Recently, some leading voices have called for yet another extension: Former Treasury secretary Larry Summers warned last week that "this is not the right moment to repeal the payroll tax cut," arguing that there would be a "great stagnation" ahead for the U.S. economy if there wasn't more done to boost growth. The expiration of the tax cut will mean a $1,000 hit for the average taxpayer, and unlike many other tax provisions of the fiscal cliff, it will hit ordinary Americans immediately when they get their paychecks in January 2013 if it isn't extended. David Certner, AARP's legislative policy director, said that more should be done to support an economy that he acknowledged is "still rocky." The group simply does not want to sacrifice the Social Security Trust Fund to do it, arguing that it will risk underfunding a revenue stream that's projected to be "depleted within the next 25 years," according to the Social Security Administration. When Congress agreed to extend payroll taxes by another year in 2011, it did so by replacing the lost funds with general revenue for the first time in history. That addressed some policymakers' concerns about the Social Security Trust Fund's insolvency. But it was a worrisome step for the AARP and other Social Security advocates, who believed it undermined the entitlement program's protected status, lumping it in with a general budget that could be subject to future cuts and trade-offs. "Social Security is a separate, off- budget program, with a dedicated funding source—messing with the formula shouldn't even be a part of the budget debate," Certner added. "The promise of this was that it would be temporary. Going beyond two years—you're going way beyond temporary country." As the fiscal cliff approaches, the AARP is ramping up its advocacy efforts to ensure that the payroll tax cuts don't go beyond Dec. 31, with a letter to Congress in the pipeline. At this point, the AARP is most concerned that a payroll tax extension could get tied up with the rest of the fiscal cliff: If Congress can't make a deal by Dec. 31 and decides to punt, the tax cut could simply get temporarily extended along with everything else, which the AARP believes is a bad precedent to set. "We want to make certain this doesn't get brought along for the ride," Certner said. That said, the group is heartened that Summers' support for another extension remains an outlier: Leading Democrats in the White House and Congress who pushed for an extension last year now say that it's time for the tax cut to end. "You don't hear anybody on the Hill clamoring for an extension, that gives us some hope," said Certner. _Update_ : The AARP submitted its letter lobbying against another payroll tax extension to the White House, Senate, and House this morning, arguing that it would "undermine confidence in Social Security and put at risk the program’s dedicated funding stream and the hard-earned benefits of millions of Americans and their families." What's more, the group suggests that another holiday might not be necessary given the improvement in the unemployment rate and recent ISM report describing positive changes in manufacturing. "While many Americans continue to struggle and our economy still has much room to improve, AARP is encouraged by recent economic indicators that point to a strengthening recovery."

Social Security needs to return to its anti-poverty roots

Social Security is unsustainable. It faces an $11.4 trillion deficit over the next 75 years. Yet Donald Trump wants to maintain current benefits, and Hillary Clinton wants to expand them. The next president needs to recognize that Social Security is much larger than it was ever intended to be — or needs to be — and that maintaining its current benefit structure will cause a huge drag on workers’ paychecks and economic growth. Social Security could better accomplish its goal with significantly lower cost through a flat, anti-poverty benefit. It’s possible, as Clinton proposes, to reduce the program’s shortfalls by raising taxes on the rich. But that would be economically destructive, and politicians would almost certainly spend the higher taxes on other government programs.   If Social Security offered competitive returns or had a positive impact on the economy, its massive size may not be so terrible. But by taking payroll taxes that could otherwise be saved and invested and trading them for current government spending and future obligations, Social Security saps the economy of growth and guarantees paltry returns.  Given its inefficiency as a retirement savings program, Social Security should focus on preventing poverty among seniors. This could be accomplished by gradually shifting toward a flat, anti-poverty benefit, increasing the eligibility age in coordination with life expectancy and work capacity and using a more accurate measure of inflation. Almost nothing would change for current and near retirees, and future workers would eventually pay lower payroll taxes.   Whatever the solution, the ones proposed by the presidential candidates — inaction and expansion — are untenable.

Republicans rushing to cut Social Security

How ironic! The part of the government that has accumulated a healthy surplus over the course of its 75-year history is under consideration for a cutback by Congress to offset the growing deficit incurred by the rest of the government [“Lawmakers ready to weigh entitlements,” front page, April 16]. It is hard to believe that the Social Security Administration, which has accumulated a surplus of more than $2.5 trillion by collecting more in taxes than spending in benefits, is now a prime target for spending cuts.  It seems this is one of the few issues on which the Obama administration and the Republicans in Congress agree. To be sure, future projections of the Social Security budget indicate that, under current rules, that surplus will be exhausted in about 20 years. But why the rush to begin cutting now? Republicans are often accused of protecting the rich, but not apparently within the government. The rich part of the government is being asked to pony up for the poorer parts. ****Albert Arking** , Potomac**

Medicare’s trust fund will last two more years. What does that mean?

_Welcome to Health Reform Watch, Sarah Kliff’s regular look at how the Affordable Care Act is changing the American health-care system — and being changed by it. You can reach Sarah with questions, comments and suggestionshere. Check back every Monday, Wednesday and Friday afternoon for the latest edition, and read previous columns here._    *[WSU]: Wayne State University The annual release of the Medicare Board of Trustees' Report is, by its nature, never a fun event.    *[WSU]: Wayne State University Each year, reporters shuffle into a big Treasury Department conference room. There, health policy experts stand in front of a podium and tell them about the exact moment that the country's largest health insurer will run out of money. This year, officials use phrases like "fund exhaustion," "unsustainable path" and "imminent depletion." And this was to describe what was actually one of the trustees' sunnier forecasts! Health and Human Services Secretary Kathleen Sebelius did announce that the Medicare's trust fund would last until 2026, two years longer than previously expected. She quickly pointed to the Affordable Care Act, which made significant cuts to Medicare spending, as a key element in shoring up Medicare's financial stability. "The Affordable Care Act has helped put Medicare on more stable ground without eliminating a single benefit," Sebelius said. Before anyone had time to pop champagne, though, Robert Reischauer, a public trustee of Medicare and former president of of the Urban Institute, quickly warned against reading too much into the program's extended lifespan. "I think such an interpretation would be a mistake," he warned. "Notwithstanding the fact that I'm cautiously optimistic that the slowdown will continue...Medicare's projections involve a lot of uncertainty." So, what should we think about Medicare's extended solvency? First, let's recall what the trust fund is and what its lifespan tells us. The Medicare Hospital Trust Fund pays most of the bills for Medicare Part A, which covers hospital visits. At its core, the trust fund is an accounting mechanism, its solvency dependent on what it takes in, via payroll taxes, and what it pays out in medical benefits. “The fund is a fiscally neutral element in the goods and services of Medicare finances,” Theodore Marmor, Spencer Martin and Jonathan Oberlander wrote in a 2003 scholarly article. That's what makes the extension of the trust fund largely predictable this year: The Affordable Care Act made more than $716 billion in cuts to the Medicare program. Many of those hit the hospitals that  the Medicare Trust Fund regularly sends billions in payments to. Cutting the rate that Medicare pays for each heart attack visit, for example, means that payroll tax income will have to stretch to cover a few more heart attack treatments. Those Affordable Care Act rate cuts have been bolstered by another new development in health policy: a dramatic slowdown in the growth of health care costs. Medicare's per capita costs grew by 1.7 percent each year between 2010 and 2012, slower than the rest of the economy. Since health care costs and __ providers' payments are growing at a slower rate than they they were a few years ago, its no surprise that the same payroll tax dollars can stretch to cover more health care.    *[WSU]: Wayne State University The big question is whether either of those trends will last. This is the point that Reischauer was making when he cautioned against reading too much into the extra two years of the Medicare trust fund's lifespan. We don't yet know how much of the health cost drop is an effect of the economic slowdown and how much reflects structural changes in the economy. Recent academic research suggests the slowing costs are a product of both, leading health policy experts to warn against making strong assumptions about whether slower cost growth is here to stay. "There are lots of uncertainties associated with medical technologies which have historically pushed up costs," Reischauer said. The Affordable Care Act's reductions are more certain; they are, after all, written into law. Still, there has been skepticism about whether doctors and hospitals can actually deliver on those changes -- or whether they will find the new financial restraints too onerous, and clamor for a reversal from Congress. Rick Foster, the former chief actuary at Medicare, raised this concern at a House Budget hearing two years ago, warning that "it is doubtful that many [health care providers] will be able to improve their own productivity to the degree achieved by the economy at large." With the release of the 2013 trustees report, we have a 280-page document that tells us what Medicare's costs look like right now and, if they keep looking like that, how much we'll spend on health care in the future. It tells us less, however, about whether the trends driving the costs down today will continue. ** _KLIFF NOTES: Top health policy reads from around the Web._**    *[WSU]: Wayne State University

Fixing Social Security — the right way

Well, there’s at least one virtue to the depressing numbers that Social Security’s trustees unveiled last week — they prove that I was right. In February I wrote that the system’s finances had deteriorated badly, due largely to the energy price boosts created by the Arab Spring. And so they have: Those increases were the primary factor in Social Security’s inflation adjustment hitting 3.6 percent this year rather than the 0.7 percent baked into the trustees’ 2011 report. That added significant costs to Social Security, but little or nothing in the way of added revenue to help offset them. Now that the gloomy numbers are official, people belatedly are pointing with alarm to the projections that Social Security’s cash expenses will exceed its cash income as far as the eye can see. (For details, see the intermediate case on Table VI.F8 on p. 206 of this year’s report.) By contrast, last year the trustees projected positive cash flow for several years, which would have given the system a little breathing space. Being a born contrarian, I won’t join the gloom-and-doom crowd. Instead, I’ll try to show you some numbers you haven’t seen before about how important it is to fix Social Security the right way — and quickly — to avoid hurting the most vulnerable members of our society. And I will offer you hope, a commodity in rare supply these days. We will skip all that stuff about the Social Security trust fund (which has accounting and political significance but no economic significance) and go straight to the number that matters. To wit: Last year, the Treasury had to borrow $160 billion to give to Social Security so that its checks (okay, its electronic deposits) wouldn’t bounce. Even in an era of trillion-dollar budget deficits, that’s serious cash. The borrowing consisted of $103 billion to cover the cost of the “holiday” reducing employees’ Social Security taxes, and another $57 billion to redeem Treasury securities that Social Security’s trust fund cashed in. This kind of borrowing can’t be sustained indefinitely. So far, we haven’t seen adverse effects on interest rates because the Federal Reserve is holding rates down by buying vast amounts of Treasury securities. But when the Fed stops doing that — which it will, sooner or later — big trouble will set in if we haven’t cleaned up our act. These numbers are all familiar. Now, to numbers you’ve probably not seen. In a fascinating April report — okay, it’s fascinating to numbers junkies, not to normal people — the Center for Economic and Policy Research calculated the impact of Social Security benefit cuts to various groups ranging from lower- income single people who don’t own homes to the well-off (albeit not rich) likes of my wife and me, who own our home. It did this by placing a dollar value on projected Social Security benefits, a good way to put the number in an overall wealth context. I make out much better than a lower-income single non-homeowning person does if Social Security is cut across the board, say by increasing the retirement age. That’s because even though any benefit reductions cost me more dollars than such a person because my benefits are higher, Social Security is a far smaller proportion of my net worth. Social Security benefits represent a stunning 92 percent of the net worth of single non-homeowners whose income is in the bottom 80 percent of all Americans, according to this study, compared to 62 percent for married homeowners in the bottom 80 percent, and only 19 percent for those in the 80 to 99 percent bracket. (I’m in the top 2 or 3 percent bracket, which isn’t broken out.) So if we’re going to cut benefits — which I think is inevitable — let’s be careful to concentrate the impact on the likes of me (for whom Social Security is important, but not crucial) and mitigate the impact on the less fortunate. Why do I think that’s doable? Because the key players involved in its number crunching — who will ultimately design a plan — are people of good faith. Take Social Security’s two public trustees — Chuck Blahous and Robert Reischauer — who span the right-wing left-wing political spectrum. You could see clearly at the report unveiling that they like and respect each other — even though they disagree. The world of Social Security techies, in which I’ve traveled for more than a decade, is full of people like Blahous and Reischauer. So, I have faith that sooner or later — I hope sooner — it will finally occur to politicians that there’s a huge downside to not fixing Social Security and having benefits cut by 25 percent in 20 years or so, if things continue on their current path. Once that happens, I think the faceless bureaucrats, many of whom I’ve come to know and like, will make a deal happen. And Social Security will be there for my children, none of whom currently expects to see a dime from it. Sloan is Fortune magazine’s senior editor at large. To read his previous columns, go to postbusiness.com.

The costs of Social Security

The Fact Checkertook issue with Senate Majority Whip Richard Durbin’s statement, “Social Security has not added one penny to the deficit” and awarded him one Pinocchio for a degree of departure from the complete truth. The Fact Checker has set forth clearly the facts of the issue but, possibly because he is trying to be “fair” to all concerned, has wrongly judged Durbin to be other than absolutely correct. Imagine that Social Security had deposited its surpluses over the years in an interest-bearing account into a bank, rather than into Treasury securities. If one year the bank, because of inadequate reserves and losses on other transactions, experienced a deficit, would any rational person claim that Social Security was responsible for even a penny of that deficit? As Durbin also noted, this does not take away from the need in the longer term to deal with actuarial and demographic issues in the financing of Social Security. But these issues are entirely separate from the current funding of Social Security, and it is difficult to understand why the Fact Checker introduced them. ****Alexander H. Flax** , Potomac**

This presidential election could totally change when you can retire

American voters and some politicians occasionally complain that they don't see a real difference between the two political parties. "It seems to me that both parties and the entire political system are to blame," Sen. Rand Paul (R-Ky.) said in announcing his presidential campaign earlier this year, calling on Republicans to choose a candidate with genuinely conservative views. "If we nominate a candidate who is simply Democrat Lite, what is the point? Why bother?" he asked.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico When it comes to Social Security, though, the presidential contenders disagree sharply, giving voters the chance to make an important choice about how elderly Americans will live now and in the future. Jeb Bush, the former governor of Florida, said on CBS's "Face the Nation" Sunday that he thinks the retirement age should be raised.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico "We need to look over the horizon and begin to phase in, over an extended period of time, going from 65 to 68 or 70, and that, by itself, will help sustain the retirement system for anybody under the age of 40," he said. Bush had previously said he favored a higher retirement age, but hadn't offered much in the way of specifics. In his brief comments, he also didn't provide details, so it is hard to be sure what his suggestions would actually mean for retirees in the future.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico The challenge is that over the long term, Social Security will  owe more to retirees than the program receives in taxes or has saved up in its trust fund. Raising the retirement age is, in principle, a way of placing the burden of making up that deficit on today's and tomorrow's workers. The thinking is that they'll live longer than their parents, so they should contribute more to the Social Security over time by working a few extra years. But there's a big asterisk here. As it turns out, proposals to raise the Social Security age often have the potential of hurting the poor. Wealthier people tend to live longer. As a result, they draw benefits for more years after they stop working until their deaths. Increasing the retirement age by the same amount for everybody could actually result in poorer retirees receiving benefits for a shorter period of time.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico The details matter, though. As Andrew Biggs of the conservative American Enterprise Institute has argued, raising the retirement age might result in more Americans applying for disability benefits, because there will be several more years in which they might be injured or fall sick before they reach retirement age. Those disability benefits might make up some of the gap between rich and poor in welfare for elderly workers.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico And as Vox's Matthew Yglesias notes, most workers begin drawing benefits early, at 62. The full retirement age is 66 and increasing to 67 for people currently in the work force (not 65, as Bush said). If they take their checks earlier, workers have to give up some of their benefits, but the trade may be worth it for people with demanding, unpleasant jobs that don't pay well. Bush didn't say anything about raising the age at which Americans are eligible to draw from Social Security if they elect to do so before the retirement age.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico In his own proposal, New Jersey Gov. Chris Christie -- also a likely presidential candidate -- was more specific, calling for an early retirement age of 64 rather than 62.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico _[Read more: Christie’s proposed Social Security changes are a political risk.] _    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Broadly speaking, though, the proposals from the Republican side of the aisle are very different from those advanced by Democrats. Hillary Rodham Clinton, the presidential candidate and former secretary of state, said in April that politicians shouldn't "mess with" Social Security. "It is not a luxury. It is a necessity for the majority of people who draw from Social Security," she said on the campaign trail in Keene, N.H.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico "I think there will be some big political arguments about Social Security," she said. Given how little common ground there is between the parties on the issue, she might be right. In the past, party leaders have tried to work out compromises around more moderate changes to the program. President Bush proposed allowing younger workers to invest some of their Social Security payments in stocks and bonds, where the money would ideally generate a larger return over the long run. The proposal faced widespread opposition.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico President Obama has offered to expand retirees' benefits more slowly using a less generous measure of inflation, in a way that protects the poorest seniors. Capitol Hill Republicans have been receptive to the idea.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Mike Huckabee, the former governor of Arkansas, is one GOP presidential candidate who has suggested he would oppose changes to Social Security. On the other hand, many Democrats have gone even farther than Clinton, arguing that Social Security should be expanded. Two of her rivals for the Democratic nomination, former Maryland governor Martin O'Malley and Sen. Bernie Sanders (I-Vt.), have called for more generous retirement benefits. _[Read more: A simple guide to the real differences between the Democratic candidates for president]_    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Clinton hasn't yet said what she thinks about that idea, or how she'd suggest altering the program to guarantee that benefits are available for retirees in the future. It's one among several hard questions that will reveal just what kind of Democrat she really is.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico

Social Security disability program reveals budget quagmire

Social Security’s disability program is a political quagmire — and a metaphor for why federal spending and budget deficits are so difficult to control. The numbers are too big; the details, too complicated; and the choices, when faced, too wrenching. President Obama’s new budget, estimated at $3.5 trillion or more, will raise all these problems. Experience suggests that little will be done to rein in long-term spending and deficits. Social Security’s disability program opens a window on this larger paralysis. Created in 1956, more than two decades after Congress authorized Social Security, the program was initially seen as a natural complement to coverage for retirees. Through sickness or accident, some workers had to retire early. They, too, deserved protection. For many years, the costs were modest. But in recent decades, they have exploded. Consider. In 2010, Social Security’s disability program cost $124 billion plus another $59 billion for Medicare (after two years, disability recipients automatically qualify for Medicare). This exceeded $1,500 for every U.S. household. For the past two decades, disability spending has increased at a 5.6 percent annual rate, compared with 2.2 percent for the rest of Social Security. As a result, disability represents nearly one in five dollars of Social Security spending, up from one in 10 in 1988. All these facts come from a fascinating paper by economist David Autor of the Massachusetts Institute of Technology. The disability program, Autor writes, is a “central component of the U.S. social safety net” but doesn’t help “workers with less severe disabilities” to stay in the labor force (By law, recipients can’t be employed because disability is defined as the inability to work.) This means Social Security collides with the 1990 Americans with Disabilities Act, which aimed to keep the disabled in jobs. Guess which prevails. One program, Social Security, pays the disabled not to work; the other, the ADA, simply encourages their work. Money wins. In 1988, 4 percent of men and 2 percent of women aged 40 to 59 received disability benefits. By 2008, the men’s rate was almost 6 percent and the women’s, 5 percent. Autor attributes disability’s expansion mainly to liberalized, more subjective eligibility rules and to a deteriorating job market for less-educated workers. Through the 1970s, strokes, heart attacks and cancer were major causes. Now, mental problems (depression, personality disorder) and musculoskeletal ailments (back pain, joint stress) dominate (54 percent of awards in 2009, nearly double 1981’s 28 percent). The paradox is plain. As physically grueling construction and factory jobs have shrunk, disability awards have gone up. For many recipients, the disability program is a form of long-term unemployment insurance, argue Autor and his frequent collaborator Mark Duggan of the University of Pennsylvania. Benefit applications surge when joblessness rises. From 2001 to 2010, annual applications jumped 123 percent to 2.9 million. On average, recipients start receiving payments at age 49 and keep them until 66, when they switch to Social Security’s retiree benefits. Superficially, the case for overhaul seems overwhelming. Tougher eligibility standards would protect the genuinely disabled but limit benefits for others. Don’t hold your breath. For starters, any crackdown could become a public-relations disaster. It might seem gratuitously cruel. Many recipients command sympathy. With low skills, their jobs prospects are poor. “People are driven into the program by desperation,” says Autor. Nor are they rolling in money; the average payment is about $14,000 a year. Advocates for the poor would protest. The disability program “isn’t in crisis,” says the Center on Budget and Policy Priorities, a well-known liberal think tank. Presidents Carter and Reagan tried to tighten eligibility. They failed. Indeed, the backlash against Reagan’s effort led Congress to relax the rules in the ways that now expand awards. High unemployment worsens the timing. Lawyers would also resist big changes. The Social Security Administration initially rejects about two-thirds of applications, but about half of these are appealed by lawyers and other professional advocates before administrative law judges, where the approval rate is between 60 percent and 75 percent. In a series of well-reported stories, The Wall Street Journal’s Damian Paletta showed that the system is open to abuse. But it’s also lucrative. Lawyers and other advocates are entitled to 25 percent of back benefits up to $6,000 per case. Their total payments approach $1.5 billion annually. The larger budget quagmire now comes into focus. What the federal government does is so vast that it suffocates informed debate and political control. The built-in bias for the status quo reflects the reality that the various parts of government are understood, defended and changed mainly by those who benefit from their existence. However strong the case for revision (and it is powerful here), it is tempered by political inertia. What’s sacrificed is the broader public good. The quagmire is of our own making. **More from PostOpinions:** Robert J. Samuelson: Busting the budget myth George F. Will: Spending’s ascending

Social Security disability trust fund projected to run out of cash by 2016

A government entitlement program is headed for insolvency in four years, and it’s not the one members of Congress are talking about most. The Social Security disability program’s trust fund is projected to run out of cash far sooner than the better-known Social Security retirement plan or Medicare. That will trigger a 21 percent cut in benefits to 11 million Americans — people with disabilities, plus their spouses and children — many of whom rely on the program to stay out of poverty. “It’s really striking how rapidly this is growing, how big it’s become and how D.C. is just afraid of it,” said Mark Duggan, a University of Pennsylvania economist and adviser to the Social Security Administration. Part of the reason for the burgeoning costs is that the 77 million baby boomers projected to swamp federal retirement plans will reach the disability program first. That’s because almost all boomers are at least 50 years old, the age at which someone is most likely to become disabled. The growing costs are also a result of the economy’s troubles. When people can’t find work and run through their jobless benefits, many turn to disability benefits for assistance. “They’re desperate,” said Ken Nibali, a retired associate commissioner of the program. “Some who are marginal and struggling to have a low-paying job now literally have no options.” So, he said, “they figure, ‘I do have trouble working, and I’m going to apply and see if I’m eligible.’ ” Sen. Tom Coburn (R-Okla.), said he has tried to interest fellow lawmakers in the issue, without much luck. “Nobody wants to touch things where they can be criticized,” Coburn said, adding, “the fund is going bankrupt” and “then what are we going to do?” Applications to the disability program have risen more than 30 percent since 2007 — the last recession started in December that year — and the number of Americans receiving disability benefits is up 23 percent. More Americans receive disability benefits than 20 years ago, although people are less likely to have physically demanding jobs, health care has improved and the Americans With Disabilities Act bans discrimination against those with handicaps. Social Security is made up of two programs: the retirement plan supporting 40 million senior citizens and 6 million survivors, and the disability insurance program created during the Eisenhower administration. The disability program pays benefits averaging $1,111 a month, with the money coming from the Social Security payroll tax. The program cost $132 billion last year, more than the combined annual budgets of the departments of Agriculture, Homeland Security, Commerce, Labor, Interior and Justice. That doesn’t include an additional $80 billion spent because disability beneficiaries become eligible for Medicare, regardless of their age, after a two-year waiting period. The disability program is projected to exhaust its trust fund in 2016, according to a Social Security trustees report released last month. Once it runs through its reserve, incoming payroll-tax revenue will cover only 79 percent of benefits, according to the trustees. Because the plan is barred from running a deficit, aid would have to be cut to match revenue. Duggan said the disability plan has been running on autopilot for decades and lawmakers could find savings to help avoid the scheduled cuts. While federally financed, the program is administered by the states, and disability rates among them vary widely. West Virginia topped the list in 2010, with 9 percent of residents between ages 18 and 64 receiving aid. Utah and Alaska had the lowest rates at 2.8 percent. People whose benefit applications are rejected can appeal to administrative-law judges, and statistics show some judges are far more likely to approve benefits than others. One reason is that the program, which once focused largely on people who suffered from strokes, cancer and heart attacks, increasingly supports those with depression, back pain, chronic fatigue syndrome and other comparatively subjective conditions. “They’re very, very hard to evaluate,” said Nicole Maestas, director of the Rand Center for Disability Research. “Reasonable people differ about what constitutes a disability.” Statistics show that once people enter the program they are unlikely to leave, with fewer than 1 percent rejoining the workforce. Many worked “menial” jobs that didn’t offer health insurance, and the program gives them an opportunity to join Medicare long before they might otherwise qualify, Nibali said. The agency faces a backlog of 1.4 million reviews it’s supposed to periodically conduct to ensure beneficiaries are entitled to stay on the rolls. The agency has said it doesn’t have the money to do the reviews. Neither President Obama nor House Republicans in their proposed budgets has addressed the disability program’s shortfall. “We’re not trying to fix every problem in America with this one document,” said House Budget Committee Chairman Paul Ryan (R-Wis.) of his budget plan. “We’re trying to prevent a debt crisis, and this is not a driver of our debt.” “The administration believes that disability insurance is a vital lifeline for millions of Americans,” Kenneth Baer, a spokesman for the White House budget office, said in an e-mail. “The president remains willing to work with Congress on a bipartisan basis to strengthen Social Security and protect the millions of beneficiaries.” He added that lawmakers didn’t fully fund the administration’s request for more money to screen beneficiaries. Senate Finance Committee Chairman Max Baucus (D-Mont.), whose committee sets Social Security policy, said the program’s finances are less dire than they may appear. Congress can funnel revenue from elsewhere in the government to cover the program’s shortfall, he said. ** — Bloomberg News  **

Washington thinks entitlements are the problem. Maybe they’re the answer.

Washington frets endlessly over the problems that Social Security and Medicare, both of which are projected to exhaust their trust funds in the coming decades, might cause the budget. But two new reports underscore the serious problems they might solve for the country. Take Social Security. For years, pension experts have spoken of the “three-legged stool” of retirement savings: Social Security, employer pensions and private savings. In recent years, however, that stool has begun to wobble, and today, Social Security is basically the only leg holding it up. In 1980, about 40 percent of private-sector workers had a guaranteed pension. By 2006, that had fallen to 15 percent. Today, the 401(k) reigns supreme, with a trajectory that is almost the precise reverse of guaranteed pensions: In 1979, 17 percent of workers had a 401(k). Today, 42 percent do. Those 401(k)s, however, are woefully underfunded. In 2010, 75 percent of workers nearing retirement had less than $30,000 in their 401(k). Sixty percent of low-income households are at risk of being unable to maintain their already modest living standards in retirement. Individual savings don’t look much better. About a third of households don’t have a savings account at all. More than 40 percent don’t have enough to cover basic expenses if they lost their main source of income. In a vicious cycle, the need for savings is so great that many workers are tapping into their 401(k)s early: In 2010, contributions to defined-contribution pensions totaled $176 billion, while early withdrawals — which carry heavy penalties — totaled $60 billion. Today, Social Security provides 37 percent of the income for all Americans over 65, and about 80 percent of the income for seniors in the bottom half of the income distribution. Given the state of private and employer pensions, those numbers will have to rise in the coming years, or else the standard of living for seniors will fall. This is the other, perhaps more pressing, Social Security crisis: It’s not generous enough to counteract the sorry state of retirement savings nationwide. In a report for the New American Foundation, Michael Lind, Steven Hill, Robert Hiltonsmith and Joshua Freedman survey this data and conclude that the ongoing debate over how to cut Social Security is all wrong: We need to make Social Security much more generous.    *[WSU]: Wayne State University They would keep today’s income-based Social Security program, but add a “Part B,” which would be a flat payout to all retirees. When parts A and B are combined, all retirees would be guaranteed 60 percent of their average working wage in retirement, with low earners seeing closer to 100 percent replacement. Part B would be pricey, adding almost a trillion dollars to Social Security’s costs in 2037, and the authors don’t have a clear proposal, much less a politically realistic plan, for how to pay for it. But not paying for it doesn’t mean those costs disappear: It either means living standards for seniors will tumble, or families will strain as they try to support older relatives. Medicare, too, can help solve some of our tougher health-care problems. A key fact — perhaps the key fact — about American health care is that the prices we pay for the health care we consume are far, far higher than in any other country. According to new data from the International Federation of Health Plans, an angiogram costs $218 in Switzerland, but $914 in America. Bypass surgery is $22,844 in France, but $73,420 in the United States. A hip replacement runs you $11,889 in Britain, but $40,364 in the U.S. “Other countries negotiate very aggressively with the providers and set rates that are much lower than we do,” says Gerard Anderson, director of the Center for Hospital and Finance Management at Johns Hopkins.    *[WSU]: Wayne State University *[WSU]: Wayne State University But not all American payers are the same. Medicare uses its massive market power to negotiate much lower prices than private insurers. For that reason, the Congressional Budget Office estimated in 2011 that “average spending in traditional Medicare will be 89 percent of (that is, 11 percent less than) the spending that would occur if that same package of benefits was purchased from a private insurer.” Back during the health-care debate, the CBO estimated that a public option able to use Medicare’s pricing power could save more than $100 billion over 10 years. In a policy paper for the Robert Woods Johnson Foundation, Robert Berenson, John Holahan and Stephen Zuckerman propose a package of changes that would save more than $700 billion over 10 years. One of the changes they propose is raising the age of eligibility from 65 to 67. But in order to blunt the impact of that change, they propose letting people between the ages of 65 and 67 buy in to Medicare on their own — that way, they can take advantage of Medicare’s lower prices, even if they’re paying for them out-of-pocket. “Buying into Medicare gives them as good a deal as they’re going to get,” Berenson says.    *[WSU]: Wayne State University If it’s such a good deal for the 65-to-67 crowd, then why not let 55-year-olds buy into Medicare, or even let everybody buy into Medicare? “I’ve always assumed it was just political opposition from Republicans,” Berenson replied. I asked him to put aside the politics and just assess whether it would work. “Conceptually, I don’t see a problem,” he said. It has become common in Washington for wonks and politicians alike to lament the public’s resistance to cutting Medicare and Social Security. But that resistance is there for a reason: These programs work extraordinarily well. Social Security has been wildly successful at raising living standards for the elderly, even as other forms of retirement savings have grown shakier. Medicare is cheaper than private health insurance, and has seen its costs grow more slowly, to boot. We’ve gotten so used to thinking of our entitlement programs as problems to be solved, we’re missing all the problems they can solve. **Further reading:**    *[WSU]: Wayne State University — Why an MRI costs $1,080 in America and $280 in France.    *[WSU]: Wayne State University — 21 graphs that show that American health-care prices are ludicrous.    *[WSU]: Wayne State University

Yes, the debt fight could delay Social Security checks. Here’s how.

