social-security

Debt Ceiling Deadline Might Be August 10, Not August 2: Report

by The Huffington Post on July 23, 2011

Huffington Post…

For months, markets have been girding themselves against the possibility that the U.S. will reach the limits of its borrowing ability on August 2 and default on its debts. But researchers at Barclays Capital think the real deadline may not be until a week later. In a note published Friday, the Barclays Interest Rates Research team wrote that “the date on which the Treasury will run out of cash to pay its obligations might not be August 2; it might be around August 10 instead.” Why the change? The note explains that previous projections showed the Treasury running out of money on the morning of Wednesday, August 3. On that day, it was predicted, the Treasury would need to spend $32 billion, including $22 billion in Social Security payments — and it was only projected to have $30 billion at its disposal. That projection was made on July 13. But since then, the researchers say, the Treasury has taken in about $14 billion more than expected, and paid out about $1 billion less than expected. Hence, the deadline date might actually be August 10, a week later than previously believed. The August 2 deadline has never been set in stone. When Treasury Secretary Timothy Geithner announced in May that the federal debt limit had been reached, he said that the government could use “extraordinary measures” to extend borrowing authority until August 2 — and that this date could change “based on government receipts and other factors.” And as the Financial Times pointed out earlier this month, researchers at Nomura have already predicted that the Treasury won’t run out of funds until August 9. The August 10 date isn’t set in stone either; it’s just the prediction of one group of researchers. The Barclays team stress that “it is extremely difficult to be sure” how much money the Treasury will take in and pay out between now and August 2. And, they say, just because lawmakers might have until August 10 to devise a deal doesn’t mean they should wait that long. “The sooner policymakers come to a deal, the sooner this source of uncertainty will disappear,” they write. As of Friday evening, negotiations between President Obama and Speaker of the House John Boehner had broken down , with Boehner saying he would confer with Senate leaders directly. The president has called Boehner, House Minority Leader Nancy Pelosi, Senate Minority Leader Mitch McConnell and Senate Majority Leader Harry Reid to the White House for an emergency meeting Saturday morning.

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Debt Ceiling Deadline Might Be August 10, Not August 2: Report

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Mitt Romney’s Economic Claims vs. The Facts

by AP on June 3, 2011

Huffington Post…

WASHINGTON — In rhetorical excesses marking his entry in the presidential campaign, Mitt Romney said the economy worsened under President Barack Obama, when it actually improved, and criticized the president for issuing apologies to the world that were never made. A look at some of the statements by Romney on Thursday in announcing his bid for the Republican nomination and how they compare with the facts: ROMNEY: “When he took office, the economy was in recession. He made it worse. And he made it last longer.” THE FACTS: The gross domestic product, the prime measure of economic strength, shrank by a severe 6.8 percent annual rate before Obama became president. The declines eased after he took office and economic growth, however modest, resumed. The recession officially ended six months into his presidency. Unemployment, however, has worsened under Obama, going from 7.8 percent in January 2009 to 9.1 percent last month. It hit 10.1 percent in October 2009. A case can be made for and against the idea that Obama’s policies made the economy worse than it needed to be and that the recession lasted longer than it might have under another president. Such arguments are at the core of political debate. But Obama did not, as Romney alleged, make the economy worse than it was when he took office. ___ ROMNEY: “A few months into office, he traveled around the globe to apologize for America.” THE FACTS: Obama has not apologized for America. What he has done, in travels early in his presidency and since, is to make clear his belief that the U.S. is not beyond reproach. He has told foreigners that the U.S. at times acted “contrary to our traditions and ideals” in its treatment of terrorist suspects, that “America has too often been selective in its promotion of democracy,” that the U.S. “certainly shares blame” for international economic turmoil and has sometimes shown arrogance toward allies. Obama, whose criticisms of America’s past were typically balanced by praise, was in most cases taking issue with policies or the record of the previous administration, not an unusual approach for a new president – or a presidential candidate. Romney’s actual point seems to be that Obama has been too critical of his country. But there has been no formal – or informal – apology. No saying “sorry” on behalf of America. ___ ROMNEY: “Three years later, foreclosures are still at record levels. Three years later the prices of homes continue to fall.” THE FACTS: Although foreclosures remain high, the number of U.S. homes that were repossessed by lenders fell in April, compared with March and a year ago, according to the foreclosure listing service RealtyTrac Inc. Romney’s claim about home prices, though, is supported by the Standard & Poor’s/Case-Shiller 20-city monthly index. It found home prices in big metro areas have sunk to their lowest since 2002. Since the bubble burst in 2006, prices have fallen more than they did during the Great Depression. ___ ROMNEY: “Instead of encouraging entrepreneurs and employers, he raises their taxes, piles on record-breaking mounds of regulation and bureaucracy and gives more power to union bosses.” THE FACTS: Romney ignores ambitious tax-cutting pushed by Obama. The stimulus plan early in his presidency cut taxes broadly for the middle class and business. He more recently won a one-year tax cut for 2011 that reduced most workers’ Social Security payroll taxes by nearly a third. He also campaigned in support of extending the Bush-era tax cuts for all except the wealthy, whose taxes he wanted to raise. In office, he accepted a deal from Republicans extending the tax cuts for all. As for tax increases, Obama won congressional approval to raise them on tobacco and tanning salons. The penalty for those who don’t buy health insurance, once coverage is mandatory, is a form of taxation. Several large tax increases in the health care law have not yet taken effect. ___ ROMNEY: “The expectation was that we’d have to raise taxes but I refused. I ordered a review of all state spending, made tough choices and balanced the budget without raising taxes.” THE FACTS: Romney largely held the line on tax increases when he was Massachusetts governor but that’s only part of the revenue story. The state raised business taxes by $140 million in one year with measures branded “loophole closings,” the vast majority recommended by Romney. Moreover, the Republican governor and Democratic lawmakers raised hundreds of millions of dollars from higher fees and fines, taxation by another name. Romney himself proposed creating 33 new fees and increasing 57 others – enough to raise $59 million. Anti-tax groups were split on his performance. The Club for Growth called the fee increases and business taxes troubling. Citizens for Limited Taxation praised him for being steadfast in supporting an income tax rollback. ___ Associated Press writers Steve LeBlanc in Boston and Jim Drinkard in Washington contributed to this report.

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Mitt Romney’s Economic Claims vs. The Facts

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Jagadeesh Gokhale: Confused Thinking on Social Security

May 27, 2011

Is Social Security a program that is independent of the federal budget (“off budget”) or one that is intimately linked to the federal budget (the “unified budget” perspective)? Writers on Social Security appear to constantly switch between the two alternative perspectives on the program’s finances, which ends up confusing rather than illuminating readers. Allan Sloan’s recent column in the Washington Post is a case in point. Mr. Sloan writes that We can make the trust fund as big as we want by putting in general revenues, as we’re doing this year, or by simply stuffing new Treasury securities into it [ Note: "unified budget" perspective here ]. But the cash flow shortages [ "off budget" perspective here ] tell us that Social Security’s problems are now in the present, not in the future [ No, references to cash-flow shortages are valid only under the "off-budget" perspective. But under it, the Trust Funds are meaningful as Social Security assets, which implies that the problem is not in the present ]. A $2.6 trillion trust fund stuffed with Treasury securities makes a lot of people feel good [ "off budget" perspective here ]. But no matter how big the trust fund is, the cash flow deficit means taxpayers are going to have to borrow — heavily — to cover beneficiaries’ checks [ "unified budget" perspective here ]. The trust fund is now irrelevant in financial terms [ "unified budget" perspective here ], although it retains moral and some legal force. Cash is king. As always. Cash is not king, confusion is. If Social Security is viewed as an “off budget” program, its Trust Fund represents a valid funding source. It consists of trust fund loans to the federal government of past surplus payroll taxes that the federal government will repay with “full faith and credit.” Since the program’s payroll and other tax revenues are dedicated to it, its financial condition and sustainability can be judged by comparing projected revenues plus the trust fund’s value with projected Social Security benefits. Under the “off budget” perspective, even if dedicated revenues are falling short of promised benefits, that “cash flow shortfall” is not a problem because the trust fund (which equals the federal government’s liability to Social Security) will allow benefit payments to continue under current laws for a long time — until 2036 under the Trustees’ latest projections. The program’s past payroll tax surpluses were, by law, invested in special issue Treasury securities, which can be redeemed to pay for benefits when revenues from dedicated taxes fall short of promised benefits. But when pundits such as Mr. Sloan mention the possibility of providing ” new ” federal transfers to Social Security — beyond redemptions of the existing trust fund — the “off-budget” attribute is negated and the “unified budget” perspective becomes relevant; under the latter, Social Security is one among equals across the entire slate of federal government programs and the term “cash flow shortfall” is rendered meaningless. “New” government transfers can plug any holes in dedicated taxes relative to benefit outlays. In that case it is not valid to question whether government transfers would “solve” the program’s “cash flow shortfall” as Mr. Sloan does. They will, by construction. Under the unified budget perspective, the only valid “cash flow shortfall” is the federal government’s annual deficit. Note that the Social Security Trust Funds are not financially irrelevant — even under the “unified budget” perspective because they authorize the automatic payment of promised benefits despite the “cash flow shortfall” of dedicated revenues compared to promised benefits. Thus, they provide fodder for liberals to argue that there’s no need to reform the system for another couple of decades. According to the Trustees, if the federal government simply owed Social Security about $21 trillion rather than the $2.6 trillion it owes today, there would be no long-term funding problem for Social Security under the “off-budget” perspective. Liberals would love to see policymakers simply make that ledger entry granting the required spending authority to Social Security. (And it would have the added benefit of putting Mr. Sloan out of the business of sowing confusion in people’s minds.) But perhaps a different ledger entry would achieve even more: Let us recognize that past excess payroll taxes relative to benefit outlays (past Trust Fund surpluses under the “off budget” perspective) have been spent on other government programs. Grants of additional spending authority for Social Security must ultimately be paid out of today’s and future taxpayer resources so making them whole is not really possible. Let us also recognize that the provision of such grants — which now increasingly appear in Social Security reform proposals — makes the “off budget” perspective economically irrelevant. Note that this is different from saying that the Trust Funds themselves are irrelevant. So policymakers should be encouraged to make the reverse ledger entry — to simply wipe out the Trust Funds entirely. That change might deliver the sorely needed sense of urgency to the debate on Social Security reforms — as is currently happening for Medicare which has very few government IOU’s in its trust fund.

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Scott Bittle: Fiscal Follies: The Debt Ceiling and the 48 Percent Solution

May 27, 2011

With the debate over the nation’s debt ceiling continuing to rage, research conducted by our organization, Public Agenda , shows a real chasm between Washington and the rest of the country. Two-thirds of Washington leaders say we need to raise the debt limit , while surveys of the public show that most Americans continue to oppose it. But there is a crucial detail in the public opinion polls that is not getting the attention it deserves. When the Washington Post and Pew Research Center surveyed Americans about raising the debt ceiling, nearly half of Americans (48 percent) admitted that they didn’t have a good understanding of what would happen if the government didn’t raise the debt limit. When that many citizens freely acknowledge that they don’t have a solid grasp of the risks to the country if the debt ceiling deal-making goes south, that’s a wake-up call for leadership. Real leadership, that is, that’s focused on the best interests of the country as opposed an obsession with elections and politics. There are times when elected officials should follow public opinion and pay careful attention to the public’s concerns and priorities. And there are times when elected officials need to lead — they need to be stewards for the country’s future. When public understanding is limited, when people don’t grasp the consequences of a major governmental decision, the time for genuine leadership has come. Technically, the United States passed the $14.3 trillion debt limit earlier in May, and now the federal government can’t borrow any more money until Congress raises the limit. Thanks to some clever accounting at the Treasury, the government can keep going until Aug 2, but at that point, the government wouldn’t have enough money to cover its bills. Douglas Holtz-Eakin, a former director of the Congressional Budget Office, has a low-tech, but riveting 60-second version of what it would really mean up on YouTube. The country would have money coming in. After all, we’ll all still have taxes withheld from every paycheck. But what’s coming in would only cover about 60 percent of our expenses, which wouldn’t be enough to cover even what most Americans consider a very “small government.” We have to at least pay the interest on the debt, otherwise we’ll risk unleashing an unpredictable, perhaps uncontrollable meltdown in the international bond markets. (We may not be safe from financial disruptions even if we pay the interest.) Once we’ve done that, there’s simply not enough money to go around. We wouldn’t have enough money to cover all the bills for Social Security, Medicare and Medicaid, although surely we’d use what is left of the country’s revenues to pay a good chunk of each one. The real problem comes later; after paying for interest and entitlement spending, there won’t be any money left for anything else. As Holtz-Eakin puts it, “no money for the troops, no money for procurement or transportation of materials.” And the Defense Department is just the first casualty. There would be no federal money for public schools, college loans, highways, the Centers for Disease Control or just about anything else most of us expect from government. The truth is that most Americans just don’t realize what not raising the debt ceiling really means. Former President Bill Clinton may have hit on something when asked why polls showed opposition to raising the ceiling at the Fiscal Summit sponsored by the Peterson Foundation this week. “Because they’ve never lived through it,” he said. “No one knows what will happen.” It is true that another common element of leadership is to use a deadline and potential crisis to force a balky group of people to sit down and get a solid deal done. One reason why the debate in Congress is stalled is because many political leaders see the debt ceiling as an opportunity to force change in the federal budget — change that surely has to come. If we actually get sensible, practical change as a result, then we can give our leaders credit for doing their job. If they get an attack of bipartisanship and willingness to compromise, we might even be able to give them credit for a job well done. But if elected officials in Washington allow the United States to slide into a potential economic disaster by blindly following what they think the polls are telling them, then history will heap on them the censure and condemnation they will so richly deserve. Indeed, the American people themselves may take a different view once the results of the decision become evident. If they think that voters are going to reward them for putting the entire country through the wringer, they’re likely to be very disappointed.

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Recession Destroyed Retirement Savings For One Out Of Four Older Workers: Survey

May 24, 2011

WASHINGTON — Workers older than 50 are gloomy about retirement after getting beat up by the Great Recession, according to a survey released Tuesday by AARP’s Public Policy Institute. During the course of the economic downturn that started in December 2007 and technically ended in June 2009, one in four older workers burned through all of his or her retirement savings, the survey found. More than half of older workers weren’t confident they’d have enough money to live comfortably in retirement, and nearly half said they expected a “less economically secure” retirement than their parents had. “Many older Americans have been buffeted by skyrocketing health care costs, dwindling home values, shrinking pension and investment portfolios, and employment struggles,” AARP executive John Rother said in a statement. “Even if you have a job, this survey demonstrates that you are not immune to the negative effects of the recession.” Even though the unemployment rate for older workers is much lower than for their younger counterparts, 12.4 percent of the 50-plus cohort told AARP they lost their health insurance, 49.5 percent said they delayed medical or dental care because of financial troubles and 13.5 percent said they started to collect Social Security retirement benefits earlier than they’d previously planned. Take, for example, the case of a 63-year-old tutor, who said she’d been laid off in June 2010 by a private teaching company. The woman, who lives in southern California, asked for anonymity because she feared revealing her name would be “deadly, deadly” for her job search. The former tutor told HuffPost she opted for early Social Security retirement benefits in January after a fruitless six-month job hunt. Since she opted for benefits before her full retirement age — which would have been at 66 years old — she received only 80 percent of her full benefit, which she said amounts to $857 a month. It covers rent, she said, but doesn’t leave much for food. “I eat a lot of apples, bananas, rice, and pasta,” the woman said, adding that she tends a garden with tomatoes, cucumbers and cantaloupes. Laid off older workers have a tougher time than most age groups finding new work. The average jobless spell for workers 55 and up lasts longer than a year , and older workers who lose long-held jobs are much less likely to find new work than younger workers. Click HERE to download a PDF copy of AARP’s survey.