There’s a theory pinging around that says no matter what happens with the debt ceiling, Social Security beneficiaries will keep getting their checks on time. Social Security is a trust fund that brings in more money than it pays out, so the theory holds that even if the United States can’t legally borrow more money, benefits must continue until the trust fund runs out. Evidence strongly suggests that theory is wrong. It’s true that there are scenarios under which Social Security checks might continue to be mailed out, unabated, in the event that lawmakers fail to raise the debt limit and force the country to only spend as much as it brings in from tax revenue. But those are only scenarios, and there are other, at least equally plausible scenarios under which Social Security checks could wind up delayed by days or weeks. Put very simply: No one knows exactly what will happen if the nation’s borrowing limit doesn’t rise. As much as retirees and policy advocates want the Obama administration to hold Social Security harmless in that case, there is no guarantee that will happen-- or that it’s legally or technically possible. Let’s break that down. **What happens if the federal government runs out of borrowing authority (as the administration predicts it will on Thursday if the limit isn’t raised)?** ********This would present a series of difficult and legallyproblematic options. The Obama administration would keep paying the nation’s bills with the tax receipts coming in the door. But because the federal budget doesn’t balance, there quickly wouldn’t be enough money. Either the administration would need to pick and choose whom to pay - FBI agents or disabled veterans? Defense contractors or diplomats abroad - or it would have to delay batches of payments across the board until enough revenue accumulates to cover them. **Could Social Security be affected?** The administration says yes. So do outside experts such as the Bipartisan Policy Center. Under what appears to be the likeliest scenario, Social Security checks would be lumped with every other bill the government pays, and only paid when the money comes in to cover them. The delays would pile up over time. Assuming the borrowing authority runs out this week and lawmakers stay in their stalemate, the policy center calculates, a batch of Social Security benefits scheduled to go on Oct. 23 would likely be delayed by two days. A larger batch, scheduled for Nov. 1, would be delayed by 12 days. The longer the debt-limit impasse, the longer the delays. **Wait, Social Security brings in more money — in taxes and interest — than the benefits cost. How could it not have money to pay benefits?** Because lawmakers don’t treat Social Security, to borrow an old phrase, like it’s in a lockbox. They mix its tax receipts with income taxes, capital gains taxes and every other revenue source the government has. Benefits get paid out of that big mixed revenue stream. “If they delay payments, then Social Security just stands in line with everything else,” said Shai Akabas, a senior economic policy staffer at the Bipartisan Policy Center. “Social security does not necessarily receive any special treatment because it has its own trust fund. It gets paid out of cash, like everything else.” **Couldn’t the Obama administration choose to treat Social Security ... special?** Maybe. The administration is certainly getting a lot of pressure from AARP and others to do so. There are a variety of technical ways advocates say the administration could make it happen. The easiest would be to say, Social Security takes priority and to move benefits to their own special line and make everyone else wait longer for their money, or deal with much larger immediate spending cuts. Akabas cautions that this could be technically difficult because an already partially shut down government would need to find a way to pay some of the government’s bills on time, but not others. It could also be legally problematic: The law appears clear that Social Security beneficiaries must be paid, but that goes for the government’s other contractual obligations, too. It’s uncharted territory for the government to pick and chose which bills to pay, and the administration still hasn’t said how it would make it work. This is why Social Security recipients should be worried. There’s no guarantee that the government will choose to keep their benefits flowing on time at other program’s expense, whatever the payment strategy might be.

Why I can’t (and won’t) stop writing about Social Security

People used to call Social Security the “third rail” of politics — mess with it, you’ll get seriously shocked. For me, Social Security has become the third rail of column-writing. Show people that the system is spending considerably more cash than it’s taking in, as I did last week, and you get zapped by readers, friends and sources. So let me try to explain where I think Social Security’s problem comes from. Which I couldn’t do last week because unlike the people who post comments or send email, I am writing to a relatively small fixed space. Despite what some readers seem to think, I wasn’t trying to run down Social Security or blame it — whatever “blame it” means in this context — for its current financial problems. All I wanted to do was to inject a dose of reality into the Social Security debate, which seems to revolve around the program’s trust fund rather than around the true state of the program’s finances. Here’s the deal: Social Security’s current cash problems date to the way Congress changed the program in 1983. Those changes were the result of a report issued by the Greenspan Commission, appointed in 1981 when Social Security was running out of cash. The 1983 legislation increased Social Security taxes, raised the retirement age, and did various other things to get more money flowing into Social Security and less flowing out. These changes produced large cash surpluses for Social Security in the early years, when the program took in much more money than it needed to pay benefits. That surplus was going to be drained by huge negative cash flow in the “out” years. But rather than set up a mechanism to save the temporary surpluses in a way that was useful to the government _as a whole_ — please note the italics — such as putting the money into corporate bonds, the commission and subsequent Congresses and administrations left things the way they had been. The fund could own only Treasury securities — no corporate bonds, no stocks. Nothing but Treasuries. So the government as a whole borrowed less when Social Security ran a cash surplus, but would borrow more when Social Security began running a cash deficit. But that was in the then-far future. Insert “kick the can down the road” or the cliché of your choice. Some people say that money was “stolen.” Not so. Everything was disclosed, and — if only by inaction — 25 years worth of Congresses and administrations knew about the situation, but left things the way they were. But starting in 2010, as I had warned (and warned and warned and warned), Social Security began running cash deficits, which are projected to continue indefinitely. Social Security pays its bills by cashing in some of its trust fund securities, and the Treasury comes up with the money to redeem the trust fund’s securities by borrowing from investors. So the government as a whole is using investor money to pay Social Security’s bills, even if Social Security is showing a profit. The true state of the program — which is enormously important to tens of millions of people — is hidden by the bizarre accounting. Despite running a cash deficit of about $70 billion in calendar year 2015, according to its recently issued trustees report, the program reported a $23 billion surplus because the trust fund collected $93 billion in interest from the Treasury. Economic justice says that people who paid Social Security taxes from 1983 on — which would include me — should be repaid by having the government drain the trust fund to pay benefits. But as things stand, that would require borrowing hundreds of billions of dollars a year. I don’t think it’s supportable. Look. I have enormous respect for Social Security. Social Security let my late parents retire in dignity. My wife and I are drawing retirement benefits, and we have children and grandkids for whom I hope Social Security will be available 50 or 60 or 100 years from now. The financial challenges are considerable. But if we approach them in an intelligent, long-term way (which I hope to offer up later this year), they’re surmountable. That’s why I keep writing about the true state of Social Security. No matter how much I get zapped.

Social Security’s contribution to the deficit

Pat Thompson [“The Social Security myth,” letters, Dec. 16] took George F. Will to task for failing to note that the $165 billion shortfall between Social Security payouts and revenue “is drawn from a trust fund of $3 trillion (and change) that built up over several decades.” Mr. Thompson failed to note, however, that there is not $3 trillion (and change) sitting in a vault waiting to be withdrawn. The Social Security trust fund consists of $3 trillion (and change) in U.S. Treasury bonds that need to be redeemed to cover the shortfall. When those bonds are redeemed, the U.S. government must generate $165 billion more to cover the shortfall in the general fund that has been used to cover the Social Security shortfall, which would then increase the deficit by the same amount as the shortfall in Social Security revenue. Therefore, Social Security does add more than one penny to the deficit. It adds $165 billion worth of pennies. ****Richard W. Souther,** Alexandria**

Health care is crowding out everything. Social Security isn’t.

Third Way has generously responded to my critique of its report alleging that spending on Social Security, Medicare and Medicaid is crowding out spending on investments like education, research and development, and infrastructure. Given what good deals some of those investments are, this would be a serious problem indeed. But while it's clear that health care spending, including Medicare and Medicaid, is growing at an alarming rate that threatens other priorities, I don't think the evidence supports the view that Social Security is doing the same. Jim Kessler of Third Way disagrees: No one disagrees that the retirement of the baby boomers is going to increase the cost of Social Security as a percentage of GDP. But it's worth noting that the increased cost does not deplete the Social Security trust fund until 2040, according to the CBO. And it got that trust fund because other programs kept borrowing from Social Security's revenues and are required by law to pay that debt back. So more and more of our Social Security obligations will take the form of debt repayment financed through general revenues, principally the personal income tax. One way to view this is as Kessler does, as Social Security "crowding out" other priorities in years to come. The other way to view it is that Social Security has been, in effect, subsidizing the rest of the government for decades and now it's their turn to pay it back. In that view, Social Security hasn't been crowding out other spending at all. It's been enabling it! The net effect on spending by the rest of the government, over the course of the loans and their repayment, is zero. So until 2040, talking about Social Security crowding out spending by the rest of the government is conceptually sort of weird. This becomes clearer if you compare changes in Social Security spending to changes in investment spending during the period studied by Third Way. If the "crowding out" story is true, there should be a substantial correlation between changes in Social Security spending, as a percentage of GDP, and changes in investment spending. But  there is no such correlation. Changes in Social Security spending only accounted for 2.4 percent of the change in total investment spending, 2.8 percent of the change in defense investment spending, and 2 percent of the change in non-defense investment spending. Not only that, but the correlation coefficients are positive - that is, increases in Social Security spending are actually mildly associated with increases in investment spending! This isn't to say that the two actually promote each other, just that there isn't really a relationship at all, historically. Kessler writes that "These two areas of the budget – both of which are critical priorities for America, born of Democratic Presidents and Congresses – are locked in a zero sum game." This is the bigger problem with his narrative. The way the Third Way paper talks about this, you'd get the impression that entitlements and investment spending together make up most of the federal budget. But they don't:

Using long-term budgeting sensibly

Whatever one thinks of Kevin Drum’s Social Security reform proposal (use an inflation measure that slightly lowers benefits, and collect a bit more in taxes by raising the income cap), I really like his attitude towards long-term budgeting: Right. There are basically two attitudes toward long-term budgeting, both a consequence of the convention that budgets include very long-term estimates, including a 75-year horizon for Social Security. One is to panic if there’s an imbalance anywhere within the horizon. That’s silly. The second way of looking at the plan shows that it’s silly by analyzing past 75-year spans and pointing out that, for example, long-term estimates would have missed World War II, or postwar growth, or the Cold War, or the end of the Cold War, or technological change. Which is true. Yes, it’s silly to care whether Social security projections work out perfectly balanced over a 75-year time frame, and it’s even sillier to worry if the federal budget projects out as balanced over even a 30-, 40- or 50-year time frame (Social Security, at least, is pretty simple to project going forward, even if there are still huge margins of error). I like, therefore, Drum’s attitude on it. We shouldn’t be held captive to 75-year estimates; anything that looks as if it will work for an extended period is probably good enough. And we should expect further imbalances in the future, and future fixes. There’s nothing wrong with that. Now, I have no problem with doing the long-term projections and peeking at them for at least a hint of what’s out there; a plan that projects near balance for 30 years but a collapse after that might not be ideal. Having a bit of a guideline toward the long-term isn’t so terrible. But the real issues, the ones really worth fighting over, are those where the projections figure to be at least mostly realistic. That’s nowhere near 75 years for Social Security, and it’s really not much longer than a decade for the budget as a whole.

Social Security proposal would mean rat race is never won

Martin Feldstein argued in favor of changes that would reduce the federal debt and allow for more job growth, particularly related to the nation’s infrastructure [“The fiscal opportunity,” op-ed, Nov. 12]. One of his suggestions involved gradually raising the age at which full Social Security benefits could be received. As he wrote, “In the 30 years since that [1983] compromise, life expectancy at age 67 has increased by three years. Gradually raising the retirement age for full benefits by three years would achieve substantial savings.” However, a trap lurks in this suggestion. As life expectancy increases, the amount of work required for full benefits would increase along with it, while the duration of retirement would remain constant. As Alice said to the Red Queen, “Well, in our country, you’d generally get to somewhere else — if you ran very fast for a long time, as we’ve been doing.” And the Queen’s reply? “A slow sort of country! Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!” ****William Vaughan Jr.** , Chebeague Island, Maine**

Social Security, Medicare trust funds serve a purpose

In his June 7 Washington Forum column, “Get rid of the trust funds,” Robert J. Samuelson advocated abolishing the Social Security and Medicare trust funds but did not note the important restraining effect of the trust fund mechanism. Unlike other government-benefit programs such as agricultural subsidies, petroleum depletion allowances or the earned-income tax credit, any proposal by a generous Congress to expand Social Security or Medicare benefits is immediately constrained by having to consider its effect on present or future trust fund balances. This has always served as a brake on the growth of the Social Security and Medicare programs. That, in turn, helps to preserve them. Publication of the annual Medicare Trustees Report invites the very type of critical scrutiny presented in Mr. Samuelson’s column. ****Edward Steinhouse** , Columbia** The writer was deputy chief counsel for the Centers for Medicare and Medicaid Services from 1981 to 1995.

What you should know about Christie’s claim that Social Security funds were ‘stolen’

The GOP presidential candidates just exchanged a few words on Social Security, one of the issues that divides them most sharply. Candidates such as Mike Huckabee, the former governor of Arkansas, have argued forcefully against reductions to Social Security. "This is a matter not of math, this is a matter of morality," Huckabee said in Wednesday night's prime-time primary debate on CNBC. "If this country does not keep its promise to seniors, what promise can it hope to be trusted to keep?" On the other hand, New Jersey Gov. Chris Christie and other candidates say that reducing future benefits for people who are working now is the only way to make sure that there's enough money in the system to go around. Christie argued for that point in the debate by claiming that Social Security's trust fund has been emptied. The trust fund is where all of the money that workers forfeit in taxes with every paycheck they cash is kept, in order to pay out future benefits. "It's not there anymore. The government stole it and spent it," Christie said. "All that's in that trust fund is a pile of IOUs for money on they spent on something else a long time ago." Social Security's finances are not in the best shape, but the money is still in the trust fund -- to the tune of $2.8 trillion at the end of last year.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico It wasn't clear exactly what Christie meant when he claimed that the government had somehow stolen all that money, but perhaps he was referring to the fact that Social Security isn't just sitting on $2.8 trillion in cash. Instead, the money is invested in Treasury bonds. In other words, Social Security loaned the money to the Treasury Department, which is using it for all kinds of things -- to pay soldiers' salaries, make grants to researchers, maintain highways and whatever else the government needs money for. The Treasury then pays Social Security interest on the loans. Perhaps Christie was suggesting that those "IOUs," in his words, won't be paid back, but few mainstream economists believe that the federal government will be unable to pay back all its debts. That fact is reflected in the extraordinarily low interest rates that investors worldwide will accept to loan the government money. If they were concerned about the government's ability to pay its debts, they would demand higher interest rates to compensate them for the risk of default. Christie said that he and the other presidential candidates need to tell elderly Americans "the truth." Christie also said that Social Security would be "insolvent" in six to seven years. Again, it is unclear to what the governor was referring. Social Security's obligations in the long term are greater than its expected revenues. Starting in about two decades, Social Security won't be able to pay beneficiaries in full if current trends continue (although they would still receive a portion of their checks). In that sense, you could say Social Security is insolvent today. Perhaps Christie meant that in six to seven years, Social Security will have to begin drawing money from the trust fund, according to program's analysts. Currently, Social Security is still taking in more money in taxes than it is paying out in benefits. That is soon to change, but because the trust fund has $2.8 trillion in it, the change won't affect Social Security payments for another 15 years or so after that.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico

Have seniors really paid for Medicare and Social Security?

"So essentially, you are in favor of genocide of seniors," wrote one reader in response to my column on the best reason to worry about the deficit. "I was correct in my assessment of you."    *[WSU]: Wayne State University The column, which you can read here, is about the way that the old anxieties about federal deficits crowding out private borrowing don't apply to our current economic situation. Rather, the more serious concern is that trends in government spending and taxation will "squeeze-out" important government programs and investments that are core to our economic future. Or, put more directly, that Social Security, Medicare and low taxes will end up squeezing out education, infrastructure and research.    *[WSU]: Wayne State University To be fair, most of the e-mails I got, even the angry ones, did not actually accuse me of elder-genocide sympathies. But they almost all made the same point. Seniors have paid for their benefits. They deserve them. A few comments on this: \- Few seniors have actually paid for their Medicare benefits. According to an Urban Institute estimate, the typical retired couple paid $122,000 in lifetime Medicare taxes but can expect to receive benefits worth $387,000. Social Security is another story. There, the average retired couple paid $600,000 in lifetime taxes for $579,000 in benefits. Put together, it's $722,000 in taxes for $966,000 in benefits. (All figures are adjusted for inflation.)    *[WSU]: Wayne State University The trust funds are, by and large, okay for a few more years, but going forward, both programs are taking in much less than they're scheduled to be paying out, particularly if health-care costs don't slow in a permanent way. - There's nothing unusual about Social Security and Medicare in this respect. We all pay into most everything the government does, and we're all paying less than we're ultimately receiving. That's why there's a large and persistent deficit. \- The problem in retirement, as elsewhere, is really health-care costs. Social Security's rising spending is both manageable and, given the state of private retirement savings, desirable. If it were up to me, I'd increase the Social Security benefit for most seniors (though I'd also do more means- testing and raise the payroll tax cap). But the real expense is coming from Medicare, where costs have been rising quickly -- though less so lately \-- without delivering much in extra value.    *[WSU]: Wayne State University - The other problem is that we have very different budgeting processes for Medicare, Medicaid and Social Security than we have for most everything else in the federal government. Spending for those programs is automatic (or, in budget parlance, "mandatory"), and the levels are based on what the programs need to deliver their promised benefits. Spending on, say, education, or infrastructure, is "discretionary," and Congress revisits such spending every single year, and often more than once in a year. - That's the basic mechanism for what I call government "squeeze-out": Medicare, Medicaid and Social Security, all of which are growing quickly due to trends in health-care spending and/or the aging of the population, basically grow automatically and Congress looks to make the numbers work by going after the other parts of the budget, where they have an easier time making changes. - A related problem is that Congress tends to cut "discretionary spending" by simply capping how much can be spent on it in the future. That way, the cuts are mystery cuts that don't affect any programs or upset any constituencies right now. Cutting Social Security doesn't work like that. So that's another reason Congress likes to cut deep into discretionary spending rather than touching mandatory spending. - Further, as the society ages, and health-care costs continue to rise (even if we're successful in our cost control efforts and they rise more slowly), taxes will need to go up and by much more than they did in the fiscal cliff deal. - The strange budget detente in which both sides now seem to accept the sequester will go into affect, at least for awhile, makes all this much worse. The point of the sequester is it cuts so deep into discretionary that Congress would never permit it to happen. But now, because Republicans won't agree to higher taxes and Democrats won't cut entitlements unless Republicans agree to higher taxes, it might actually happen. This is leading to a lot more squeeze-out than anyone would've predicted, say, two years ago. - The point here isn't that seniors don't deserve their benefits, or have done something wrong. It's that the structure and politics of the federal budget right now are leading to a situation in which spending on retirees and keeping taxes low on current workers could really shortchange needed investments in our future. And, while I don't want to fall into the trap of pretending that government exists to pay out future Social Security benefits, if future growth is low, it's very difficult to imagine promises to current workers being kept. - Related to that point, I wonder sometimes about a future for the budget in which we get very good at figuring out which health-care spending delivers value but we don't get much better at cost control. It's an easy enough future to imagine: Perhaps the coming rush of comparative-effectiveness research shows that some very expensive treatments should be used much more widely. Add in a couple of very effective, very expensive new treatments or drugs, and you're there. That's a future in which taxes need to be much higher but health-care spending doesn't need to be much lower. As a general point, the real problem with health-care spending isn't how much we're spending but how little we're getting. If sticking on our current budget trajectory could make us live twice as long, there'd be a very good argument for simply doing that.

How to sort out Social Security’s finances while making it more generous

Social Security is not in danger of becoming insolvent any time soon. According to the program's actuaries, without any changes, Social Security will be able to pay out full benefits until 2033. And there's reason to doubt that problems will arise even 21 years from now. As Jared Bernstein noted when the latest projections came out, the expected date when the Social Security trust fund will be exhausted has varied wildly over the past few decades. Yet despite its medium-run sustainability, many deficit reduction plans target the program for cuts. For example, Bowles-Simpson introduces means-testing and raises payroll taxes for high earners, but also cuts benefits across the board by adopting a less generous inflation measure, known as "chained CPI," and raises both the minimum age where retirees can claim benefits and the age when they can claim full benefits. As Nobel laureate Peter Diamond has explained, the latter change is hugely regressive, primarily targeting poor workers in physically demanding occupations. Domenici-Rivlin includes the inflation measure cut, means-testing and payroll tax increase, but leaves out the regressive retirement age increase. But if one wants to make the program solvent indefinitely without endangering vulnerable seniors, there are options. A new bill from Sen. Mark Begich (D-Alaska), the Protecting and Preserving Social Security Act, provides one method. The Begich bill would lift the current payroll tax cap, which exempts wages in excess of a certain amount ($110,100 this year) from the tax. In turn, it would give high earners, who would pay more, additional benefits upon retirement, just as benefits increase as wages do for workers below the cap. According to the Congressional Research Service, a change like that would almost entirely wipe out the program's long-run actuarial imbalance. Specifically, it would eliminate 95 percent of the shortfall, meaning that a mild increase in the payroll tax rate from 12.4 percent to 12.5 percent would be enough to cover the tiny remaining gap. And without any changes at all, the program would be able to pay out full benefits until after 2085. Indeed, the exhaustion date for the trust fund following such a change is so far in the future that CRS didn't even calculate it. But Begich's bill doesn't just increase taxes for high earners. It also increases benefits across-the-board. While Bowles-Simpson and Domenici-Rivlin adopt a stingier "chained CPI" measure for inflation, Begich adopts "CPI-E," or a measure that specifically captures inflation in goods that seniors buy. Due to deteriorated health and other considerations, goods seniors buy tend to be more expensive than those younger people purchase. Begich's CPI-E change would mean, effectively, a 4.5 percent benefit increase for the program's beneficiaries, including not just seniors but their designated survivors and disabled Americans as well. The bill likely will face a steep legislative hill. It amounts to a large tax increase for the rich, including people making between $110,100 and $250,000, and as such would violate Obama's pledge to not raise taxes on people making under a quarter million dollars a year. But given that it makes the tax code more progressive and increases benefits at the same time that it sorts out the program's finances indefinitely, don't be surprised if progressives latch onto it going forward.

Social Security’s simply complicated mess

Allan Sloan’s June 30 Deals column, “Worried about 2030? Social Security’s in trouble here and now,” was only partially right. Social Security is not in a “dire state.” Congress has the power to fix it at any time, starting with the “ridiculous accounting” imposed by Congress and addressing “Social Security taxes” as part of the larger problem. Government simply pays out more than it takes in. Solution? Eliminate the Social Security tax, making it an integral part of total income tax with no exceptions. (This could lower the rate from the current 6.2 percent that is capped at $118,500 pay.) As a safety net, means-test Social Security benefits: We who currently pay taxes on as much as 85 percent of our Social Security benefit should have benefits reduced. As a retirement safety net, simply provide the option to pay more for a larger Social Security benefit instead of working through complex regulations for more than a half-dozen slightly different but very similar retirement plans. As long as we have a functioning government with taxing and spending authority, Social Security and other government programs will muddle through. How well programs survive depends on congressional will to identify, prioritize and fix the most pressing problems. ****Ken Tomcich** , Arlington** **Allan Sloan used to call** Social Security trust funds **** “Trust Me” funds. I can be more succinct than Mr. Sloan : The trust funds are part of the national debt. They are not bank accounts (The Treasury used to say this explicitly). They will last until they are paid off, not merely until 2000-something. The problems are twofold: More money is being paid out than is coming in. The Treasury borrows more money to pay the difference. For many years the reverse was true, so the Treasury didn’t have to borrow as much. But the excess was spent and a notation was put into the trust funds. And various government officials and the media talk as if the trust funds were bank accounts, which they are not. The funds are part of the national debt. To fix this we must cut benefits or increase payroll taxes (or some combination thereof). ****Jim Martin** , Rockville**

Q&A for federal workers: New TSP investment, withdrawal options

The TSP also offers “lifecycle” funds that mix investments in the basic funds in ratios that vary with the expected withdrawal dates — 2020, 2030, 2040 or 2050. Those mixes become more conservative over time. In 2020, the fund with that date will merge with a current income fund and the TSP will offer funds with five-year increments through 2065. Separately, the TSP is working to allow account holders to invest in funds other than the ones it offers, including actively managed mutual funds, through an investment “window.” There is no projected date for that window to open. Meanwhile, bills are pending in Congress to allow more choices for withdrawing money after leaving the government — and, for those at least age 59½, while still employed. All the planned changes are aimed at bringing the TSP more up to date with what’s available in other retirement savings programs.

A cut to Social Security disability benefits may be around the corner

The annual check-up for Social Security is in, and one program looks more dire than the rest. If Congress doesn’t act, people receiving Social Security disability benefits could see a nearly 20 percent cut to payments at the end of next year, according to the latest version of the Social Security trustees report released Wednesday.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico The disability trust fund will be depleted by the fourth quarter of 2016, leaving the administration with enough income to pay 81 percent of benefits, according to the report, which is updated annually. The health of the Social Security program didn’t change by much, and the cut to disability benefits has been expected for years. But now that Congress has still not come up with a compromise for boosting the funding, the shortfall is more imminent. As explained in the report’s summary: The cuts would most immediately affect the 10.9 million people receiving disability benefits as of 2014, but other beneficiaries could see benefit cuts down the line. If Congress doesn’t act to reform the program, the trust fund used for retirement benefits would be depleted by 2035, a year later than previously expected. Some policy experts say Congress could act to reform the program just in time to avoid the cuts to disability benefits, but any fix may be short term. Lawmakers could decide to redirect some of the payroll taxes going to the retirement trust fund to fill the gap in disability benefits, says Shai Akabas, associate director of economic policy at the Bipartisan Policy Center. “Everybody is in agreement that something needs to happen,” Akabas says. “But until the two parties come together on a compromise, that puts people in a high state of uncertainty.” Another possibility is that lawmakers could come up with a short-term fix to boost the financing for the disability program while also changing benefits in some way. For example, President Obama recently proposed making it so that people who receive unemployment benefits cannot receive Social Security disability benefits at the same time. (Currently you can receive both.)    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico A less likely scenario is that lawmakers could use the urgency of the cuts to disability benefits to come up with broader reform that would stabilize funding for the entire Social Security program, Akabas says, though that would be harder to pull off politically. The Social Security program hasn’t been reformed substantially in decades — and lawmakers have a track record of waiting until cuts are about to happen. A bipartisan commission led by Alan Greenspan in the 1980s called for increasing the payroll tax, gradually increasing the retirement age and introducing a partial tax on benefits, among other adjustments. The changes were eventually approved in 1983, the year that it was expected that the Social Security trust fund would be depleted.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico **Read more:**    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Five of the most important facts everyone gets wrong about Social Security    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico What age is best to start drawing Social Security benefits? Truth is, it depends.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Finance Lab: He’s $90,000 in debt and six years from retirement    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico

Did you know in rural America, disability benefit rates are twice as high as in urban areas?

**Q:** What programs serve Americans with disabilities? **A:** Two federal programs provide benefits to people with disabilities. One is Social Security Disability Insurance (SSDI), which was signed into law in 1956 and serves disabled workers. It is available only to people with enough work experience. The other, Supplemental Security Income (SSI), which began paying benefits in 1974, serves the disabled poor and is a means-tested benefit. **Q:** If the number of people receiving disability has increased so much, it must be easy to get on the rolls, right? **A:** Wrong. Disability benefits, for both SSI and SSDI applicants, are very **** difficult to secure. In fact, only about four in 10 applications are approved. It can take as long as two years, after several layers of appeals, to win approval. **Q:** So what has driven the growth then? **A:** This is more controversial. Most experts agree that the primary factor in SSDI’s growth is demographics. Because of the aging of the baby-boom generation, more people are at an age when disability is more likely. More women also are in the workforce. Then there is simple population growth. Some experts think those factors represent nearly all of the increase. But others point to a congressional act that broadened the definition of disability, economic factors such as recessions and approvals they criticize as too lenient as contributing factors. **Q:** Is the number of people on disability still rising? **A:** No. In 2015, for the first time in decades **** the number of people on disability decreased slightly as the demographic factors that drove the rise started to subside and older Americans aged into their retirement years. **Q:** In that case, what’s the problem? **A:** The program for disabled workers, which Congress had to rescue from insolvency in 2015, is estimated to go broke again sometime over the next decade or so. The government this year is expected to spend $192 billion on disability payments — more than the combined total that will be spent on welfare, unemployment benefits, housing subsidies and food stamps. **Q:** What sort of income, individually, does this provide for recipients? **A:** A meager one. The maximum monthly payment for an SSI beneficiary is $735. The amount of money SSDI beneficiaries receive depends on how much money they made. The average monthly check is less than $1,200. For most beneficiaries, the checks are not taxable. **Q:** Do they receive any other services? **A:** Beneficiaries receive health insurance through Medicare, for SSDI recipients, and Medicaid, for SSI recipients. **Q:** Do beneficiaries ever return to work? **A:** Rarely. Some die within a few years of starting benefits. Other disabled workers try to return to work, but don’t keep their jobs for long. Or they continue working, but make less than the income threshold that would put their benefit at risk. Less than 4 percent of disabled workers get off disability within 10 years of their first payment. **Q:** Are disability beneficiaries spread evenly nationwide? **A:** The majority of disability recipients live in densely populated urban and suburban areas, but they are disproportionately prevalent in rural America — where, on average, 9.1 percent of the working-age population receives disability, compared to the national average of 6.5 percent and an urban rate of 4.9 percent. Beneficiaries are even more overrepresented in the Southeast and central Appalachia. These are places economists have called “disability belts.”

Medicare trust fund projected to last until 2026 as health costs drop

Falling health-care costs are brightening the financial outlook for Medicare, extending the life of the trust fund that supports the program until 2026 — two years later than previously forecast. The new projections, released Friday by the program’s trustees, credit President Obama’s Affordable Care Act in part for the improvement in the finances of the federal health insurance program for the elderly. The act’s limits on Medicare Advantage, a more expensive form of Medicare run by private insurers, are proving more effective than previously forecast, the report said. The trustees also cited lower-than-expected spending in “most . . . service categories — especially skilled nursing facilities,” a development that is not well understood. Costs have been slowing throughout the health-care industry, partly because of the recent recession, economists say, but also because of what appear to be more fundamental changes aimed at reducing waste and improving health outcomes. The trustees reported no such gains in the finances of Social Security, but no significant deterioration, either. The Social Security trust funds will have enough cash to pay full retirement and disability benefits until 2033, the report said. Both programs still face huge long-term financial problems as the baby-boom generation retires. And on Friday, analysts worried that the sunnier projections, together with an improving economy and a rapidly shrinking federal budget deficit, could serve to further dampen enthusiasm in Washington for tackling the nation’s toughest fiscal problems. “To me, that’s the real loss of all this good news,” said Paul B. Ginsburg, president of the Washington-based Center for Studying Health System Change. “I don’t think anyone except the most extreme person, seeing these trends, thinks the [Medicare] cost problem has been solved. But the way politicians are, it does tend to take the pressure off.” At a news conference at the Treasury Department to release the report, top administration officials pledged to do more to control costs even as they hailed the early success of the president’s signature health-care initiative. The Affordable Care Act has come under sustained attack since its passage in 2010 from Republicans who accused Obama of raiding Medicare to help pay for an expansion of health coverage for the uninsured. The Affordable Care Act indeed aimed to slice roughly $700 billion in savings from Medicare over a decade, mainly through cost controls for providers. The result since its passage, Health and Human Services Secretary Kathleen Sebelius told reporters, has been to extend the life of the trust fund that pays hospital bills by nearly a decade. “Today’s trustee report confirms that the ACA is continuing to strengthen Medicare and ensure its solvency for future generations,” Sebelius said, noting that the administration had advanced that goal “without eliminating a single guaranteed benefit.” With Medicare spending per person now rising at the historically low rate of 1.7 percent a year, Sebelius said, seniors can also expect to profit: Preliminary estimates show Medicare premiums for 2014 will not rise “a single dime.” Sebelius is one of four administration officials who serve on the board of trustees for Medicare and Social Security. There are also two public trustees: Charles Blahous, a research fellow at the Hoover Institute, and Robert D. Reischauer, a former president of the Urban Institute and a former director of the Congressional Budget Office. At the news conference, Reischauer cautioned that it “would be a mistake” to interpret the two-year improvement in the life of the Medicare trust fund “as a significant development.” He noted that the future of Medicare “depends critically on our ability to adhere to the [spending] discipline in the ACA” — a prospect that has long generated skepticism. Even if the act holds up, independent analysts say policymakers will have to do more to shore up Medicare and Social Security at a time when 10,000 people are retiring daily. “The good news doesn’t mitigate the long-term challenges with the growing elderly population,” said Patricia Neuman, director of the Program on Medicare Policy at the Henry J. Kaiser Family Foundation. Reischauer and Blahous also warned against complacency for Social Security. While the trust fund for retirement benefits will be solvent for decades, a separate fund for disability benefits will run out in 2016 without congressional action. Making both programs fully solvent for 75 years would require an immediate increase in the 12.4 percent payroll tax of 2.7 percentage points, or an immediate cut in benefits — for all beneficiaries — of more than 16 percent. “Even if a Social Security solution were enacted today and effective immediately, it would require financial corrections that are substantially more severe than those enacted” in the last major reforms to Social Security in 1983, they wrote in a message included in the report. Treasury Secretary Jack Lew said Obama “recognizes how essential reform is” and “is determined to work on a bipartisan basis to put Social Security and Medicare on a stronger footing.” In his most recent budget request, Obama proposed using a less-generous measure of inflation to calculate annual cost-of-living adjustments for Social Security, an idea that would fix about a quarter of the program’s long-term funding shortfall. Obama has also proposed to cut Medicare spending by reducing “excessive subsidies to prescription drug companies and ask[ing] wealthy seniors to contribute a little more,” as Lew put it. But those proposals have gone nowhere in Congress, where members of both parties have shied away from reforms that would affect current beneficiaries. There is some hope that the need to raise the federal debt limit later this year will create fresh pressure for a deal. But for now, Lew acknowledged Friday, momentum has waned. “Our challenge is going to be the path to have this conversation in a bipartisan way,” Lew said. “I remain hopeful that we will do that. Doing it sooner rather than later gives us more choices.”

The Social Security myth

George F. Will [“Fixing a judgmental tax code,” op-ed, Dec. 13] charged Senate Majority Whip Richard J. Durbin (D-Ill.) with a falsehood for saying, “Social Security does not add a penny to the deficit.” Mr. Will pointed out that there was a shortfall of $165 billion between payouts and revenue. What Mr. Will failed to note is that this $165 billion is drawn from a trust fund of $3 trillion (and change) that built up over several decades. Mr. Will used a logic that only a conservative columnist (or banker) can love: Workers can put money in the bank, but they cannot withdraw it. The argument that Social Security is running a deficit and must be reformed is the biggest “bait and switch” of all time. The 1986 reform of Social Security stated explicitly that the program would run surpluses until baby boomers begin to retire, and then it would draw down those accrued surpluses until the baby-boomer wave passed. ****Pat Thompson** , Gilbert, Ariz.**

A wise prescription for Social Security Disability Insurance

BY THIS time next year, a crucial federal safety-net program could be out of cash, or almost out of cash. We refer to Social Security Disability Insurance (SSDI), which paid benefits to 9 million disabled workers (and 2 million of their dependents) in 2014, at a total annual cost of $141 billion. There’s no mystery why this has happened: Growth in beneficiaries has outstripped the accumulation of payroll taxes in the Social Security trust fund dedicated to disability benefits. There’s also no doubt about what will happen if Congress fails to act: a sudden 19 percent benefit cut, possibly right in the middle of the 2016 election campaign. Those are the cold, hard facts, according to the newly published 2015 annual report of the Social Security system’s trustees. What to do about those facts, however, is controversial. It would be relatively simple to adjust the share of payroll taxes that flows into Social Security’s two trust funds, so that the old age and survivors’ fund gets less and the disability fund gets more. That’s essentially how Congress handled the last disability funding crisis in 1994. And it’s how the White House, in a new paper released by the Office of Management and Budget, is recommending that lawmakers address this one. This recommendation reflects the White House’s view that SSDI’s growth has slowed in the past couple of years and that most of it reflected demographic factors — such as population aging and the entrance of women into the workforce — rather than the design of the program itself. Therefore, no immediate reforms are needed beyond a shift of resources into SSDI “while policymakers develop longer-term policies,” as the OMB report puts it. The problem is that SSDI is far from functioning optimally; while most of the program’s rising cost is, indeed, due to demographics, not all of it is. As recent research in labor economics has shown, some of the growth is due to post-1984 program rules that made it easier to claim disability on the basis of mental or musculoskeletal ailments. Perversely, SSDI provides employers no incentive to keep individuals at work, earning wages, while providing those who get benefits no incentive to return to the workforce. As economist David Autor of MIT has written, “the SSDI program spends too few societal resources helping individuals with disabilities to remain employed and too many resources supporting the long-term dependency of individuals who could be self-sufficient with . . . appropriate accommodation and support.” Though hardly the sole, or leading, cause of declining labor-force participation in the United States, SSDI is nevertheless a factor. Reforming it could raise the economy’s potential growth, as well as millions of people’s life prospects. The pending crisis creates an opportunity for bipartisan compromise, in which Congress diverts more money to SSDI — linked to structural changes. The last tax reallocation, 20 years ago, “was intended to create the time and opportunity for such reforms,” as the Social Security trustees’ report puts it; it would seem that the time, and the opportunity, are finally here. **Read more on this issue:** Charles Lane: Chris Christie’s tilt at Social Security Robert J. Samuelson: Social Security disability program reveals budget quagmire George Will: The harm incurred by a mushrooming welfare state

The illusion of health-care ‘trust funds’

_Bryan R. Lawrence is founder of Oakcliff Capital, a New York-based investment partnership._ Machiavelli famously advised princes to use deception to win power and to get things done. Five centuries later, a deception used by our leaders to win power is making it harder for them to fix the biggest issue facing our nation. If we do not reduce the growth rate of health-care costs, they will consume the federal budget. We risk a debt crisis rivaling the 2008-09 crash. Changes that other countries have made soberly, achieving lower costs and better health outcomes, will be imposed on us by our creditors. Their goal will be the return of their money, not the quality of Americans’ health care. This danger is laid out clearly in reports from the Treasury Department and Medicare trustees, calling our finances “unsustainable.” President Obama said in 2009 that “the biggest threat to our nation’s balance sheet is the skyrocketing cost of health care. It’s not even close.” But many voters don’t understand the need to reduce cost growth. Decades of bad accounting, and of politicians promising to protect the Medicare and Social Security “trust funds,” have encouraged the widespread belief that people have spent years paying into a fund for their future benefits. This election season is no exception. The presidential candidates accuse each other of raiding Medicare — to the tune of $716 billion over the next 10 years — and offer competing plans to keep its trust fund from going to zero. One example is Bill Clinton’s speech at the Democratic convention, in which he said the Democrats would keep the trust fund from “going broke”until 2024, as opposed to 2016 under the Republicans. But the government’s numbers show that Medicare has a trust fund in name only. Medicare spent $549 billion in 2011, according to the latest report from its trustees, but Medicare had just $325 billionin assets in December. Is it accurate for anyone to describe an account able to cover just seven months of spending as a “giant trust fund”? Worse, only 38 percent of Medicare’s expenses are covered by payroll taxes, down from 62 percent in 1990. Beneficiaries’ premiums cover 13 percent, but the Treasury Department is required by law to make up the difference. The trustees have calculated that paying for the boomers’ retirement without additional income taxes would require the Treasury to immediately deposit $27 trillion into the Medicare trust fund and $11 trillion into the Social Security trust fund. And because Congress tends to ignore its own cost controls, the Medicare trustees believe that legally required cuts to physician reimbursement rates will continue to be overridden and that the Affordable Care Act’s cost controls are unlikely to be effective. “[A]ctual future Medicare expenditures are likely to exceed the intermediate projections shown in this report, possibly by quite large amounts,” they wrote, and they give an alternative set of projections. According to the Government Accountability Office, this likely cost-control failure would require that an additional $12 trillion be deposited into Medicare. Because we don’t have $50 trillion, the Medicare trustees have calculated the tax increase on working Americans that we would need immediately and for the next 75 years: 4 percent of gross domestic product, or almost 6 percent of GDP if the cost controls don’t work. But taxes can’t be the whole answer. Federal income taxes paid by all Americans were equal to about 6 percent of GDP in 2009, the latest year for which data are available. So if costs can’t be controlled, federal income taxes would have to double. Or, if the top 1 percent were made to pay the entire shortfall, their effective federal tax rate would have to go from 24 percent to more than 80 percent. To feed a health-care system that costs more and delivers less than any other developed country, do we really want to double income taxes on middle-class Americans, or impose confiscatory tax rates on our highest-earning citizens? Given the choices we must make, why are we letting the presidential candidates argue about how to keep that $325 billion “trust fund” from going to zero? It’s as silly as a couple facing a $500,000 problem arguing about how to keep a minimum balance in their checking account. I have some sympathy for politicians who are trying to be responsive to their constituents. It is rational for them to wait for a crisis to do what is unpopular and to place some of the blame on voters unwilling to hear about hard choices. The illusion fills a need. Who doesn’t want a trust fund, especially in today’s economy? But a crisis will bring solutions more painful than change we make ourselves. Our health-care system is fixable — all other developed countries provide universal health care with better outcomes at significantly lower costs. All have settled on a way to choose which services to fund. We have not done this work because it does not poll as well as talking about phantom trust funds. A political season filled with innumerate debate is bad enough. A debate that further cements an illusion into voters’ minds is worse. Whoever wins will have to govern. The campaign we are having will not make doing so easier. **Read more on this issue:** Robert J. Samuelson: Missing from the presidential debate — talk of our fiscal future The Post’s View: Both candidates dodging serious issues in the debates Bryan R. Lawrence: Why we can’t afford Medicare

Charles Lane: Social Security Disability Insurance’s incentive not to work

In the 1960s, Woody Allen bemoaned the fact that it was impossible to get a divorce in New York unless one spouse could prove the other’s infidelity. “The Ten Commandments say, ‘Thou shalt not commit adultery,’ ” Allen quipped. “But New York state says you have to.” A similar contradiction plagues American thinking — and American policy — on disability. The Americans With Disabilities Act, passed with bipartisan support in 1990 at the urging of then-President George H.W. Bush, enshrines the notion that every American can and should hold a job regardless of physical or mental limitations. Under the ADA, employers who refuse to hire or promote the disabled may be liable for money damages in federal court. Social Security Disability Insurance, however, pays people who can show that they are too mentally or physically impaired to remain in the labor force. In short, for many workers, SSDI creates a quasi-right _not_ to work. This paradox is getting expensive. SSDI spending has doubled as a percentage of gross domestic product in the last 25 years, according to the Congressional Budget Office. The program paid $128.9 billion to 8.3 million beneficiaries in fiscal 2011, about one-fifth of all Social Security spending. The average monthly benefit is $1,100, slightly less than the average Social Security retirement check, but after two years on SSDI, beneficiaries also get Medicare. Indeed, SSDI added $80 billion to the cost of Medicare in fiscal 2011. The disability trust fund, financed by a portion of the Social Security payroll tax, is set to run out of cash by 2016, though the government will undoubtedly borrow to meet its obligations. What’s going on? Work certainly hasn’t gotten more physically demanding; quite the contrary. There’s no evidence that workers in general are substantially less healthy than they used to be. The answers lie in SSDI’s haphazard history. When first adopted in 1956, the program applied only to workers older than 50 who were terminally ill or unable to work for the rest of their lives. It was essentially an early- retirement program for people with cancer, heart disease and other grave physical conditions. In 1960, however, Congress removed the minimum age requirement, and in 1965, it allowed people to qualify if they suffered from a condition rendering them unable to “engage in substantial gainful activity” for a year or more, including mental and musculoskeletal ailments. After that, the rolls swelled with people claiming crippling back aches and depression. Both the Carter and Reagan administrations tried to cull undeserving cases, but the resulting backlash was so strong that Congress actually liberalized the rules in 1984. In 2010, mental and musculoskeletal conditions accounted for 54 percent of all new SSDI cases, according to the CBO. Though Washington pays benefits, states help decide who qualifies. Approval rates vary wildly across the country. Experience has been consistent in one respect, however: Applications spike during serious recessions, as laid-off workers turn to SSDI when unemployment benefits run out. Thanks to the Great Recession, applications spiked in 2010 to an all-time high of 2.94 million, before declining slightly last year. I don’t mean to imply that all, or even most, SSDI beneficiaries are malingering. Indeed, some of the recent increase in enrollment would have occurred anyway due to the aging of the population. It is nevertheless true that SSDI offers all the wrong incentives: Employers pay nothing when their workers go on SSDI. And for many workers, especially those with few skills, the alternative to a steady SSDI check (and, often, Medicare) would be a minimum-wage job, possibly one without insurance. Of course, the longer one stays out of work, the rustier one’s skills get. The program has no training or rehabilitation component. Not surprisingly, only about 1 percent of SSDI beneficiaries have left the rolls annually since the mid-1980s, according to data compiled by MIT economist David Autor, a leading advocate of reform. More than 6 percent of the U.S. working-age population is on SSDI. Does that statistic represent laudable social solidarity, a scandalous excess of the welfare state, or a tragic but unavoidable idling of human resources? Or is it an expression of this country’s understandable ambivalence about exactly what we should expect from the disabled, in an age when we know that depression really does disable some people — and that a man with two prosthetic legs can run in the Olympics? We have no choice but to reconcile our conflicting goals and sentiments in a more cost-effective way than SSDI does now. Otherwise, SSDI’s growth will continue to erode productivity, swallow up scarce tax dollars, and make it that much harder to afford a sufficient safety net for everyone who needs it. **_lanec@washpost.com _ ** **Read more on this subject:** Robert J. Samuelson: Would Roosevelt recognize today’s Social Security? The Post’s View: The tattered safety net for the disabled Kathleen Hall Jamieson: Could a truly honest politician win? News story: Employers shift disability insurance costs to workers

The Social Security mess

Regarding the Sept. 28 Business article “Social Security is a mess. How to fix it?”: A “trust fund” will not keep Social Security self-financed until 2020. No money has ever been in this fund, just unenforceable promises to pay back past excess Social Security revenue the government spent rather than saved. Yes, the government made good on some of those promises last year when Social Security revenue fell short by $76 billion, but the money actually came from general government revenue and more government borrowing, not from the trust fund. That squeezed other government programs and helped push up our already massive debt. Unless Social Security is reformed, including benefit cuts and revenue increases, the situation is quickly going to get worse. ****Willis Bush** , Dumfries** ● “ Social Security is a mess. How to fix it? ” left out the Social Security solutions favored by most Americans, according to National Academy of Social Insurance research: Gradually raise the contribution rate that workers and employers each pay from 6.2 percent of earnings to 7.2 percent and gradually eliminate the cap on taxable earnings (now $117,000). These two changes wipe out Social Security’s shortfall and pay for benefit improvements. Currently the 6 percent of workers whose earnings exceed the cap stop paying each year when they hit the cap (for example, in August if you earn $200,000; in January if you earn $2 million). With the cap eliminated, top earners would contribute to Social Security all year as other workers do. In return, they would get slightly higher benefits and, more important, the benefit of paying their fair share for a program that stabilizes the economy and provides essential security to all Americans. ****William J. Arnone** , Washington** The writer is chair of the board of directors of the National Academy of Social Insurance.

Social Security, which protects old and young, needs bolstering

Regarding the Nov. 18 editorial “Liberalism gone awry”: Downplaying the looming retirement crisis, The Post asserted that Congress must choose among deficit reduction, investing in the young and strengthening Social Security. These are false trade-offs. Today, half of Americans have less than $10,000 in savings, and only 14 percent are “very confident” they will have enough money to retire, according to the Employee Benefit Research Institute. Faced with this crisis, Social Security is more important than ever, particularly for today’s young workers who find it difficult to save and lack access to an employer-provided pension. That is why we introduced legislation to increase Social Security benefits and extend the solvency of the trust fund through 2049 by removing the wage cap that unfairly protects high earners from paying payroll taxes at the same rate as middle-class workers. Bear in mind that Social Security does more than keep seniors out of poverty; it also invests in young people, as millions of children receive benefits as dependents of retired, disabled or deceased workers. We do not have to choose between the young and the elderly. By expanding Social Security, we can do both. ****Tom Harkin and Linda Sanchez** , Washington** Tom Harkin, a Democrat, represents Iowa in the Senate. Linda Sanchez, a Democrat, represents California’s 38th District in the House. ● The Post rightly argued that we should invest more in children. But it should have noted the critical role of Social Security in protecting and supporting children and families. Social Security benefits millions of children who live in households that entirely or partially rely on the program to survive. It pays more benefits to children than does almost any other federal program. Benefits go to nearly 100 percent of children whose parent or caregiver dies or is disabled. Social Security is especially important for children being raised by grandparents. In fact, 22 percent of families in which grandparents or other relatives are raising children live in poverty. Without Social Security, that number would be closer to 60 percent. Our nation’s budget challenges are real, but any plan to reform Social Security must recognize that children and older adults live in units, and those units are called families. Social Security is more than a retirement program. It’s a critical family protection program. ****Donna M. Butts** , Fort Washington** The writer is executive director of Generations United. ● I was aghast to read the editorial excoriating a proposed increase in Social Security benefits for seniors. Increasing Social Security benefits is the right thing to do. A person may work 45 years or more, with a Social Security contribution made every paycheck. Most retirees will not live more than 15 or 20 years. In retirement, seniors should not have to rely on the current low level of benefits, since increasingly this benefit is their main or only source of income. Do not forsake us when we are old. That is not what the United States is about. ****Michael Kurman** , Owings Mills, Md.**

Romney’s budget would require a 40% cut to everything but Medicare, Social Security, and defense

_This analysis of Mitt Romney's budget promises was originally posted on August 14. But with Romney set to officially accept the GOP nomination for president tonight, it's worth taking another close look at the policy proposal he's placed at the center of his campaign._ The Republican budget might keep President Obama’s cuts to Medicare. But a Romney administration wouldn’t. Lanhee Chen, the campaign’s policy director, left no room for doubt in his statement: “A Romney-Ryan Administration will restore the funding to Medicare, ensure that no changes are made to the program for those 55 or older, and implement the reforms that they have proposed to strengthen it for future generations.” Avik Roy, a health-care policy adviser to Romney, doubles down. “Whatever you think of Obamacare’s cuts to Medicare, the fact is that a Romney administration would repeal them,” he writes. But then how will a Romney administration make its budget math add up?  Romney is not going to make these kinds of cuts to the federal pie. (Shannon Stapleton — Reuters) Consider what Romney has promised. By 2016, he says federal spending will be below 20 percent of GDP, and at least 4 percent of that will be defense spending. At that point, he will cap federal spending at 20 percent of GDP, meaning it can never rise above that level. All that’s hard enough. Romney will have to cut federal spending by between $6 and $7 trillion over the next decade to hit those targets. As my colleague Suzy Khimm has detailed, those budget promises already require cuts far in excess of what even Paul Ryan’s budget proposes. But Ryan’s budget includes more than $700 billion in Medicare cuts over the next decade, Romney’s budget won’t. And Romney promises that there will be no other changes to Social Security or Medicare for those over 55, which means neither program can be cut for the next 10 years. But once you add up Medicare, Social Security and defense and you’ve got more than half of the federal budget. So Romney is going to make the largest spending cuts in history while protecting or increasing spending on more than half of the budget. The Center on Budget and Policy Priorities indulged this idea back in May. If Social Security and Medicare are spared from cuts, then to get federal spending under 20 percent of GDP while holding defense spending at 4 percent of GDP, “all other programs — including Medicaid, veterans’ benefits, education, environmental protection, transportation, and SSI — would have to be cut by an average of 40 percent in 2016 and 57 percent in 2022.” Consider what the Romney campaign, then, is saying: If Romney is elected, then by his third year in office, every single federal program that is not Medicare, Social Security, or defense, will be cut, on average, by 40 percent. That means Medicaid, infrastructure, education, food safety, road safety, the postal service, basic research, foreign aid, housing subsidies, food stamps, the Census, Pell grants, the Patent and Trademark Office, the FDA — all of it has to be cut by, on average, 40 percent. If Romney tried to protect any particular priority, it would mean all the others have to be cut by more than 40 percent. That’s not even remotely plausible. The consequences would be catastrophic. The outcry would be deafening. And Romney has shown no stomach for selling such severe cuts. Consider that, even as we speak, Romney is running away from the unpopular bits of the Ryan budget, which delivers far less devastating cuts than what Romney is promising. Does anyone really believe that he will take office and cut education by 40 percent? That he will take office and, after running away from specifics during the campaign, propose what would surely be the most unpopular budget in American history? And does anyone believe that the real Romney is the guy who made these outlandish budget promises in order to win a Republican primary, rather than the guy who is disavowing Ryan’s Medicare cuts mere days after naming him to the ticket? This is simply not a credible budget plan, and Romney’s fast retreat from Ryan’s most unpopular cuts makes it even less credible. And yet Romney, who has never released the specific cuts that would make his numbers add up, repeatedly touts it on the campaign trail, and the media dutifully reports his promises to cut federal spending by more than $500 billion in 2016, and in fact to balance the budget by the end of his second term, which would require far larger cuts than what I’ve outlined here, despite the fact that everyone basically knows these cuts aren’t credible and will never happen. I’m not sure what alternative there is, exactly, except to say, as clearly as possible, Romney’s budget plan is a fantasy, and it will never happen. I would revise that opinion if Romney released a list of specific cuts that achieved his spending goals and showed himself willing and able to take the heat for them. But I don't think that's going to happen.

Retirement fund tries to reassure workers in anticipation of debt ceiling maneuver

The federal government once again may resort to a financial maneuver involving federal employee retirement savings to stave off a default, and the Thrift Savings Plan once again is seeking to assure investors that there would be no personal cost to them. The Treasury Department has said it can use several short-term maneuvers, including one involving the Thrift Savings Plan’s government securities fund, to buy time during the debt ceiling standoff. That fund, called the G Fund, is available only through the 401(k)-style TSP program for federal employees. It yields returns that are nearly comparable to those of mid-term Treasury bonds, although investments are made daily. In a “disinvestment” period, the Treasury stops issuing the securities that make up the fund. Though the Treasury has yet to use the measure, TSP managers released a statement in hopes of calming any possible anxiety. “G Fund investors are always fully protected and G Fund earnings are fully guaranteed by the Federal Government due to statutory protections in the Thrift Savings Plan Investment Act of 1987,” TSP executive director Greg T. Long said in a statement Monday. “This protection, known as the ‘make-whole’ provision, will work to ensure that G Fund investors are completely unaffected by the limitation on securities issued by the U.S. Treasury. G Fund account balances will continue to accrue earnings and be updated each business day, and loans and withdrawals will be unaffected.” Under the make-whole procedure, after the debt ceiling is raised, the TSP and the Treasury reconstruct securities in the fund to replicate what they would have been without an interruption in their issuance. The TSP disinvestment maneuver has been used numerous times in similar situations. This time, the Treasury already has used a separate maneuver involving the civil service retirement fund, which it similarly said will not affect benefits to federal retirees. As of year-end 2012, the G fund held $142 billion, 43 percent of the $330 billion on investment with the TSP.

Romney’s budget plan is a fantasy

The Republican budget might keep President Obama's cuts to Medicare. But a Romney administration wouldn't. Lanhee Chen, the campaign's policy director, left no room for doubt in his statement: "A Romney-Ryan Administration will restore the funding to Medicare, ensure that no changes are made to the program for those 55 or older, and implement the reforms that they have proposed to strengthen it for future generations." Avik Roy, a health-care policy adviser to Romney, doubles down. "Whatever you think of Obamacare’s cuts to Medicare, the fact is that a Romney administration would repeal them," he writes. But then how will a Romney administration make its budget math add up?  Consider what Romney has promised. By 2016, he says federal spending will be below 20 percent of GDP, and at least 4 percent of that will be defense spending. At that point, he will cap federal spending at 20 percent of GDP, meaning it can never rise above that level. All that's hard enough. Romney will have to cut federal spending by between $6 and $7 trillion over the next decade to hit those targets. As my colleague Suzy Khimm has detailed, those budget promises already require cuts far in excess of what even Paul Ryan's budget proposes. But Ryan's budget includes more than $700 billion in Medicare cuts over the next decade, Romney's budget won't. And Romney promises that there will be no other changes to Social Security or Medicare for those over 55, which means neither program can be cut for the next 10 years. But once you add up Medicare, Social Security and defense and you've got more than half of the federal budget. So Romney is going to make the largest spending cuts in history while protecting or increasing spending on more than half of the budget. The Center on Budget and Policy Priorities indulged this idea back in May. If Social Security and Medicare are spared from cuts, then to get federal spending under 20 percent of GDP while holding defense spending at 4 percent of GDP, "all other programs — including Medicaid, veterans' benefits, education, environmental protection, transportation, and SSI — would have to be cut by an average of 40 percent in 2016 and 57 percent in 2022." Consider what the Romney campaign, then, is saying: If Romney is elected, then by his third year in office, every single federal program that is not Medicare, Social Security, or defense, will be cut, on average, by 40 percent. That means Medicaid, infrastructure, education, food safety, road safety, the postal service, basic research, foreign aid, housing subsidies, food stamps, the Census, Pell grants, the Patent and Trademark Office, the FDA -- all of it has to be cut by, on average, 40 percent. If Romney tried to protect any particular priority, it would mean all the others have to be cut by more than 40 percent. That's not even remotely plausible. The consequences would be catastrophic. The outcry would be deafening. And Romney has shown no stomach for selling such severe cuts. Consider that, even as we speak, Romney is running away from the unpopular bits of the Ryan budget, which delivers far less devastating cuts than what Romney is promising. Does anyone really believe that he will take office and then propose cuts that make the Ryan budget look soft on federal spending? That he will take office and, after running away from specifics during the campaign, propose what would surely be the most unpopular budget in American history? And does anyone believe that the real Romney is the guy who made these outlandish budget promises in order to win a Republican primary, rather than the guy who is disavowing Ryan's Medicare cuts mere days after naming him to the ticket? This is simply not a credible budget plan, and Romney's fast retreat from Ryan's most unpopular cuts makes it even less credible. And yet Romney, who has never released the specific cuts that would make his numbers add up, repeatedly touts it on the campaign trail, and the media dutifully reports his promises to cut federal spending by more than $500 billion in 2016, and in fact to balance the budget by the end of his second term, which would require far larger cuts than what I've outlined here, despite the fact that everyone basically knows these cuts aren't credible and will never happen. I'm not sure what alternative there is, exactly, except to say, as clearly as possible, Romney's budget plan is a fantasy, and it will never happen.