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Manisha Thakor : The New Retirement? Working… if You Are Lucky

May 19, 2011

What’s Your Retirement Plan? A recent study by Transamerica’s Center for Retirement Studies concludes that for a large portion of folks, “never retiring” is their plan A. Alas, a significant percentage of the eager-to-keep-working population is unprepared with a plan B in case they find themselves involuntarily removed from the workforce. And as Catherine Collinson, President of Transamerica’s Center for Retirement Studies points out, “Planning not to retire is simply not a viable retirement strategy.” Here are the three stats from this extensive TCFRS survey that struck me smack in the gut. I’ll follow them up with some action steps that you can take to make yourself a role-model for preparing for the new retirement realities. American workers estimate their median retirement savings needs at $600,000. Unfortunately, a mere 30% currently have over $100,000 saved in retirement accounts. With a $600,000 nest egg, you could withdraw $24,000 a year (based on the 4% rule). Add to that Social Security, which right now could run from say $13,000 – $23,000 a year depending upon your household composition and work history, and you are looking at retirement income in the range of $37,000 to $47,000. That works. But at a level of savings below $100,000, you are looking at something closer to $22,000 in annual retirement income (using midpoints). Ouch. Not nearly as pretty of a picture. Just 9% of workers frequently discuss saving, investment and planning for retirement with family and friends . This topic is the massive pink elephant in the room. If you are not talking about it, you are likely not taking action steps toward preparing yourself for it. Would you expect your kids to make wise career decisions if you never talked about the subject with them? Only 10% of workers have written out their retirement strategy. Would you attempt to build a house without plans and blueprints? Of course not. The same goes for your retirement planning. A little advance preparation can go a long way. So yada, yada, yada — you might very well be thinking. What the heck, Manisha, can I actually do about this in MY LIFE TODAY? Here are my top 3 tips for you, inspired by Catherine Collinson’s extensive and excellent work on the topic . Teach yourself to financially fish. Just like you seek out an expert guide with your physical health or your spiritual development, commit to educating yourself about the basics. You can take the inexpensive online financial literacy course I offer, Money Rules… For Women (meant literally & figuratively) for $39… or go to your library and read one of the many wonderful personal finance books and magazines available. One of my favorites is Michael R. Piper’s Can I Retire? . I also strongly recommend reading Mark Miller’s wonderful blog, Retirement Revised . Two websites I love with great retirement calculators are EBRI’s Ballpark Retirement Calculator and FIREcalc . Participate! If your workplace offers a 401k, 403b or 457 plan — contribute the max you can afford. And if not offered, remember you can open up an IRA on your own at the financial institution of your choice. While participation rates are creeping up, 1 in 5 eligible employees still are not participating in the valuable employee benefit. If you are over 50, take advantage of catch-up contributions and consider inter-generational or multi-inhabitant households . For many people over 50, the math of the “traditional” retirement just doesn’t work. And if you have loved ones — and especially young working women in your lives — please share with them this recently released data from a Capital One survey , which disturbingly shows recently graduated young men are kicking our female tushies when it comes to higher saving rates, increased use of mobile/email alerts and regularly checking credit reports. These are key steps for 20-, 30- and 40-somethings — and especially women — to take to avoid much of the potential pain heading the way of baby boomers (see my last post on The 77/11 Effect and the implications for working women). What about you — do you talk about retirement planning in your household? Do you have any tips to share with fellow readers about what has worked well for you? We’d love to here your thoughts! [This post originally appeared at ManishaThakor.com .] Want more financial love? You can follow Women’s Financial Literacy Initiative founder, Manisha Thakor, on Twitter at @ManishaThakor , sign up to get her email updates delivered ri ght to your inbox here , and enroll in her innovative new online personal finance course called “Money Rules.”   

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Tom Coburn Was Debt Ceiling Deal Linchpin

May 19, 2011

WASHINGTON — Maybe it was all a pipe dream – the idea that a “Gang of Six” from across the Senate’s ideological spectrum could solve the nation’s deficit despite enormous obstacles placed in their way by President Barack Obama and leaders of both parties. The remaining five are opting to plug ahead, but they may just be marking time after the departure of conservative Oklahoma Sen. Tom Coburn, the crucial cog if the gang was ever going to be able to sell a deal. Coburn, one of the few Republicans with enough tough-on-spending “street cred” to wage a fight with anti-tax purists, provided vital political cover for Republicans even thinking about raising revenues as part of a bipartisan grand bargain that would include cuts in benefit programs that Democrats hold sacred, like Medicare and Social Security. So when he dropped out of the Gang of Six group on Tuesday – he says he’s taking a “sabbatical” and may rejoin it later – it was a major, perhaps fatal blow to hopes for a comprehensive approach tackling the deficit problem before the 2012 elections. “He makes it more difficult to gain the kind of broad support you would hope for on the Republican side because Tom Coburn’s highly regarded in our conference,” said Sen. Rob Portman, R-Ohio. Coburn exited after Democrats rejected his demand for about $130 billion more in Medicare cuts beyond the $400 billion already on the table. That prompted Coburn to pronounce the emerging package a bad mix of spending cuts to tax increases. The politics were lousy as well. It became apparent to Coburn that Democrats could get behind an emerging agreement a whole lot easier than Republicans could. The anti-tax sentiment in the GOP is simply too strong, while lots of Senate Democrats are eager to demonstrate they’re tough on spending. The Gang of Six, now down to five, was trying to craft a deficit-slashing plan along the lines of the 10-year, $4 trillion package that Obama’s deficit commission put together last year. Basically, the plan called for a dollar in higher taxes in exchange for every $3 in cuts to government spending and benefit programs. The nation’s $14.3 trillion debt would continue to grow, but at a much slower pace. The commission plan got good reviews from deficit hawks but a chilly reception from the White House and leaders in both parties. But the idea driving the Gang of Six was that an agreement within the group – whose members include a leading liberal in Dick Durbin, D-Ill., and one of the most prominent conservatives in Coburn – would provide the catalyst to swing dozens of more senators behind their work. “The Gang of Six … was designed to force the idle – not gridlocked – Senate, and then the House and the president, to enact a long-term deficit-reduction package,” Coburn wrote in a Washington Post op-ed on Thursday. One of the reasons the group was noteworthy was that its GOP members – Coburn, Saxby Chambliss of Georgia and Mike Crapo of Idaho – were willing to agree to revenue increases of about $1 trillion over the coming decade as the price for getting Democrats to accept cuts to Medicare, Medicaid and Social Security. If senators at the liberal and conservative edges of their respective parties could agree, the thinking went, a wide swath in the middle would follow. “Coburn and Durbin are the two key players in the group,” said former Sen. Judd Gregg, R-N.H., who retired from the Senate last year. “From a philosophical standpoint they represent polar opposites, and if they agreed on something … then you we have a real core for bipartisan action. So yes, (Coburn’s) critical.” The gang’s remaining five senators – the other two Democrats are Mark Warner of Virginia and Kent Conrad of North Dakota – pledged to soldier on without Coburn. But what was already an uphill climb seems to have gotten a lot more steep. The glass-half-full take on Coburn’s departure is that it could make it easier for the remaining five to get an agreement. Selling it without Coburn is another matter. For starters, both Senate GOP Leader Mitch McConnell of Kentucky and Majority Leader Harry Reid, D-Nev., have long opposed the Gang of Six approach. McConnell ruled out tax increases; Reid and Obama made it clear they have no appetite for tackling shortfalls in Social Security before the 2012 election. That opposition, coupled with the enormous difficulty in confronting the dangerous politics of taxes, Medicare and Social Security, may have doomed the group from the start. Instead, the leadership apparatus of both parties as well as Obama have embraced a working group led by Vice President Joe Biden to come up with spending cuts to attach to must-do legislation to allow a government that’s now borrowing 40 cents of every dollar it spends to continue to do so. “The Republican leadership has reservations, as does the Democratic leadership, about stepping onto these very highly charged political issues as we basically begin a presidential campaign,” said Gregg, who also was a member of Obama’s deficit panel. “The White House does too. They have not been too constructive in the exercise.” Meanwhile, the Group of Six Minus One meets again on Monday. Chambliss, R-Ga., said the group’s goal remains “to get a long-term deficit reduction plan that would work and that could be sold to 60 members of the Senate, period.” Chambliss, however, is in for more political heat now that Coburn’s out of the gang. He got a taste on Wednesday. “Together, their bipartisan plan will raise Americans taxes massively over the next few years and do nothing to solve the very real crisis of Social Security and Medicare,” conservative activist Erick Erickson wrote in a blog post. “Every once in a while the stupid party and evil party get together and do something both stupid and evil. They call it bipartisanship. It looks pretty much like what Saxby Chambliss is orchestrating.” ___ EDITOR’S NOTE – Andrew Taylor has covered Congress since 1990.

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Dean Baker: The Good News and the Bad News in the Social Security Trustees’ Report

May 16, 2011

There was both good news and bad news in the Social Security trustees’ report released last week. The bad news is that the program is projected to cost somewhat more in the latest report than in the 2010 report. As a result, its projected 75-year shortfall was increased by 0.3 percentage points of covered payroll from 1.92 percent to 2.22 percent. The year when it was first projected to face a shortfall was moved up a year from 2037 to 2036. This bad news about the program is also the good news. The main reason that the program’s finances deteriorated between the 2010 report and the 2011 report is that in the 2011 report the trustees assumed that we would enjoy substantially longer life expectancies than they did in the 2010 report. They increased their projected life expectancy for men turning age 65 in 2010 from 18.1 years to 18.6 years, a gain of 0.5 years. The trustees increased their projected life expectancy for women turning age 65 by 0.3 years. Remarkably, virtually no one in the deficit-obsessed media even noticed this projected increase in life expectancy, simply highlighting the bad news about Social Security’s finances. Of course the trustees likely anticipated how their report would be received. It is important to recognize that this is the report of the Social Security trustees, not the professional staff of the Social Security Administration (SSA). The six trustees include three Obama cabinet members, the head of the Social Security Administration, who is a holdover Bush appointee, and Charles Blahous, an independent trustee who was President Bush’s point man on his Social Security privatization drive. The professional staff of SSA does make recommendations to the trustees, but these recommendations are held as carefully guarded secrets, like battle plans in the war on terrorism. Even accepting the 2011 report at face value the picture is hardly as dire as many politicians in Washington are claiming. We have seen much worse before. For example in 1997, the trustees projected a shortfall that was equal to 2.23 percent of payroll . At that time, their projections showed the trust fund first being depleted in 2029. The 1997 report also assumed a slower rate of real wage growth than the 2011 report. A lower rate of real wage growth meant that any tax increase that might have been imposed to maintain long-term solvency would have taken up a larger share of the growth in the real wage of the average worker. Alternatively, any cut in benefits would have done more to slow the improvement in the living standards of retirees over time. There can be little doubt that the most recent projections show a much brighter picture of Social Security and the economy going forward than what was projected through most of the 1990s. It is also important to keep the Social Security numbers in context. Proponents of cuts to Social Security have spent fortunes on pollsters and focus groups trying to put the program’s finances in the most dire possible light. They are fond of reporting things like the program’s $17.9 trillion shortfall over the infinite horizon . The focus groups show that this one is really good for scaring people. After all, “trillion” is a really huge number and $17.9 trillion must be really really huge. Of course no one has any clue what “infinite horizon” means. So no one knows that this is a projection of what the program looks like in the 23rd, 24th, and 25th century and beyond, if we never change it in any way. The vast majority of this $17.9 trillion shortfall comes in years after 2200. Social Security does have a long planning period, but if anyone thinks that we are actually making policy for the 24th century then we should keep this person far removed from the levers of power. The best way to make the size of the projected Social Security shortfall understandable is to put it in context. Relative to the size of the economy, the projected Social Security shortfall is equal to 0.7 percent of GDP. By comparison, annual spending on the military increased by more than 1.6 percentage points of GDP between 2000 and 2011. So the burden imposed by the wars in Iraq and Afghanistan are almost 2.5 times larger than the money that would be needed to eliminate the Social Security shortfall. To take another point of reference, the Congressional Budget Office’s analysis of the Ryan Medicare privatization plan implied that it would increase the cost of buying Medicare-equivalent policies by more than $34 trillion , a sum that is almost five times as large as the projected Social Security shortfall. If the Social Security shortfall is a really big deal, then the additional costs attributable to the Ryan plan are five times a really big deal. Interestingly, almost no one in the media seems to be talking about that burden.

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Government: Bad Economy Has Shortened Life Of Social Security, Medicare

May 13, 2011

WASHINGTON — The bad economy has shortened the life of the trust funds that support Social Security and Medicare, the nation’s two biggest benefit programs, the government reported Friday. The annual checkup said the Medicare hospital insurance fund will now be exhausted in 2024, five years earlier than last year’s estimate. The Social Security trust fund is expected to be exhausted in 2036, one year earlier than before. The trustees who oversee the two programs said the worsening financial picture emphasizes the need for Congress to make changes soon. The longer lawmakers wait, the more likely they will be forced to impose steep tax increases, deep benefit cuts, or both, to save the programs. By acting sooner, the trustees said, Congress can impose gradual changes that don’t hurt current beneficiaries and give future retirees time to prepare. “Larger, more difficult adjustments will be necessary if we delay reform,” said Treasury Secretary Timothy Geithner, chairman of the trustee panel. “And making reforms soon that are phased in over time would help reduce uncertainty about future retirement benefits.” The trustees said that they moved the expected date for the Medicare hospital trust fund to be exhausted from 2029 to 2024 because of a weaker economy, which means fewer people working and paying payroll taxes into the fund, and continued increases in health care costs. Last year’s report had extended the life of the Medicare fund by 12 years to reflect the savings that were included in the massive overhaul of health care that President Barack Obama pushed Congress to pass in 2010. Without the changes in health care law, the administration said, the Medicare trust fund would be exhausted in 2016. The savings in the health care legislation are still included in the trustees’ projections but have been updated to reflect data on the economy and health care costs over the past year. Many experts believe that the outlook for Medicare is actually worse because the trustees’ projections assume deep cuts in payments to doctors that Congress has routinely waived, and because other cost savings from Obama’s health care law will be difficult to realize. The Social Security trust fund was projected to be exhausted one year earlier than the previous projection of 2037. The trustees said in 2036 the government will be taking in enough in Social Security payroll taxes to pay only about three-fourths of existing benefits. The new report projected that the millions of Social Security recipients would receive a small – 0.7 percent – cost of living increase in their benefit checks in 2012. In 2010 and 2011, there were no cost of living increases in the checks because inflation was low. A 0.7 percent increase would not be seen by many beneficiaries because the extra money would be eaten up by higher insurance premium payments for Medicare. The actual benefit increase will be determined based on the performance of the government’s Consumer Price Index. That figure will be released in October. Democrats and Republicans agree that Medicare must be addressed soon, but the consensus ends there, even as a bipartisan group of lawmakers headed by Vice President Joe Biden is holding talks on ways to tackle the nation’s mounting debt. Most Republicans and some Democrats in Congress have said they won’t vote to increase the government’s ability to borrow without significant spending cuts. The government is expected to reach its borrowing limit of $14.3 trillion soon. Geithner said Friday that Congress should “move as quickly as possible” to raise the borrowing limit. He has told lawmakers that he can take steps to delay until Aug. 2 what would be an unprecedented default on the debt. Changes to Medicare, the government health insurance program for older Americans, could be part of an agreement to increase the debt ceiling. But Social Security appears to be off the table. Many Democrats, including Senate Majority Leader Harry Reid, D-Nev., have been adamant that they will not support cuts in Social Security benefits, even if they target only future retirees. Senate Republican leader Mitch McConnell acknowledged on Thursday that changes to Social Security won’t be part of any agreement. Democrats and Republicans are sparring over how to fix Medicare. House Republicans have passed a plan that would replace Medicare with a voucher-like payment system for future retirees, but GOP leaders in Congress have acknowledged that the plan is unlikely to pass the Democratic-led Senate. Nearly 55 million retirees, disabled people and children who have lost parents receive Social Security benefits, which average $1,077 monthly. More than 46 million people are covered by Medicare. Six trustees oversee Social Security and Medicare, including Geithner, Labor Secretary Hilda Solis, Health and Human Services Secretary Kathleen Sebelius and Social Security Commissioner Michael Astrue. ___ Associated Press reporters Martin Crutsinger and Ricardo Alonso-Zaldivar contributed to this report.

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Heather McGhee: Who’s Budgeting for a Middle Class?