Despite gains, much work remains on entitlement programs

_J. Robert Kerrey was a Democratic U.S. senator from Nebraska from 1989 to 2001. John C. Danforth was a Republican U.S. senator from Missouri from 1976 to 1995._ A lot can happen in 20 years. And yet sometimes you look back and find that for all the apparent change, you are not very far from where you started. We have had that feeling lately as we look back on the work we did as co- chairs of the 1994 Bipartisan Commission on Entitlement and Tax Reform. In August of that year, our commission issued an interim report. Thirty of the 32 members agreed that “current trends are not sustainable.” Much has changed since then. Yet in Washington, one thing remains the same: Current trends are unsustainable. The numbers have changed, of course. In fact, some of the changes have been positive, particularly the projections for health-care spending and interest on the debt. For the next few years at least, the debt is projected to remain relatively stable as a share of the economy. Unfortunately, that is not the end of the story. We still have a structural mismatch between entitlement promises and revenue. An aging population and rising health-care costs, the basic dynamics that we warned about, remain a threat to fiscal stability. Meanwhile, the passage of time, the failure to take more ambitious actions and the enactment of new obligations have combined to limit our choices and placed the government in a more difficult position to address the challenges than it was in 20 years ago. The debt burden has grown sharply. Debt held by the public has gone from 48 percent of gross domestic product in 1994 to 74 percent in 2014. This limits our fiscal flexibility and constrains the policy choices of future generations. Demographics are working against us. The baby boom generation, which was coming into its peak earning years when we were on the commission, has begun to retire, slowing potential economic growth, lowering potential revenue and increasing spending on retirement and health-care benefits. Social Security, which still had many years of positive cash flows ahead of it in 1994, has begun to run cash deficits. With each passing year, the cumulative gap that must be closed grows wider, and the Disability Insurance Trust Fund is projected to run dry before the next president takes office. Government health-care benefits have been expanded with a Medicare prescription drug benefit (Part D), wider eligibility for Medicaid and new health-insurance subsidies. Discretionary spending has been capped at its lowest level in more than 50 years, making further savings from this category improbable. Simply maintaining the current caps will be an onerous challenge. Income-tax rates have been cut for most households, and the revenue drain from “tax expenditures” has increased. Even the good news on interest costs and health care comes with some major caveats. Interest on the debt has grown more slowly than we projected, primarily because deficits were not as high as forecast in the early years, and interest rates in recent years have been unusually low due to the economic slowdown. As deficits begin to rise again and interest rates return to more traditional levels, however, the cost of servicing our higher debt will become the fastest-growing category of the budget. The prospect of spiraling interest costs has merely been postponed, not eliminated. Health-care cost growth has moderated considerably in recent years, and this development is now programmed into the long-term projections by both the Congressional Budget Office and the Medicare trustees. However, the extent to which this slower growth will persist is highly uncertain. If the recent decrease in per person costs proves to be temporary, as some analysts believe, the expense of providing benefits could rise much higher than projected. Moreover, the favorable long-term projections depend in part upon the success of cost-control strategies in the Affordable Care Act that have yet to be fully implemented or tested. The Medicare chief actuary has warned that some of the assumed savings may not be feasible over the long term. Buying time through incremental change has also left in place a dynamic that is transforming the federal budget into little more than an automated process of writing checks to individuals. Such transfer payments have grown from 56 percent of the budget in 1994 to 70 percent in 2014. Federal investment spending has continued a decline that began before our report. According to the Office of Management and Budget, federal spending on major investment programs is now 2.7 percent of GDP and 12.8 percent of the budget — both historic lows. Forty years ago, those numbers were 4.1 percent of GDP and 22.7 percent of the budget. We’re placing a growing burden on future workers and investing less in the economy that will be called upon to support that burden. And this generationally irresponsible pattern will continue, absent major changes that alter the long-term trends rather than simply postpone a crisis. We still believe that such changes can happen. For the sake of a stronger economy for future generations, they must. But the clock is ticking, and these issues have largely been ignored on the campaign trail this fall. We can’t wait another 20 years. **Read more on this issue:** Catherine Rampell: Cautious optimism on the economy Charles Lane: Another tax reform solution: taxing consumption Fred Hiatt: Obama’s false victory over the deficit Robert J. Samuelson: Budget policy as prayer The Post’s View: Obama budget avoids needed entitlement and tax reform Lawrence Summers: Strategies for sustainable growth

Ryan supported Social Security privatization in 2005. What was that again?

At the vice-presidential debate Thursday, Rep. Paul Ryan was asked about the time when, back in 2005, he pushed to partially privatize Social Security. Here's how Ryan replied: "What we said then, and what I've always agreed, is let younger Americans have a voluntary choice of making their money work faster for them within the Social Security system." Ryan was quick to add that Mitt Romney isn't proposing anything like this now. So what _was_ the plan to privatize Social Security anyway? And what were the main criticisms of the proposal? Here's a quick refresher. **Where it started:** Back in his 2005 State of the Union address, George W. Bush declared that Social Security was "headed for bankruptcy." As a remedy, he outlined a proposal for younger workers to divert some of their payroll tax contributions to the program into private accounts, where people could invest in a "conservative mix of bonds and stock funds." He argued that these personal accounts could deliver a higher rate of return than what Social Security offers. In the ensuing months, several Republicans in Congress sponsored legislation to allow younger workers to steer a portion of their payroll tax contributions to Social Security into private accounts. The bill sponsored by Paul Ryan and Sen. John Sununu (R-N.H.) would have allowed workers under the age of 55 to take around half of their payroll tax contributions and place it in a private account, if they so chose. **The criticisms:** The main budgetary hurdle with these privatization proposals is that they would make Social Security _less_ solvent in the short term. There's a transition problem. If younger workers can divert their payroll taxes into private accounts, then the Social Security Trust Fund has less money available to pay current retirees. So the government would either have to borrow money or raise taxes or cut benefits to make up the difference. At the time, the Center on Budget and Policy Priorities estimated that the Ryan-Sununu plan would create an $85.8 trillion shortfall by 2050. (Ryan's plan was the most far-reaching, but even more modest proposals like that of Lindsey Graham would have left Social Security about $17.1 trillion in the hole.) The Social Security Administration concurred that carving out personal accounts would increase the deficit. The Congressional Budget Office found that diverting payroll taxes into private accounts would not improve the health of Social Security — unless the plan included sharp payroll tax hikes and benefit cuts. **Was privatization a better deal?** Think tanks in favor of privatization, such as Cato and Heritage, argued that workers could earn a higher rate of return by investing in stocks than the Social Security program gets by investing in Treasuries. But other conservative economists, like Harvard's Robert Barro, disputed that there was any sort of "free lunch" here — stocks do carry a premium, but they are also riskier. The CBO, for its part, argued that when you account for this extra risk, personal accounts wouldn't yield a higher return. A related worry was that privatization would leave retirees vulnerable to the whims of the stock market. What would happen, say, if a person retired just as the financial crisis hit? An analysis (pdf) by the Center for American Progress's Ben Furnas found that a worker who had retired in 2008 would have lost $26,000 in Social Security benefits if he had been enrolled in private accounts his whole life. **Why it died:** The Republican proposal met with furious push-back in 2005 — almost no Democrats supported it — and the GOP decided not to even bring it up for a vote. Bush turned his attention elsewhere, giving Social Security just a perfunctory mention in his next State of the Union address, and eventually dropped the subject. **Republicans used to support private accounts, but they're quieter on the subject now:** Ryan, obviously, has been a major backer of private accounts in the past. His "Road Map for America's Future" in 2010 contained a Social Security privatization proposal, though his most recent 2012 budget didn't include the idea. Mitt Romney, for his part, has been supportive of carving out private accounts in the past. Here's what he said in a 2007 Republican primary debate: "The president said let’s have private accounts and take that surplus money that’s being gathered now in Social Security and put that into private accounts. That works." Romney also wrote favorably about privatization in his 2010 book, "No Apology." But more recently, Republicans have been shying away from idea. In last night's vice-presidential debate, Ryan stressed, "That's not what Mitt Romney's proposing." In the previous debate, Romney himself simply said "neither the president nor I are proposing any changes for any current retirees or near retirees, either to Social Security or Medicare." Instead, Romney supports raising the retirement age for younger workers and curbing the growth of benefits for higher-income Americans.

White House budget director’s claim that Social Security disability is ‘very wasteful’

Candidate Donald Trump vowed to protect and save Social Security “without cuts.” Yet President Trump’s budget director, Mick Mulvaney, recently seemed to indicate the administration is reconsidering Trump’s stance on saving the program without making reductions in spending. Mulvaney said Social Security disability insurance is the “fastest growing program” that “grew tremendously under President Obama,” and a “very wasteful program” that needs to be fixed. Are his claims accurate? Social Security is designed to help the elderly and the poor, by providing workers disability pay and life insurance while they work, and a basic level of income in retirement.  The number of beneficiaries of disability insurance peaked under President Barack Obama, at nearly 11 million in 2013, and then came back down to about 10.6 million in 2016. There were 9.3 million beneficiaries as of December 2008, shortly before Obama took office.  An OMB official said Mulvaney — who said “it grew tremendously under President Obama” — was actually referring to the general growth in disability beneficiaries from 1996 (6 million) to 2016 (10.6 million), rather than specifically to the Obama years. Spending went from $115 billion in 2009 to more than $140 billion in 2016, a 22 percent increase, according to the OMB. But those raw numbers need to be put into context. A lot of the growth during that period was related to demographics. Members of the baby boomer generation entered their peak disability years (their 50s), before they hit retirement at 66. As people aged, they continued to make more money on average, so the costs to the program increased.    The OMB official said Mulvaney spoke about the growth in the disability program to highlight that it will be insolvent by 2023. Something needs to be done before beneficiaries’ payments get cut, the official said: “Based on the Social Security Administration’s analysis, at that point the Trust Fund will only be able to provide 89 percent of scheduled benefits.”   While Mulvaney criticized the growth in Social Security disability insurance under Obama, the OMB said Mulvaney was referring to general growth in the program since 1996. But that’s still misleading. The program did grow since 1996, but a lot of that had to do with the shifting demographics of Americans who rely on the program. The baby boom generation aged and entered its peak disability years before retiring. More women entered the workforce and became eligible for disability benefits. The raw number of beneficiaries did peak under Obama, largely because of the Great Recession, but it came back down since 2013. The OMB pointed to $6.6 billion in disability insurance overpayments in fiscal 2011-2015 to support Mulvaney’s claim that it’s a “very wasteful program.” But that’s a stretch; overpayments represented less than 1 percent of total disability outlays during that time. According to the OMB, Mulvaney’s general point was that the disability trust fund is projected to be depleted in 2023 if no changes are made to the program. If that’s really what he meant to say, Mulvaney needs to deliver his talking points better than he did during this particular interview. After all, he does manage the federal budget.        Share the Facts

The problem with Social Security lies in its history

How growing income inequality is hurting Social Security

The nation’s old-age pension and disability insurance program is funded by a payroll tax that this year applies to wages of $118,500 and below. But the amount of revenue coming in is not as large as it could be, now thatan increasing share of wage growth is going to people who make more than that, and the wages of many Americans are stagnant, or even in decline. That is adding fiscal stress to a program already struggling with the demands of an aging population. With more Americans reaching retirement age, Social Security is projected to eat through its funding reserves by 2033, assuming Congress took no action to bolster its finances. If that happened, Social Security trustees have said the program would be taking in only enough money to pay 75 percent of promised benefits—an unthinkable fate for a program that nearly two-thirds of seniors rely on for most of their retirement income. “Upward redistribution of income in the United States has meant that income has shifted away from the workers whose full earnings are taxed and toward high-income workers whose additional dollars are exempt,” read the report. The top 1 percent of wage earners took home about 12.9 percent of the nation’s total wage income in 2013–just short of the 13.7 percent that was earned by the entire bottom half of wage earners, the report said. And many of the richest Americans count on capital gains for most of their income, but capital gains are exempt from the payroll tax. The tax cap is adjusted each year in step with average wage growth year to year. Overall, some 17 percent of the nation’s wages escaped the tax, up from 10 percent in 1983. The increase in the share of wages exempt from the payroll tax has been jagged, but the upward drift has been unmistakable, as the chart below illustrates. The report says that the dire picture would be a bit different if wage increases had kept pace with the productivity gains of workers over the past three decades. Also, if the payroll tax covered the same 90 percent of earnings that it did in 1983, the program’s coffers would be $1.1 trillion larger and a significant chunk of its shortfall would disappear. “While policymakers cannot undo the past, they can take action to improve Social Security’s fiscal outlook by implementing policies that boost wages, combat rising inequality, and modernize the program’s revenue structure to reflect today’s economy,” the report said.

Matt Miller: The great American political gridlock

With everyone pretty much agreed that little will be done in Washington to tackle the country’s biggest challenges in the next few years (save perhaps for immigration reform — still a big “if”), it’s a good time to take stock of just how confused and ineffectual our political parties have become. Start with Democrats. Here’s what we now know will be true come 2016. After eight years of the most liberal president in half a century, 20 million Americans who want full time work won’t be able to find it; America will be more unequal than at any time since the 1920s; there will be less upward mobility in the United States than in virtually all of Europe; 1 in 5 children will live in poverty; our school rankings will continue to slide internationally; poor children will still be assigned to the worst teachers and most run-down facilities in the country; 12,000 Americans will still die each year from gun violence; college will be less affordable and student debt higher than ever; half of all jobs will pay less than $35,000 a year; the wealthiest 400 Americans will have more assets than the bottom 150 million combined; our top banks will be bigger than before, and powerful enough to fight off rules meant to prevent a repeat of the financial meltdown; we’ll spend a third to twice as much per person on health care than other wealthy nations without better results; health insurance premiums will consume a third of the average family’s income; carbon emissions will continue to rise toward levels most scientists say threatens the planet; most Americans won’t be saving nearly enough to maintain their standard of living in retirement; and politicians will spend literally half their time groveling for cash from the 1/20th of 1 percent of Americans who bankroll their campaigns. _With a record like this, what will progressives do for an encore?_ If Democrats are disappointed, Republicans are detached from reality. Many in the GOP seem to think we’re under the rule of a Kenyan socialist. Yet corporate profits are at record highs. The Dow was at 7,949 when Obama was sworn in; today it tops 15,000. The share of national income going to labor as opposed to capital is at all-time lows. Nearly all of the income gains in the economic recovery have gone to the top sliver of highest-earning Americans. Obama agreed to extend 82 percent of the Bush tax cuts. And the president’s health-care plan (all hysteria to the contrary aside) followed a sensible Republican design. _With a record like this, what are Republicans complaining about?_ Democrats say their disappointment is the GOP’s fault — if those lunatics didn’t run the House and clog the Senate with the filibuster, they say, we’d have made much more progress. That’s right up to a point. But it’s not the whole story. A Republican House doesn’t explain why President Obama’s last jobs plan only proposed to put 1 to 2 million Americans back to work when at least ten times more need a full time job. Republican madness can’t explain why Obama artfully slams the GOP on student loan interest rates while touting a plan that would leave tuitions and debts still higher a decade from now. Republican lunacy can’t explain why the White House often brags about having enacted universal health coverage, a goal aides boast has eluded presidents for a century, when Obama has done no such thing — at least 20 to 30 million people will still be uninsured when the dust clears (from a law I support). In short, Republican nihilism and intransigence — huge problems, so please don’t arrest me, false equivalency police! — can’t explain the Democratic ambition gap. In fact, it’s not clear that anything in my depressing inventory above would be meaningfully different if the GOP had vanished or capitulated. Rare instances aside, this means Democrats aren’t offering ideas equal to the magnitude of our problems. Republicans, meanwhile, can’t even see what the problems are. Thus our predicament. We don’t have a system where one side will vanquish the other. Yet we can’t afford this endless gridlock, because globalization and rapid technological change continue to undermine the middle class. We have two choices. We can figure out how to rise and renew the country together. Or we can drift. Truth is, even if we had a functioning governing class that was able to act, it would be hard to develop an agenda to meet this moment. But when we can’t even try at the federal level to do serious things, we’re sunk. If you think this analysis is in the ballpark, repeat after me: We need something new. We need something new. _Read more fromMatt Miller’s archive or follow him on Twitter._ **Read more from Opinions:** Katrina vanden Heuvel: Fix the bankrupt student loan proposals Harold Meyerson: Labor wrestles with its future Robert J. Samuelson: The jury’s out on whether Dodd-Frank will save capitalism

The federal insurance fund protecting millions of pensions is running out of cash

One of the nation’s largest multi-employer pension funds said that it is out of ideas for ways to save itself from an impending failure.  But there’s one major problem — that program is expected to run out of money, too. The Pension Benefit Guaranty Corp., which insures private pensions, is dealing with long-standing financial woes with the fund that protects multi-employer pension plans. The program, which some experts say wasn’t really intended to be used, was set up more than four decades ago to serve as a backstop for private-sector pension plans. But it has been relied on more than expected by large plans on unsteady financial footing. The fund’s deterioration could pose a threat to the 10 million people in multi-employer plans who could soon be left without a safety net for their pensions. Although most of those workers and retirees are in plans that are financially healthy, about 1.5 million people — including the Central States members — are in plans that are projected to run out of cash over the next 20 years. In the past few weeks, lawmakers, Central States officials and consumer advocates have called for a legislative solution that would shore up fragile pensions and the struggling insurance fund. “We need a more comprehensive solution,” said Rep. Marcy Kaptur (D-Ohio), who introduced a bill last year that would provide the insurance program with government assistance. “Millions and millions of Americans are affected by this.” Previous efforts to bolster the insurance program have failed, or so far fallen short. For instance, a 2014 law that made it possible for multi-employer pension plans to cut benefits for retirees was meant to alleviate the burden on the PBGC. But now that the Treasury Department has rejected the Central States proposal, which was the first test under the law, the insurance agency is back where it started. With roughly $2 billion in assets, the fund for multi-employer plans does not have enough money to pay benefits for the plans that are expected to become insolvent over the next decade. The Central States fund alone, which pays about $2.8 billion in benefits each year and is the largest multi-employer plan in financial trouble, would overwhelm the multi-employer insurance program if it went under. “At this time, only government funding, either directly to our Pension Fund or through the PBGC, will prevent Central States participants from losing their benefits entirely,” wrote Thomas Nyhan, the executive director of the fund, in a letter on why he thinks the fund cannot come up with another rescue plan. The Pension Benefit Guaranty Corp., which insures private pensions, was created as part of the 1974 Employee Retirement Income Security Act (ERISA) to provide another level of security for the millions of Americans counting on pensions in retirement. The agency has separate programs for single-employer plans, through which one company is paying completely for the costs of financing a pension, and multi-employer plans, which allow businesses to share the costs of providing pension benefits to their workers. The insurance fund for single-employer plans is financially stable, but the fund for multi-employer plans is woefully underfunded. That’s because when the multi-employer plan insurance fund was created, it was expected that the fund would not be needed much, said Josh Gotbaum, former director of the Pension Benefit Guaranty Corp. and a guest scholar at the Brookings Institution. The thinking was that multi-employer plans would be able to turn to the other companies in the pension fund if one employer fell short in contributions or went out of business, he said. Because of that, multi-employer plans pay smaller premiums than single-employer plans and receive smaller payments from the PBGC when their funds run out of cash. But over the past several years, multi-employer plans have faced financial challenges similar to those of the Central States fund, he said. Two severe market downturns over roughly 10 years left the plan without enough money to pay expected benefits. At the same time, many companies went out of business, leaving the plan with a smaller number of employers available to pitch in and cover that shortfall. “What they didn’t think of was, suppose if most of the companies go away and only a few employers are left holding the bag?” Gotbaum said. With that shortfall in mind, many of the workers and retirees covered by the Central States plan are rallying behind a bill introduced by Democratic presidential candidate Bernie Sanders and Kaptur that would repeal the 2014 law that made it legal to cut pension benefits and instead lead to government assistance for the PBGC. Over the past two weeks, senators including Sherrod Brown (D-Ohio), Claire McCaskill (D-Mo.) and Ron Wyden (D-Ore.) wrote to Senate Majority Leader Mitch McConnell (R-Ky.) asking him to address the pension crisis before the Senate breaks for the summer. But because previous efforts to boost pension funds with taxpayer dollars have failed, fund executives and other pension experts are skeptical that any legislation calling for government help will gain traction. A 2010 bill that would have provided taxpayer assistance to pension funds died in committee. Gotbaum said that if such an effort didn’t survive when Democrats had a majority hold in Congress, he doubts a similar program will advance much in a Republican-controlled legislature. In the meantime, lawmakers could provide more funding for the PBGC in a way that doesn’t rely on taxpayer support — increasing the annual premiums that multi-employer plans pay to the PBGC, which are still set by Congress. Those premiums, which are essentially paid by the companies in the plan, were more than doubled to $27 per participant in 2014, but a bigger increase is needed for the fund to be able to support all of the plans expected to run out of cash, Gotbaum says. The PBGC is scheduled to issue reports in early June that offer more insight on the financial health of the fund and explain how large premiums need to be to keep the fund solvent. The agency declined to comment ahead of the reports. In a report released in March, the agency said annual premiums paid by multi-employer plans would need to be increased to $156 per person, or about six times the current amount, to give the fund about a 90 percent chance of staying solvent over the next 20 years.  While that is substantially higher than what multi-employer plans are paying now, it would put them on par with the average premium paid by single-employer pension plans, making it more feasible, Gotbaum said. Whatever the fix, retirees and consumer advocates are urging Congress, pension plans and the insurance agency to make changes before it’s too late. Dale Dobbs, a retired driver near Richland Center, Wis., would have seen his pension cut by 50 percent if the Central States proposal had been approved, he said. Treasury’s rejection of the plan bought the retirees more time to find an alternative solution, but their “work is not done,” said Dobbs, 73. “The only real option is for Congress to step forward,” he said, adding that he is encouraging his fellow retirees to contact their local representatives.

The CBO highlights fiscal self-delusion

Republicans can continue patting themselves on the back for the Budget Control Act of 2011, but it hasn’t helped in any significant way because they ducked on entitlements. (“In particular, spending as a share of GDP increases for Social Security, the major health care programs (primarily Medicare), and interest on the government’s debt. Much of the spending growth for Social Security and Medicare results from the aging of the population: As members of the baby-boom generation age and as life expectancy continues to increase, the percentage of the population age 65 or older will grow sharply, boosting the number of beneficiaries of those programs.”) Of course, President Trump’s “skinny budget” doubles down on the failed BCA formula by slashing discretionary spending and ignoring entitlements altogether. The likely consequences of ballooning debt should not be ignored: “The amount of debt that is projected under the extended baseline would reduce national saving and income in the long term; increase the government’s interest costs, putting more pressure on the rest of the budget; limit lawmakers’ ability to respond to unforeseen events; and increase the likelihood of a fiscal crisis, an occurrence in which investors become unwilling to finance a government’s borrowing unless they are compensated with very high interest rates.” Ironically, in after election during which many voters fretted that they were the first generation to leave their children and grandchildren worse off than they, Trump and the GOP are preparing to do just that, namely load on more and more debt and leave their children and grandchildren with a federal budget in which entitlements and interest on the debt crowd out just about everything else, and high interest rates choke off growth.  Allow in more immigrants who tend to be younger and have greater attachment to the labor market, and you’ll minimize that disagreeable trend. But, of course, Trump and the far right want to do the opposite and choke off immigration. It’s almost as if they don’t want America to win anymore.

Happy Birthday, Social Security! I hope I’m going as strong and beloved as you are when I turn 80.

Today is Social Security’s 80th birthday, and in its honor, let’s take a moment to honor a system that is both an essential component of retirement security and a real testament to the importance of the role of government.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico I realize we live in an age where that role is disparaged daily, in many cases by the very people who are paid by the rest of us to do a better job of running the government. And yet, even while gridlock and dysfunction persist, Social Security keeps on trucking along, providing a progressive, fully vested, universal, guaranteed pension to nearly all elderly Americans. And it does so highly efficiently, with administrative costs that amount to less than 1 percent of annual benefits, “far below the percentages for private retirement annuities.”    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico So, raise a glass (of Metamucil?) in her honor, and consider these points: While she’s a healthy 80, Social Security does face a long-run solvency gap. After 2034, according to the latest estimates, the program would be able to pay 75 percent of scheduled benefits. That’s not zero, as is often misrepresented by fear mongers, but it’s a serious shortfall that must be avoided. (The Social Security Disability Insurance trust fund is projected to face a shortfall much sooner, in 2016; but while this has led to alarmist critiques, a simple reallocation between the DI and old-age trust funds, a noncontroversial step that Congress has undertaken many times in the past, would enable both funds to pay full benefits through 2034.)    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Broadly speaking, there are only three ways to close the solvency gap, which, looking out 75 years, amounts to less than 3 percent of taxable payroll: we can raise taxes, cut benefits, or do both. In considering our menu of options, we should remember that, as jumps out from the figure above, Social Security is an essential income component for low- and middle-income elderly families. These families cannot sustain any cuts to their benefits. Some ideas: **Raise the maximum amount of wages subject to the payroll tax.** Due to increased earnings inequality (an increased share of earnings going to the highest earners), this tax now hits only about 83 percent of covered earnings, well less than the 90 percent it applied to in decades past.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico **Gradually apply the payroll tax to employer-provided health care benefits.** A few years ago, Pete Domenici and Alice Rivlin made the case—pretty convincingly, I thought—that the growth of employer-sponsored fringe benefits has fueled cost pressures in the health-care system and eroded the Social Security tax base, as a rising share of workers’ total compensation has come in the form of untaxed benefits rather than taxed wages. Their application of this idea closed around a third of the 75-year gap.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico **Broaden the tax base** by subjecting voluntary salary-reduction plans, such as cafeteria plans and health care Flexible Spending Accounts, to the payroll tax (as 401(k) plans and similar retirement accounts already are).    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico **Increase the payroll tax.** As my colleague Kathy Ruffing has written, “Future workers are expected to be more prosperous than today’s. Under the trustees’ assumptions, the average worker will be almost 50 percent better off — in real terms — in 2040 than in 2014, and twice as well off by 2070. It is appropriate to devote a small portion of those gains to the payroll tax, while still leaving future workers with much higher take-home pay. Social Security is a popular program, and poll respondents of all ages and incomes express a willingness to support it through higher taxes.”    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico **Reduce benefits for wealthy recipients.** But don’t expect to close much of the gap this way. As the figure implies, most of the benefits go to low and middle income households. Only 2 percent of Social Security benefits go to retirees with non-Social Security income of $100,000 or more each year, and only about 10 percent goes to people with income above $40,000. To fix Social Security this way, you’d have to break it.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Years ago, in a book called “All Together Now: Common Sense for a Fair Economy,” I wrote the following:    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico For sure, none of those fixes are easy, and today’s politics seems quite removed from common sense and fairness. But ask yourself why this 80-year old program is so popular. I suspect it’s because behind the noise that passes for political debate, people recognize Social Security for what it is: an elegant, efficient, collaborative solution to a universal challenge.