May 9, 2011

For the first time, the majority of Americans believe that their children won’t be better off than they are . If current trends continue — in just a few categories: wages, benefits, retirement income, personal debt, job creation, job quality, job security, and costs for education, child care and health care — they’re absolutely right. So as the lights are dimming on the American Dream, what are America’s political leaders doing? They’re tripping over one another to reach for the off switch. That’s exactly what the leading deficit reduction plans amount to, according to an analysis we conducted recently at Demos , a non-partisan policy center. In ” Budgeting for America’s Middle Class ,” we graded the various budget plans on their impact on working- and middle-class Americans and the result was disheartening. The only legislative budget to get above a “C” — that issued by the Congressional Progressive Caucus’ ” People’s Budget ” — only garnered 77 votes in the House and is unlikely to come to a vote in the Senate. Download the full Report Card (PDF) When today’s deficit hawks (including, however reluctantly, the president) debate how the nation should tax and invest over the coming decades, they seem to ignore that those priorities could make or break America’s future middle class. That’s because the middle class did not create itself in the mid-20th century. Along with strong labor institutions, robust public investments (which we made despite high deficits) made the financial success of ordinary families a national priority. We built the national highway system; put a generation to college on grants, not loans; and invested in public research that redounded to enormous private gain. The result was the greatest middle class the world has ever known. That all shifted in the mid-1970s as organized big business gained influence in Washington, the power of labor unions weakened, and a range of new policies undermined the living standards of working Americans. As a result, working- and middle-class families have been losing ground for the past 30 years . This reality compelled Demos to join with the Century Foundation and the Economic Policy Institute to create OurFiscalSecurity.org , a project with the goal of conducting regular reality checks on the fiscal policy debate. We relied on the principles that created a strong American middle class to craft our own model budget blueprint, ” Investing in America’s Economy .” The blueprint shows that we can tackle our long-term fiscal challenges while creating jobs, safeguarding Medicare and Social Security, and decreasing inequality. In Congress, the representatives in the CPC designed their “People’s Budget” with similar principles in mind and achieved comparable goals. Unfortunately, the new Demos report card shows that the budget proposals with the most political tailwinds — Bowles-Simpson , the President’s new deficit plan and Rep. Paul Ryan’s (R-WI) budget — fail to harness these proven methods. On the most urgent factor — job creation and an accelerated recovery — the president’s plan received a “C,” the Bowles-Simpson plan a “D-” and Rep. Ryan’s proposal failed. None of these plans included the additional public investment needed to make up for our $1 trillion shortfall in economic demand. All three ignored the lesson President Roosevelt learned in 1937 when he cut spending and the country fell back into Depression, or more recently, when Britain’s austerity measures zeroed-out GDP growth . While educating the next generation is seldom included in long-term fiscal policy debates, our children and grandchildren are constantly evoked as reasons to slash and cap spending now. We graded the plans for the investments they make in this generation through both early childhood care and higher education. The House Progressives, OurFiscalSecurity.org and President Obama all demonstrate that we can rein in the debt without leaving behind a disintegrating nation to a poorly educated generation. They also preserve our obligation to the elderly through strengthened Social Security and Medicare, showing one generation need not be pillaged for the well-being of another. There were some surprises. The Bowles-Simpson plan, for example, scored higher than the president’s for reducing our out-of-control defense budget. For all his deficit-cutting bluster, Rep. Ryan received an “incomplete” for long-term debt reduction, since the budget chairman has failed to give adequate details on the taxes he’ll need to raise to meet his target. He can’t seem to give up his raft of new tax cuts for the wealthy and their heirs — even at a time when taxes are lower than they’ve been since 1958 . Does Rep. Ryan really believe that Americans are willing to stomach the end of middle-class America? Until the political conversation takes note of the relationship between our fiscal choices and the future of the middle class, our leaders will continue to get away with touting policies that exacerbate its decline. The winning legislative plan in our report card — the CPC’s “People’s Budget” — demonstrates that we can achieve fiscal balance while preserving the America we all cherish.

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Scott Bittle: Fiscal Follies: No New Taxes? So Now What?

May 8, 2011

As of this weekend, it looks like Congress will hammer out some sort of deal to extend the federal debt ceiling and avoid pushing the country to the brink of default. The response from the Washington Post ‘s Ezra Klein is the best we’ve read so far. “Whew,” Klein wrote last week. As Klein tells it, both sides are softening their hard line positions out of a “healthy aversion to unimaginable consequences.” Whew indeed. But regardless of what kind of package Congress agrees on, this is just the beginning. We need to cut spending and raise revenue for years to get the country out of its fiscal mess. Unfortunately, a sizable contingent of Americans still believes we can solve our problems without tax increases — or at least not any that would affect “me.” More than half of Americans (53 percent) reject the idea of small tax increases and small cuts in Social Security and Medicare to “significantly” reduce the federal debt. Majorities oppose eliminating deductions for home mortgages, state and local taxes, and contributions to charities as “part of a plan to reduce the federal budget deficit.” By a margin of two-to-one, the public wants to balance the federal budget by cutting spending rather than raising taxes. And why wouldn’t they? Politicians have been telling the public for years that all we need to do is cut — even if they stop short of describing the details. So let’s take a look at what “no new taxes” really means if that’s the way we decide to go. Our trillion-dollar budget problems will be $3 trillion dollars worse. Since the Bush taxes cuts are set to expire in 2014, “no new taxes” means that Congress will need to extend them. According to the Congressional Budget Office, extending all of the existing cuts (both the Bush cuts and the expanded tax credits put in under President Obama) means government will have about $3.2 trillion dollars less to spend over the next decade . If we were at even-steven now, or even close, that would be one thing, but the United States is some $14 trillion in debt , and on track to have our national debt exceed the size of our entire economy in only 10 years or so. Plus, just about every budget out there, from the left, right, and the center (and including the Ryan plan ) has us adding to the red ink for decades. The cuts would have to be savage. Okay, for the sake of argument, let’s see what it would take to eliminate 2011′s $1.4 trillion deficit just by cutting spending. The total budget is about $3.8 trillion, so you have to cut about a third of what government now spends . That might not sound impossible, but once you take a look at the numbers, the task is daunting. To cut the deficit by one-third, you would need to eliminate everything government does except for defense, Social Security, Medicare, Medicaid, and paying interest on the debt. Losing that “non-security discretionary spending” would save $533 billion , but of course, you’ve also just wiped out the entire departments of agriculture, commerce, education, energy, and labor. We no longer have federal meat inspectors, the Centers of Disease Control, FEMA or Pell grants. Want to sink your teeth into defense spending? That’s fine, but to eliminate that $1.4 trillion deficit, entirely, you’d need to cut the entire national security budget: all $900 billion of it in 2011. People may end up paying more one way or the other, even if it’s not called a “tax.” The Republicans seem to be backing away from Rep. Paul Ryan’s controversial budget plan, which included turning Medicare into a voucher plan. It’s a “no new tax” plan, and whatever you think about it overall, it makes one tradeoff perfectly clear: the price for no new taxes is higher medical premiums for seniors . Under his plan, the CBO reported, by 2030 seniors would be paying double what they’re currently projected to pay for Medicare . In a philosophical sense, you may have strong feelings about paying higher premiums versus more taxes — but the cost to your bank account is the same either way. Taxing fat cats doesn’t help as much as you think. It is true that most Americans (although certainly not the purists) do back the idea of raising taxes on people who earn more than $250,000 a year . Unhappily, it doesn’t raise that much money. The CBO calculated that raising taxes by 1 percent on the top two income brackets (individuals earning about $175,000 and couples earning about $212,000) would only bring in about $84 billion dollars over the next decade. Unfortunately, our projected deficit for next year is about 10 times that. There certainly are other options — larger tax increases for wealthier Americans, higher corporate taxes, higher payroll taxes, modest tax increases on all of us, taxing fossil fuels, and so on. But the “no new taxes” mantra shuts down any reasonable conversation on how to cut spending and increase revenues in the fairest, least destructive way. The fact is that most government spending is on Social Security, Medicare, and Medicaid, programs the vast majority of Americans value, and there’s no way to protect them (even with tweaking) without raising taxes to cover what they cost. Perhaps the worst result for the country is when an immovable fixation against higher taxes on one side hits up against an immovable fixation on the other side that Social Security and Medicare are untouchable. At that point, the math is simply impossible. In the near-term, Congress may agree on some immediate spending cuts and make some promises about what they’ll do in the future. We’ll all feel better temporarily. But unless more Americans begin to grasp the facts of the budget, we’ll never get out of this. It’s easy to say “no new taxes,” but in real life, the results are almost unimaginable.

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Joe Biden, Congressional Group Begin Budget Talks

May 5, 2011

WASHINGTON — Bowing to political reality, Vice President Joe Biden on Thursday acknowledged the need to pair significant spending cuts with legislation raising the government’s borrowing limit so it can pay its bills. “They’re not technically connected, but the face of the matter is they’re practically and politically connected,” Biden said at the start of budget meetings with top lawmakers at Blair House, the guest house across Pennsylvania Avenue from the White House. As he spoke, the vice president glanced at House Majority Leader Eric Cantor, R-Va. Members of both parties say the government must address out-of-control deficits in order for Congress to go along with the unpleasant task of increasing the debt ceiling beyond the current $14.3 trillion limit. The government borrows more than 40 cents of every dollar it spends. The White House and Republicans who run the House say a deal expected this summer probably won’t produce sweeping changes to taxes and benefit programs such as Medicare and Social Security. But Cantor came to the talks with $715 billion in proposed savings from other programs, including cuts to farm subsidies and food stamps, according to an aide. The federal deficit could reach $1.6 trillion this year, so both sides are setting modest expectations. But they said the meeting offered a chance to identify even small cuts that can build toward a broader agreement. Treasury Secretary Timothy Geithner took some pressure off the talks when he told Congress this week that the government could continue to meet its obligations through Aug. 2. The government is borrowing an average of $125 billion a month. House Republicans have passed a detailed budget blueprint that aims to cut spending by more than $5 trillion over the next decade. Biden sought to flesh out a plan that President Barack Obama outlined last month that would reduce deficits by $4 trillion over 12 years. “We staked out our position in a very definite way. They haven’t,” Cantor said Wednesday. “So we need to understand where they’re coming from.” Obama’s proposal calls for about $1 trillion in higher tax revenues, a nonstarter with House Republicans. At the same time, a GOP plan to slash Medicaid and turn Medicare into a program in which future beneficiaries receive subsidies to purchase private health insurance is dead with the White House and Democrats. In addition to Cantor, the White House invited the second-ranking Senate Republican leader, Arizona’s Jon Kyl; the chairman of the Senate Appropriations Committee, Hawaii Democrat Daniel Inouye; the chairman of the Senate Finance Committee, Montana Democrat Max Baucus; and senior House Democrats Jim Clyburn of South Carolina and Chris Van Hollen of Maryland. One proposal that some Republicans hope to add to the debt ceiling bill would cap spending at about one-fifth of the size of the economy, backed by automatic cuts if Congress failed to enact legislation that keeps spending under the limit. That idea from Sens. Bob Corker, R-Tenn., and Claire McCaskill, D-Mo., is opposed by the White House. It says the plan would force drastic, across-the-board cuts to Social Security, Medicare and Medicaid while doing nothing to fix tax laws full of special breaks. “Arbitrary spending caps are nothing but a backdoor means of imposing immediate and deep cuts in Medicare and Social Security,” said Kenneth Baer, spokesman for the White House budget office. Cantor wouldn’t dismiss the idea, but he said Republicans want something concrete immediately. “All that is fine, but the history of Congress has been that anytime you put enforcement mechanisms in place like that, ultimately they’re waived,” he said. “We’re about trying to effect real cuts, real reforms this year.”

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FTC Settles Over Data Breach, ‘Deceptive’ Practices

May 3, 2011

Two companies have settled charges leveled by the Federal Trade Commission that they failed to adequately protect large quantities of sensitive employee data. The companies, Ceridian Corporation and Lookout Services, violated federal laws that require they take appropriate security measures to protect the data, which included Social Security numbers and other personally identifiable information. A report recently revealed that data breaches were at an all time high in 2010 , with 96 percent of all breaches shown to have been avoidable by implementing simple security measures. The FTC claimed that both companies promised to take the measures, but did not do so–something that became clear when security breaches at each company exposed the data of over 65,000 consumers. The FTC called their security practices “unfair and deceptive.” According to the FTC’s report , Ceridian, a provider of payroll and HR services, stored data on its network in readable text without “a business need,” allowing the breach to occur and putting information including direct deposit data at risk. The personal data of approximately 28,000 Ceridian customers was compromised. To help employers comply with immigration laws, Lookout Services offers the ‘I-9 Solution’ product, which stores names, addresses, dates of birth and Social Security numbers. The company also failed to adequately protect its data. The FTC found that anyone with the correct URL was able to bypass the Lookout website’s authentication procedures and easily access sensitive data — no username or password necessary. According to the FTC complaint , an employee of a Lookout customer was able to gain unauthorized access to the personal data of over 37,000 consumers. As part of the settlement, the companies will have to implement appropriate security programs and get independent audits of these programs every other year for the next 20 years.

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Dean Baker: Why Does Senator McCaskill Want to Bankrupt Our Children?

May 2, 2011

That is what people should be asking Missouri Senator Claire McCaskill along with her fellow senators who are advocated strict caps on government spending. The idea being pushed by Senator McCaskill, together with Tennessee Senator Bob Corker and several other prominent senators, would limit federal spending to 20.6 percent of GDP. It would require difficult to obtain super-majorities to exceed this cap. Spending would be cut across a variety of programs if the cap is not reached. This proposal is hugely deserving of ridicule for a variety of reasons. First, it operates from a blatantly wrong premise – that government spending has grown out of control. Those familiar with arithmetic know that government spending had increased by little as a share of GDP prior to the downturn caused by the collapse of the housing bubble. In 2007, the last year before the onset of the recession, spending as a share of GDP was 19.6 percent. That is 1.1 percentage points less than the 20.7 percent share 30 years earlier in 1977. So the idea that there is a long-term trend of out of control spending is simply not true, or what they call outside of Washington, a “lie.” Spending has risen in the wake of the downturn, but this was not due to a flood of new and expensive government programs. It was overwhelmingly attributable to the expansion of safety net programs like unemployment compensation and Food Stamps and a decline in GDP, which raises the spending-to-GDP ratio even when spending remains constant. If McCaskill and the other senators are upset about this recent rise in spending then they should be going after the incompetents at the Fed and Treasury who somehow could not recognize the $8 trillion housing bubble whose collapse wrecked the economy. This was indeed a horrendous mistake that has been devastating to the country, but it has nothing to do with government spending. Over the long term government spending is projected to rise, but this also has nothing to do with the profligacy of Congress. There are two reasons for the projected increases in spending. The first is an aging population. As a result federal programs that provide for elderly like Social Security, Medicare, and Medicaid will cost more money. The second reason is that health care costs are still rising out control. The United States already pays more than twice as much per person for health care as other wealthy countries. This disparity is projected to grow even larger in coming decades. If this proves true then it will both impose enormous costs on the private sector and lead to growing strains on the budget. By contrast, if health care costs were brought under control we would be looking at huge budget surpluses in the decades ahead. Of course controlling costs would mean confronting the insurance and pharmaceutical industries and other powerful lobbies. Unfortunately Senator McCaskill and her colleagues lack the courage to confront such powerful elites. In fact, McCaskill and her colleagues do not even have the courage to propose cuts for specific programs. Does McCaskill wants to cut Medicare, Social Security, Head Start, unemployment insurance? She won’t tell her constituents or the country. She just wants to cut generic spending. This one might sell well with the Wall Street crew, but it is incredibly bad policy. First off, any budget expert can quickly devise 100 ways to game spending caps, the most obvious being tax expenditures, where the government gives a tax break for items it wants to subsidize. This does not count as spending. More importantly, a strict limit on government spending that is binding would prove enormously costly because there are some things that the government does more efficiently than the private sector. Providing Medicare to retirees is one of the items in this category, according to the non-partisan Congressional Budget Office (CBO). CBO’s analysis of Representative Ryan’s plan for privatizing Medicare showed that having private insurers take over the Medicare program would add more than $34 trillion to its costs over its 75-year planning period, an amount that is almost seven times the size of the projected Social Security shortfall. CBO’s analysis implies that the Ryan plan, which was approved by the Republican House last month, would increase the cost of paying for retirement health care for someone turning 65 in 2022 (the first year the plan takes effect) by almost $170,000. This doesn’t count the cost transferred from the government to beneficiaries. This is pure waste associated with using a more inefficient private system rather than the public system. There is a similar story with Social Security. The administrative costs of privatized systems like those in the United Kingdom or Chile are 20-30 times as high as the administrative costs of the Social Security system in the United States. This would cost a typical retiree close to $40,000 in higher fees (which is income to the financial industry) that would come directly out of their retirement income. If Senator McCaskill and her colleagues really expect their caps to be binding then they must want to privatize either Social Security or Medicare or both. Arithmetic leaves few other options. By 2030, CBO projects that spending on Social Security, Medicare and Medicaid would take up 14.5 percent of GDP. If we assume, conservatively, interest payments of 3.0 percent of GDP, this brings us to 17.5 percent of GDP against a proposed cap of 20.6 percent. Any reasonable level of spending on the military, education, infrastructure, the environment and research and development would push the country far over the cap. This would leave little choice except to privatize Social Security and/or Medicare imposing an enormous and unnecessary burden on our children and grandchildren. The higher costs associated with privatized programs will leave all but the wealthiest workers struggling in retirement. Of course, the senators who want to impose this enormous burden on our children and grandchildren will mostly be enjoying a comfortable retirement themselves by the time the effects of their policy are being felt. In the meantime, they will have enjoyed the praise of the Wall Street crew and the elite media for having the courage to destroy the programs that the middle class depends upon. Welcome to Washington.

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Michele Bachmann Invokes Holocaust In Railing Against Taxes

May 1, 2011

(AP) MANCHESTER, N.H. — Minnesota Rep. Michele Bachmann on Saturday described the loss of “economic liberty” that young Americans face today as a “flash point of history” in which the younger generation will ask what their elders did to stop it. In a speech to New Hampshire Republicans, Bachmann recounted learning about a horrific time in history as a child – the Holocaust – and wondering if her mother did anything to stop it. She said she was shocked to hear that many Americans weren’t aware that millions of Jews had died until after World War II ended. Bachmann said the next generation will ask similar questions about what their elders did to prevent them from facing a huge tax burden. “I tell you this story because I think in our day and time, there is no analogy to that horrific action,” she said, referring to the Holocaust. “But only to say, we are seeing eclipsed in front of our eyes a similar death and a similar taking away. It is this disenfranchisement that I think we have to answer to.” The generation of Americans just entering the work force now could eventually see 75 percent of their earnings sucked up by income taxes, Social Security and Medicare, Bachmann said. Those young workers are going to wonder what people were doing while “watching quite literally our economic liberty pulled out from under us.” “The question comes down to this: what will you say to that next generation about what you did to make sure that wouldn’t be their fate?” she said. Bachmann, along with fellow potential presidential hopefuls Rick Santorum and Tim Pawlenty, spoke at a forum organized by “We the People,” a conservative organization created by former congressional candidate Jennifer Horn.

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Jerry Jasinowski: The S&P Wakeup Call

April 22, 2011

Standard & Poor’s decision to change the nation’s long-term credit outlook from stable to negative should be seen as a wakeup call to Congress and the White House that we simply must find a credible solution to the fiscal crisis, and soon. This is not strictly a domestic issue. Our government’s credit worthiness underpins the world economy. Foreign governments invest trillions in U.S. debt instruments because they believe our credit is good. The mere possibility that Congress will not extend the debt limit is enough to send shivers throughout the world financial system. The prospect of losing our credit worthiness in the not too distant future is even more disconcerting. Our ability to borrow vast sums of money at reasonable rates — and the acceptance of the U.S. dollar as the world currency of choice — confers upon us innumerable advantages. If we let these advantages slip away, the cost of credit will be higher, economic growth will be slower and our standard of living will be reduced. The reason for S&P’s change in outlook is not hard to understand. Our government is spending much more money than it takes in. Roughly 40 cents of every dollar that Uncle Sam spends is borrowed. We have had back-to-back deficits of $1.5 trillion and have almost reached our self-imposed debt limit. In the absence of a credible debt reduction plan, Congress may not be able to summon enough votes to raise the debt limit. If that happens, no one will need S&P to question our credit worthiness. It will be gone with the wind. The budget plan offered by Rep. Paul Ryan (R-WI), Chairman of the House Budget Committee, was politically bold in that it proposed real reductions in entitlement spending. There is no question that is where the real problem is. Spending as a percentage of GDP has grown from 19 percent in 2000 to 25 percent of GDP in 2010, and almost all of that was due to the growth of Social Security, Medicare, Medicaid and Defense. Any viable solution will of course include increased revenues, but there is not enough money in the world to plug that hole. Spending is the central problem that must be dealt with. Two bi-partisan deficit commissions, including the one created by President Obama, also made serious recommendations to reduce the deficit. One can quibble about specifics, but they did put everything on the table. Instead of criticizing Ryan, President Obama should focus on the recommendations of his own deficit commission. We need leadership to define the tough decisions that must be made and bring us all together to do what must be done. We urge the President to provide the leadership the country so urgently needs. Jerry Jasinowski, an economist and author, served as President of the National Association of Manufacturers for 14 years and later The Manufacturing Institute. You can quote from this with attribution. Let me know if you want to talk to Jerry.

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Scott Bittle: Fiscal Follies: S&P, Groucho Marx, and the Bond Vigilantes

April 21, 2011

Admittedly, we may have an odd sense of humor when it comes to the federal budget. But after an initial shiver of fear, our first reaction to the news that Standard & Poor’s had issued a “negative outlook” for the U.S. national debt was: “Oh, no. Mrs. Teasdale has finally made her move.” You may not know who Mrs. Teasdale is, but she’s the oblivious dowager played by Margaret Dumont who starts the action rolling in the classic Marx Brothers political satire, Duck Soup . That movie starts with a government financial crisis, and Mrs. Teasdale may be the world’s first “bond vigilante.” Some say the term “bond vigilante” dates from the 1980s, while others say it was coined during the Clinton administration. Either way, it describes what happens when the traders who deal in government securities start to get nervous about a nation’s deficits and debt load, and threaten to dump their bonds unless a government changes its policies. That’s what S&P is starting to do with its “negative outlook,” and that’s what Mrs. Teasdale does in Duck Soup . Duck Soup takes place in the fictional nation of Freedonia, which is broke. Mrs. Teasdale, who has more money than sense, agrees to lend $20 million to Freedonia’s government, but only if it will appoint Rufus T. Firefly (Groucho) as prime minister. Things only get worse, and more ridiculous, from there. But while it’s an absurd situation, it’s also an indispensible lesson: when you’re in debt and need to borrow, the people with the cash on hand hold the cards. You might not think the United States and Freedonia have much in common. Now that we know we can’t fix this thing by axing agricultural subsidies and National Public Radio, we face some truly unpleasant choices — cutting spending on things that matter to people and hiking taxes in an economy that’s still sputtering. Right now we’re borrowing to get by, and we can only continue to do that as long as the world’s investors continue to loan us money. Right now, the United States relies on borrowed money that we get by issuing Treasury bonds. We have about $9.66 trillion in Treasury bonds outstanding, and we’ve got another $4.6 trillion in intergovernmental debt (mostly borrowed from the Social Security Trust Fund), which also has to be repaid. U.S, Treasuries are owned by investors around the world ranging from the People’s Bank of China and the “Caribbean Banking Centers” (The Bahamas, Cayman Islands, and the like) to state and local governments to individual bond holders like Mrs. Teasdale. For years, the United States has been in the catbird seat in the world bond market. Both here and abroad, investors have always seen U.S. Treasuries as a prudent, trustworthy investment in a dangerous, changeable world. Government bonds in general are considered one of the safest investments out there, no matter which government you’re talking about, because governments (a) can always raise taxes to pay their bills and (b) rarely go out of business. But sometimes governments get in too deep and then drag their feet on getting their fiscal houses in order. Then bondholders start wondering whether the government is actually good for the money. That’s what has happened to Greece, Ireland, Portugal, and Spain over this past year. The world’s bond markets had their Mrs. Teasdale moment when they started to see these countries as risky financial bets. That’s the reason behind the wave of budget-cutting sweeping over Western Europe right now, as Britain and France try to head off trouble. It’s important to remember: the United States is a wealthy, powerful country, the biggest economy in the world. We’re also the sole superpower, so it’s unlikely any of our creditors would impose a leader like Rufus T. Firefly on us. (We’re not saying he might not get elected on his own.) But it’s risky to think that we’re invulnerable to the power of the bond markets. They know we’re good for the money, if we tax ourselves more and/or spend less. But what S&P and others are really saying is that they don’t think we’ve got the political will to do either one. S&P said there was “significant risk that Congressional negotiations could result in no agreement on a medium-term fiscal strategy until after the fall 2012 Congressional and presidential elections,” and S&P said there’s a one-in-three chance it would actually lower our bond rating in the next two years. Is it fair that the bond market has this much power? Not really. Did the bond ratings agencies behave as dimwittedly as Mrs. Teasdale when they missed the looming financial crisis in 2008? Sure. Does that change anything? Not at all. We’ve been safe from the Mrs. Teasdales of the world so far, but with new red flags appearing every day, how long can that last? The cold fact is that the federal budget is on an unsustainable path , because as the population ages and our health care costs continue to go up, the costs for Medicare and Social Security are going to skyrocket. In a little more than a decade, our national debt could be as big as our entire economy, and nearly the entire federal budget could be taken up by Medicare, Medicaid, Social Security and interest on the money we’ve already borrowed. If we don’t start getting our deficits down and reining in our long-term spending, someday Mrs. Teasdale will come to call, and she’ll be able to make demands, and we’ll have to listen, and it won’t be funny. At that point, every single one of us could be in duck soup.

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N.C. Gov. Vetoes Controversial Unemployment Bill

April 18, 2011

North Carolina Gov. Bev Perdue (D) has vetoed legislation that would have cut the state’s budget while allowing 37,000 laid off workers in the state to receive their final 20 weeks of federal unemployment insurance benefits. Republicans in the North Carolina General Assembly attached budget cuts to a bill maintaining the state’s eligibility for the federal Extended Benefits program last week. Perdue issued her veto threat on Saturday, after tornadoes smashed houses and killed 22 people throughout the state . In the aftermath of the unemployment showdown, Perdue and state Republicans lobbed unkind press releases at each other. “The General Assembly has once again shown they are willing to play games with people’s lives in holding hostage some 37,000 unemployed North Carolinians,” a Perdue spokeswoman said in a Saturday statement. “But to sign the bill and suffer the extreme cuts proposed by Republicans would risk the future of this state and the lives of 9.5 million citizens.” North Carolina Republican Party Chairman Robin Hayes returned fire : “It is a shame that Governor Perdue would cut off the jobless benefits of 37,000 families to avoid cutting one cent from her big spending, big government budget proposal.” The GOP-crafted bill would cut spending in the governor’s fiscal 2011-2012 budget by 13 percent. To do so, it would halt raises for public workers and require workers to contribute a larger portion of their salaries to their pension plans. North Carolina is one of three states where the Extended Benefits program began phasing out on April 16 . EB is fully funded by the federal government and does not affect state deficits. In states with high unemployment rates, it provides up to 20 weeks of benefits for layoff victims who exhaust 53 weeks of federal Emergency Unemployment Compensation and 26 weeks of state benefits without finding work. States are eligible for the EB program if the local unemployment rate is at least 10 percent higher than it was in either of the two previous years. Even though unemployment remains high — it’s 9.7 percent in North Carolina — it hasn’t risen enough to meet that requirement. In December, Congress said states could change the “look back” period to cover the previous three years instead of just two, but several state legislatures have balked at the offer of additional aid for the jobless. Republican lawmakers in Michigan and Missouri used the EB opportunity to pass an unprecedented reduction in state unemployment insurance. The EB legislation in North Carolina moved under the radar of local and national advocates for unemployed workers. “There was very little notice around this bill moving, and so there’s a lot of concern there was an effort to play politics with the unemployed,” said Alexandra Sirota, director of the North Carolina Justice Center, a local affiliate of the progressive Center on Budget and Policy Priorities, a Washington think tank. She added that she expected Democratic lawmakers to push a clean version of the EB fix later this week. The legislature is controlled by Republicans. Spokespeople for party leaders in the General Assembly didn’t respond to requests for comment from HuffPost. Ron, a 61-year-old human resources manager who said he lost his job in mid-2009, told HuffPost federal unemployment benefits helped he and his wife “keep the lights on, keep food, keep a reasonable portion of gasoline in the car. It helps to meet the basic needs.” Ron, who lives in Research Triangle Park, asked his full name not be used because he’s had some interviews recently and doesn’t want potential employers to know he’s struggling. He said he has a few more weeks before he’s eligible for Extended Benefits. If those benefits disappear and he doesn’t land a job by the end of the year, he said, he’ll apply for early retirement benefits from the Social Security Administration. “Without the unemployment benefits, we’re going to be in some trouble,” he said.

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America’s Richest Taxpayers See Federal Taxes Dramatically Drop

April 17, 2011

WASHINGTON — As millions of procrastinators scramble to meet Monday’s tax filing deadline, ponder this: The super rich pay a lot less taxes than they did a couple of decades ago, and nearly half of U.S. households pay no income taxes at all. The Internal Revenue Service tracks the tax returns with the 400 highest adjusted gross incomes each year. The average income on those returns in 2007, the latest year for IRS data, was nearly $345 million. Their average federal income tax rate was 17 percent, down from 26 percent in 1992. Over the same period, the average federal income tax rate for all taxpayers declined to 9.3 percent from 9.9 percent. The top income tax rate is 35 percent, so how can people who make so much pay so little in taxes? The nation’s tax laws are packed with breaks for people at every income level. There are breaks for having children, paying a mortgage, going to college, and even for paying other taxes. Plus, the top rate on capital gains is only 15 percent. There are so many breaks that 45 percent of U.S. households will pay no federal income tax for 2010, according to estimates by the Tax Policy Center, a Washington think tank. “It’s the fact that we are using the tax code both to collect revenue, which is its primary purpose, and to deliver these spending benefits that we run into the situation where so many people are paying no taxes,” said Roberton Williams, a senior fellow at the center, which generated the estimate of people who pay no income taxes. The sheer volume of credits, deductions and exemptions has both Democrats and Republicans calling for tax laws to be overhauled. House Republicans want to eliminate breaks to pay for lower overall rates, reducing the top tax rate from 35 percent to 25 percent. Republicans oppose raising taxes, but they argue that a more efficient tax code would increase economic activity, generating additional tax revenue. President Barack Obama said last week he wants to do away with tax breaks to lower the rates and to reduce government borrowing. Obama’s proposal would result in $1 trillion in tax increases over the next 12 years. Neither proposal included many details, putting off hard choices about which tax breaks to eliminate. In all, the tax code is filled with a total of $1.1 trillion in credits, deductions and exemptions, an average of about $8,000 per taxpayer, according to an analysis by the National Taxpayer Advocate, an independent watchdog within the IRS. More than half of the nation’s tax revenue came from the top 10 percent of earners in 2007. More than 44 percent came from the top 5 percent. Still, the wealthy have access to much more lucrative tax breaks than people with lower incomes. Obama wants the wealthy to pay so “the amount of taxes you pay isn’t determined by what kind of accountant you can afford.” Eric Schoenberg says to sign him up for paying higher taxes. Schoenberg, who inherited money and has a healthy portfolio from his days as an investment banker, has joined a group of other wealthy Americans called United for a Fair Economy. Their goal: Raise taxes on rich people like themselves. Shoenberg, who now teaches a business class at Columbia University, said his income is usually “north of half a million a year.” But 2009 was a bad year for investments, so his income dropped to a little over $200,000. His federal income tax bill was a little more than $2,000. “I simply point out to people, `Do you think this is reasonable, that somebody in my circumstances should only be paying 1 percent of their income in tax?’” Schoenberg said. Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee, said he has a solution for rich people who want to pay more in taxes: Write a check to the IRS. There’s nothing stopping you. “There’s still time before the filing deadline for them to give Uncle Sam some more money,” Hatch said. Schoenberg said Hatch’s suggestion misses the point. “This voluntary idea clearly represents a mindset that basically pretends there’s no such things as collective goods that we produce,” Schoenberg said. “Are you going to let people volunteer to build the road system? Are you going to let them volunteer to pay for education?” The law is packed with tax breaks that help narrow special interests. But many of the biggest tax breaks benefit millions of American families at just about every income level, making them difficult for politicians to touch. The vast majority of those who escape federal income taxes have low and medium incomes, and most of them pay other taxes, including Social Security and Medicare taxes, property taxes and retail sales taxes. The share of people paying no federal income tax has dropped slightly the past two years. It was 47 percent for 2009. The main difference for 2010 was the expiration of a tax break that exempted the first $2,400 of unemployment benefits from taxation, Williams said. In 2009, nearly 35 million taxpayers got a tax break for paying interest on their home mortgages, and nearly 36 million taxpayers took the $1,000-per-child tax credit. About 41 million households reduced their federal income taxes by deducting state and local income and sales taxes from their taxable income. About 36 million families cut their taxes by nearly $35 billion by deducting charitable donations, and 28 million taxpayers saved a total of $24 billion because their income from Social Security and railroad pensions was untaxed. “As a matter of policy, there would be a lot of ways to save money and actually make these things work better,” said Leonard Burman, a public affairs professor at Syracuse University. “As a matter of politics, it’s really, really difficult.” ___ Online: Tax Policy Center: http://www.taxpolicycenter.org National Taxpayer Advocate: http://www.irs.gov/advocate United for a Fair Economy: http://www.faireconomy.org