The tattered safety net for the disabled

MOST WARNINGS about skyrocketing entitlement spending come accompanied by a day of reckoning far off in the future (though that day is coming closer). Not so in a little-noticed but fast-growing corner of Social Security: coverage for those with disabilities. The latest report from the Social Security trustees found that the costs of the disability insurance program, which provides coverage to 11 million disabled workers and dependents, would exceed the amount coming in from payroll taxes by the beginning of next year. The disability insurance trust fund is on track to run out of money completely in 2016. This is not necessarily an imminent crisis; Congress, as it has in the past, can replenish the trust fund by rejiggering the share of payroll taxes that flow to the Social Security retirement and disability accounts. But the report illustrates the disturbing growth trajectory of the disability insurance program, which paid out about $130 billion last year, or more than 20 percent of all Social Security benefits, retirement and disability combined. The accompanying cost of Medicare for these beneficiaries, who are entitled to health coverage after two years of disability, was another $90 billion. The number of workers with disabilities has nearly tripled since 1990, growing far faster than the working-age population as a whole. A significant part of the growth is due to the aging of the population and the entrance of women into the workforce, making women who become disabled entitled to benefits. Another, likely temporary, cause is the economic downturn, during which disability claims have spiked 25 percent. The rise in program costs is troubling, especially in an era when work has become less physically taxing, the population has become healthier and technology to allow people with disabilities to work has improved. David Autor and Mark Duggan noted in a paper for the Brookings Institution’s Hamilton Project that “one of the most common and rapidly expanding diagnoses for individuals receiving [disability] awards is mental illness,” which accounted for 20 percent of awards in the past decade, although the prevalence of mental disorders in that time has not changed. Because of the entwined nature of the Social Security retirement and disability systems, the best approach would be to tackle both problems together and ensure that both are on a sustainable fiscal footing. The disability program is badly in need of updating, with a system designed to encourage those with disabilities to find work rather than penalizing them for doing so. Currently employers have no incentive — beyond requirements of the Americans With Disabilities Act — to accommodate workers with disabilities. Under the current either/or approach of disability determinations, workers are effectively required to give up on efforts to stay in the labor force even to be eligible to obtain benefits. The lengthy wait time for a final determination can consume years while applicants’ ability to reenter the workforce if the claim is denied diminishes. Meanwhile, those who are awarded benefits are discouraged by the rules from finding suitable work. Still, it’s important to keep in mind: This is a needy population. Benefits are modest, averaging about $1,100 a month. Sixty percent of those receiving them have a high school education or less. Almost one-fourth live below the poverty level. This piece of the safety net needs to be bolstered and modernized, not allowed to unravel. **For more on this topic:** Ezra Klein: The speed read: Sen. Tom Coburn’s ‘The Debt Time Bomb’ Robert S. Samuelson: Would Roosevelt recognize today’s Social Security? Eric Yoder: Feds would have to pay more toward retirement The Post’s View: Ending Montgomery’s police disability scam

Social Security must be fair for everyone, not just retirees

No one should assess Social Security policy in isolation. What is fair in Social Security must relate to what is fair for the national budget as a whole.  Even as revenues grow, the number of workers available to pay for Social Security benefits is falling rapidly, meaning that either benefits must be cut, taxes increased, or both. Every delay puts more of the cost on the young.   Still, no Social Security benefits need to be cut for those currently retired. To do better for those elderly with median or lower lifetime incomes, we should raise minimum benefits and give credit for raising children. We should also fix absurd rules around spousal and survivor benefits and other sources of inequity. The current system discourages work in late-middle age, something that is no longer easily affordable and which reduces economic growth, personal income and tax revenues. Congress should reduce Social Security’s natural disincentives for work both by adjusting the retirement age as we live longer and saving a larger share of lifetime benefits for later ages, when health needs rise and work is less possible. As lifespan increases, Social Security now promises a typical newly retired couple aged 62 an average of more than 28 years of benefits (today, one of them is likely to make it to 90 years of age). That’s more than enough; there are greater societal needs than the desire for more retirement years.

Let’s run the fantasy math on Social Security

It must be fantasy finance month. In my previous column, we discussed how on July 4, New Jersey Gov. Chris Christie created $13.5 billion out of thin air and credited it to the state’s troubled employee pension funds, making them look far less bad. But Jersey Math, of which more later, is a rounding error compared with the Federal Fantasy Math that lets Social Security’s retirement and disability programs look better on paper even as their financial situation gets worse. If you dig into the Social Security Trustees Report released last week, you find that over the past seven years, the retirement and disability programs have run through a total of more than $400 billion of cash — money the Treasury had to borrow to give to the funds to keep benefit payments from bouncing. But during the same period, the assets of the programs’ trust funds rose by more than $300 billion. How can this be? Fantasy Math. From the end of 2009 through the end of last year, the trust funds were credited with more than $700 billion of interest on the Treasury securities they own — securities that pay interest by giving the funds more securities rather than cash.  Before we proceed, please note that these numbers, which cover the operations of the retirement and disability programs, have been disclosed in the trustees’ annual reports each year. But the numbers aren’t summarized the way I’ve just done. And they’re certainly not called Fantasy Math. Please also note that I’m not blaming this situation on the people who run Social Security, for whom I have enormous respect. This isn’t their doing, it’s a situation that they inherited. The major problem giving rise to Federal Fantasy Math is that Social Security’s bookkeeping is opaque and misleading. That’s why most people seem to think that everything is fine with the programs as long as their trust funds are growing. A secondary problem is that most people — including those in the news media — focus on the trust funds’ projected expiration date (currently 2034 for the retirement program and 2028 for the disability program) rather than getting to the heart of what’s going on. To wit: that although Social Security’s programs are self-sufficient on paper, in reality they’re running into major problems.  Now, let’s look at some key Social Security numbers. From the start of 2010 through the end of 2016, the retirement and disability programs took in a combined $5.320 trillion of cash. I’m including the $217 billion the Treasury put into the trust funds in 2011 and 2012, when Social Security taxes were reduced in the name of economic stimulus. I’m also including the $190 billion of income tax that higher-income Social Security beneficiaries paid on their benefits. Cash outlays totaled $5.736 trillion. That nets out to a cash drain of $416 billion. The Treasury borrowed that money in the financial markets to redeem trust fund securities so Social Security had the cash to pay benefits. So how does a $416 billion cash drain end up adding $307 billion to the combined trust funds? Easy, the funds earned a combined $723 billion of interest on their Treasury holdings. Now look. I’m not saying that Social Security is about to go under, which it isn’t; or that its programs are a fraud or Ponzi scheme, which they aren’t. My fear is that people will decide to “solve” Social Security’s problems by increasing the interest rates on the trust funds’ non-cash-paying $2.85 trillion of Treasury securities. Or by creating securities out of thin air, a la Jersey, and putting them into the trust funds. But preserving Social Security in anything like its current form for our kids and grandkids involves sacrifice, not financial subterfuge. We have to put in more cash and slow the growth in benefit outlays. Trusting in trust funds and ignoring reality won’t end well. You can trust me on that.

Medicare finances improve partly due to ACA, hospital expenses, trustee report says

Medicare’s financial stability has been strengthened by the Affordable Care Act and other forces that have been subduing health-care spending, according to a new official forecast that says the fund covering the program’s hospital costs will remain solvent until 2030 — four years later than expected a year ago. The annual report, issued Monday by trustees overseeing the government’s two largest entitlement programs, found little change overall in the finances of Social Security. The trustees warned, however, that the part of Social Security that pays monthly benefits to people with disabilities is especially fragile and, without changes, will start to run short of money for benefit checks in 2016. Taken together, the findings provide a nuanced portrait of the fiscal future of these two programs, which act as cornerstones of social insurance — and a buffer against poverty — for older people and other vulnerable Americans. The trustees welcomed the improved financial prospects for Medicare but acknowledged that the underlying reasons are not yet entirely understood. At the same time, they exhorted Congress to take steps to prevent both programs from collapsing in the long term. “Neither Medicare nor Social Security can sustain projected long-run program costs,” the trustees said in a message accompanying their reports. For the past few decades, Democrats and Republicans have fretted about the unsustainability of the Medicare and Social Security programs. They have appointed high-level commissions, proposed legislation and tried to stoke public fears that benefits might not be available for their parents — or themselves. But Congress has not restructured either program to withstand long-term fiscal pressures, and the issue has been absent lately from the agendas of both parties. At a news briefing Monday, Cabinet secretaries and two public trustees reiterated the call for Congress to act. “[We] must make manageable changes now, so we do not have to make drastic changes later,” Treasury Secretary Jack Lew said. “It is getting very late in the game” to find a bipartisan consensus, said the trustees’ only Republican, Charles P. Blahous III, who worked on Social Security and other economic issues as an aide to President George W. Bush. “A solution much further delayed is a solution much less likely to occur.” Both programs are being strained by the nation’s demographics. As more baby boomers reach retirement age, people 65 and older are making up an increasing percentage of the country’s population, with proportionally fewer working-age Americans chipping in payroll taxes. Medicare’s finances are facing other pressures, too, including from scientific advances that lead to new treatment and therapies, the report said. The trustees’ forecast said that the trust fund that pays for hospital care — Medicare Part A — has been strengthened significantly, with the date when it is predicted to start running short of money extended by 14 years since the Affordable Care Act was enacted in 2010. The report also predicted that the insurance premiums that older Americans pay for the portion of Medicare that covers doctors’ visits and other outpatient care would probably remain the same for a third year in a row. Health and Human Services Secretary Sylvia Mathews Burwell said that it is impossible so far to gauge how much of that trust fund’s improved fiscal health was due to the health-care law as opposed to other changes in the health-care system that are slowing cost increases. She said both had a role. The ACA, for instance, is slowing payments to Medicare Advantage, the part of the program in which older Americans join private health plans, while other provisions focus on curbing hospital readmissions. The report said that spending on hospital stays last year was less than expected, although trustees noted that analysts have not determined whether this trend reflected broad economic trends or stemmed from specific changes in the practice of medical care. If Medicare is unchanged by 2030, the year it is projected to become insolvent, it would then be able to pay 85 percent of its beneficiaries’ hospital bills, a proportion that would slip to 75 percent by 2047, the forecast said. For Social Security, the trustees predicted that the program’s two separate trust funds will, combined, have enough money to pay all the retirement and disability benefits it owes until 2033, the same time horizon as in the last two annual forecasts. They forecast that Social Security will be able to afford checks for retirees and workers’ survivors until 2034 — nearly two decades longer than the part of the program that pays disability benefits. Social Security’s expenditures last year exceeded its income from payroll taxes, as it has each year since 2010, the report says, although interest so far is making up the difference. This year, President Obama backed away from an idea he broached in his budget last year to save money for Social Security by changing the basis on which inflation is calculated for the program. But his 2015 budget proposal reprises the idea of charging more for care under Medicare to older Americans who are relatively well-off — an idea that Congress has not touched this year. In calculating Medicare’s future finances, the trustees for the first time acknowledged that Congress has each year overridden scheduled reductions in Medicare doctors’ fees — cuts that, if adopted, would lower payments for doctors’ services by 21 percent in 2015. In the latest report, the trustees assumed that such cuts would continue to be waived. The trustees noted that their new forecast was released 49 years to the week that President Lyndon B. Johnson signed the law that enacted Medicare, a major component of the Great Society programs of the mid-1960s. Social Security was a response to the Great Depression of the 1930s. Last year, Medicare insured 52 million Americans, including 43.5 million age 65 and older and nearly 9 million younger people with disabilities. Social Security last year provided benefits to 41 million retired workers and their families, 6 million survivors of workers who died, and 11 million working-age people with disabilities. More from The Washington Post: Data uncovers nation’s top Medicare billers High courts rule for and against health-law subsidies White House reverses proposed cuts to Medicare plans AARP: Don’t touch Social Security and Medicare benefits

Social Security, Treasury target taxpayers for their parents’ decades-old debts

A few weeks ago, with no notice, the U.S. government intercepted Mary Grice’s tax refunds from both the IRS and the state of Maryland. Grice had no idea that Uncle Sam had seized her money until some days later, when she got a letter saying that her refund had gone to satisfy an old debt to the government — a very old debt. When Grice was 4, back in 1960, her father died, leaving her mother with five children to raise. Until the kids turned 18, Sadie Grice got survivor benefits from Social Security to help feed and clothe them. Now, Social Security claims it overpaid someone in the Grice family — it’s not sure who — in 1977. After 37 years of silence, four years after Sadie Grice died, the government is coming after her daughter. Why the feds chose to take Mary’s money, rather than her surviving siblings’, is a mystery. Across the nation, hundreds of thousands of taxpayers who are expecting refunds this month are instead getting letters like the one Grice got, informing them that because of a debt they never knew about — often a debt incurred by their parents — the government has confiscated their check. The Treasury Department has intercepted $1.9 billion in tax refunds already this year — $75 million of that on debts delinquent for more than 10 years, said Jeffrey Schramek, assistant commissioner of the department’s debt management service. The aggressive effort to collect old debts started three years ago — the result of a single sentence tucked into the farm bill lifting the 10-year statute of limitations on old debts to Uncle Sam. No one seems eager to take credit for reopening all these long-closed cases. A Social Security spokeswoman says the agency didn’t seek the change; ask Treasury. Treasury says it wasn’t us; try Congress. Congressional staffers say the request probably came from the bureaucracy. The only explanation the government provides for suddenly going after decades-old debts comes from Social Security spokeswoman Dorothy Clark: “We have an obligation to current and future Social Security beneficiaries to attempt to recoup money that people received when it was not due.” Since the drive to collect on very old debts began in 2011, the Treasury Department has collected $424 million in debts that were more than 10 years old. Those debts were owed to many federal agencies, but the one that has many Americans howling this tax season is the Social Security Administration, which has found 400,000 taxpayers who collectively owe $714 million on debts more than 10 years old. The agency expects to have begun proceedings against all of those people by this summer. “It was a shock,” said Grice, 58. “What incenses me is the way they went about this. They gave me no notice, they can’t prove that I received any overpayment, and they use intimidation tactics, threatening to report this to the credit bureaus.” Grice filed suit against the Social Security Administration in federal court in Greenbelt this week, alleging that the government violated her right to due process by holding her responsible for a $2,996 debt supposedly incurred under her father’s Social Security number. Social Security officials told Grice that six people — Grice, her four siblings and her father’s first wife, whom she never knew — had received benefits under her father’s account. The government doesn’t look into exactly who got the overpayment; the policy is to seek compensation from the oldest sibling and work down through the family until the debt is paid. The Federal Trade Commission, on its Web site, advises Americans that “family members typically are not obligated to pay the debts of a deceased relative from their own assets.” But Social Security officials say that if children indirectly received assistance from public dollars paid to a parent, the children’s money can be taken, no matter how long ago any overpayment occurred. “While we are responsible for collecting delinquent debts owed to taxpayers, we understand the importance of ensuring that debtors are treated fairly,” Treasury’s Schramek said in a statement responding to questions from The Washington Post. He said Treasury requires that debtors be given due process. Social Security spokeswoman Clark, who declined to discuss Grice’s or any other case, even with the taxpayer’s permission, said the agency is “sensitive to concerns about our attempts to arrange repayment of overpayments.” She said that before taking any money, Social Security makes “multiple attempts to contact debtors via the U.S. Mail and by phone.” Grice, who works for the Food and Drug Administration and lives in Takoma Park, in the same apartment she’s resided in since 1984, never got any notice about a debt. Social Security officials told her they had sent their notice to her post office box in Roxboro, N.C. Grice rented that box from 1977 to 1979 and never since. And Social Security has Grice’s current address: Every year, it sends her a statement about her benefits. “Their record-keeping seems to be very spotty,” she said. Treasury officials say that before they will take someone’s refund, the agency owed the money must certify the debt, meaning there must be evidence of the overpayment. But Social Security officials told Grice they had no records explaining the debt. “The craziest part of this whole thing is the way the government seizes a child’s money to satisfy a debt that child never even knew about,” says Robert Vogel, Grice’s attorney. “They’ll say that somebody got paid for that child’s benefit, but the child had no control over the money and there’s no way to know if the parent ever used the money for the benefit of that kid.” Grice, the middle of five children, said neither of her surviving siblings — one older, one younger — has had any money taken by the government. When Grice asked why she had been selected to pay the debt, she was told it was because she had an income and her address popped up — the correct one this time. Grice found a lawyer willing to take her case without charge. Vogel is exercised about the constitutional violations he sees in the retroactive lifting of the 10-year limit on debt collection. “Can the government really bring back to life a case that was long dead?” the lawyer asked. “Can it really be right to seize a child’s money to satisfy a parent’s debt?” But many other taxpayers whose refunds have been taken say they’ve been unable to contest the confiscations because of the cost, because Social Security cannot provide records detailing the original overpayment, and because the citizens, following advice from the IRS to keep financial documents for just three years, had long since trashed their own records. In Glenarm, Ill., Brenda and Mike Samonds have spent the past year trying to figure out how to get back the $189.10 tax refund the government seized, claiming that Mike’s mother, who died 33 years ago, had been overpaid on survivor’s benefits after Mike’s father died in 1969. “It was never Mike’s money, it was his mother’s,” Brenda Samonds said. “The government took the money first and then they sent us the letter. We could never get one sentence from them explaining why the money was taken.” The government mailed its notice about the debt to the house Mike’s mother lived in 40 years ago. The Social Security spokeswoman said the agency uses a private contractor to seek current addresses and is supposed to halt collections if notices are returned as undeliverable. After hours on the phone trying and failing to get information about the debt Mike’s mother was said to owe, the Samondses gave up. After waiting on hold for two hours with Social Security last week, Ted Verbich also concluded it wasn’t worth the time or money to fight for the $172 the government intercepted last month. In 1977, Verbich, now 57, was in college at the University of Maryland when he took a full-time job in an accountant’s office. Because he was earning income, he knew he had to give up the survivor’s benefits his mother had received since his father died, when Verbich was 4. But his $70 monthly checks — “They helped with the car payment,” he said — kept coming for a short time after he started work, and Verbich was notified in 1978 that he had to repay about $600. He did. Thirty-six years later, with no notice, “they snatched my Maryland tax refund,” said Verbich, a federal worker who has lived at the same address in Glendale, Md,. for 30 years and regularly receives Social Security statements there. The feds insisted that he owed $172 but could provide no documents to back up the claim. Verbich has given up on getting his refund, but he wants a receipt stating that his debt to his country is resolved. “I’ll put in the request,” a Social Security clerk told Verbich, “but in reality, you’ll never get anything.” Grice was also told there was little point in seeking a waiver of her debt. Collections can only be halted if the person passes two tests, Clark said: The taxpayer must prove that he “is without fault, and [that] repayment of the overpayment would deprive the person of income needed for ordinary living expenses.” More than 1,200 appeals have been filed on the old cases, Clark said; taxpayers have won about 10 percent of those appeals. The Treasury initially held the full amount of Grice’s federal and state refunds, a total of $4,462. Last week, after The Washington Post inquired about Grice’s case, the government returned the portion of her refund above the $2,996 owed on her father’s account. But unless the feds can prove that she ever received any of the overpayment, Grice wants all of her money back. “Look, I love a good fight, especially for principle,” she said. “My mom used to say, ‘This country is carried on the backs of the little people,’ and now I see what she meant. This is really sad.”

The push to expand Social Security

GIVEN THE the many competing demands on the nation’s limited resources, how high should increasing Social Security benefits be on the priority list? Very high indeed, according to Democratic Party activists, who regard fatter checks for the elderly as a hallmark of what true progressives believe. That’s why both Hillary Clinton and Sen. Bernie Sanders (I-Vt.) have embraced a version of the proposal in their campaigns for president. Now comes President Obama with a declaration Wednesday in favor of “increas[ing] its benefits so that today’s retirees and future generations get the dignified retirement that they’ve earned.” Thus did Mr. Obama finally capitulate to Democratic critics who never quite forgave his previous willingness to trim Social Security cost-of-living increases; he’s helped to cement the new “progressive” orthodoxy. Except that there would not necessarily be anything progressive about an across-the-board Social Security increase, even one paid for by imposing the payroll tax on wages and salaries above the current $118,500 maximum, as the Democrats suggest. The program requires that much of what higher earners pay in higher contributions would have to be returned to them as higher benefits. An analysis by the Third Way think tank of Mr. Sanders’s Social Security- boosting plan, the most aggressive, found that it would confer five times more money on the top 20 percent of earners than on the bottom 20 percent. Ms. Clinton, for her part, has proposed more limited benefit expansion, for widows and for those who took significant time out of the paid workforce to care for children. Even that proposal, however, is not targeted to the neediest in each category. Not only does Social Security compete with other spending priorities; there are also competing priorities within the program itself. Specifically, revenue spent enhancing benefits cannot be used to build up the Social Security Trust Fund, currently headed for depletion by 2034. By all means, impose payroll taxes on more earnings, as all Democrats now suggest — including Mr. Obama, though he never formally proposed such a tax increase during his presidency. Even top earners have only finite resources, however; if you tax them more for Social Security, it will be harder to tax them more for other pressing needs. Additional payroll taxes should be used to extend the trust fund, thus stabilizing overall federal finances and preserving “fiscal space”; benefit increases, if any, should be targeted to the very poorest elderly. In truth, the elderly as a whole are not the neediest group in our society; far from it. People 65 and over  are less likely than the general public to live in poverty — and only half as likely to live in poverty as children under 18, according to the Census Bureau. They have higher average income (from all sources) than their counterparts in all but one other industrialized democracy, according to the Committee for a Responsible Federal Budget. Some 44.8 percent of those 65 and up are “satisfied” with their financial situation, roughly twice the level of comfort of all other age cohorts, according to the National Opinion Research Center’s 2014 General Social Survey. Yet in 2011, the federal government spent six times as much on the elderly as it did on children. Children can’t vote. **Read more on this issue:** Jared Bernstein: For the first time, President Obama leans into Social Security expansion Paul Waldman: President Obama just changed the national debate on Social Security Robert J. Samuelson: Yes, we can work longer Andrew G. Biggs: The ‘retirement crisis’ that isn’t

A different approach to protecting Social Security and the safety net

In her April 11 op-ed, “Respect your youngers,” Catherine Rampell presented a false choice between economically secure retirees and sufficient funding for education, infrastructure, children and the poor. In fact, there are a number of steps we should take to protect both seniors and the social safety net. Raising the minimum wage would mean more taxes available for Social Security and other programs as well as fewer impoverished workers needing a hand up. Lifting the cap on earnings subject to Federal Insurance Contribution Act tax also would strengthen the Social Security system without any concomitant diminution in funds available for other anti-poverty programs, schools and infrastructure. Ms. Rampell foresees a United States in which less fortunate groups compete for economic security. Common-sense solutions demand that the wealthiest, whose incomes have greatly increased over the past 30 years, take a little less. ****Hal Ginsberg** , Sand City, Calif.**

Social Security’s predictable predicament

Of course the outlook for Social Security is worse relative to last year’s report [“Social Security’s financial forecast gets a bit darker,” news article, April 24]. The article prominently reported the forecasts and analyses offered by program trustees and administration officials but failed to mention the effect of the 2-percentage-point payroll tax cut the past two years. What else would happen to Social Security when its revenue is shrunk by so much? ****Alex Della-Valle,** Alexandria**

Study: Immigrant workers ‘heavily subsidize’ Medicare

As Congress mulls changing America’s border and naturalization rules, a study finds that immigrant workers are helping buttress Medicare’s finances, because they contribute billions a year more than immigrant retirees use in medical services. “Immigrants, particularly noncitizens, heavily subsidize Medicare,” the researchers wrote in the journal Health Affairs. “Policies that reduce immigration would almost certainly weaken Medicare’s financial health, while an increasing flow of immigrants might bolster its sustainability.” The Hospital Insurance Trust Fund, which pays for Medicare’s Part A inpatient hospital care, skilled nursing facilities, home health and hospice for the aged and disabled, had assets of $244 billion at the start of 2012 but is projected to run out of money in 2024 as the population ages, according to estimates of the Medicare trustees. It is financed by payroll and self- employment taxes. The study examined the impact of 29 million immigrants counted in the census on the financing of the Medicare program. It included those who had become U.S. citizens as well as those who hadn’t, but, the authors noted, probably excludes many illegal immigrants who dodged the survey. The study found that in 2009, immigrants contributed $33 billion to the trust fund, nearly 15 percent of total contributions. They received $19 billion of expenditures, about 8 percent, giving the trust fund a surplus of $14 billion. People born in the United States, on the other hand, contributed $192 billion and received $223 billion, decreasing the trust fund by $31 billion, according to the paper’s lead author, Leah Zallman, a scientist at Cambridge Health Alliance in Massachusetts, Between 2002 and 2009, immigrants generated a cumulative surplus of $115 billion for the trust fund, the study found. Most of the surplus contribution came from noncitizens. The immigrants created a net gain primarily because of demographics: There are 6.5 immigrants of working age for every one elderly immigrant, but only 4.7 working-age native citizens for every one retiree. Although that ratio could change in the future, the report notes that the Census Bureau projects that the share of immigrants in the United States will increase for the next 18 years. In addition, care for immigrants also costs Medicare slightly less. The average expenditure was $3,923 for immigrant enrollees and $5,388 for U.S. born enrollees, a difference “of borderline significance,” according to the paper, written by Zallman and health professors at the City University of New York and Harvard Medical School. The researchers wrote that changes in the nation’s immigration policy that would create a path to citizenship for undocumented immigrants would increase revenue for the trust fund, as many workers would shift from under-the-table employment to work where payroll taxes were collected. Also, they would have an easier time getting higher-paid jobs. However, letting the undocumented become citizens would also increase the number eligible for Medicare and, therefore, the expenditures on their behalf. The researchers did not factor in the Supplementary Medical Insurance Trust Fund, which finances Medicare Part B to pay for physician services and outpatient care, into most of their calculations. That’s because the financial trajectory of that fund is less clear, as it relies on enrollee premiums and annual appropriations from Congress. There was no significant difference between the amount spent on immigrants and U.S.-born people from that fund, the study noted. The authors interjected personal views normally not found in academic papers of this sort: “Having ourselves witnessed immigrants dying needlessly because of lack of health care, we (and many of our colleagues) are motived by the belief that all patients have a human right to health care. But economic concerns — including the worry that immigrants are driving up US health care costs — have often dominated the debate over immigration. Our data offer a new perspective on these economic concerns.” The paper anticipates that the immigrant surplus to the hospital trust fund will continue for many years, as most of those workers are decades away from retirement. In an interview, Zallman said, “If we continue to have a steady influx of working age immigrants, we’re likely to see the subsidy continue for many years to come.” ** — Kaiser Health News  ** Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health-care-policy organization that is not affiliated with Kaiser Permanente. This article was produced with support from the SCAN Foundation.

Closed Social Security offices, furloughed staff under GOP cuts, agency warns

Social Security is facing dark times —  not just figuratively, but as in the lights would go out. That’s the warning from Social Security Administration (SSA) officials if an appropriations bill pushed by House Republicans takes effect. “There would be up to two weeks of furloughs for all employees,” the agency said in information obtained by The Washington Post. “During this time, our offices would be closed to the public.  Additionally, a full hiring freeze would cause service degradation and long wait times and delays.  As a result, many Americans may wait longer to receive the benefits they have been planning to use during their retirement, and the most vulnerable of our citizens will have to wait even longer for disability claims decisions, causing more hardship and frustration for millions of families.”   Social Security eventually touches the lives of almost all Americas. It provides old-age income as well as assistance to others of all ages. But SSA officials predict those services would be seriously interrupted with funding cuts planned by House Republicans. Carolyn W. Colvin, SSA’s acting commissioner, called on Congress to strengthen the program by passing the Obama administration’s spending plan.  “The president’s 2017 budget funding level will allow us to continue to balance our service and stewardship activities,” she said. “It will also allow us to invest in and leverage technology to modernize our service delivery for the millions of people who we help to secure today and tomorrow.” Yet, the services don’t seem so well balanced now. More than 1.1 million people are waiting for a disability hearing. That means they have to wait more than 500 days, on average, to get a decision on their appeals. SSA has closed more than 60 field offices and 500 mobile offices since 2010. Last year, waits of three weeks for an appointment were common. Callers to the 800 number have to wait 13 minutes on average, if they get through at all. Calling the House reductions “mind-boggling,” Rep. Rosa DeLauro (Conn.), the top Democrat on the House Appropriations labor, health and human services, education subcommittee, said “these cuts would be a disaster and the American people will suffer.” Rep. Tom Cole (R-Okla.), chairman of the panel, did not respond to a request for comment. The union representing many agency employees views the cuts as a precursor to privatizing Social Security. “Cutting staff when SSA is processing historically high claims is irresponsible and a sign that the Republicans who voted for this cut are not interested in providing tax payers with good service regarding SSA,” said Witold Skwierczynski, president of the American Federation of Government Employees SSA Council. “Instead they appear to be creating a scenario that insures the collapse of the program and will enhance the push to privatize it.  If the public loses trust and faith that the federal government can administer SSA, they will look to privatization proposals as an alternative.”

Blaming and fleecing the ‘rich’ won’t fix Social Security

It’s getting to be Social Security time. As the 2016 elections get closer, conservatives agitate to cut back benefits and liberals agitate to raise them. Both sides are likely to increase in volume when Social Security’s delayed annual trustees’ report finally appears later this year. And when people realize that in 2014, Social Security ran a $73 billion cash deficit — that gets to be serious money — even though its trust fund got bigger. So today, I’m launching what I hope will become a series of Social Security truth-teller articles. By that, I mean columns or articles that will explain what’s actually going on with our biggest and most important social program — as opposed to the conventional wisdom or what conservatives or liberals have to say. We’ll start today with the idea shared by a truly odd couple — New Jersey Gov. Chris Christie (R) on the right, and Sen. Elizabeth Warren (D-Mass) and other liberals on the left. Why tie Christie and the liberals together? Because they all think that “the rich” are somehow benefiting unfairly when it comes to Social Security’s retirement benefits. And, in my fact-supported opinion, they’re both wrong. Christie proposes to deal with “the rich” by reducing benefits for Social Security retirees who have $80,000 of non-Social Security income and eliminating them entirely for people with $200,000 of such income. Liberals want to increase benefits and safeguard the system in large part by eliminating or greatly raising the wage cap (currently $118,500) on which the 12.4 percent Social Security tax is collected. But when you look at the relationship between what higher-income people pay in Social Security taxes and the benefits they get, you see that what the “max tax” payers get from Social Security is actually worth considerably less than the value of the taxes that they pay into the system. I know this because six years ago I asked Social Security’s actuaries to place a value on the benefits my wife and I stood to get in retirement compared with the value of the Social Security taxes that she and I and our employers had paid over the years. (I assume, as most analysts do, that the employers’ Social Security tax payments ultimately come out of their employees’ pockets.) My wife and I offered a classic case because I had paid max tax for the 35-year period on which recipients’ Social Security benefits are based. Guess what: Social Security’s actuaries calculated that our benefits were worth only about 75 percent of the value of our contributions. (For details, see wapo.st/sloanSS.) What’s more, because my wife and I pay income tax on 85 percent of our Social Security benefits — money that gets credited to the Social Security trust fund — our benefits are effectively reduced by an additional 20 percent or so. That means that our benefits are worth only about half of what we put in. The fact that I continued working — and paying maximum Social Security taxes — for five more years reduced our benefits even further relative to our contributions. So, you see, people who earn the maximum wage covered by Social Security — a more accurate term than “the rich” — are subsidizing Social Security rather than getting a fat deal. As one of those people, I think that’s perfectly fine. Social Security, after all, is an intergenerational transfer payment designed to make sure that people who have worked all their lives, paid taxes and played by the rules don’t have to spend their golden years living on street corners and eating cat food. I have absolutely no problem with wanting to have max-tax types like me pay more income tax on my Social Security benefit, or to slow down the rate of growth of my benefit or to increase the covered wage — any of which would help to put Social Security cash income and cash outlays into some sort of balance. But eliminating a promised benefit for which I’ve paid taxes for more than 50 years, as Christie wants to do, if I happen to have done well? To add 12.4 percent in Social Security tax to top earners’ marginal rate, as some liberals want to do by eliminating the salary cap? Either of those turns Social Security from an earned benefit that is subtly means-tested into welfare. And we all know what tends to happen to welfare in this country.