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Controversial GOP Budget Proposal Passes House Vote

April 15, 2011

WASHINGTON — The House has passed a Republican budget blueprint proposing to fundamentally overhaul Medicare for future beneficiaries while combating out-of-control budget deficits. It would impose sharp spending cuts on social safety net programs like food stamps and Medicaid. The GOP proposal passed 235-193, with every Democrat voting “no.” The nonbinding plan lays out a fiscal vision cutting $6.2 trillion over 10 years from the budget submitted by President Barack Obama. It calls for transforming Medicare from a program in which the government directly pays medical bills into a voucher-like system that subsidizes purchases of private insurance plans. People 55 and over would remain in the current system, but younger workers would receive subsidies that would steadily lose value over time. THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below. A bold but politically risky plan to cut trillions of dollars from the federal budget steamed toward a party-line House vote Friday, as insurgent Republicans rallied behind the idea of fundamentally reshaping the government’s role in health care for the elderly and the poor. The GOP plan proposes a federal budget totaling $3.5 trillion next year, while promising more than $6 trillion in accumulated spending cuts over the next decade compared with the budget that President Barack Obama offered in February. It relies on stiff cuts to domestic agency accounts, food stamps and the Medicaid health care program for the poor and disabled. The GOP’s solution to unsustainable deficits that presently require the government to borrow more than 40 cents of every dollar it spends is to relentlessly attack the spending side of the ledger while leaving Bush-era revenue levels intact. It calls for tax reform that would lower the top income tax rates for corporations and individuals by cleaning out a tax code cluttered with tax breaks and preferences, but parts company with Obama and the findings of a bipartisan deficit commission, who propose devoting about $100 billion a year in new revenues to easing the deficit. The Republican plan “disavows the relentless government spending, taxing and borrowing that are leading America, right at this moment, toward a debt-fueled economic crisis,” according to the document. Democrats and many budget experts say this spending-cuts-only approach is fundamentally unfair, targeting social safety net programs like Medicaid and food stamps while leaving in place a tax system they say bestows too many benefits on the wealthy. Republicans shied away from tackling Social Security shortfalls, steering clear of a political minefield. But their budget plan calls for transforming Medicare from a program in which the government directly pays medical bills into a voucher-like system that subsidizes purchases of private insurance plans. People 55 and over would remain in the current system, but younger workers would receive subsidies that would steadily lose value over time. “The changes being proposed would not affect one senior citizen in America, not one. Anyone 55 years and older will not be affected by any of these changes,” said House Speaker John Boehner, R-Ohio. “But if you’re 54 and younger, those Americans understand that if we don’t make changes, the programs won’t be there.” Virtually every budget expert in Washington agrees that projected Medicare cost increases are unsustainable, but the GOP initiative – attacked by Democrats as ending Medicare’s guarantee as we know it – has launched a major-league Washington imbroglio. The primary author of the GOP plan is unfazed by the Democratic attacks. “The biggest threat to Medicare is the status quo and the people defending it,” House Budget Committee Chairman Paul Ryan, R-Wis., told The Associated Press on Thursday. Democrats countered with official estimates showing the GOP plan would provide vouchers whose value would steadily erode. “They end the Medicare guarantee,” said top Budget Committee Democrat Chris Van Hollen of Maryland. “They force seniors to leave the Medicare program and go into the private insurance market where costs continue to rise day in and day out.” The House began debate on the measure Thursday and continued Friday with the easy defeat of two liberal budget alternatives. In a tricky vote Friday, a plan offered by the conservative Republican Policy Committee failed, 136-119, in a tally which most Democrats withheld their votes. The Democratic strategy was to force some Republicans to vote against the conservative plan, which was being “scored” by anti-tax groups like the Club for Growth, which supports economic conservatives in GOP primary races. Had the conservative plan actually passed, it would have derailed the underlying GOP budget. The GOP plan isn’t actual legislation. Instead, under the arcane and decidedly imperfect congressional budget process, the measure sketches out a nonbinding blueprint each year for running the government. The resolution doesn’t require the president’s signature, but it does set the framework for changes to spending or tax policy in follow-up legislation. The most immediate impact of the GOP plan would be to cut the $1 trillion-plus budget for appropriated programs next year by $30 billion, following on $38 billion in cuts just adopted. That would return domestic agency accounts below levels when George W. Bush left office. Friday’s voting comes on the heels of final congressional action on a long-overdue plan to wrap up the 2011 budget year. That measure claims $38 billion in savings but just $20 billion to $25 billion in lower deficits because illusory spending cuts comprise a big portion of the measure. The Democratic-controlled Senate has yet to produce its alternative plan as the Budget Committee chairman, Sen. Kent Conrad, D-N.D., and other members of Obama’s independent fiscal commission pursue a bipartisan “grand bargain” blending big spending curbs with new revenues flowing from a simplified tax code. The budget deficit is projected at an enormous $1.6 trillion this year, but more ominously, current projections show an even worse mismatch as the baby boom generation retires and Medicare costs consume an ever-growing share of the budget. But there’s a standoff between House Republicans and Obama over the president’s plan to raise taxes on upper-income people. For the long term, Ryan’s 10-year plan still can’t claim a balanced budget by the end of the decade because of promises to not increase taxes or change Medicare and Social Security benefits for people 55 and over. But eventually annual deficits are projected to fall to the $400 billion range, enough to stabilize the nation’s finances and prevent a European-style debt crisis that could force far harsher steps, Ryan says. The GOP plan seeks to cut $5.8 trillion from the budget. But that amount is inflated because, like Obama, the Ryan plan underestimates the likely costs of military operations overseas to produce $1 trillion in iffy spending cuts. The GOP measure also comes after Obama on Wednesday promised stiffer deficit curbs than contained in his February budget. Obama proposed reducing deficits by $4 trillion over 12 years, with $3 trillion coming from spending reductions and $1 trillion from additional revenue. He would leave Medicare and Medicaid intact but with new cost controls. But after Ryan asked the White House budget office for more details, he was pointed to a news release.

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House Prepares To vote On $6 Billion GOP Spending Cut Plan

April 15, 2011

WASHINGTON — A bold but politically risky plan to cut trillions of dollars from the federal budget is coming to a House vote, with insurgent Republicans rallying behind the idea of fundamentally reshaping the government’s role in health care for the elderly and the poor. The GOP plan, expected to be voted on Friday, promises more than $6 trillion in spending cuts over the next decade compared with the budget that President Barack Obama offered in February, relying on stiff cuts to domestic agency accounts, food stamps and the Medicaid health care program for the poor and disabled. But while leaving Social Security alone, the measure calls for transforming Medicare from a program in which the government directly pays medical bills into a voucher-like system that subsidizes purchases of private insurance plans. People 55 and over would remain in the current system, but younger workers would receive subsidies that would steadily lose value over time. Virtually every budget expert in Washington agrees that projected Medicare cost increases are unsustainable, but the GOP initiative – attacked by Democrats as ending Medicare’s guarantee as we know it – has launched a major-league Washington imbroglio. The primary author of the GOP plan is unfazed by the Democratic attacks. “The biggest threat to Medicare is the status quo and the people defending it,” House Budget Committee Chairman Paul Ryan, R-Wis., told The Associated Press on Thursday. Democrats countered with official estimates showing the GOP plan would provide vouchers whose value would steadily erode. “They end the Medicare guarantee,” said top Budget Committee Democrat Chris Van Hollen of Maryland. “They force seniors to leave the Medicare program and go into the private insurance market where costs continue to rise day in and day out.” The House began debate on the measure Thursday with a vote on it and several competing alternatives – most importantly a Democratic substitute raising taxes on the wealthy and a plan by GOP conservatives to cut far more harshly – scheduled for Friday. The GOP plan isn’t actual legislation. Instead, under the arcane and decidedly imperfect congressional budget process, the measure sketches out a nonbinding blueprint each year for running the government. The resolution doesn’t require the president’s signature, but it does set the framework for changes to spending or tax policy in follow-up legislation. The Democratic-controlled Senate has yet to produce its alternative plan as the Budget Committee chairman, Sen. Kent Conrad, D-N.D., and other members of Obama’s independent fiscal commission pursue a bipartisan “grand bargain” blending big spending curbs with new revenues flowing from a simplified tax code. The budget deficit is projected at an enormous $1.6 trillion this year, but more ominously, current projections show an even worse mismatch as the baby boom generation retires and Medicare costs consume an ever-growing share of the budget. But there’s a standoff between House Republicans and Obama over the president’s plan to raise taxes on upper-income people. Friday’s voting comes on the heels of final congressional action on a long-overdue plan to wrap up the 2011 budget year. That measure claims $38 billion in savings but just $20 billion to $25 billion in lower deficits because illusory spending cuts comprise a big portion of the measure. For the long term, Ryan’s 10-year plan still can’t claim a balanced budget by the end of the decade because of promises to not increase taxes or change Medicare and Social Security benefits for people 55 and over. But eventually annual deficits are projected to fall to the $400 billion range, enough to stabilize the nation’s finances and prevent a European-style debt crisis that could force far harsher steps, Ryan said. The GOP measure also comes after Obama on Wednesday promised stiffer deficit curbs than contained in his February budget. But after Ryan asked the White House budget office for more details, he was pointed to a news release.

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Obama Tiptoes On Proposed Tax Increases

April 14, 2011

WASHINGTON — With his striking choice of words, President Barack Obama clearly outlined the greatest perils for Republicans – and for Democrats – in the nation’s high-stakes debate over spending and social programs. Obama used vivid, populist language in a forceful speech Wednesday to denounce the GOP plan for cutting spending and revamping Medicare and Medicaid. The Republicans, he said, have concluded that “even though we can’t afford to care for seniors and poor children, we can somehow afford more than $1 trillion in new tax breaks for the wealthy.” But the president’s language was tortured and opaque when it came to one element of his own proposal: raising taxes for certain Americans, mostly high earners. Obama said he wants “to reduce spending in the tax code.” That code, he said, is “loaded up with spending on things like itemized deductions.” By any measure, “spending in the tax code” is a curious phrase. It likens tax revenue to a source of money that “spends” down its total when tax cuts are enacted and conversely “reduces spending” when taxes go up, including cases in which temporary tax cuts are ended. Long gone are the days when Democrats employed frank language on taxes, as presidential nominee Walter Mondale did in 1984. “Mr. Reagan will raise taxes, and so will I,” Mondale said in accepting the nomination. “He won’t tell you. I just did.” Obama left no doubt he believes some taxes should go up. But he couched it in careful terms designed to distance himself from proverbial “tax-and-spend Democrats” almost as much as he distanced himself from what he suggested are heartless Republicans. Throughout his 43-minute speech, Obama portrayed himself as a fair but frugal leader willing to trim popular agencies, including the military, and to raise taxes only on wealthy people who have benefited disproportionately in recent years. It’s part of a broader appeal to independent voters, who swung dramatically from Democratic candidates in 2008 to Republicans in 2010 and who hold the key to his re-election hopes next year. Americans are showing increased alarm at the fast-growing federal debt. It’s coupled with concern, along with sometimes conflicting emotions and beliefs, about the nation’s biggest social programs, Medicare and Social Security. Both parties face political opportunities and risks as they confront these issues. And both parties are seeking phrases and slogans to best exploit their openings while minimizing their weaknesses. House Republicans plan this week to pass an ambitious 10-year plan that would convert Medicare to a voucher program and turn Medicaid into a state block grant program, saving the government billions of dollars. The bill would reduce tax rates for corporations and high earners, while ending some tax-avoidance loopholes. Democrats feel the GOP is overreaching, chiefly in its proposed changes to Medicare, the rapidly expanding federal health care program for older Americans and the disabled. They think voters will recoil at the notion of higher medical costs for the elderly, especially if income tax rates are falling for high earners. Obama ripped the Republican plan. “It’s a vision that says America can’t afford to keep the promise we’ve made to care for our seniors,” he said. “It ends Medicare as we know it.” Republicans, meanwhile, have virtually perfected their attacks on any Democrat who suggests a tax increase of any kind. Several top Republicans criticized Obama’s long and multilayered speech on that topic alone. Obama “doesn’t get it,” said Mississippi Gov. Haley Barbour, a likely presidential candidate. “The fear of higher taxes tomorrow hurts job creation today.” “The real problem is that Washington spends too much, not that it taxes too little,” said Sen. Lamar Alexander, R-Tenn. Numerous bipartisan and nonpartisan analysts say it is almost impossible to solve the nation’s debt problem without some combination of tax increases, spending cuts and substantial changes to Medicare and Social Security. After calling for an array of spending cuts Wednesday, Obama made the case for targeted tax increases, albeit in roundabout language. Because Medicare and Social Security are popular with both parties, he said, “and because nobody wants to pay higher taxes, politicians are often eager to feed the impression that solving the problem is just a matter of eliminating waste and abuse, that tackling the deficit issue won’t require tough choices.” He said he would not repeat last year’s decision to extend Bush-era tax cuts – now scheduled to expire before 2013 – for families earning more than $250,000 a year. “We cannot afford $1 trillion worth of tax cuts for every millionaire and billionaire,” the president said. He renewed his call for limiting itemized deductions “for the wealthiest 2 percent of Americans.” Such deductions apply to money spent on mortgage interest payments, charitable gifts and other items. Obama described such goals as “reducing tax expenditures.” “I think it was very, very smart” to use such unfamiliar and indirect language, said Matt Bennett, vice president of Third Way, a Democratic-leaning think tank that praised Obama’s speech. “Why not put it in those terms?” he said in an interview. “It’s what the Republicans’ Frank Luntz would do.” Luntz is a GOP adviser known for pushing carefully crafted political terms, such as referring to levies on estates as the “death tax.” Bennett said Republicans have demonized even reasonable and necessary tax increases to the point that “it’s a gigantic problem” for solving the nation’s fiscal woes. If a “term of art” will blunt GOP attacks, he said, it could help Obama advance his agenda and give political cover to Republican lawmakers who believe some element of tax increases must be part of a deficit-reduction drive. In his closest brush with an explicit call for tax increases Wednesday, Obama chastised the most insistent Republicans. “Some will argue we shouldn’t even consider ever, ever raising taxes, even if only on the wealthiest Americans,” the president said. “It’s just an article of faith for them. I say that at a time when the tax burden on the wealthy is at its lowest level in half a century, the most fortunate among us can afford to pay a little more.” It fell far short of Mondale’s candor. But it was enough to unleash a barrage of GOP criticisms, certain to resound through the fall of 2012. ___ EDITOR’S NOTE – Charles Babington covers Congress and politics for The Associated Press.

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Heather McGhee: President’s Deficit Plan Recaptures the Fiscal High Road — Almost

April 13, 2011

Today, the President of the United States laid out his vision for restoring fiscal responsibility in a way that does not impede our fledgling recovery or violate the core inter-generational promises made during the American Century. Demos applauds the President’s leadership. First, the positives. The President reaffirmed his commitment to the type of public investment that has made America great, such as education, infrastructure, and encouraging innovations in energy and science. He also recognized that we can no longer justify a defense budget that has contributed to 2 out of every 3 dollars in increased discretionary spending since 2001 . He addressed one of the real drivers of long-term debt — health care costs — by targeting the source of cost increases, instead of simply targeting the government or individual payers of these increases, as the Ryan plan does. His courageous approach — strengthening the Independent Payment Advisory Board and allowing more generics competition and government bargaining–directly challenges the insurance and drug lobby who hold far too much sway in Washington. The President also offered a strong counter to the worst elements of the conservative budget orthodoxy. He either explicitly or implicitly rejected the most economically damaging proposals, including: continuation of the Bush tax slashing ideology that brought us a job-growth-free decade; an 18 percent GDP spending cap that would guarantee our international decline; and privatization and block granting of Medicare and Medicaid. Unfortunately, the President has retreated from the urgency of joblessness. He resisted proposals that would send us back into Recession, yes, but where is the plan to put 29 million under- and unemployed Americans back to work ? He rejected the right-wing war against the American government, yes, but when will he wage war against economic inequality and middle-class decline, for which government is the most powerful weapon? With federal tax receipts at the lowest share of the economy in three generations — and corporate taxes at a record low , any legitimate deficit plan must raise considerable revenue. The President does not appear to have that intention. His plan embraces the same basic bad math of the Bowles-Simpson plan: $3 in spending cuts for every $1 in additional tax revenue. Fortunately, the inclusion of interest payments with spending will provide more balance than the economically unsound Bowles-Simpson approach. Nevertheless, we must admit that we have a revenue problem, and will in fact need more spending to rebuild a middle-class economy. We simply cannot power a 21st century, high-speed rail economy on a 20th century steam engine tax base. Let us be clear: the conservative fiscal vision is austerity for the vast majority of Americans and publicly-financed charity for a narrow elite. This cannot stand, and the President made that clear. Here are some ways that policymakers can improve on the strong foundation the President set today: • Look Beyond the Bush Tax Cuts . Given our record inequality and urgent national needs, why should we stop at simply reversing the Bush tax cuts on the highest income bracket, a group that is diverse in and of itself? The President should ask that those who benefit most in our society contribute much more to its survival. New, higher tax brackets should be created for millionaires, billionaires and wealthy heirs, along the lines of Rep. Schakowsky’s Fairness in Taxation Act. • “Corporate Citizens” Should Pay Like Citizens . The President reiterated his call to close corporate tax loopholes, but without raising more revenue, echoing the business lobby’s false complaint about the statutory rate’s effect on economic competitiveness. The truth is, corporations now account for just 9 percent of federal tax revenue (down from 27 percent in 1955) and contribute a percentage of taxes to our GDP that is lower than all other industrialized nations. Corporate tax reform must ask for more from American business. • Commit to Retirement Security . With employers failing to provide adequate private pensions, Social Security benefits will need to be higher for most future retirees to sustain today’s living standards. Young workers may be relieved that their benefits won’t be “slashed” in the President’s vision, but without major reform of our private retirement system , any decrease is unacceptable (and unnecessary, as higher payroll taxes could fund sustained benefit levels). In other, less-reported news, the Congressional Progressive Caucus unanimously voted yesterday to release its own alternative budget. The CPC’s fiscal plan delivers a bolder, more coherent vision of what’s broken in the economy, who broke it, and how to fix it.

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Bill Lawson: Why Businesses Should Hire More Veterans With Disabilities

April 12, 2011

Most people would agree that America’s Veterans with disabilities — those who have served and sacrificed for our freedoms — clearly deserve a fair shot at what is at the heart of the American dream, a good job with a good company. Yet the unemployment statistic for Veterans with severe disabilities is a startling 85 percent . How can we work together to change this picture and to turn this grim statistic around? How can we bring the collective power of the public and private sectors together to improve the quality of paralyzed Veterans’ lives while also improving business’ bottom line? At Paralyzed Veterans of America ( www.pva.org ), we decided to meet this challenge head on — helping those who wore the uniform and were seriously injured get good jobs and careers. We invested in a vocational rehabilitation program, designed to empower Veterans with disabilities with the services and tools they need to reintegrate into the job market — while matching them with businesses and organizations with career positions. The program — with offices in Richmond, VA; Minneapolis, MN; San Antonio, TX; Long Beach, CA, Boston, MA and Augusta, GA — was established through an innovative public-private partnership between Paralyzed Veterans of America, businesses and the U.S. Department of Veterans Affairs (VA). We have helped hundreds of Veterans with disabilities through this program and have developed working relationships with more than 300 employers. There are three elements that work to make our jobs and careers program a success: connecting with Veterans, connecting with businesses and changing perceptions. The program receives clients in a number of ways, from visiting newly injured patients to word of mouth. But the most important thing is that the program proactively reaches out to the Veterans, often meeting them early in the rehabilitation process, engaging patients, their families and outpatients alike and publicizing the program at events and in the media. With our offices located in VA spinal cord injury (SCI) centers, we maximize vocational rehabilitation exposure to the SCI Veterans and service providers. Our voc rehab counselors network with Chambers of Commerce, community organizations (such as Rotary), job fairs and Veterans employment coordinators. They attend meetings and reach out to local and national employers to develop a network of business leaders who want to hire America’s Veterans. For Veterans with disabilities, career opportunities can change their expectations of what comes next for them. With encouragement and help, they feel empowered to take the rights steps to finding a good job and fulfilling career. For businesses, Veterans make great employees. They are disciplined, focused, reliable, hard working, team players and much more. In addition to working with Veterans, our voc rehab team spend time educating employers on working with people with disabilities. We complete a work assessment of the position to ensure we provide a good fit for the employer. We also provide information on tax and other incentives that vary by state for hiring people with disabilities. Plus, the program is recognized as an approved “employer network” (EN) by the Social Security Administration. The truth is, hiring more Veterans with disabilities is a win, win for our country. Those who served secure good careers; employers get great employees; and, in turn, our economy becomes stronger. It’s a strategy that helps empower America’s best with everything they need to live full, self-sufficient and productive lives. It’s a strategy that’s good for business and great for our nation. Employers: America needs you to hire more paralyzed and disabled Veterans! Bill Lawson of Woodward, Oklahoma was elected National President of Paralyzed Veterans of America at its 64th Annual Convention in August 2010. He is a staunch advocate for veterans and people with disabilities. This story is part of Military Families Week, an effort by HuffPost and AOL to put a spotlight on issues affecting America’s families who serve. Find more at jobs.aol.com/militaryfamilies and aol.com .

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L. Randall Wray: Budgetary Impasse: Is There an Alternative to Hoovernomics?

April 7, 2011

I don’t know if I can stomach much more of the posturing in Washington. We know it is all about politics. And Congressman Ryan has yet again said that budget cutting is about “morality”, not economics. The possibility that a sovereign government might be shut-down this weekend because its elected representatives will not extend a self-imposed debt limit just boggles the mind. I’m so fed up I really cannot write about that nonsense any more. Yet, the insanity has seeped outside the beltway. Even economists — who should know better — are weighing-in in favor of Washington’s budget-cutting. And not just any economists — even those with Bank of Sweden-awarded “Nobels” (mind you, not real Nobel prizes) and assorted other distinctions have come to the support of the craziest Tea Party ideas. Cutting government spending is good for growth! The fiscal stimulus package cost us jobs! Worker pensions caused the fiscal shortfall facing states! Keynes and Roosevelt are responsible for all our current problems! Time to bring back Hoovernomics! For example, in a Wall Street Journal article this week three Hoover Institute economists (Gary Becker, George Schultz and John Taylor) endorsed Republican efforts to make large federal government budget cuts. I will not address all the arguments made in defense of a “Hooverian” approach to economics. Instead I want to focus on the two main points made. These are arguments that any student of Econ 101 from 1950 up to the present day would have been able to destroy with both argument and evidence. Here are their arguments: When private investment is high, unemployment is low. In 2006, investment–business fixed investment plus residential investment–as a share of GDP was high, at 17%, and unemployment was low, at 5%. By 2010 private investment as a share of GDP was down to 12%, and unemployment was up to more than 9%. In the year 2000, investment as a share of GDP was 17% while unemployment averaged around 4%. This is a regular pattern. In contrast, higher government spending is not associated with lower unemployment. For example, when government purchases of goods and services came down as a share of GDP in the 1990s, unemployment didn’t rise. In fact it fell, and the higher level of government purchases as a share of GDP since 2000 has clearly not been associated with lower unemployment. They then supply a graph showing investment and government spending as a share of GDP to demonstrate these two points. Based on that data, these Hooverians argue that the solution is to cut federal spending and then to hold its growth rate below that of GDP. This will allow the share of government spending to fall — while economic growth will let tax revenues rise a bit faster so that the budget will move toward balance. (Indeed, tax revenue does tend to grow much faster than GDP in a boom — increasing as a percent of GDP — which is how we got the Clinton-era budget surpluses.) By framing their argument in terms of ratios to GDP, the authors provide a misleading characterization of cause and effect. It is true that high investment spending tends to increase GDP while lowering unemployment — that is the Keynesian “multiplier” at work. High growth of GDP, in turn, lowers the ratio of government spending to GDP so that we will observe a correlation between falling unemployment and a falling government share of GDP — but that is a correlation of no causal significance. When an investment boom collapses — as it did in 2006-2007 — GDP growth then falls and the government share of a smaller GDP will rise. Our Hooverians interpret that as “proof” that a rising government share does not help to fight unemployment. In fact, however, relatively stable government spending over a cycle helps to cushion a private sector “bust”. While it is hard to prove the counterfactual — how bad would things have been without sustained government spending? — it is hard to believe their argument that a loss of 8% of GDP due to reduction of private spending would not have led to a much deeper recession (or depression) without the stabilizing force of our government spending. Simply arguing that we did not get recovery in spite of the Obama stimulus ($800 billion over two years, or well under half the loss of private sector spending) will not do — it does not tell us how high unemployment would have gone in the absence of stimulus. Let us take a look at the components of GDP over the past two decades. Recall from your Econ 101 course that the aggregate measure of a nation’s output of goods and services (GDP) is equal to the sum of consumption, private investment, government purchases, and net exports (for the US that is of course negative). We can further divide investment into residential (housing) and nonresidential (investment by firms). Finally, we can divide government spending between federal government and state and local government. The following chart graphs the domestic components of GDP (net imports are left out), indexing each component to 100 in 1990. (This makes the scale easier to show in the graph, and simplifies comparison of growth by component. For example, if consumption spending doubles between 1990 and 2000, its index increases from 100 to 200.) What we see in this graph is that the slowest growing component over the two decades was federal government spending — it actually did not grow much until the term of President George W. Bush. (A substantial portion of federal government growth since 2000 can be attributed to our multiple wars, as well as to domestic spending on security in the aftermath of 9-11.) By 2010, federal government spending was just over 2.3 times bigger (in nominal terms) than its spending in 1990. This graph certainly does not appear to show that federal government spending has been growing so fast that it is “crowding out” private spending on investment. Indeed, it was only after President Bush’s spending increases for foreign wars and domestic security that we see obvious outsized booms in residential and nonresidential investment. There is no evidence that government purchases crowded out private investment spending. Private consumption as well as state and local government spending grew steadily, increasing by about 267% before the deep recession led to some retrenchment. Note that the fiscal crisis now facing cities and states will lead to continuing cutbacks in state and local government spending–the “perfect fiscal storm” I wrote about last time. And while consumption appears to be recovering by 2010, the jury is still out. Still, the overriding picture one gets is that consumption as well as state and local government spending have been growing relatively steadily, and at a pace considerably faster than growth of federal government spending. By contrast, residential investment boomed in the real estate bubble, growing 350% by 2005. It then collapsed so that it stood at an index of just 150 in 2010 (fifty percent higher than in 1990). Nonresidential investment shows a clear cyclical nature, and it too collapsed in the aftermath of the global financial collapse. Viewed in this light, it is not at all surprising that when total investment (residential plus nonresidential) is growing rapidly, unemployment tends to fall; but when investment spending collapses we lose jobs at a stupendous pace. In a small government economy, it is investment that dominates, through the Keynesian multiplier: when firms and households are optimistic, we get residential and nonresidential investment, growth, and jobs; when they are pessimistic we get recession and unemployment. This has long been the concern of Keynesian economists: investment by its very nature is highly cyclical, subject to what J.M. Keynes called “whirlwinds of optimism and pessimism”. That is not all bad. J. Schumpeter referred to the “creative destruction” that makes capitalism dynamic — waves of innovation generate new investment, wiping out firms that get left behind. But if an entire economy is whipped about by unstable investment, we oscillate between the extremes of boom and bust. That is why we need some spending that is more stable — better yet, we need a source of spending that can act in a countercyclical manner to offset the swings of investment. And that is precisely what we created in the aftermath of the Great Depression. First, we grew the federal government — from about 3% of GDP in 1929 to above 20% after WWII. As Hyman Minsky used to say, government needs to be at least as big as investment to ensure it can offset swings of investment spending. As the chart above shows, federal government spending is not subject to the wild swings that afflict investment, so it helps to stabilize GDP and jobs–if it is big enough. Second, we put in place a variety of federal government programs that help to stabilize household consumption (unemployment benefits, Social Security retirement, and “welfare” for households, firms, and farms). That is, again, reflected in the chart above–even when the financial sector crashed and unemployment exploded, consumption dipped only slightly, thanks in large part to government “transfer” payments like unemployment benefits. Note that transfer payments are not explicitly included in the chart above. Rather, payments like unemployment benefits and Social Security show up in consumption — helping to stabilize it over the course of the cycle. Our modern Hooverians would like to return to the “good old days” of President Hoover, when the government was smaller and both unwilling and unable to offset the swings of private investment spending. Back then, when investment collapsed unemployment did not go to 9 or 10 percent, it went all the way to 25 percent. When people lost their jobs, there was no “welfare” to fall back on. Hence, consumption would collapse — feeding through to lost retail sales, and on to farm products, and thence throughout every corner of the economy. That is why GDP fell in half, and why the Great Depression was so “great”. Government was far too small to stabilize spending and incomes. Sure, we got the New Deal programs that helped a bit. Unfortunately, President Roosevelt lost his nerve in 1936 in the face of budget deficits. He raised taxes and constrained spending in an attempt to reduce the deficit. In fact, the following crash in 1937 was the sharpest in US economic history — even worse than the 1929 crash. The New Deal programs, by themselves, would never have generated recovery, because they were too small–just like the Obama stimulus. Instead it was WWII that ramped up government, increased budget deficits to 25%, and increased production to the full employment level. The rest, as they say, is history. Or, at least it was. Until modern Hooverians decided to return to the completely discredited economics of the distant past. Hoovernomics would turn back the clock to ring in another Great Depression with the same old pre-Keynesian ideas that failed us in the 1930s. As I have been arguing for years, we actually have it much better than the Keynesian-New Dealers of the 1930s had: we gave up gold and fixed exchange rates. We adopted a sovereign currency. Our government faces no financial constraints. Except those that are self-imposed by inside-the-Beltway thinking. Cross-posted from Benzinga . A shorter version of this was posted earlier at New Economic Perspectives from Kansas City. I thank James Felkerson for producing the graph. L. Randall Wray is a Professor of Economics, University of Missouri–Kansas City. A student of Hyman Minsky, his research focuses on monetary and fiscal policy as well as unemployment and job creation. He writes a weekly column for Benzinga every Tuesday. He also blogs at New Economic Perspectives, and is a BrainTruster at New Deal 2.0. He is a senior scholar at the Levy Economics Institute, and has been a visiting professor at the University of Rome (La Sapienza), UNAM (Mexico City), University of Paris (South), and the University of Bologna (Italy).