One of the nation’s largest pension funds could soon cut benefits for retirees

More than a quarter of a million active and retired truckers and their families could soon see their pension benefits severely cut — even though their pension fund is still years away from running out of money. Within the next few weeks, the Treasury Department is expected to announce a crucial decision on whether it will approve reductions to one of the country’s largest multi-employer pension plans.  For many workers, the promise of a guaranteed income stream for life — a benefit now nearly extinct for younger generations — was at times strong enough to convince them to sacrifice pay raises or other job opportunities. But after decades of challenges that left many pension funds in tough financial straits, some people are learning in retirement that the promises made to them may have to be broken. The Central States Pension Fund, which handles the retirement benefits for current and former Teamster union truck drivers across various states including Texas, Michigan, Wisconsin, Missouri, New York and Minnesota, was the first plan to apply for reductions under the new law. Consumer advocates watching the case say the move could encourage dozens of other pension plans across the country that are facing financial struggles to make similar cuts. “This is going to be a national crisis for hundreds of thousands, and eventually millions, of retirees and their families,” said Karen Friedman, executive vice president of the Pension Rights Center. Like many other pension plans, the Central States Pension Fund suffered heavy investment losses during the financial crisis that cut into the pool of money available to pay out benefits. While the stock market has recovered since then, the improvements were not enough to make up for the shortfall that grew as the number of companies contributing to the plan declined and the number of people retiring and collecting benefits increased, said Thomas Nyhan, executive director of the Central States Pension Fund. That imbalance left the fund paying out $3.46 in pension benefits for every $1 it received from employers. The shortfall has resulted in the fund paying out $2 billion more in benefits than it receives in employer contributions each year. If nothing is done, the fund could become insolvent by 2025, said Nyhan. And because of its size, the plan could overwhelm the Pension Benefit Guaranty Corporation, the insurance agency meant to shore up private pension funds, if it went under, Nyhan said.  “This was a very hard decision, a gut-wrenching decision,” Nyhan said, adding that he feared not taking any action could leave retirees with no pension at all. “It’s not a question of if there are going to be cuts. The question is where and when.” If Treasury approves the fund’s proposal, then retirees could see their paychecks shrink by July 1. The move would give the fund at least a 50 percent chance of lasting for another 30 years as opposed to running out of cash in 10 years if no changes are made, Nyhan said. A decision is expected by May 7. But opponents say there may be some negative consequences if the cuts are approved. “It’s going to open the floodgates for other cuts,” said Friedman of the Pension Rights Center. Out of the 10 million workers and retirees covered by multi-employer pension plans, roughly 1 million people are in plans that could run out of money over the next two decades, according to estimates from the PBGC. Already, three other pension plans that pay benefits to truck drivers and ironworkers have applied to the Treasury to have their pension benefits reduced.  For many retirees, the losses may be much steeper. Ava Miller, 64, and her husband, Ed Northrup, 68, could see their combined monthly pension income cut to about $3,000 from the nearly $7,000 they receive now, according to a letter they received from Central States in October. If the cuts go through, Miller, who worked as a dispatcher in Flint, Mich., said they will need to dip into their savings to help cover their $1,300 mortgage payment, heating bills and trips to visit her 84-year old mother. Northrup, a retired car hauler, has started applying for truck driving jobs that could supplement their potentially smaller pension payments. What makes the cuts more painful, Miller said, is that she took pay cuts so that the company could continue making contributions to the pension. “I did everything I was supposed to,” Miller said, adding that she and her husband made extra payments on their car loan to cut down on their monthly bills after they received letters in October informing them of the potential cuts. Critics of the cuts say the fund still has time to come up with an alternative solution. Some retirees and other supporters have rallied behind a bill introduced by Democratic presidential candidate Bernie Sanders (Vt.) that would repeal the measure allowing the cuts, calling instead for the government to provide assistance to troubled pension funds. Nyhan says he also supports that proposal and would welcome the money, but feels the chances that it will pass politically are slim. If the cuts are approved, the proposal would be put to a vote by all 407,000 participants of the plan, including current workers and retirees who are exempt from the cuts because of their age or a disability. But even if a majority of the members vote against the proposal, the pension fund is so large that the Treasury Department may still be required to implement the cuts in order to protect the pension guaranty program. Last week, hundreds of retirees, workers and family members from Michigan, Wisconsin, Texas and other states gathered on the lawn in front of the Capitol to rally against the cuts. They waved signs and periodically broke into chants of “No cuts.” A steady stream of lawmakers, including Sens. Elizabeth Warren (D- Mass.), Chuck Grassley (R-Iowa) and Tammy Baldwin (D-Wis.), walked on to a stage to speak against the legislation and to push for an alternative solution. Roy Wroblewski, 64, a retired truck driver from Detroit, stood near the stage pumping his fist and holding up a sign that said “no cuts.” Wroblewski, who hauled cars for about 30 years before retiring at 58, said he had just begun to feel stable financially two years before when he began collecting Social Security benefits. If his pension payments are cut in half to about $1,300, he says he’ll have to go back to work. But after two knee surgeries, truck driving is no longer an option. Like other retirees at the rally, he said his union often prioritized preserving the pension over other benefits like pay raises. “We always said the money was good enough but we want to have [our pensions],” Wroblewski said. “Now we’re back to fighting again.”

The costs of Social Security

Glenn Kessler was too lenient in his Dec. 2 Fact Checker column on Social Security [“Democrats’ sleight of hand on Social Security, deficit”]. Statements that Social Security does not add to the federal deficit are unequivocally incorrect. In 2012, Social Security adds roughly $165 billion to the deficit as its benefit expenditures exceed its tax income by that amount. This gap is filled entirely by revenue that the federal government borrows. Social Security is indeed financed from separate trust funds, but these receive revenue from several sources, including borrowed money. There is understandable confusion about the interest payments the trust funds receive from the general fund, which add to the federal deficit. But there ought to be no confusion about the roughly $220 billion in additional debt purposefully issued to Social Security from general revenues in 2011 and 2012. These transfers accompanied a payroll tax cut and were deficit-financed by design. They represent a deliberate policy decision by federal lawmakers to borrow to permit Social Security to pay benefits well beyond those that could be financed from participant contributions. ****Charles P. Blahous III** , Rockville** The writer is a member of the Social Security board of trustees.

Warren Buffett says this simple mistake has cost investors more than $100 billion

Billionaire Warren Buffett has some wise words for investors: Stop throwing money away on bad advice.  The “massive fees” charged by active fund managers — who often promise to outperform the broader market — can leave savers worse off than if they had simply used a low-cost index fund that tracks a stock-market index, Buffett warned. To illustrate his argument, the “Oracle of Omaha” laid out the results of a challenge he presented to fund managers more than a decade ago. In 2005, he bet $500,000 that no investment professional could find five hedge funds that would match the performance of an index fund tracking the Standard & Poor’s 500-stock index over the long run. Only one fund manager stepped up to the plate: Ted Seides, a co-manager of the investment firm Protégé Partners. Over the first nine years of the challenge, the five hedge funds chosen by Seides delivered an average 2.2. percent a year. The S&P 500 funds picked by Buffett returned an average 7.1 percent a year. “That means $1 million invested in those [hedge] funds would have gained $220,000. The index fund would meanwhile have gained $854,000,” Buffett wrote. While some of the funds chosen by Seides showed fewer losses than the S&P 500 index fund in some years or gained more than the index in other years, the index fund outshone them all over the long run: Buffett cites “human behavior” as a reason investors continue to choose costly funds. Some people associate bigger price tags with higher quality, he said, adding that the same isn’t always true when it comes to investing. Many investors, college endowments and pension funds would be better off using the simpler investment products, he wrote, noting that even a 1 percent fee can add up over time. Last year, the Labor Department finalized the so-called fiduciary rule. The regulation would make it more difficult for some brokers to recommend pricey or complicated investment products and would require brokers working with retirement savers to put their client’s interests ahead of their own. In some cases, that could require brokers who are choosing between two similar funds to recommend the less-expensive option. Earlier this month President Trump signed a memo asking officials to reevaluate the fiduciary rule and determine if it is harmful to investors, a move that supporters of the regulation fear is an effort to weaken or eliminate the rule altogether. In the letter, Buffett also praised famed investor John “Jack” Bogle, the founder of Vanguard Group and a pioneer in the index fund universe. “In his early years, Jack was frequently mocked by the investment-management industry,” Buffett wrote. “Today, however, he has the satisfaction of knowing that he helped millions of investors realize far better returns on their savings than they otherwise would have earned.”

Study: Waiting to join Social Security can boost income for some retirees

Americans can start receiving Social Security benefits between the ages 62 and 70. Recent proposals to raise the retirement age have raised fears about slashing income to seniors. But a new paper points out that for some seniors, joining Social Security later can actually boost their lifetime income, depending on their health, marital status and the country's interest rates. There is already a built-in incentive for delaying Social Security benefits: Those who wait to sign up are expected to collect benefits for less time, so the government adjusts their benefits upward according to an actuarial formula. It didn't always pay off to join later. But nowadays, the combination of longer life expectancy, new rules regarding couples and historically low interest rates allows some late joiners to collect more Social Security benefits over their lifetimes, according to a new paper for the National Bureau of Economic Research: In other words, for those who can afford to wait, delaying Social Security benefits can pay off, particularly for healthy individuals and married couples. The potential advantage however, fluctuates wildly depending on the interest rate: For healthy single women, joining at age 70 boosts their net Social Security benefits by 24 percent over their lifetimes when interest rates are assumed to be zero, while that gain drops to 7 percent at best when interest rates are 2.9 percent, no matter how long they wait. The most that less healthy single men can expect to gain from delaying benefits is 1.5 percent over their lifetimes, if they wait until age 65, and there's no benefit from waiting when interest rates are closer to historical norms.

Not ready to retire, but not finding work

A friend recently called to tell me he had been laid off from a company where he worked for more than a decade. He’s 60 years old and not ready to retire, either financially or emotionally. He is, however, prepared for the reality of the situation. He recognizes that he has a tough road ahead. He knows he probably won’t ever earn the salary he had. And even for a much lower-paying job, he’ll be competing with people half his age. Need proof of that? A GAO report in 2012, the most recent available, said unemployed workers 55 and older were the least likely to find another job. “I speak to a lot of big audiences of people over 50 looking for jobs,” says Kerry Hannon, career expert and author of “Getting the Job You Want After 50 for Dummies.” “I feel and I see the palpable fear. The job market has not improved for this set of people.” “It’s not a pretty scene,” she says. “What happens is people say they will keep working, but for various reasons, including health, they don’t keep working.” Employment consultant Sara Rix says surveys show that up to 80 percent of people think they will work in retirement. A much lower percentage of people actually do (19 percent, according to the AARP). People don’t continue working for many reasons: layoffs, health and unexpectedly becoming a caregiver are just a few. Those still able to work can face tremendous difficulties finding a new job. The elephant in the room is age discrimination. “We are struck by the data that show it takes an awful long time for older workers to find new employment after losing a job, over 40 weeks,” says Daniel Kohrman, senior attorney with AARP Foundation Litigation, “and that’s consistent with our experience from working in legal cases over many years. Part of the challenge is that there are a lot of stereotypes out there about older workers.” One big reason people plan to work later in life, including in retirement, is that they have not saved enough for retirement. Fifty-seven percent of retirees reported having less than $25,000 in savings and investments, not counting their homes or traditional pensions. Twenty-eight percent said they have less than $1,000, according to a survey by the Employee Benefit Research Institute and Greenwald and Associates. So they think they will keep working to help make up for the money they did not save. It just doesn’t work out that way. And because they are so unprepared financially, many forced into an early retirement are taking Social Security earlier than planned. That can cost them thousands of dollars over a lifetime. If you apply for benefits at 62, your benefit will be 25 percent less than had you waited until full retirement age. “If they get laid off in their late 50s or early 60s, the odds of finding a job paying what that existing job did are slim,” says Timothy McGrath, managing partner at Riverpoint Wealth Management in Chicago. “It would not be unusual for a client making a half-million a year to have to find a job making $100,000. “We can’t plan that we are going to always work or work till 65,” he says. “There is a good chance they will not work where they want to. They may find a lower-paying job, but that might meet their retirement objective.” Television personality Rene Syler, former co-host of The Early Show on CBS from 2002 to 2006, lost her job when the show was revamped. “You are either being forced out or you leave on your own volition,” says Syler, 54, now an author and founder of goodenoughmother.com. “I think those numbers are really growing. What is happening to people like me? It’s not like we will be able to have a job and career that we retire from, and have a pension and live happily ever after. I never had a pension. I expected to do it longer than I did.” “The older the population gets, their careers may be over, but they have to continue with their lifestyle,” says Marty Welch of the Legacy Franchise Group. “It can be a challenge with people who are not able to live off their Social Security or a pension. This generation is living longer, into their 80s, so a lot of times they will need income.” McGrath says people always think they want to work, but when they get older, they often want to do it on their own terms. “I have clients who love their jobs in their 40s and hate it in their 50s,” he says. It’s an adviser’s job to bring up things that a client can’t imagine. “Most people who are making good money, there is a reason,” he says. “When you get in your late 50s and 60s, it’s usually not fun. They get laid off or can’t take it anymore, and then they want to something different.” Rix, meanwhile, says people often leave voluntarily, thinking they will easily find another job. “If you are planning on working in retirement, having something lined up before you submit your papers to your employer is a good idea,” she says. “Not only is it easier to keep a job than to find a job, it’s easier to find a job if you have a job. Planning will play a big part in preparing you for life after a forced or unexpected retirement. “You’ve got to start planning at 55 what you want to do at 60,” Hannon says. “People don’t. They don’t think that far down the line.” Next week: Planning your second act.

More good Obamacare news highlights why GOP alternative will never materialize

You may have noticed that the Medicare trustees have announced that the life of the program’s trust fund had been extended another four years to 2030 because of savings achieved through the Affordable Care Act. But you probably didn’t hear about this: The Obama administration has announced that because the ACA closed the Medicare prescription drug “donut hole,” since 2010, over 8 million seniors and disabled people have saved a total of $11.5 billion on medications, or an average of over $1,400 per beneficiary.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday It was a good reminder that the ACA does a lot of things to improve the health system, not all of which make the front pages. And that has forced Republicans to come up with yet another way to keep alive the notion that someday we’ll finally get rid of it: Claim that it is only a matter of time until the law collapses on its own, making  and vow to have something or other ready to go in its place. We’ll get to that in a moment, but in case you’ve forgotten, the donut hole was part of the prescription drug benefit passed in 2003 under President Bush. The way it works is that Medicare pays for much of your prescription drug costs up to the first couple thousand dollars, then stops paying entirely for the next few thousand dollars — that’s the hole, where beneficiaries had to pay for 100 percent of their drug costs — and then begins paying again after your out-of-pocket costs approach $5,000. The donut hole represented a huge hardship for millions of seniors, so the ACA closes it over time. The donut hole sometimes comes up when you hear an administration official or some other Democrat give a long list of the good things the ACA has done for people. And almost all of the items on that list are benefits that Republicans would never risk taking away from voters. Which is why actual repeal of the ACA would be so difficult for Republicans. You can talk about repeal in the abstract, and try to assure people that whatever they like about the law would still be there. But if you actually did it, you’d have to confront anger over the loss of all those particular provisions. And once you tell seniors you won’t re-open the donut hole, and tell cancer survivors that insurance companies will still be required to cover them regardless of their pre-existing conditions, and tell young people they can still stay on their parents’ insurance, and tell middle-income people they can still have the subsidies that enabled them to buy private coverage, and tell people that insurance companies will still be forbidden from rescinding their policy if they get sick or have an accident, all of a sudden it looks you’re repealing Obamacare and replacing it with…Obamacare. So what’s a Republican to do? They’re faced with two unacceptable options. They could publicly admit that the ACA is here to stay (which they know by now) and bring on the wrath of their base, to whom they’ve been promising repeal for years. Or they could detail what “repeal and replace” would look like and open themselves up to blistering attacks from Democrats. The answer to that quandary is to promise that a detailed Republican health care plan is on its way, but never actually deliver it. To see how that works, we can look at this interview with Paul Ryan published in the Washington Examiner:    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday They need to “get ahead of that” — how forward-thinking and proactive, given that it’s been a mere four years since the law was passed and the GOP has yet to come up with its alternative. The interviewer tries just once to get Ryan to be specific, and is rewarded with an utterly meaningless free-market word salad: In other words, they’ll be getting right on that. And thus it will be forever: the GOP “repeal and replace” plan will be always be coming soon, yet it will never arrive.

Less than a month from retirement? Keep your fingers crossed.

If you have a 401K plan or any one of a number of widely held investment accounts, Fitch Ratings has great news: You’re once again exposed to the travails of the euro zone. U.S. money market funds – the large pools of cash used as a play-it-safe investment and money management tool – are once again plowing into the euro zone, particularly French banks. Euro-zone holdings of the 10 largest U.S. money market funds have nearly doubled since hitting a low last summer, when a euro-zone breakup seemed not only possible but, to some, likely. *[WSU]: Wayne State University Euro-zone banks now account for 14.5 percent of top fund holdings, or nearly $100 billion, according to Fitch’s research. The 10 firms analyzed by Fitch represent about 45 percent of the $1.5 trillion U.S. money market pool. It is another sign that the capital flight that nearly wrecked the 17-nation currency union is reversing. Though the region’s economy remains turgid, the financial system has stabilized enough for the money funds to feel confident crossing the Atlantic again – even with new U.S. rules forcing them to be even more conservative. Money market funds are supposed to be virtually risk-free for the investor – a dollar placed there is expected to hold its value, and the returns are correspondingly low. It’s a spot to park money to keep it safe, often offered as a cash alternative in 401k plans or as a holding place for funds waiting to be invested. When the money market funds abandoned Europe in the spring of 2011 it accelerated the region’s slide toward breakup and stranded euro-zone banks without one of their staple sources of dollars. The fact that the money is returning, like green shoots after a forest fire, is a sign of growing confidence that a major meltdown has been avoided. Maybe. Fund managers have been wrong before – most notably when “safe” investments in Lehman Bros. led one New York fund to “break the buck" in 2008 and threaten an entire industry that serves as a sort of lubricant for the financial system.    *[WSU]: Wayne State University But according to Fitch, the funds are not just dipping a toe in Europe, but investing in earnest. Money market investments are by nature short term. But the 10 large funds analyzed by Fisk have been increasingly willing to make slightly longer commitments – buying 40-day certificates of deposit at euro-region banks, for example, instead of using agreements good for only a day or two. If you are less than month from retirement, keep your fingers crossed.

Yes, we can work longer

Can Americans work longer? Or are we so broken down by our 60s that extending work life would be cruel? These questions stalk the debate over Social Security and Medicare. Critics of current policy, including me, have long urged that eligibility ages slowly rise to reflect longer life expectancy. Not so fast, counter others. Just because people live longer doesn’t mean they can — or should — work longer. We now have a new study that confronts the question. The answer: an emphatic yes. “Most people are healthy enough to work longer than they do now,” write economists Courtney Coile of Wellesley College, Kevin Milligan of the University of British Columbia and David Wise of Harvard. Most Americans could work another two to four years without adverse consequences, they say. That would move the current eligibility age for full benefits from today’s 66 to somewhere between 68 and 70. Presumably, the increase would be phased in to give people time to adjust. (The full eligibility age is already scheduled to increase slowly to 67 by the end of the next decade.) Of course, health issues alone won’t settle the issue. Millions of Americans regard a lengthy retirement as something they’ve been promised. They don’t want it cut, even if life expectancy has increased. (At birth, U.S. life expectancy is now 79 years, up from 70 years in 1960.) Their position is that Social Security spending should automatically increase to cover longer retirements. They also argue that the poor — being less healthy than wealthier workers — would be hit hardest by higher eligibility ages. How do the economists conclude that most Americans could work a few years longer? One way would be to define “good health” as the absence of some conditions (say, diabetes) and the presence of others (say, proper weight). The economists sensibly didn’t do this. It would have opened an endless technical debate over the definition of “good health,” with defenders of today’s eligibility ages advocating an exacting definition and opponents embracing looser standards. Instead, the economists took a simpler approach. For most of the last century, Americans’ health has slowly improved. Mortality rates — the share of the population that dies at a given age — have dropped. The result is, for example, that the mortality rates for today’s 55-year-old men equal rates for men who were 49 in 1977. Suppose, ask the economists, today’s 55-year-olds worked in the same proportion as the 49-year-olds in 1977. Eighty-nine percent would be working now, as opposed to the 72 percent of 55-year-old men who actually work. The study performs similar estimates along the 55-to-69-year-old age spectrum. In 2010, 37 percent of 65-year-old men worked; the rate would have been 77 percent if the 65-year-olds had worked in similar proportions as men in 1977 with the same death rates. The assumption is that people with the same death rates have roughly the same health and are equally capable of working. But because this is not necessarily so, the study performs a similar exercise on people’s evaluations of their own health — are they in good, fair or poor health? — and their ability to handle “activities of daily living”; these include dressing, bathing, walking across a room. Arguably, these detailed measures of health more directly affect the capacity to work. Again, the same relationship holds: Older people today seem as healthy as people who were several years younger a few decades ago. So why shouldn’t they work the same way, too? What’s confusing is that — quite obviously — older people are less healthy than younger people. The catch is that they’re getting less healthy at a slower rate: Today’s older Americans are healthier than yesterday’s older Americans. What, if anything, should we do about that? The economists don’t make a specific policy proposal. They concede that even a gradual increase in Social Security’s eligibility age would fall hardest on the poor, who have shorter life expectancies. They also note that older workers face possible job discrimination and that any change in the eligibility age relates to the larger issue of how much the government should support retirement. They simply “intend for our analysis to contribute to the discussion about relatively modest changes to Social Security.” Unfortunately, that’s a debate we aren’t having. _Read more fromRobert Samuelson’s archive._ **Read more on this topic:** Robert J. Samuelson: The life-expectancy gap Andrew G. Biggs: The ‘retirement crisis’ that isn’t Charles Lane: Entitlement reform, RIP

Why Social Security holds Treasury bonds

The chutzpah of Richard W. Souther’s Dec. 22 letter is stunning. He left out the reason the $3 trillion Social Security trust fund is in U.S. Treasury bonds: The Treasury borrowed the money from Social Security in the first place. (That’s what bonds are: loans.) Am I to be held responsible for a little bit of the federal deficit every time I redeem one of my U.S. Savings Bonds? ****Don DeGeorge,** Ellicott City**

How you would fix Social Security: Sooner rather than later

_About a month ago, the Post invited readers to chime in on what they thought were the best ways tofix Social Security. _    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico _With the help of theCenter for Retirement Research, we presented an array of 12 solutions commonly suggested for the retirement system, which is projected to be so depleted that it will be unable to pay full benefits by 2033. Then we asked readers to pick the options they would consider._   __   _This week we’re reporting on the solutions that have resonated with the most readers. We’re tallying the results we’ve seen so far, but you can stillcheck out the graphic and choose the solutions you think would work best. _    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico One thing was clear from the first month’s responses to our question about how to fix Social Security: Readers want something to get done. Only 2 percent of responses were in favor of “doing nothing,” which would mean that after 2033 –when the Social Security trust fund is expected to be depleted– retirement benefits would be cut by 23 percent. And only 3 percent of responses said it would be a good idea to put off raising taxes until after the trust fund is depleted, at which point a steep tax hike would be needed to pay benefits. “People recognize the problem and that something needs to be done,” says Catherine Collinson, president of the nonprofit TransAmerica Center for Retirement Studies, which conducted a survey earlier this year that reached a similar conclusion. Only 9 percent of the people surveyed by the center said they would do nothing to reform Social Security. Close to a third, or 28 percent, said they wanted to increase taxes. Fourteen percent said they wanted to cut benefits and another 28 percent said they favored a more balanced approach. Still, anyone watching the program inch closer and closer to its long-expected funding shortfall might say they’d be happy to see lawmakers take any approach. Social Security hasn’t been changed substantially since 1983, the last time the trust fund was close to zero. And it’s not looking like lawmakers will have reason to take action any time soon– or at least not for a couple of years. Some analysts think Congress will consider reforming the program in two years when the Social Security disability trust fund is expected to be depleted, leading to a 20 percent cut in disability benefits. “Historically, you would simply transfer from Social Security, basically kick the can down the road,” says William Hoagland, a senior vice president at the Bipartisan Policy Center, a think tank based in Washington. “We don’t think that’s going to be as easy this time around.” There are already some efforts underway. In May, Reps. Tom Cole (R-Okla.) and John Delaney (D-Md.) introduced a bill that would create a bipartisan commission to improve Social Security. And the Bipartisan Policy Center, launched a commission in the spring that will create a list of policy recommendations for improving retirement security, including Social Security. Still, it’s not clear if and when those recommendations might lead to change. By basically rejecting the solutions that called for “passing the problem off to the next generation,” readers suggested that they want to improve Social Security not just for themselves, but for their children and grandchildren. “They would much rather see Congress take action now,” says David Brown, senior policy advisor for the Economic Program at Third Way, a centrist think tank based in Washington. Readers also seem to support a more balanced approach. For a program that typically divides voters and politicians into two camps, (Raise taxes! Cut benefits!) readers seemed to favor a little bit of each. Instead, Congress is giving them the exact opposite of what they want: nothing at all. **Related:   **    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico How you would fix Social Security: Raise the retirement age    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico How you would fix Social Security: Tax higher earnings **   **    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Finance Lab: They have a pension, long-term care insurance and savings. But is it enough?    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico

Pensions guaranteed a stream of income until you died. Promises are being broken.

It used to be that many Americans worked for a company for decades and looked forward to the time when they could retire and collect a pension. Your pension was a guaranteed stream of income that would come faithfully until you died. But increasingly we see pension promises broken. And it’s sad and troubling. Think Detroit. This summer, Detroit retirees voted to accept cuts to their pensions. “As the public pension debacle in bankrupt Detroit shows, we may never find a solution that completely eliminates the risk of your money running out,” Dan Kadlec wrote recently for Money/Time. “The deal still left the city’s 32,000 current and future retirees with diminished benefits and no certainty that they won’t be asked to give up more down the road,” Kadlec said. “Their fate is largely in the hands of the markets — as is the case for millions of workers saving in 401(k) plans, and even many of those still covered by a private pension.” Then in more pension news this week, congressional leaders struck a deal that would allow cuts to retiree benefits in some struggling multiemployer pension plans. It would for the first time allow the benefits of current retirees to be severely reduced, The Washington Post’s Michael Fletcher reported. “If passed, the change would apply to multiemployer pensions, where a group of businesses in the same industry joins forces with unions to provide pension coverage for employees,” Fletcher wrote. “As many as 200 multiemployer plans covering 1.5 million workers are in danger of running out of money over the next two decades. Half of those are thought to be in such bad shape that they could seek pension reductions for retirees in the near future.” There are a number of reasons why the pensions are going broke — membership declines, an aging workforce and downturns in the stock market. Not surprisingly, retirement security advocates are worried that opening this door will lead to cuts for other retirees, too. Joyce Rogers, a senior vice president for AARP, said in a statement: “After a lifetime of hard work to earn their pensions, retirees don’t deserve to receive a bad deal, in which they have had no say, cut behind closed doors and secluding the very people who would be impacted the most.” The truth is we’ve lost our say long ago. As I’ve told so many who ask how much they should save for retirement: Save as much as you can because, folks, not much is guaranteed anymore. **Color of Money question of the week** Do you have a pension, and if so, do you feel it’s secure? Send your comments to colorofmoney@washpost.com. Please include your name, city and state. **In a debt trap** There are a lot of people in debt who think they will never be able to pay off their loans, according to a survey released Wednesday by CreditCards.com. As The Washington Post’s Jonnelle Marte reported this week, the credit card comparison Web site found that nearly 1 in 5 consumers with loans said they think they will never be able to finish paying off their debt. CreditCards.com “polled more than 1,000 people in early December and asked them what age they expected to be debt free, after factoring all of their consumer debt, including credit card bills, car loans, student loans and other types of loans like mortgages,” Marte wrote. “On average, people said they didn’t expect to be done paying off those loans until they were 53.” She continued: “Some people may expect that they’ll be paying off debt for a while simply because some loans just take a long time to pay down. Mortgages are commonly issued as 30-year loans. People who consolidate their student loans also expect to be paying them for decades. And people are even stretching their auto loans.” Even if you have a long time to pay off a debt, such as a mortgage, don’t lose hope. And do what you can, when you can, to apply extra payments to get out of your debt trap. **Live online chat today** Please join me today to talk about money — your money. Do you have some financial issues you need help figuring out? If so, I’ll be around from noon to 1 p.m. to answer your questions. Join the chat by clicking on this link. **No gifts for you** A Utah couple decided to teach their three young boys a Christmas lesson. In a blog post “Why My Husband and I Cancelled Christmas,” Lisa Henderson explained why they banned Christmas gifts for their kids this year. They said: “We are fighting a very hard uphill battle with our kids when it comes to entitlement.” The money the couple would have spent on presents for the boys will instead be used to give to others. They’ve also been doing various community service projects with the boys. So I asked you: Do you think canceling Christmas is a good way to teach children about gratitude? Here’s what some of you had to say: “I think the Hendersons are on the right track,” wrote **Dani** from Atlanta. “I have small children who are preschool age and younger, and they have yet to receive Christmas gifts from Mommy and Daddy. It’s not because they have the wrong attitude, but because, as Christians, we don’t want them confused about what Christmas is really about.” **Debra Paschall** of Washington, D.C. wrote: “I can embrace the family values they want to teach their children. While I overindulged my only daughter for 11 years, I’m a lot mellower in how I raised my son, and he’s grounded and grateful. It is important to teach our children about gratitude!” “Canceling the gifts this year makes a bold and positive statement, but the way they handle future years of Christmas and birthday presents will determine the lasting effect on their children’s sense of entitlement,” wrote **Cainna Browning** of Boynton Beach, Fla. “If the lack of gifts is framed solely as a punishment, I worry they will reward with excessive shopping again once the children are better behaved. To be successful in the long term, they must commit to dismantling the materialistic culture they’ve created in their family.” Love these comments from **Debra Coleman** of Northfield, Minn., who wrote: “This year at Thanksgiving we had started talking about Christmas and decided, as a family, that our Christmas had gotten way too commercial. What were we teaching our little ones? So this Christmas, there will be much fewer gifts. They will receive one or two gifts from their parents and pajamas from the grandparents, but that is it.” Coleman continued: “Our grandchildren are from ages 1 to 9 years. Last year, we noticed the children were completely overwhelmed when opening their mountain of gifts. We realized we had created this frenzy, and it made us sad. So this year, we’ve decided to make Christmas about giving instead of receiving. We will build on this theme to hopefully make our children grow in healthier ways as individuals.” Readers may write to Michelle Singletary at The Washington Post, 1150 15th St. NW, Washington, D.C., 20071, or michelle.singletary@washpost.com. Personal responses may not be possible, and comments or questions may be used in a future column, with the writer’s name, unless otherwise requested. To read previous Color of Money columns, go to www.postbusiness.com.

Elizabeth Warren wants to spend more on Social Security. But she’s not thinking big enough!

_On the Senate floor on Monday, Elizabeth Warrendelivered a speech arguing that Social Security should be expanded — not cut. In this, she joins a growing movement of Senate Democrats, including Tom Harkin, Mark Begich and Bernie Sanders. "Social Security is incredibly effective, it is incredibly popular, and the calls for strengthening it are growing louder every day," Warren said. _    *[WSU]: Wayne State University _The main idea Warren references is adoptinga more generous measure of inflation known as CPI-E. That's a tweak, and not a particularly good one. It would waste a lot of money helping seniors who're already doing fine. And CPI-E is actually less generous than the current inflation measure so long as health costs remain under control. But Warren's broader arguments on the retirement crisis are sound -- and they make a case for thinking much bigger on expanding Social Security. I wrote about this back in April._    *[WSU]: Wayne State University Washington frets endlessly over the problems that Social Security, which is projected to exhaust its trust funds in the coming decades, might cause the budget. It frets about it so much, in fact, that it completely misses the problems Social Security is uniquely poised to solve for the country. For years, pension experts have spoken of the “three-legged stool” of retirement savings: Social Security, employer pensions and private savings. In recent years, however, that stool has begun to wobble, and today, Social Security is basically the only leg holding it up. In 1980, about 40 percent of private-sector workers had a guaranteed pension. By 2006, that had fallen to 15 percent. Today, the 401(k) reigns supreme, with a trajectory that is almost the precise reverse of guaranteed pensions: In 1979, 17 percent of workers had a 401(k). Today, 42 percent do. Those 401(k)s, however, are woefully underfunded. In 2010, 75 percent of workers nearing retirement had less than $30,000 in their 401(k). Sixty percent of low-income households are at risk of being unable to maintain their already modest living standards in retirement. Individual savings don’t look much better. About a third of households don’t have a savings account at all. More than 40 percent don’t have enough to cover basic expenses if they lost their main source of income. In a vicious cycle, the need for savings is so great that many workers are tapping into their 401(k)s early: In 2010, contributions to defined-contribution pensions totaled $176 billion, while early withdrawals — which carry heavy penalties — totaled $60 billion. Today, Social Security provides 37 percent of the income for all Americans over 65, and about 80 percent of the income for seniors in the bottom half of the income distribution. Given the state of private and employer pensions, those numbers will have to rise in the coming years, or else the standard of living for seniors will fall. This is the other, perhaps more pressing, Social Security crisis: It’s not generous enough to counteract the sorry state of retirement savings nationwide. In a report for the New American Foundation, Michael Lind, Steven Hill, Robert Hiltonsmith and Joshua Freedman survey this data and conclude that the ongoing debate over how to cut Social Security is all wrong: We need to make Social Security much more generous.    *[WSU]: Wayne State University They would keep today’s income-based Social Security program, but add a “Part B,” which would be a flat payout to all retirees. When parts A and B are combined, all retirees would be guaranteed 60 percent of their average working wage in retirement, with low earners seeing closer to 100 percent replacement. Part B would be pricey, adding almost a trillion dollars to Social Security’s costs in 2037, and the authors don’t have a clear proposal, much less a politically realistic plan, for how to pay for it. But not paying for it doesn’t mean those costs disappear: It either means living standards for seniors will tumble, or families will strain as they try to support older relatives. Other ideas might be cheaper, and partial pay-fors abound: The tax breaks for retirement savings cost hundreds of billions of dollars and are sharply regressive. Famously, Mitt Romney had between $21 million and $102 million in a tax-advantaged Roth IRA. That's not a good use of taxpayer funds. And on the spending side, as much as its anathema to many liberals, Social Security could be significantly less generous to wealthier retirees. It has become common in Washington for wonks and politicians alike to lament the public’s resistance to cutting Social Security. But that resistance is there for a reason: These programs work extraordinarily well. Social Security has been wildly successful at raising living standards for the elderly, even as other forms of retirement savings have grown shakier. We've gotten so used to thinking of our entitlement programs as problems to be solved, we're missing all the problems they can solve.

Why you can stop worrying about the national debt

So it's official: No one is worried about the U.S. debt anymore. Not even Moody's, one of the nation's top ratings agencies. In a report issued Wednesday, Moody's declared the government's finances "relatively healthy, having surpassed our prior expectations" for reducing the scary annual budget deficits that drove the debt to nearly $18 trillion and the highest level as a share of the economy since the end of World War II. After four years of deficits in excess of $1 trillion, last year's budget gap was a relatively manageable $483 billion, or 2.8 percent of the size of the economy. "The overall message is, Number 1, we're confident in the credit-worthiness of the U.S. government for the next couple years," said Moody's Senior Vice President Steven Hess. But -- and you knew this was coming -- there are dark clouds on the horizon. By 2018, the ratings agency expects annual deficits once again to surpass 3 percent of the size of the economy and to keep getting bigger. By 2030, debt held by outside investors is on track to rise from the current 75 percent of the size of the economy to 88 percent, an alarming increase that "likely would bring negative pressure" on the nation's sterling AAA credit rating. The source of this additional debt? ""The rising cost of healthcare services and demand for those services due to the aging of the population," which will slowly drive spending on Medicare and Social Security through the roof. Fortunately, Washington has plenty of options for righting its future finances. Unfortunately, all of them are what the report delicately calls "politically sensitive." For example, policymakers could increase immigration rates, importing more workers to shore up the finances of the federal health and retirement programs and cover the cost of Baby Boom retirement benefits. They could also raise revenue, for example, by lifting the cap on Social Security taxes, which are currently paid only on annual income under $117,700. Or they could raise the Social Security tax rate, which currently stands at 12.9 percent, evenly divided between workers and their employers. Or they could cut benefits. The report suggests limiting the share of wages replaced by Social Security benefits. Or limiting Medicare eligibility. Or charging higher Medicare premiums. Or reducing insurance subsidies for working people under President Obama's Affordable Care Act. At a time when even Republicans are vowing to deliver "every penny" that's been promised to seniors, most of these ideas could be dismissed as non- starters in Washington. Even popular solutions, like making the well-off pay more in taxes to support Social Security, are politically fraught. And while some Democrats are holding out a higher Social-Security income cap as the answer to our budget woes, the Moody's report makes clear that that option, on its own, would fall well short of solving the problem. To stabilize the federal debt load, policymakers may need to raise taxes AND cut benefits.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico The good news, at least from Moody's perspective, is that the nation has bought itself some time. Though the budget battles of the past few years have been painful to watch, they did manage to restrain spending and raise a little bit of cash. So, Hess said, the ratings agency is feeling "comfortable" with the state of U.S. finances, even if nothing more gets done in the final years of Obama's presidency. "We don't think the political configuration in Washington right now indicates they will actually do anything," Hess said. "But we're confident for the next several years."

Robert J. Samuelson: The end of government

Something strange is happening in Washington. We are slowly dismantling the federal government, even as its spending is growing larger. The paradox is that governmental competence is being systematically degraded while the government’s size, as measured by its budget, is increasing. We are spending more and getting less, and — unless present trends are reversed — this will continue for years. It threatens the end of government as we know it. The cause is no mystery. An aging population and higher health spending automatically increase budget outlays, which induce the president and Congress to curb spending on almost everything else, from defense to food stamps. Over the next decade, all the government’s projected program growth stems from Social Security and health care, including the Affordable Care Act. By 2024, everything else will represent only 7.4 percent of national income (gross domestic product), the lowest share _since at least 1940_ , says Douglas Elmendorf, head of the Congressional Budget Office. This is the central budget story, and it’s largely missed — or ignored — by political leaders, the media, political scientists and the public. The welfare state is taking over government. It’s strangling government’s ability to respond to other national problems and priorities, because the constituencies for welfare benefits, led by Social Security’s 57 million, are more numerous and powerful than their competitors for federal support. Politicians of both parties are loath to challenge these large, expectant and generally sympathetic groups. The United States, of course, is not the only advanced society grappling with aging, but it is extreme in its stubborn denial of the obvious. The Pew Research Center recently polled people in 21 countries about whether aging is a problem. The United States ranked 19th in its unconcern, ahead of only Indonesia and Egypt, whose populations are young. Only 26 percent of Americans thought aging was a problem. The share was 87 percent in Japan, 55 percent in Germany and 45 percent in France. Why the differences? Pew speculates that these other societies are already older and are aging faster. In Japan, the 65-and-over population is projected to be 37 percent of the total in 2050, up from 23 percent in 2010. For Germany, the increase is from 2010’s 21 percent to 33 percent. These societies face huge adjustments. By contrast, the United States’ shift is from 13 percent in 2010 to 21 percent in 2050. But that’s still a major change, with most of it occurring by 2025. Americans don’t worry about aging, mainly because their leaders studiously avoid the subject. Choices are made on the sly with little public understanding. The Budget Control Act of 2011 imposed across-the-board limits on most non-Social Security and non-health-care spending; the 2013 “sequester” deepened cuts. To offset an explosion of spending on new retirees (in the next decade, Social Security beneficiaries grow by a third), the remedy is to chop the rest. Consider: ●The military is being weakened. As a share of national income, defense spending is projected to fall by 40 percent from 2010 to 2024. For example, the Air Force has discussed retiring all its 300 A-10 jets, a close-in ground support fighter, for a savings of $3.7 billion. The move would mean that “more people will get hurt and die” in combat, one general told the Wall Street Journal. ●The National Institutes of Health reports that since 2003 its budget has declined 22 percent in inflation-adjusted dollars. The cuts squeeze research for Alzheimer’s, AIDS, cancer and heart disease — among others — and makes it harder for younger scientists to get grants. ● Chief Justice John Roberts warns that cuts in the federal courts’ $7 billion budget threaten delays in trials and decisions. Since 1997, the system’s workforce has shrunk 14 percent, despite more civil filings (up 2 percent), criminal defendants charged (up 34 percent) and people on probation (up 45 percent). These examples aren’t isolated. The Post reports that the number of immigration judges has fallen nearly 10 percent, making deportation hearings more perfunctory. Government’s most powerful agency isn’t even on the organizational chart. It’s AARP, the chief lobbying group for retirees, which triumphs over the Pentagon and other Cabinet departments. A better balance between retirees and everything else needs to be found. But no one is looking. Budget debates and the media focus on deficits and debt ceilings. This makes people seem engaged when they are actually evading explicit choices of what programs to cut and taxes to raise. Both liberals and conservatives are complicit in this charade, but liberals are more so because their unwillingness to discuss Social Security and Medicare benefits candidly is the crux of the budget stalemate. This refusal is rich in irony: The pro-government party in rhetoric has become an anti-government party in practice. _Read more fromRobert Samuelson’s archive._ **Read more about this issue:** Robert J. Samuelson: Let’s get rid of (the term) entitlements Greg Sargent: McConnell proposal would force major review of entitlements The Post’s View: Mr. Obama’s time to lead on entitlements Fred Hiatt: Obama’s modest proposal to cap retirement entitlements Jennifer Rubin: Obama’s abject failure on entitlement reform

Poll: Americans expect economic pain to continue

Americans remain deeply pessimistic about the nation’s economic future nearly four years into the recovery, and the vast majority think it will take “many years” for things to return to the way they were before the downturn, according to a poll released Thursday. The survey by the John J. Heldrich Center for Workforce Development at Rutgers University paints a picture of a nation wounded by the recession in ways that have diminished future expectations. Nearly one in four respondents said they were laid off at some point during the past four years, and even larger numbers said they had immediate family members or close friends who were thrown out of work. Many of those who found new jobs were forced to settle for less. Nearly half said they took a step down in status from their previous jobs, while 54 percent said they have had to accept lower pay. Often, the pay cuts were severe. On-third of re-employed workers said they swallowed salary cuts of more than 30 percent, while another third said their pay went down between 11 percent and 20 percent. Even though the economy has recovered more than half the 9 million jobs lost during the Great Recession, the survey found that Americans perceive that the economy has descended to a new normal. Fewer than one in five agree that jobs, careers and employment opportunities will be better for the next generation. Nearly three in five said the ability of young people to afford college — a crucial, if ever more uncertain, factor in upward mobility — is permanently damaged. More than two in five believed workers will never feel as secure in their jobs as they did before the recession. Nearly half said the elderly will have to find part-time work after retiring. And 86 percent of Americans said the availability of good jobs at good pay will never return or will not return for many years. “We have had many months straight of private-sector job growth. Yet people are stuck with this attitude and perception,” said Carl Van Horn, director of the Heldrich Center. “It speaks to how powerful, widespread and enduring this Great Recession is.” The survey’s findings in many ways match other measures of the nation’s economic struggles after the worst downturn since the Great Depression. The downturn destroyed nearly 40 percent of Americans’ wealth, according to the Federal Reserve, and pushed the unemployment rate to 10 percent. Private employers have added new jobs for three years straight, and the unemployment rate is now 7.9 percent. The stock market is back to pre- recession levels, and housing values are beginning to rebound across the country. Still, significant damage remains — 4.7 million workers have been out of work longer than six months. Meanwhile, the Census Bureau has reported that wages are down, and other researchers have found that a disproportionate number of jobs created in the recovery are at the low end of the wage scale. The survey found that most Americans are not expecting sharp improvement. More than 61 percent expect their family finances to remain at their current diminished levels, nearly three times the number who think their finances will get back to pre-recession levels. The survey found that Americans blame factors other than the recession for their economic plight. Seven in 10 said the high jobless rate is partly the result of foreign competition and “cheap labor” abroad. Four in 10 suspected that illegal immigrants have taken jobs away from Americans. Another four in 10 said unemployment remains high because Americans “lack the skills” for jobs that might be available. The survey found strong support for three policy proposals aimed at improving the nation’s labor market. Eight in 10 wanted the government to award tax credits to employers that hire new workers. Three out of four supported stronger education and job training programs. And three out of five said the government should fund direct job creation programs. At the same time, however, there was deep skepticism about Washington’s ability to do anything to significantly improve the economy, the survey found.

Why immigrants are the best thing that happened to Medicare

America's growing immigrant population might not be all that bad for the country's health-care system. In fact, it's probably playing an important role in helping to keep it afloat. U.S. immigrants' net contribution to Medicare's Hospital Insurance Trust Fund, the program's core funding source, was $183 billion between 1996 and 2011. US-born Americans? Negative $69 billion, according to a new report by the Partnership for the New American Economy, an immigration advocacy group. That means that immigrants have been pumping a lot more money in than they take out, while the rest of the population has been doing just the opposite. On a per person basis, immigrants contributed $62 more per person to the trust fund than the U.S.-born, and claim $172 less in benefits. By the institute's estimates, the cash contributed by immigrants over the 16-year span was more than a mere inconsequential boost. "Our analysis indicates that non-citizen immigrants, a group that includes both authorized and unauthorized immigrants, played a particularly large role subsidizing the care of the U.S.-born population," the report says. The net $183 billion contribution was enough to ensure the prolonged buoyancy of Medicare trust fund, which according to the most recent projection will remain solvent through 2030. Immigrants' contributions alone have helped secure three extra years of hospital coverage for the roughly 52 million Medicaid beneficiaries living in the U.S.. Why? The reason lies mostly in one simple fact: Immigrants are much younger on average than the overall American populace, and younger people don't go to the doctor (or hospital, in this instance) nearly as often. By 2030, there will be more than 400 seniors to every 1,000 working-age adults in the U.S., according to estimates by the Federal Reserve Bank of Boston. For immigrants that number will be much lower (pdf), largely because Latinos, the fastest growing immigrant group in the country, pose a significantly lower financial risk, because of their relative age and health.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday

Are Medicare and Social Security going bankrupt?

Rep. Paul Ryan just said that Medicare and Social Security are going bankrupt. What's the forecast for the two programs? Here’s what the trustees had to say.

Fact Check: Ryan says Medicare going ‘bankrupt’

Ryan: "Medicare and Social Security are going bankrupt. These are indisputable facts." It is highly misleading to use the phrase “bankrupt.” There are different parts of Medicare, much of which is paid from general revenues and premiums. Part A, which pays hospitals, has a “trust fund,” made up of special-issue Treasury bonds, that always seems to be on the edge of running dry, even though it is funded by a payroll tax paid by employees and employers. But even so, the payroll tax could pay most estimated expenditures for decades.

The reason not to expand Medicaid in Virginia

The Dec. 16 Metro article “Round 2 in Va. on Medicaid growth” obscured the reasoning behind arguments against expanding Medicaid in Virginia. The article stated: “House Republicans are staunchly opposed to extending an entitlement program to able-bodied adults. They also doubt the federal government can afford to bankroll most of the $2 billion-a-year cost.” This sentence makes this doubt sound irrational, when the Department of Health and Human Services has clearly stated that some matching federal funds will be withdrawn permanently after a few years. Matching Medicaid funding for states will be cut back to 90 percent by 2020. A news release from HHS says that “effective January 1, 2014, the federal government will pay 100 percent of the cost of certain newly eligible adult Medicaid beneficiaries. These payments will be in effect through 2016, phasing down to a permanent 90 percent matching rate by 2020.” The money has to come from somewhere, however, and most people against the expansion simply don’t want to pay higher state income taxes. ****Erik Rogers** , Alexandria**

No more operating money available through Thrift Savings Plan

As the government bumps up against the debt ceiling, one place it cannot look for more headroom is the federal employee retirement savings program.    *[WSU]: Wayne State University One of the Thrift Savings Plan’s investment options, the government securities fund, or G fund, often has been used to free up operating money for the government. However, the Treasury already has used that “disinvestment” accounting move among the other financial maneuvers it took in the spring when the government technically hit the ceiling–and whose limits are now running out.    *[WSU]: Wayne State University During a disinvestment period, the Treasury stops issuing the special securities that make up the G fund, in effect taking that debt off the government’s books. The maneuver has been used many times over the years and investors are not directly affected. They continue to be credited with interest payments and the securities are reconstructed once the debt ceiling is raised. The G fund is only one of the investment options in the TSP, however: it also has a bond fund, three stock-based funds and five “lifecycle” funds that mix investments in the five underlying funds according to the expected withdrawal date. As of the end of September, there was $375 billion in the TSP; of that $173 billion was in the G fund. The money in the other funds, though, is not available for the government to use because of the TSP’s 401(k)-style design, in which the accounts are the personal property of the investors. “Treasury cannot access any of the money in any of the other funds,” TSP spokeswoman Kim Weaver said in an e-mail.

Are immigrants a boon for Social Security or a drain on it?

For Marcelo, a construction worker who lives in Silver Spring, the way he will live out his old age will likely depend on the details of an immigration reform plan that a group of U.S. senators intend to unveil next week. Marcelo, an undocumented immigrant who moved to the United States in 1999, and his wife, an undocumented house cleaner, have no retirement savings, although both have paid taxes since arriving from their native Bolivia. “Sometimes it’s like you’re wasting your time,” said Marcelo, 48, who did not want his last name used because of his immigration status. “When you think of the future, there’s nothing coming.” An immigration reform package is likely to include a path to citizenship for the nation’s 11 million undocumented immigrants, many of whom already file tax returns and pay into the Social Security trust fund. Now, as the imminent retirement of 78 million baby boomers puts Social Security on a steady course toward depletion, some experts are debating whether legalizing the undocumented and encouraging immigration will help shore up the system with tax contributions or drain it by adding more beneficiaries to the rolls. A low birthrate and a disproportionately large population of aging baby boomers have created a top-heavy ratio of retirees to working-age Americans, with too few younger workers to support government benefits at current levels. Some argue that if undocumented immigrants are allowed to live and work here legally, they will contribute more. “There is the hope that they would get better jobs . . . and fewer of them would be under the table,” said Leighton Ku, professor of health policy at George Washington University. “If you’re legalized, your employment opportunities improve a lot.” A 2012 Social Security Administration report estimated that, on balance, adding more immigrants would give a slight boost to Social Security, since the population of workers would rise sooner than the population of beneficiaries. But the boost is not large. Currently, about 1 million immigrants per year come to the United States; whether this number stays the same or increases to 1.37 million, the fund will be depleted around 2033, the report said, noting that the fund gets a .07 percent gain for every additional 100,000 immigrants. “It is relatively small,” said Madeleine Sumption, senior policy analyst at the Migration Policy Institute. “But given the extent of the problem, Congress is going to want to be looking for all of the avenues that they can use to improve the financial health of Social Security, and if you look at what the other options are, there’s a limited number of things you can do.” Possibilities, she said, include some combination of immigration, tax hikes, benefit cuts and raising the retirement age — all politically difficult moves. Dowell Myers, an immigration expert at the University of Southern California’s Sol Price School of Public Policy, said that while a steady inflow of immigrants will not eliminate the imbalance, the problem would be much worse without them. “Immigrants contribute far more in their working years than they are a burden on the ratio in their senior years,” he said. “Having more immigrants means more workers to carry the load. And then immigrants have their own children, and they help carry the load.” But Steven Camarota, director of research at the Center for Immigration Studies, which supports limits on immigration, said that America’s immigrants are not young or fecund enough to shore up the system. “If the immigrants all came at 20 and had seven or eight kids, you would see more of a difference,” he said. The average immigrant arrives at age 30, and immigrant women have, on average, 2.1 children, according to the Pew Research Center. Camarota added that immigrants tend to be poorer than native-born Americans and are therefore more reliant on a wide range of public services. “If you bring in a lot of immigrants who are paying into Social Security but then need all these other social programs — well, then you’re not helping the situation.” Analysts on both sides agree that increasing the number of highly skilled immigrants would shore up the system more than the Social Security Administration report accounts for, since high-skilled immigrants pay more taxes and spend more than low-skilled ones. Lawmakers said last month that they are considering doubling the number of visas for highly skilled workers, to around 130,000 per year. But many lower-skill jobs will also need filling as America ages, said Ai-jen Poo, director of the National Domestic Workers Alliance. For example, about 23 percent of caretakers for the growing ranks of the elderly are immigrants, mostly undocumented, she said. “We simply do not have the adult bodies to take care of the older adult population,” she said. In addition, many elderly immigrants contribute indirectly to the economy without holding jobs that earn benefits, said Patience Lehrman, national director at Project Shine at Temple University, a program that helps older immigrants. “A 75-year-old grandmother may not be able to work a 65-hour workweek, but by virtue of the fact that they can babysit the children of their child who is working full time, their child can participate in the GDP,” she said. Many undocumented immigrants have been paying into the system for years. Since 1996, they have been able to file taxes using a government-issued individual taxpayer identification number; others use fake Social Security numbers. An estimated half to three-quarters of undocumented immigrants pay taxes, Sumption said. But even if they are allowed to become legal residents and ultimately citizens, their years of taxpaying may not translate into retirement benefits they can use. To be eligible, a person must have paid into the system for at least 10 years, and it is not clear whether, under immigration reform, payment by once-undocumented workers would count retroactively toward Social Security. If it doesn’t, those now nearing retirement age may have to start from scratch. Washington Perez, 56, a native of Ecuador, worked in the District for 14 years without authorization before receiving legal permanent residency in 2011. He now works 65 hours a week at two jobs, both of which require physical labor, and he is not sure how much longer he can keep it up. “It’s not fair for someone who has worked all those years to lose all the benefits that you’ve accumulated over all this time,” said Perez, pausing to chat in the back room of the thrift shop where he was hoisting heavy boxes of books and papers. “Why do they give you a taxpayer identification number if they’re not going to recognize it?” If he has to start paying into the system from scratch, Perez could be working well into his 70s. Even with a path to citizenship, it could still be a decade or more before those currently here illegally become legal residents and eligible for services. Gerardo Flores, 48, worries that he and his wife, who sell Mexican food from a cart in Philadelphia, will never be able to stop working. An undocumented immigrant who has paid taxes since arriving in the late 1980s, he said glumly, “We will work until we die.” With only a few more years of physical labor left in him, Marcelo said he dreams of becoming a U.S. citizen, running an import-export business and then retiring here. If a path to citizenship is offered, he may become eligible in time to receive Social Security. Otherwise, when he and his wife get too old for physical labor, they will return to Bolivia, where it is cheaper to live and he owns property. “No way to stay here with no benefits,” Marcelo said. But he added that he has a feeling immigration reform might change his fortunes. “I feel happy, really,” he said with a small smile. “There’s something on the way, something is coming.”