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Social Security Stopping Mailed Earning Statements

April 7, 2011

WASHINGTON — Those yearly statements that Social Security mails out – here’s what you’d get if you retired at 62, at 66, at 70 – will soon stop arriving in workers’ mailboxes. It’s an effort to save money and steer more people to the agency’s website. The government is working to provide the statements online by the end of the year, if it can resolve security issues, Social Security Commissioner Michael Astrue said. If that fails, the agency will resume the paper statements, which cost $70 million a year to mail, he said. “We’ll provide it, we expect, one way or another, before the end of the calendar year,” Astrue told The Associated Press. “We’re just right now trying to figure out the most cost-effective and convenient way to provide that to the American public.” The statements, mailed to 150 million people each year, project future benefit payments, helping workers plan for retirement. The decision to suspend the mailings was unrelated to the talk of a possible partial government shutdown. It was, however, related to the agency’s operating budget, which has essentially been frozen at 2010 levels – minus about $350 million in economic stimulus money the agency had been using to handle claims. Advocates for older Americans say they are sympathetic about the agency’s budget problems, but several said an online option is insufficient, especially for people who may not have computer skills or access to computers. “As far as the information being available online, that’s not going to help a lot of people we work with,” said Max Richtman, executive vice president of the National Committee to Preserve Social Security and Medicare. “This was a concrete piece of paper, a document that workers would receive that would give them confidence in the program,” Richtman said. “Otherwise, they hear a lot of the debate in Washington. It’s going to be there; it’s not going to be there.” Claims for retirement and disability benefits are up significantly since the nation’s economy soured in 2008. About 2.7 million people applied for retirement benefits last year, a 17 percent increase from 2008, according to agency statistics. About 3.2 million people applied for disability benefits last year, a 23 percent increase. Since the 1980s, Social Security statements have been mailed each year to workers older than 25. They include a history of taxable earnings for each year – so people can check for mistakes – as well as the total amount of Social Security and Medicare taxes paid over the lifetime of the worker. The statements provide estimates of monthly benefits, based on current earnings and when a worker plans to retire. Workers can claim early retirement benefits starting at age 62. Full benefits are available at age 66, a threshold that is gradually increasing to 67 for people born in 1960 or later. The statements are mailed throughout the year, so many people have already received them this year. Tens of millions have not. The agency does offer a benefits estimator on its website that Astrue said can be even more helpful than the annual Social Security statements. Workers can enter their Social Security numbers on the website and get estimates of future benefits, depending on when they plan to retire. “You can go online and you can get a very accurate estimate of your likely retirement benefits,” Astrue said. Press. “You can run scenarios.” The website, however, does not provide the detailed earnings and payroll tax history that workers had been receiving in the mail each year. Mary Johnson, a policy analyst at The Senior Citizens League, said the detailed paper statements help workers ensure they are getting credit for their proper earnings each year. “When we get these we realize just how modest our benefit will be, and the need for savings, and to work as long as we are able to,” Johnson said in an email. Ending the statements is part of a trend in government to conduct more of its business electronically. Social Security already mails out few paper checks. About 88 percent of beneficiaries have their payments deposited directly into bank accounts. Social Security has been beefing up its website in recent years, offering more services and information online as millions of computer-savvy baby boomers reach retirement age. The agency launched a new public campaign this week featuring two celebrities that baby boomers will find familiar: actors Patty Duke and George Takei. Takei starred in the original “Star Trek” TV show, and the campaign features ads playing on a “Star Trek” theme, with Duke and Takei emphasizing how easy it is to apply for benefits online. About 41 percent of applications for retirement benefits come in online, Astrue said. About 44 percent of Medicare applications are done online. In all, the agency’s website attracts about 11 million visitors each month. ___ Online: Social Security: www.ssa.gov Benefits estimator: http://www.ssa.gov/estimator/

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Obama: Government Shutdown Will Delay Pay To Troops

April 6, 2011

WASHINGTON — The Obama administration warned Wednesday that a federal shutdown would undermine the economic recovery, delay pay to U.S. troops fighting in three wars, slow the processing of tax returns and limit small business loans and government-backed mortgages during peak home buying season. ( SCROLL DOWN FOR UPDATES ) The dire message, delivered two days before the federal government’s current spending authority expires, appeared aimed at jolting congressional Republicans into a budget compromise. Billions of dollars apart, congressional negotiators were working to strike a deal by Friday to avert a shutdown by setting spending limits through the end of September. The last such shutdown took place 15 years ago and lasted 21 days. President Barack Obama telephoned House Speaker John Boehner Wednesday, and Boehner’s office said the speaker told Obama he was hopeful a deal could be reached. As the talks continued, the White House sought to put the prospect of a shutdown in terms people would care about, warning even that the beloved Cherry Blossom parade in the nation’s capital would be wiped out. The Smithsonian Institution and national parks around the country would also be closed. A shutdown would come at an especially busy time for the Smithsonian. The Cherry Blossom Festival, which concludes this weekend, draws many tourists to an area near the museums. The Smithsonian counts about 3 million visits each April and has already sold 23,000 IMAX movie and lunch combos to school groups for the month. Under long-standing federal rules, agencies would not be affected that provide for U.S. national security, dispense most types of federal benefit payments, offer inpatient medical care or outpatient emergency care, ensure the safe use of food and drugs, manage air traffic, protect and monitor borders and coastlines, guard prisoners, conduct criminal investigations and law enforcement, oversee power distribution and oversee banks. Mail deliveries will continue in the event of a shutdown. U.S. postal operations are not subsidized by tax dollars. According to the shutdown scenario described by the administration, the government would have to significantly cut staffing across the executive branch, including workers at the White House and civilian employees at the Defense Department; close to 800,000 workers would be affected. Congress and the federal court system will also be subject to a shutdown. At the Pentagon, defense officials were finalizing plans that would lay out how the department would deal with a shutdown. But they already have acknowledged that U.S. military troops – including those in war zones – would receive one-week’s pay instead of two in their next paycheck if the government closes. Military personnel at home and abroad would continue to earn pay, but they won’t get paychecks until there is a budget agreement and government operations resume. Col. Dave Lapan, a Pentagon spokesman, said that the Pentagon will be open on Monday and will be staffed. He said decisions on which Defense Department employees must report to work will depend on their jobs, rather than where they are based. Key national security responsibilities, including operations in Afghanistan, Iraq and Libya and earthquake assistance to Japan would not be interrupted by a shutdown, the Pentagon said. The CIA also won’t be closing, though it will be drawing down some non-essential personnel, to be in compliance with federal law, according to a senior intelligence official, speaking on condition of anonymity to discuss matters of intelligence. Officials familiar with the shutdown say essential counterterrorism functions in other parts of the intelligence community will continue, like monitoring of the terrorist watch lists, and essential intelligence collection and analysis. At the Internal Revenue Service, the tax filing deadline remains April 18 – delayed three days because of a local holiday in Washington. Tax audits, however, will be suspended if there is a shutdown. The IRS won’t process paper returns during a shutdown. Those expecting a refund should file their returns electronically and ask that the money be deposited directly into their bank accounts. Tax payments are welcome, though it is still unclear whether help lines for taxpayers will be staffed. Social Security payments will continue to be delivered, and applications for benefits will continue to be processed. But some services will be limited, Social Security Commissioner Michael Astrue said. “The checks will continue to go out. The problem will be on an extended CR, it will be increasingly difficult to get changes in address, changes in status, and those types of things done,” Astrue said. Astrue said Social Security headquarters and regional offices will be closed. Some limited services will still be available at field offices, but the details are still being worked out, he said. Medicare would still pay medical claims for its 48 million recipients, who are mainly seniors but also several million younger people who are permanently disabled or have kidney failure. Payments to doctors, hospitals and other service providers could be delayed, however, should a shutdown continue for several months. At the National Institutes of Health, groundbreaking medical research would experience a disruption. Patients already being treated at the NIH’s famed hospital in Bethesda, Md., would continue to get that care, but new patients could not be admitted. Likewise, no new studies of drugs or other treatments could begin. The Federal Housing Administration, which guarantees about 30 percent of home mortgages, would stop guaranteeing loans. The issuance of government backed loans to small businesses would be suspended, according to the White House. The Obama administration said the impact on the housing market would be more severe than in 1995, the last time there was a government shutdown. The Federal Housing Administration accounts for 30 percent of the mortgage market, nearly three times the amount 16 years ago. The nation’s 15,700 air traffic controllers would keep working, as would many of the Federal Aviation Administration’s 6,100 technicians who install and maintain the equipment for the nation’s air traffic control system. ___ Associated Press writers Lolita Baldor, Anne Gearan, Joan Lowy, Lauran Neergaard, Stephen Ohlemacher, Ricardo Alonso-Zaldivar, Brett Zongker and Marcia Dunn in Cape Canaveral contributed to this report.

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One In Four Working Baby Boomers Say They’ll Never Retire, Survey Finds

April 5, 2011

WASHINGTON — Baby boomers are starting to retire, but many are agonizing about their finances and believe they’ll need to work longer than they had planned, a new poll finds. The 77 million-strong generation born between 1946 and 1964 has clung tenaciously to its youth. Now, boomers are getting nervous about retirement. Only 11 percent say they are strongly convinced they will be able to live in comfort. A total of 55 percent said they were either somewhat or very certain they could retire with financial security. But another 44 percent express little or no faith they’ll have enough money when their careers end. Further underscoring the financial squeeze, 1 in 4 boomers still working say they’ll never retire. That’s about the same number as those who say they have no retirement savings. The Associated Press-LifeGoesStrong.com poll comes as politicians face growing pressure to curb record federal deficits, and budget hawks of both parties have expressed a willingness to scale back Social Security, the government’s biggest program. The survey suggests how politically risky that would be: 64 percent of boomers see Social Security as the keystone of their retirement earnings, far outpacing pensions, investments and other income. The survey also highlights the particular retirement challenge facing boomers, who are contemplating exiting the work force just as the worst economy in seven decades left them coping with high jobless rates, tattered home values and painfully low interest rates that stunt the growth of savings. “I have six kids,” said Gary Marshalek, 62, of South Abington Township, Pa., who services drilling equipment and says he has repeatedly refinanced his home and dipped into his pension to pay for his children’s college. His inability to afford retirement “sounds like America at the moment,” Marshalek said. “Sounds like the normal instead of the abnormal.” Marshalek was among the 25 percent in the poll who say they plan to never retire. People who are unmarried, earn under $50,000 a year, or say they did a poor job of financial planning are disproportionately represented among that group. Overall, nearly 6 in 10 baby boomers say their workplace retirement plans, personal investments or real estate lost value during the economic crisis of the past three years. Of this group, 42 percent say they’ll have to delay retirement because their nest eggs shrank. Though the first boomers are turning 65 this year, the poll finds that 28 percent already consider themselves retired. Of those still working, nearly half want to retire by age 65 and about another quarter envision retiring between 66 and 70. Two-thirds of those still on the job say they will keep working after they retire, a plan shared about evenly across sex, marital status and education lines, the survey finds. That contrasts with the latest Social Security Administration data on what older people are actually doing: Among those age 65-74, less than half earned income from a job in 2008. “I’m going to keep working after I retire, if nothing else for the health care,” said Nadine Krieger, 58, a food plant worker from East Berlin, Pa. Citing $50,000 in retirement savings that she says won’t go far, she added, “We probably could have saved more, but you can’t when you have a couple of kids in the house.” About 6 in 10 married boomers expect a comfortable retirement, compared with just under half of the unmarried. Midwesterners are most likely to express confidence in their finances. “I’m a good planner,” said Robert Rivers, 63, a retired New York State employee in Ravena, N.Y. He still works seasonally for the federal government and collects a modest military pension. A recreational pilot, he says he has scaled back his lifestyle by flying and driving less. “I’m spending money I have, not spending it and trying to repay it,” he said. Among boomers like Rivers who plan to continue working in retirement, 35 percent say they’ll do so to make ends meet. Slightly fewer cite a desire to earn money for extras or to simply stay busy. Excluding their homes, 24 percent of boomers say they have no retirement savings. Those with nothing include about 4 in 10 who are non-white, are unmarried or didn’t finish college. At the other end, about 1 in 10 say they have banked at least $500,000. Those who have saved at least something typically have squirreled away $100,000, with about half putting away more than that and half less. Despite the worries and dearth of savings cited by many, only about a third of boomers say it’s likely that they’ll have to make do with a more modest lifestyle once they retire. Only about 1 in 4 expect to struggle just to pay their expenses. Financial experts say such expectations are often not realistic. “Most families have to make a significant adjustment from their working lives to their retirement years,” said financial planner Sheryl Garrett, who runs the Garrett Planning Network. Ads that show silver-haired couples strolling off into the sunset do not represent the typical retirement, she added. The AP-LifeGoesStrong.com poll was conducted from March 4-13 by Knowledge Networks of Menlo Park, Calif., and involved online interviews with 1,160 baby boomers born between 1946 and 1964. The margin of sampling error is plus or minus 3.5 percentage points. Knowledge Networks used traditional telephone and mail sampling methods to randomly recruit respondents. People selected who had no Internet access were given it for free. ___ AP Polling Director Trevor Tompson, Deputy Director of Polling Jennifer Agiesta and AP News Survey Specialist Dennis Junius contributed to this report. ___ Online: Array

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Mike Lux: Wall Street Banks: Making Enemies Everywhere

March 29, 2011

In a post a few days back , I observed that the big Wall Street banks were in for a fall because they had become so arrogant in their power and wealth. One example of this is on the swipe fee issue, where their over-the-top market manipulation and hyper-aggressive political tactics are ticking off not just old progressive populists like me, but a lot of the rest of the business community. Small retailers, grocers, restaurant owners, gas station owners, and cabbies have become incensed at the way these banks and their credit card companies charge exorbitant swipe fees and will not negotiate on the matter. I have started working with retail business groups on this issue simply because I’d much rather see these Main Street business folks get more of the $48 billion going out the door in swipe fees than the big banks that control more than 80 percent of the market. This issue is likely to come up for a vote within days in the Senate, so raise some hell. Here’s a new Web ad an organization I chair, American Family Voices , just put up that does a great job of talking about this issue from the small business point of view. Check it out : Over the weekend, I wrote about an ad on the Clean Air Act that AFV had just put up. Yesterday, I wrote about the Social Security and Medicare issue . While these are very different issues in one way, they all have one thing in common: They are about attacks on the American middle class. Wealthy special interests, along with their allies in Congress and the right-wing flacks like Glenn Beck that defend them (have you seen Beck’s high-pitched whining over the last week about the outrageous idea that people might actually want to take to the streets to challenge Wall Street on foreclosures?), want the ability to run roughshod over the American middle class — even if it means poisoning your kids, telling your Grandma she’s just going to have to get by on less, or taking money out of the pockets of consumers and struggling small businesses on every credit/debit card transaction. Washington is dominated by these behemoths, so even when standing up for policies that so obviously benefit the vast majority of middle-class Americans, it is difficult to fight them. These Wall Street banks are the worst of the special interests. It is not enough to have crashed the entire world economy with their speculative bubbles and financial fraud; it is not enough that in their determination to continue to manipulate their books and inflate their assets they are foreclosing on millions of homeowners rather than writing down their mortgages; it is not enough that they fight tooth and nail against every tiny little bit of oversight that sensible folks want to place on them; it is not enough that the six biggest banks already own assets equaling 64 percent of our nation’s GDP. None of that wealth, power, and hubris is enough for them. They also want to gouge every mom-and-pop businessperson who wants to let customers pay for things with a credit or debit card. The first step in restoring the American Dream is to take these wealthy, arrogant Wall Street guys and other wealthy special interests out of the temple of our government . Mike Lux is the President of American Family Voices.

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Rick Santorum Blames Abortion For Social Security Woes

March 29, 2011

CONCORD, N.H. — In his latest trip to New Hampshire, Republican Rick Santorum says the Social Security system would be in much better shape if there were fewer abortions. The former Pennsylvania senator and potential presidential candidate was asked about Social Security during an interview on WESZ-AM radio in Laconia on Tuesday morning. He says the system has design flaws, but the reason it is in big trouble is that there aren’t enough workers to support retirees. He blamed that on what he called the nation’s abortion culture. He says that culture, coupled with policies that do not support families, deny America what it needs – more people. Santorum has been a frequent visitor to New Hampshire, which holds the earliest presidential primary.