Katrina vanden Heuvel: Social Security’s needed expansion

On the very day thata bleak jobs report showed how feeble the recovery is, the White House revealed that the president will propose a budget that features cuts in Social Security. This was designed to get Republicans to agree to negotiate a grand bargain on deficit reduction — or to prove that they are obstructing any deal. House Speaker John Boehner’s reflexive reaction immediately revealed the political folly of the president’s ploy: “ _If the president believes these modest entitlement savings are needed_ to help shore up these programs, there’s no reason they should be held hostage for more tax hikes.” (Emphasis added) The exchange has Republicans salivating. Cutting Social Security becomes the president’s choice, not something extorted by Republicans. If Democrats stand for anything, it is defense of Social Security and Medicare, the United States’ most beloved and vital social programs, a proud legacy of the New Deal and the Great Society. The president’s negotiating ploy puts every Democrat supporting the president’s budget in a contested reelection race at peril in 2014. Democrats will face a flood of ads accusing them of wanting to cut Social Security and face the wrath of seniors who constitute a greater percentage of the vote in midterm elections. If Democratic leaders Nancy Pelosi and Harry Reid have any sense, they will organize their entire caucuses and pledge to oppose any deal that cuts a dime from Social Security benefits. The economics of the president’s proposal are even worse than the politics. The crisis we face in Social Security isn’t that the benefits are too generous; it is that more and more Americans lack the savings for a secure retirement. Decades of wage stagnation and the corporate rollback of pensions have sapped worker savings. The Wall Street wilding that produced the Great Recession savaged what little wealth workers had stored in the value of their homes when the housing bubble collapsed, as well as their 401(k)s and IRAs when the stock market imploded. Fifty-five percent of all workers have no retirement plan at work. Only about 15 percent of private-sector workers have traditional employer pensions with a guaranteed benefit. Corporations used the turn to 401(k) individual savings accounts to drastically slash their retirement contributions. This hidden pay cut has had devastating effects. With wages not keeping up with costs, workers have been unable to save much on their own. Fifty-seven percent of workers report less than $25,000 in total savings other than the value of a home or a defined- benefit pension. Many families are wracked by either the loss of a job or a medical crisis that upends their finances, exhausting their savings and forcing them to pay penalties to tap their retirement accounts. Yale political scientist Jacob Hacker has shown that more than one in five Americans lost at least a quarter of their available household income during the Great Recession. Social Security’s austere payments — averaging $1,262 per month — replace only about 33 to 40 percent of annual earnings, when most experts argue retirees need about 70 percent of their income to maintain their living standards in retirement. Sixty percent of Americans receive at least two-thirds of their retirement income from Social Security, with the bottom 40 percent receiving 84 percent of theirs from Social Security. Yes, we need to reform Social Security, but the reform should increase, not cut the income support that millions rely on. In an important political blueprint for sensible reform released by the New American Foundation, Michael Lind, Steven Hill, Robert Hiltonsmith and Joshua Freedman call for adding a supplement to Social Security that would guarantee all retirees about 60 percent of their average wage in retirement (similar to that of most other developed nations). They would pay for the expanded benefit not by increasing the payroll tax rate but by eliminating tax breaks for the wealthy, particularly those now offered to private retirement plans that disproportionately benefit the wealthy (à la Mitt Romney’s famous $100 million IRA plan) They would also lift the payroll cap to make Social Security financially stable. The authors argue that the United States would end up spending about the same percentage of gross domestic product on the overall retirement system, but with a much fairer distribution of support. This would also stabilize and improve the overall economy since the elderly will spend those extra dollars, giving a boost to aggregate demand. The greatest power of a president is the power to set the agenda. He (or eventually she) is the great teacher, and Barack Obama is one of the most skilled. This president now could be informing Americans that deficits are plummeting and that we must address the human tragedy of mass unemployment. He could be rallying Americans to address the growing retirement crisis. He could focus attention on continuing to challenge the entrenched interests that drive up costs in our health system, the greatest source of our long-term debt concerns. Instead he is fixated on more austerity, on a “grand bargain” that will include cuts to already inadequate Social Security payments. That is a lousy deal, not a grand bargain for most Americans. _Read more fromKatrina vanden Heuvel’s archive or follow her on Twitter._ **Read more from Opinions:** The Post’s View: The tattered safety net for the disabled Robert S. Samuelson: Would Roosevelt recognize today’s Social Security? Eric Yoder: Feds would have to pay more toward retirement

Congressmen propose new commission to fix Social Security

Reps. Tom Cole (R-Okla) and John Delaney (D-Md) introduced a bill Friday that would create a bipartisan commission to improve Social Security. Cole, a senior Republican on the House Appropriations Committee, is partnering with Delaney, a junior member of the House elected in 2012, to propose a 13-member Social Security Commission that would have a year to come up with a list of recommendations for improving the program. As it stands, the Social Security Administration has enough funds to pay full benefits through 2033, according to the latest trustees report.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday After then, the administration will only be able to pay about 75 percent of scheduled benefits through 2087. The shortfalls for the Social Security Disability Insurance program are more immediate, with beneficiaries facing a benefit cut as early as 2016 if Congress fails to act. "The nice thing about acting now is we can make very small changes and strengthen the program for 75 years," said Delaney in a phone interview. "If we wait, we can still make changes but they would have to be drastic changes." A number of lawmakers have been proposing ways to improve the Social Security program, but it's not clear how likely it is that any of these proposals will come to fruition. Two weeks ago, Sen. Marco Rubio (R-Fla.) announced a broad plan to reform America's retirement system that included raising the retirement age for younger workers, scaling back the growth of benefits for wealthy seniors and eliminating the payroll tax for people who continue to work after reaching full retirement age.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday Delaney said he is personally in favor of increasing funding for Social Security benefits by raising the maximum taxable income and introducing a new threshold to increase payroll taxes paid by higher earners. There's some evidence that Americans would back Delaney's approach. As for Cole, he says he is in support of gradually raising the retirement age and changing the way cost of living adjustments are calculated. Any final recommendations would be created by the commission.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday The Social Security program has not been changed substantially since the 1980s, when a bipartisan commission led by Alan Greenspan in 1981 called for increasing the payroll tax, gradually increasing the retirement age and introducing a partial tax on benefits, among other adjustments. At least two key differences set that instance apart from the commission being proposed today: During the 1980s, concerns about the health of the Social Security program were more immediate, with some estimates saying the trust fund could be depleted by 1983, the year in which the changes were eventually approved. And that commission was created by President Reagan, not by Congress.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday More recently, the Simpson-Bowles commission created in 2010 also proposed three main changes to Social Security, such as raising the taxable maximum on income to 90 percent of all income, slowing the cost-of-living adjustments and raising the retirement age. But that proposal ultimately did not muster enough votes in Congress. Under the bill introduced Friday, the commission would have a year to create a list of recommendations for making the Social Security trust fund solvent for 75 years. Twelve members of the committee would be appointed by leadership from both parties in the House and Senate (two of the appointees must be non-elected experts); the 13th appointee would be named by President Obama. Recommendations would then need to be put up for a vote before the House and the Senate. “At the end of the day most Americans believe in Social Security and most Americans want to make it work and are willing to make a sacrifice in order to make it happen,” said Cole. “This is at least an effort to get the discussion going.”

The next reform to welfare reform

The Aug. 22 editorial “Happy birthday, welfare reform” correctly noted that the 20-year-old welfare reform experiment has been a mixed bag. When it was passed by Congress and signed by President Clinton, many of us opposed the measure. We feared — rightly so, as it turned out — that many people would not be able to comply with the law’s many hurdles and would lose assistance without having other sources of income to live on. Today we see that funding for the Temporary Assistance for Needy Families program has basically been frozen over the past two decades, at $16.5 billion a year. Once inflation is taken into account, this represents a massive cut. And we see that states have often used TANF as a slush fund, diverting funding to purposes they would otherwise have paid for themselves. That has left relatively little for cash assistance and work-training programs, which together add up to less than one- third of state spending, on average. What now? Yes, Congress needs to reform TANF so that it helps more of the poorest families. But Congress and the next administration also should invest in subsidized jobs; raise the minimum wage; ensure an adequate safety net; adopt family-friendly work policies such as affordable child care, paid medical leave and predictable hours; and invest in human capital through a sound education system, all the way from prekindergarten through college. ****Deborah Weinstein** , Bethesda ** The writer is executive director   of the Coalition on Human Needs.

How Social Security penalizes working women

Most people think Social Security operates on a simple principle. While you work, you pay taxes. The more you pay, the fatter the checks you cash once your retire. But the system is much more complicated. And because of the way Social Security was set up in the 1930s, it doesn't benefit everyone equally. The biggest winners are spouses who stay at home -- for the most part, women. The losers are married couples in which both spouses work, as well as some people who are unmarried or divorced. Social Security benefits in part reflect how much people have paid into the system through payroll taxes during their careers. Yet among couples who have paid the same amount into the system, those with one earner can draw tens of thousands of dollars more in lifetime benefits, compared to households with two earners. In other words, married couples with a lone (usually male) breadwinner can put less into Social Security and get more out of it than families with other arrangements. These costly quirks in the system are putting more and more retirees at a disadvantage. More women have joined the workforce, and fewer are getting married. Rates of divorce have increased as well. In particular, there are far more unmarried and divorced black women, and the result is a racial skew in Social Security benefits. "The original design was basically based on the stereotype of the man working and the spouse staying at home," said Eugene Steuerle, an economist at the nonpartisan Urban Institute. "Social Security was meant as a whole-household benefit. That security was intended to extend to your spouse," said David Knapp, an economist at the RAND Corporation. "The world has just changed so dramatically." When you draw Social Security checks, you receive benefits based on how much you've earned and paid in taxes. There's one major exception: You instead receive half of your spouse's Social Security check if that amount is greater. By way of example, take a married woman who has never worked, but whose husband earned about $100,000 a year. Even though she hasn't paid into the system at all, she will receive about $15,000 a year in retirement -- half of her husband's check. Now, take another, similar woman who works a part-time job or returns to the workforce after having kids. She'll pay into the system, giving up part of her paycheck every month in taxes. Yet there is a good chance that she'll receive the same Social Security benefit as if she not worked at all. That's because she will still receive half of her husband's benefit, the same $15,000 a year, unless she makes enough that her own earnings would entitle her to more. There is a good chance she won't. Social Security benefits are calculated based on workers' average earnings over their entire careers, and for a variety of reasons, women earn less, on average, than men **.**    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico In fact, 36 percent of working women born between 1940 and 1943 will receive as much in Social Security benefits as if they not worked at all, according to a study conducted by the Social Security Administration.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Now, consider the effect on an unmarried woman. Let's say she earns $30,000 a year on average. Based on the taxes she pays on her wages, she can expect to draw the same amount annually as the first woman when she retires -- about $15,000. But suppose she marries a man who makes $70,000 a year. She and her husband together bring in $100,000 a year. That's the same amount as the earlier couple -- and they pay the same amount in taxes. But here's the rub. The working woman would still receive the same amount from Social Security as the woman who stays at home. That's because half of her new husband's benefit would be just $13,000, less than she would receive if she were single. She receives the larger amount instead. ****    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico For his part, though, the husband earned less and will receive less in retirement than the man in the first example, about $26,000 versus $30,000. Taken together, the second couple will receive about $41,000 in annual benefits, compared to the first couple's $45,000. These days, more people are getting the short end of the bargain. An expanding share of men and women are completely ineligible for Social Security spousal and survivors' payments because they have never married, or because they were married for fewer than 10 years. That's especially the case among black women. More than a third of black women in late middle age were ineligible by 2009, about twice the share of white and Hispanic women, according to the Social Security Administration.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Some who draw these checks from Social Security would be destitute without them, especially poor, elderly women who could work only a little and save only a little when they were younger. Many would argue the government has to help care for them in their old age. On the whole, though, the benefits tend to put wealthier couples at an advantage. If the benefits were eliminated, Social Security would distribute proportionally more money to the poor, economists say.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Critics of the benefits say that lawmakers should consider making changes, given Social Security's mediocre long-term finances. If current trends continue, Social Security will no longer be able to pay its beneficiaries in full in about two decades. "We're paying benefits to people who neither need them or paid for them, and that's a luxury we can't afford right now," said Andrew Biggs, a scholar at the conservative American Enterprise Institute. He called the bonuses for married women "an anachronism from an age when women didn't work outside the home."

Robert Samuelson: Is the West retiring early retirement?

We may be witnessing the last gasp of early retirement — not just in the United States but in many industrialized countries. Considering the high unemployment since the 2008 financial crisis, you might expect the opposite. Early retirement would flourish. It would strike many unemployed older workers as the path of least resistance. Can’t get a job? Retire instead. Surely this has happened, but it’s being diluted by a determination to work longer. Early retirement is in retreat. So finds a new study of 20 advanced countries done by economists Gary Burtless and Barry Bosworth of the Brookings Institution think tank. Excluding countries with depression-like unemployment — Greece, Portugal, Spain and Ireland — all these nations have experienced higher labor force participation by older workers since 2007. Some gains are startling. In Germany, the share of the 60-to-64 population with jobs went from 33 percent in 2007 to 47 percent in 2012; in the Netherlands, from 30 percent to 44 percent. This continues a trend of working longer that started in the 1980s and 1990s. In the United States, 52 percent of the 60-to-64 population held jobs in 2012, the same as in 2007. But the share of older people with work or searching for a job — the broad definition of “labor force participation rate” — has continued to rise. Translation: A shrinking share of older Americans are dropping out of the labor force and relying exclusively on retirement benefits and savings. What’s occurring is a massive shift in private behavior. For most of the 20th century, working years decreased in industrial countries. People stayed in school longer and retired earlier. In 1910, reports Burtless, more than half of American men aged 73 were still working; by 1994, half of men aged 62 had retired. This is now shifting: In 2011, only at 64 had half of men retired. At 65, men’s labor force participation rate was 46 percent, up from the historical low of 31 percent in 1982. Trends for women are similar. The causes lie in a messy mix of public policy, improved health and changes in lifestyles and economic conditions. For the United States, Burtless cites an increase in Social Security’s eligibility age for full benefits from 65 to 66; a shift among employers from “defined benefit” pensions (which provide payments until a recipient’s death) to “defined contribution” pensions (which provide support only until pension savings are exhausted); and higher education levels among baby boomers. “Better educated people retire later in life,” he says, “and baby boomers are much better educated than previous generations.” Similar factors are probably at work abroad: cuts in public programs — or fear of cuts; more economic uncertainty; longer lives and jobs that are less physically demanding. Still, a few advanced countries retain low retirement ages: prominently, France, Italy and Belgium. In 2012, only about 20 percent of their populations aged 60 to 64 had jobs. On the whole, the lengthening of working lives is a good thing, with one big caveat. First, the benefit: As populations age, countries no longer can afford to have growing numbers of elderly supported by declining numbers of young and middle-aged individuals. Welfare states are strained, and the costs of caring for the elderly are a main cause. People need to remain productive for longer. Now, the caveat: This transition is happening at an awful time. Without stronger economic recoveries, jobs taken by older workers contribute to the high unemployment of the young. _Read more fromRobert Samuelson’s archive._ **Read more on this topic:** Robert J. Samuelson: We need to stop coddling the elderly Charles Lane: Pandering to seniors over Social Security The Post’s View: Social Security proposals are wrongheaded Kermit C. Zieg Jr.: Better bonds could make retirement easier

Democratic candidates want the rich to pay for fatter Social Security checks

In a policy paper released Friday, former Maryland Gov. Martin O'Malley called for more generous Social Security benefits, partly paid for with higher taxes on workers who make more than $250,000 a year.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico The presidential contender's proposal is similar to the one released earlier this year by his rival, Bernie Sanders. President Obama had advanced the idea as a candidate in the 2008 campaign, but the consensus among Democrats is still missing an important member. Hillary Clinton, the frontrunner in next year's primary, has yet to put out a detailed plan. In 2008, she said she opposed the tax increase, although she recently suggested her views may be changing. _[Clinton is open to raising Social Security taxes on six-figure earners]_    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico With relatively few workers saving for retirement, progressive activists and Democrats in Congress have argued for fattening Americans' monthly Social Security checks. At the same time, the system's trust fund will be exhausted sometime about 20 years from now, according to current projections. If that happens, Social Security won't be able to pay out in full the benefits that retirees would be owed, even at the current level.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Higher taxes on well-heeled workers could help pay for more generous benefits. Workers only pay Social Security taxes on their yearly income below a certain limit. This year, the limit is $118,500 in earnings. They won't pay taxes on the rest, and Social Security will not count anything above that limit toward their benefits. O'Malley and Sanders would impose Social Security payroll taxes on workers who earn more than $250,000 a year. Workers who make less than $250,000 but more than the existing limit ($118,500 this year) would pay the same amount in taxes.   _   [A simple guide to the real differences between the Democratic candidates for president]   _   Sanders proposed a larger tax increase than O'Malley did. The independent senator from Vermont also called for an additional 6.2 percent tax on investment income above $250,000, which would ensure that wealthy people who get most of their income from dividends and stock sales instead of salaries also pay more into Social Security. Social Security actuaries project that under Sanders's proposal, the system's trust fund would be exhausted in 50 years, rather than 20, as shown in the chart below.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico O'Malley's proposal does not include a tax on investment income, and also includes other benefits not in Sanders's plan. O'Malley wants to allow people who take time off work to care for a child or aging parent credit that time toward their benefits when they retire, even though they may have limited or no income in those years. Independent estimates of how O'Malley's plan would affect Social Security's finances in the long term aren't available yet, but his proposal would probably would do less to shore up the system than Sanders's would. "Social Security remains an especially critical lifeline for our parents and grandparents," O'Malley's plan reads. "We should expand   Social Security so they can retire with the dignity they have earned over the course of their working lives."    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico _[Read more: O’Malley proposes expanding Social Security benefits, other measures to aid seniors]_    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Andrew Biggs, a scholar at the conservative American Enterprise Institute, said O'Malley's math didn't add up. "The very definition of fiscal irresponsibility is promising more benefits before you've figured out how to pay the benefits you’ve already promised," Biggs said. Americans generally agree that Social Security should be expanded. Polls show that Americans support increases in Social Security taxes, along with more generous benefits. But that doesn't mean a change in the limit on taxable income would be easy to move through Congress. Sanders's proposal, in particular, would amount to a substantial tax increase on the rich.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico

Republicans want to reform disability insurance. Here’s why that’s hard.

Republicans have been railing against big government for years, but for the past two decades they have all but ignored the growth of one of the nation’s biggest and costliest programs: Social Security Disability Insurance (SSDI). That may be changing. Congressional Republicans are making noises about fundamental reforms, voicing concerns that “malingerers” are swelling the ranks of the beneficiaries, as in Sen. Rand Paul’s musing that “over half of the people on disability are either anxious or their back hurts — join the club.”    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico SSDI is a big target. It provides a monthly check to more than 10 million people at a cost of $140 billion annually in 2013. The program has been growing for years, a surge attributed to a mix of factors, including the increase in Social Security’s full retirement age, the aging of the baby boomers and the growth of women in the workforce (which has increased the pool of possible recipients).    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Benefits are paid through a trust fund that quietly takes a portion, currently 1.8 percent, of the 12.4 percent Social Security wage tax, with half coming from employers and the other half from the paychecks of employees. But the trust fund is running out of money; the Social Security trustees say it will fall short by the end of 2016.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico All Congress has to do to fix this is to reallocate a small portion of the tax from the retirement program to the disability fund, a move that would have negligible impact on the retirement program’s finances. But, in the opening days of the 114th Congress, House Republicans seized on the program’s looming insolvency, enacting a resolution that creates a point of order against any reallocation bill that does not also include reforms that improve the trust fund’s actuarial balance.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico In theory that means that if Congress is unable to reform the program, disability benefits will be cut by nearly one-fifth when the trust fund runs out. Will reform happen? The automatic triggering of draconian cuts makes it seem more likely, but the nearly 60-year history of SSDI suggests five major obstacles: **1) There is no strong constituency for reform**.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico SSDI was enacted in 1956 after a ferocious struggle in which business groups lined up against the legislation. As Martha Derthick’s “Policymaking for Social Security” recounts, after enactment, business groups more or less withdrew from opposing SSDI, even as the program expanded, and have since played only a minor role in the politics of the program.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Why? The most obvious explanation is that employers can pass the costs of their portion of the tax to workers in the form of reduced wages. The real costs of the program are borne by everyone who receives a wage, a diffuse and amorphous group. In theory one could imagine a powerful “Wage Workers For Reduced SSDI Taxation” coalition, but so far this has failed to materialize, and thus the ranks of interests that will mobilize in support of cutting disability insurance are pretty thin — mainly organizations ideologically committed to reduced government. **2) The opposition will be united**.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico On the flip side the beneficiaries of the program are well organized and can be counted on to fully mobilize to protect SSDI. Disability organizations like Disabled American Veterans, the Consortium for Citizens with Disabilities, and The Arc (for people with intellectual and development disabilities) may not have huge financial resources, but it’s not fun for politicians to oppose them. Disability groups are likely to be joined by AARP and other senior groups, which have deeper pockets and may see SSDI cuts as the opening salvo in a broader attack on Social Security. **3) Backlash is likely**.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Cutting a program aimed at people with disabilities can be politically perilous, as the Reagan administration learned in the early 1980s. The administration reasoned that some SSDI recipients were either not really eligible or healthy enough to work, so it expedited a review process aimed at “cleansing” the rolls. The result was a political fiasco. The media found horror stories of despondent disabled people who had been summarily cut off and left penniless, including several who committed suicide. A huge backlash against the reviews led to their suspension and, eventually, policies that expanded SSDI eligibility. **4) SSDI is a complex system.**    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico The process by which people apply for SSDI benefits is multilayered, involving state agencies, two levels of appeal within the Social Security Administration and further appeal to the federal courts. Intervening in this system is no simple matter. As Jennifer Erkulwater shows _,_ even if Congress acts, reform can easily go awry if the SSA is not cooperative or the courts begin to question the direction of the policy.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico **5) Increasing the employment of people with disabilities requires investment and ingenuity.**    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico The main rationale for cutting SSDI is saving money, but any realistic plan to shrink the program will require further spending, both to vet the current eligibility of recipients and to get qualified beneficiaries back to work. The Obama administration is proposing to invest more money on both these ventures, but it’s unclear that Republicans will go along. Moreover, the much-ballyhooed path from the disability rolls to the workplace appears much bumpier than policymakers imagine. A 2010 OECD report concludes that no nation has yet discovered an effective way to get people receiving disability benefits into work. The only successful strategy identified thus far is to intervene early, before people even apply for disability benefits, and encourage them to stay in the jobs they have. Alas, this approach is hard to envision for SSDI, as people can only apply to the program after they have been out of work for a minimum of five months.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico Of course, it is possible that Republicans will overcome these challenges, maneuver a bill through the always-tricky obstacle course on Capitol Hill, and persuade a Democratic president to sign a major disability reform package. Don’t bet on it. As some journalists have sleuthed out, the fine print of the House resolution gives Congress an out: Lawmakers could reallocate just enough money to keep the program for a couple of more years without triggering the point of order. A small reallocation would have a barely perceptible effect on the fiscal health of the retirement program.    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico If Congress has to choose between a tough vote cutting benefits to people with disabilities and a simple vote for reallocation, it is not hard to see the path of least resistance. _Thomas F. Burke is a visiting scholar at the Institute of Government Studies at UC-Berkeley and a professor of political science at Wellesley College. Jeb Barnes is a professor of political science at the University of Southern California. They are the authors of “_How Policy Shapes Politics: Rights, Courts, Litigation and the Struggle Over Injury Compensation” _(Oxford University Press, 2015)._    *[WSU]: Wayne State University   *[Tue]: Tuesday   *[Wed]: Wednesday   *[UNM]: University of New Mexico

Trumpanomics: Fantasies over facts

Trumpanomics doesn’t compute. The media keep piling on Donald Trump, because he keeps saying things that are controversial, impractical, undesirable and — in some cases — simply impossible. Into this last category has now tumbled something new: Trump told Post reporters Robert Costa and Bob Woodward that he could eliminate the $19 trillion federal debt “over a period of eight years.” He won’t, even if he wins in a landslide. To explain: You can’t increase military spending (which Trump has promised), preserve Social Security benefits (also a Trump promise), enact a huge tax cut (another proposal) and simultaneously pay off the debt. Trump’s budget is awash in glaring contradictions. The math doesn’t work. It’s virtually impossible to retire all the debt. A quick look at the budget shows why. In fiscal 2016, the national government will spend $3.9 trillion, estimates the Congressional Budget Office.  The largest programs are Social Security ($911 billion), Medicare ($695 billion), defense ($548 billion) and Medicaid ($371 billion). Spending exceeds tax collections, resulting in a deficit estimated at $534 billion. To cover the shortfall, the government borrows; the borrowings then add to the federal debt. How can Trump eliminate the publicly held debt of about $14 trillion? (The $19 trillion figure also includes Treasury securities held by government trust funds, such as Social Security. In theory, these debts could be canceled if Congress refused to spend from the trust funds.) Just balancing the budget would require $534 billion of spending cuts or tax increases in 2016. If applied only to defense, the cut would virtually eliminate the Pentagon. If applied only to Social Security, the benefit cut would be 59 percent. If the four large programs listed above were all exempted (plus interest on the debt, $253 billion), all the remaining programs would need to be cut by nearly half. Given an aging population and high health costs — health spending is nearly 30 percent of the budget — this exercise would have to be repeated annually. From 2017 to 2026, present policies produce deficits estimated at $9 trillion by the CBO. That would be added to the debt. And remember: These hypothetical changes merely balance the budget; they don’t repay the existing debt. That would require additional spending cuts or tax increases. How much? Back-of-the-envelope calculations suggest another $1 trillion to $1.5 trillion annually. There’s no consensus for this policy. If undertaken, it would surely provoke doubt whether the economy could handle such a dramatic shift, from large budget deficits to large surpluses, without plunging into a deep recession. But even without these problems, Trump would need to repudiate some of his other promises. His proposed tax cut, for example, would lose about $9.5 trillion in revenue over a decade, estimates the nonpartisan Tax Policy Center. The contradictions are so obvious that they raise questions about Trump’s understanding or motives. Did he mean to say that he could end annual deficits as opposed to repaying the entire debt? If so, why was he confused? If not, does he cynically assume that most people won’t notice the inconsistencies? Either way, fantasies trump facts. _Read more fromRobert Samuelson’s archive._ **Read more about this topic:** Ruth Marcus: Donald Trump’s utterly ridiculous budget plan Catherine Rampell: Donald Trump, the Santa Claus of tax reform

Highway Transportation Fund needs a permanent and simple fix

WITH THE Highway Trust Fund running dangerously low on cash, threatening infrastructure projects across the country in the height of construction season, members of Congress seem to have settled on their latest short-term gimmick to pay for the country’s roads and rails. The only question left seems to be when they will try to do something better. The answer should be: immediately. Without new funding, the Transportation Department will begin slashing highway payouts to states starting Aug. 1. Few want to see that, but lawmakers have been perpetually unable to fund the nation’s transportation budget responsibly. So, depressingly if predictably, with another funding crisis looming, members of Congress seem to agree on exploiting an arcane accounting trick called pension smoothing, which could reduce the security of private pensions but would result in more federal revenue over a decade. That decade’s worth of revenue will pay for several months of transportation spending. This budget gimmickry is distasteful for several reasons, starting with the fact that the plan spends money now, over the course of less than a year, that the government will make back over 10 years. The idea is to give Congress more time to sort out a permanent solution to the Highway Trust Fund’s perpetual funding shortfalls. But lawmakers don’t need more time; they need more spine. The straightforward policy, the one on which the Highway Trust Fund historically has been based, is to raise the gas tax to keep up with inflation and infrastructure needs. This model is fair and efficient, demanding that those who use the roads pay for them. As a sustainable and predictable source of revenue, a gas tax of sufficient size also would eliminate uncertainty about the level and source of government transportation funding. Congress could end the transportation funding crunch by adopting a bipartisan plan from Sen. Bob Corker (R-Tenn.) and Sen. Chris Murphy (D-Conn.). The proposal would raise the gas tax by 12 cents per gallon over two years, and it would index the tax to inflation. The last time Congress raised the gas tax, in 1993, it failed to peg the tax to inflation, which is largely why lawmakers are scrounging for money now. Lawmakers should pass the Corker-Murphy plan. Instead, they are fighting over when they will have to consider the long-term transportation funding issue. Many Republicans want to push off the decision-making until next spring. Many Democrats want to have the debate this December. If lawmakers aren’t willing to accept the obvious funding plan in front of them before the November elections, they should do so immediately afterward, when the political atmosphere may be more conducive to doing the right thing. More important, there’s no reason to make the country wait any longer for funding certainty. **Read more about this issue:** The Post’s View: Paving the way for shoring up U.S. transportation funding The Post’s View: A detour from common sense on the Highway Trust Fund shortfall The Post’s View: Mr. Obama’s risky transportation plan David Alpert: The trouble with ditching the gas tax

How long is too long to be CEO?

If Jeff Immelt indeed steps down sometime before the expected 20-year mark as CEO of General Electric, his tenure will be unusual. Not for being shorter than average — but actually, for being far longer.    *[WSU]: Wayne State University The Wall Street Journal reported Tuesday that there have been talks for him to do so. Immelt, who started the job four days before September 11, 2001, has had a rocky tenure that spanned the financial crisis, during which the company's finance arm came under immense pressure and lost its vaunted AAA credit rating. Still, his 13 years at the top exceed the 9.7 years that are now average for CEOs of Standard & Poor's 500-stock index companies. And even that number is particularly long: 9.7 years is the highest average tenure, according to a recent report by the Conference Board, since 2002.    *[WSU]: Wayne State University Two decades, after all, is long for anyone to keep such a demanding job, however well compensated. As the Journal story cited, the nature of a global CEO job like Immelt's requires such a brutal schedule that it's hard to imagine doing it for five years, much less 10 or 20.    *[WSU]: Wayne State University So if 20 years is too long, and 9.7 years is the longest average we've seen in years, what's actually the right tenure for a CEO? Is there one? And is there a point at which the experience, confidence and relationships that come with being in the job for a long time can start to hurt rather than help companies? Some evidence suggests that CEOs who hold the job for longer than a decade can be good for shareholders. A Fortune survey from 2012 found the sweet spot to be between 10 and 15 years. In examining 100 public companies with CEO departures, it found that brief tenures of five years or less showed an equal mix of positive and negative returns for shareholders. Around the seven year mark, positive returns began to outweigh negative ones; and between 10 and 15 years was "ideal."    *[WSU]: Wayne State University Meanwhile, yet another study by Booz Allen Hamilton from back in 2002 found that CEOs who were in the job more than 10 years tended to have greater median annual rates of return than those with shorter tenures. Still, the Booz article also raised an important point: "There is a chicken-and-egg question here — does good performance lead to longevity, or does longevity lead to good performance?" Moreover, the consulting firm's study also showed that in the second half of the tenures of long-serving CEOs, returns for shareholders sank. Those who served more than 10 years had median annual returns of 5.9 percent in the first half of their tenure, compared to -0.9 percent in the second half.    *[WSU]: Wayne State University So maybe there is a downside to sticking around too long. Yet another intriguing recent study backs that up. It looked at how CEOs' performance fared over time — not just with shareholders, but with employees and customers. It found that a far shorter tenure of just 4.8 years is actually optimal.    *[WSU]: Wayne State University Here's why. CEOs' relationships with their employees, unsurprisingly, grow stronger as years go by. Yet their relationships with customers, after improving for several years, start to weaken over time, leading to worse performance. The researchers explained it this way in the Harvard Business Review last year: "As CEOs accumulate knowledge and become entrenched, they rely more on their internal networks for information, growing less attuned to market conditions. And, because they have more invested in the firm, they favor avoiding losses over pursuing gains. Their attachment to the status quo makes them less responsive to vacillating consumer preferences."    *[WSU]: Wayne State University Of course, whether or not Jeff Immelt — or any CEO — has stayed in the job long enough is ultimately up to the company's board of directors. (In Immelt's case, the Journal reports that they remain strongly in his corner.) But if boards and CEOs get too cozy over the years, directors could be less likely to ask the hard questions of whether the leader is being too cautious or too internally focused to make the right decisions for shareholders.    *[WSU]: Wayne State University Another recent study by the executive search firm Spencer Stuart found that companies that replace about one board member a year on average had market- beating performance. If the average U.S. board has 10 or 11 members and that optimal level of board turnover actually happens, a CEO who sticks around for 10 years would have an entirely new set of people on the board than those who first elected him or her to the job — and this new group might be less hesitant to make a change. Perhaps the best question, then, isn't what's the right tenure for CEOs, but what's the right length of service for the people who make the decisions about their jobs.    *[WSU]: Wayne State University **Read also:**    *[WSU]: Wayne State University Boards don't know their next CEOs    *[WSU]: Wayne State University Average pay for Washington-area CEOs more modest than national peers    *[WSU]: Wayne State University **LikeOn Leadership? Follow us on Facebook and Twitter.**    *[WSU]: Wayne State University