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Dean Baker: The Deficit Hawks Target Nurses and Firefighters

March 29, 2011

Many people might think that the country’s problems stem from the fact that too much money has been going to the very rich. Over the last three decades, the richest one percent of the population has increased its share of national income by almost 10 percentage points (Excel spreadsheet). This comes to $1.5 trillion a year, or as the deficit hawks are fond of saying, $90 trillion over the next 75 years. To put this in context, the size of this upward redistribution to the richest one percent over the last three decades is roughly large enough to double the income of all the households in the bottom half of the income distribution. The upward redistribution amounts to an average of more than 1.2 million dollars a year for each of the families in the richest one percent of the population. And this upward redistribution was brought about by deliberate policy. We pursued a trade and high dollar policy that was intended to put downward pressure on the wages of manufacturing workers. The Federal Reserve Board deliberately kept unemployment higher than necessary in order to weaken workers bargaining power. We extended patent monopolies to allow drug companies to jack up prices, raking in hundreds of billions a year. And, we gave the Wall Street banks the benefit of “too big to fail” status so they can borrow with a government subsidy. These policies and others fueled this enormous upward redistribution. But the deficit hawks don’t want us talking about any of these things. The deficit hawks insist that we have to cut Social Security and Medicare benefits now! They are busy hyperventilating over the enormous deficits, the result of the economic collapse, which was in turn the result of their economic mismanagement. (Wait, we are not supposed to talk about that.) And the deficit hawks have clear ideas on how they want to deal with the costs of Social Security and Medicare over coming decades. And, it does not involve taking money from the tiny group of wealthy people who have profited enormously at the expense of the middle class over the last three decades? Nor are the deficit hawks interested in reining in the drug companies, the insurance companies or the doctors. The bloated prices and exorbitant pay of these actors is the main reason that U.S. health care costs are so wildly out of line with health care costs in other wealthy countries. But deficit hawks don’t get paid to go after rich people or the health care industry. Deficit hawks get paid to go after the benefits of middle-income people. This is why we were treated to a Washington Post column by finance industry executive Robert Pozen telling liberals that they should support his plan for raising the retirement age and cutting Social Security benefits for higher-income earners. When Pozen talks about cutting benefits for higher-income earners he is not thinking of people like Peter Peterson or Robert Rubin. He has his gun sights on people earning $40,000 to $80,000 a year. In other words, Pozen wants to cut benefits for workers like schoolteachers, firefighters and nurses. These are workers that definitely enjoy somewhat higher pay and a higher standard of living than most of the workforce, but only in Washington deficit hawks’ circles are these people living lavish lifestyles that need to be cut back. These workers are quite explicitly the target of the Washington deficit hawk gang. The deficit hawk crew will even shed some crocodile tears for the poor who earn near the minimum wage and live near the poverty level. They would raise their benefits if not for those greedy plumbers and mechanics who insist on getting the Social Security benefits that they paid for. In the next few weeks we will be treated to an endless parade of budget experts who will be yapping about “entitlements” and insisting that middle-income workers are living too lavishly. While all these experts have really impressive credentials it is important to remember that these credentials did not prevent this highly paid crew from overlooking the largest asset bubble in the history of the world. If this group had paid a tenth as much attention to the housing bubble as they are now paying to the deficit projections, we would not be sitting around with 25 million who are unemployed, under-employed or out of the workforce altogether. The deficit hawks are very good when it comes to whining about the deficit and demanding sacrifices from middle-class workers. They just aren’t very good when it comes to understanding the economy.

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Jane White: The Social Security Fix: End Corporate Welfare

March 28, 2011

With momentum building to rein in record budget deficits, Democrats are sharply divided over whether to tackle Social Security by raising the retirement age and/or raising the income ceiling that is taxed from the first $106,800 of wages to the first $170,000. Senator Majority Leader Harry Reid and Sen. Chuck Schumer are lining up against such measures and Reid scheduled a rally on Capitol Hill on Monday to show support for Social Security and opposition to cuts in benefits. Bur why are the only options on the table to cut or not to cut what is already a meager wage replacement scheme? Moreover, we need to acknowledge that our personal and federal financial deficits are more a function of corporate tax dodges than reckless spending. How about actually taxing the companies that got rid of pensions as a way of bankrolling more generous Social Security benefits, along with forcing them to turn 401(k) plans into real pensions? Let’s face it, while the working class is struggling to make ends meet and unemployment remains stubbornly high, the corporate class is doing just fine. U.S. corporate profits hit an all-time high at the end of 2010, according to data from the federal Bureau of Economic Analysis. Corporations reported an annualized $1.68 trillion in profit in the fourth quarter, exceeding the previous record of $1.65 trillion in the third quarter of 2006. Not only are companies reaping profits but they are laughing all the way to the bank when it comes to overseas tax breaks. Thanks to an arm-twisting in 2009 by the CEOs of IBM, Caterpillar, Cisco and others, BusinessWeek reports that the Obama administration backed down from its proposal to raise some $160 billion by hoisting taxes on U.S. companies overseas profits. As a result of various overseas tax dodges, many multinationals pay less than the statutory rate of 35%, according to The Analyst’s Accounting Observer; Big Pharma paid around 23% in 2008 and info tech companies paid about 26%. Between tax breaks, tax cuts and the fact that hedge fund managers can pay capital gains tax instead of income tax, we’ve created a corporate welfare state. The corporate share of the nation’s receipts has shrunk from 30% of all federal revenue in the mid-1950s to 6.6% in 2009. Since federal revenue in 2009 was $2.1 trillion, if the corporate share had stayed at 30%, that would have brought in $630 billion in revenues in that year alone. I apologize to readers who may be tired of reading my rants about the retirement crisis, but this is the biggest economic disaster that nobody’s talking about except for a recent article in the Wall Street Journal . If 85% of Boomers can’t afford to retire, college graduates won’t be able to find jobs. What’s more, If these Boomers have to transform themselves from spenders into savers, that shift is going to take a wrecking ball to the 70% of U.S. economic growth that’s driven by consumer spending. As I said in a previous post, even if Social Security were solvent, it’s downright stingy. The only workers for whom 70% of wages will be replaced by Social Security are those making minimum wage at age 65; since benefits average $1,067 a month. Given that the median wage for that age cohort is around $65,000, only a tiny minority of Americans can rely on Social Security alone. We need to force companies to bankroll a more secure retirement, whether it’s footing more of the bill for Social Security and/or making 401(k) plans into actual pensions by contributing the equivalent of 9% of pay to their accounts, as Australian employers are required to do. What’s tragic about the current stand-off between the Tea Party anti-tax zealots and the Democrats is that as recently as the mid-1990s there was an actual consensus among liberals and conservatives, including the antigovernment Americans for Tax Reform and Ralph Nader’s liberal Public Interest Research Group, that strove to curtail subsidies and tax breaks for business. Sen. John McCain went so far as to call for an independent “corporate welfare commission,” declaring that “Congress has not got the political guts to address this issue of corporate pork.” Unfortunately, I couldn’t find any updates showing that this commission was ever created, more evidence that this partisan divide is turning this country into a shipwreck.

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Republicans Appear Poised To Take On Entitlements

March 27, 2011

CORAL SPRINGS, Fla. — If there’s any place where tea partiers in Congress might hesitate to call for cuts in Social Security and Medicare to shrink the federal debt, Florida’s retirement havens should top the list. Even here, however, Republican lawmakers are racing toward a spending showdown with Democrats exhibiting little nervousness about deep cuts, including those that eventually would hit benefit programs long left alone by politicians. In fact, many GOP freshmen seem bolder than ever. It’s Democrats, especially in the Senate, who are trying to figure out how to handle the popular but costly retirement programs. Congress, meanwhile, is rapidly nearing critical decisions on the budget and the nation’s debt ceiling. In southeast Florida last week, first-term GOP Rep. Allen West, a tea party favorite, called for changes that some might consider radical: abolish the Internal Revenue Service and federal income tax; retain tax cuts for billionaires so they won’t shut down their charities; stop extending unemployment benefits that “reward bad behavior” by discouraging people from seeking new jobs. As for entitlements, West told a friendly town hall gathering in Coral Springs, if Social Security, Medicare and Medicaid “are left on autopilot, if we don’t institute some type of reform, they’ll subsume our entire GDP” by 2040 or 2050. GDP, or gross domestic product, measures the value of all goods and services produced in the United States. Social Security, the largest federal program, mainly benefits retirees. Medicare provides health coverage for older people. Medicaid helps those with low incomes. Combined, the three consume about 40 percent of the budget. Their costs are growing rapidly. Social Security and Medicare benefits now exceed the payroll taxes that fund them. West, who’s likely to draw serious Democratic opposition next year, showed scant interest in edging toward the center on anything. He didn’t take issue with the man who said congressional Democrats “have joined with the radical Islamists,” or with the woman who said President Barack Obama “certainly doesn’t support Israel.” In Greenville, S.C., a different Republican freshman with tea party ties, Rep. Trey Gowdy, also suggested during last week’s congressional break a paring back of social programs. According to a Greenville News account posted on his website, Gowdy “described a recent school classroom where most children indicated they think it’s the government’s job to provide health care, Social Security and education. ‘We’ve got to do something about the sense of entitlement,’ Gowdy said.” Gowdy’s office later said he thinks Social Security “is a key aspect of a broad effort to fundamentally reform our entitlement system, but any solution must honor our commitment to current retirees.” Indeed, West and many other Republicans say current and soon-to-be retirees should see no benefit cuts. Their calls for changing Medicare and Social Security often lack specifics, and it’s unclear whether the divided Congress will tackle the programs’ long-term problems or postpone action, as has happened many times before on Capitol Hill. West’s desire to slash spending seems to stop at his district’s doorstep. The Coral Springs audience cheered loudly when he said he helped secure a $21 million grant for a new runway at the nearby Fort Lauderdale airport. “Grant money is not pork,” West said. He issued a press release saying the runway project “will generate at least 11,000 jobs” by 2014 and cost $791 million. While West spoke in Coral Springs, several dozen Republicans had wine and hors d’oeuvres in Palm Beach as they awaited a speech by former New York City Mayor Rudy Giuliani. There was ample sympathy in the room for raising the eligibility age for Social Security benefits. Obama’s debt commission recommended gradually increasing the full retirement age, from 67 to 69, over the next 65 years. “No one is going to be hurt by it,” said Steve Stevens, 80, a retired real estate developer. If people, rich or poor, count on Social Security to fund their retirement, he said, “it’s very poor planning.” Obama’s debt commission has recommended gradually increasing the full retirement age, from 67 to 69, over the next 65 years. Cynthia Steele, 51, said anyone making more than $100,000 a year should not receive Social Security benefits, even if it affected her and her friends. In Washington, Democrats are conflicted. Thirty-two Senate Democrats joined 32 Republicans in urging Obama to negotiate a broad-based spending plan that includes changes to Social Security and Medicare. Senate Majority Leader Harry Reid, D-Nev., says he opposes cuts in Social Security benefits. The centrist Democratic group Third Way says the public is ready to embrace gradual changes to entitlement programs and that Republicans are winning the issue so far. “We don’t believe Republicans ‘going too far’ will be their Waterloo,” the group said in a memo. “The party seen as most serious on the issue will win the day.” If Republicans and Democrats cannot agree soon on spending plans for this year and next, the government could face its first partial shutdown since 1996. That prospect worries leaders of both parties, and they are watching to see if last week’s recess hardened of softened lawmakers’ positions. West suggested there is room for compromise, but not much. “I’m not for shutting down the government,” he told the Coral Springs crowd. But he said Obama must lead the budget negotiations, or else. If there is a shutdown, West said, “it’s going to be because the president is not engaged.”

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Millennial Generation Has Its Own AARP To Lobby For Jobs And Deals

March 25, 2011

WASHINGTON — One in six are unemployed, more than any other adult age group. They carry an average of $24,000 in student debt . And one in 10 have been forced to move back in with their parents after school. No doubt about it, these are hard times for young adults. But it takes a leap of faith to start a membership and advocacy group called Our Time as the Millennial generation’s answer to AARP. Launched this week in a Pennsylvania Avenue office down the street from the White House, Our Time seeks to use online organizing to “change corporate practices, create exclusive deals and spark a national conversation.” It wants to “stand up for Americans under 30” while using its bargaining might to get discounts on health insurance and credit card programs. And with a homepage that Friday showed a scruffy dude screaming, “F#%K, I need a job! One in six of us is out of work,” and no annual dues for a generation used to getting everything free online, Our Time is unlikely to be mistaken for the group formerly known as the American Association of Retired Persons. “Our generation has more of an economic reason to engage than anyone,” said il, the group’s 25-year-old president. “We can’t just complain about these things or sit on the sidelines. We need to use our generation’s unique strengths to fix them … This is the civil rights issue for our generation. If you can’t have economic freedom and mobility to become financially independent at an early age, than you are entering society on the wrong foot.” Our Time’s target audience can be summed up by the headline in a recent New York Times op-ed written by a 24-year-old: “Educated, Unemployed and Frustrated.” It is being formed at a time when a growing chorus of commentators — from David Brooks to Fareed Zakaria to Robert Samuelson — are connecting the yawning budget deficit to the nearly 40 percent of the federal budget that goes to Social Security and Medicare. Where, they ask, is the political will to take on those entitlements when, according to a 2009 Brookings Institution report , an elderly person receives $7 in federal aid for every $ 1 that goes to a child. “Everyone’s talking about ‘doing it for the children,’ yet the children are being neglected, or at the very least held hostage for political gain,” Segal said. “We have become cheap talking points for our budget, health care system, tax code and just about every other social quandary.” Segal said his peers worry their generation will be the first economically less well off than their parents’ and doubt the social safety net will be there when it’s their turn to retire. “We want to make sure every generation is willing to put some skin in the game, otherwise we’re just kicking the can down the road,” Segal said. “We’re not here to complain and ask for federal handouts.” Donna Butts of the advocacy group Generations United said Our Time sounds “wonderful,” especially at a time when young people in the Middle East are feeling so empowered. But she worries the group will wind up pitting one generation against another. Millennials aren’t the first to enter the workforce during recessionary times, she notes. “From our perspective,” she said, “it’s not a fight, it’s a family.” Dean Baker, a liberal economist at the Center for Economic and Policy Research, said the group is “founded on a lie” if its creators believe older generations are getting a bigger share of the pie. “It’s obviously wrong-headed,” he said, to blame seniors instead of the rich for taking more than their fair share of the nation’s wealth. Segal said he isn’t interested in sparking a war with his grandparents’ generation or with Baby Boomers. If anything, the early-bird dinner crowd has been an inspiration to a generation that can barely afford anything more elaborate than Chipotle. “Young people don’t have a seat at the table now and that’s because we don’t vote in high enough numbers” like seniors do, Segal said. Indeed, the genesis of Our Time grew out of the 2004 election, when Segal and his friend, Jarrett Moreno, were students at Kenyon College in Gambier, Ohio. They were among hundreds of students who made national headlines when they had to wait 10 hours or more to vote in the presidential election. Segal, who grew up in an affluent suburb on Chicago’s North Shore, went on to found SAVE, the Student Association for Voter Empowerment to help get out the youth vote in the 2008 election. The group eventually grew to more than 10,000 members on 40 college campuses. Young voters turning out in force helped elect Barack Obama president in 2008. Two years later, though, many may have been too busy looking for a job to vote in congressional elections. Segal and D.C. native Jarrett Moreno, a friend from Kenyon, decided there was a need to engage their peers year-round and not just at election time. And that’s where Our Time came in. Neil Howe, a generational expert whose books include “Millennials Rising: The Next Great Generation,” says Our Time has the potential to be “the political and social movement equivalent of Groupon.” He compares today’s 20-somethings to the World War II G.I. generation that made AARP into the powerhouse membership and lobbying group it is today. While today’s seniors lacked Facebook or other social network sites, they were joiners who believed in what Howe calls “collective entitlement.” Just as the generation that came of age in the Great Depression energized the union movement, Howe said Millennials like those who recently marched in Madison, Wis., could lead a revival for organized labor. “They are a strong civic generation with a strong sense of peer cohesion,” Howe said. “They probably will reoccupy the civic void left behind by Generation Xers and Boomers and will create the same sense of solidarity that the G.I. generation, or greatest generation did.” And they will do it in a style very different than the Baby Boomers. Before they began qualifying for Social Security this year, many Boomers didn’t trust anyone over 30 — a credo taken to the extreme in the 1968 cult classic “Wild in the Streets .” The Millennials at Our Time prefer to use humor to dramatize their plight, as in a series of online videos entitled, “Living at Home Sucks.” And Segal said the emphasis is on entrepreneurship: “If you can’t find a job, create your own.” Baker said there is nothing wrong with being entrepreneurial “but they are deluded if think they can all get by running their own businesses,” noting the vast majority of start-ups fail. Whether Our Time will be among the failures remains to be seen. “The economic challenges they face are not overstated,” Howe said. “Their challenge is politically whether they can get other people to see them as having legitimate grievances, that the system owes them something.”

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CBO: Obama Understates Future Budget Deficits By $2.3 Trillion

March 18, 2011

WASHINGTON — A new assessment of President Barack Obama’s budget released Friday says the White House underestimates future budget deficits by more than $2 trillion over the upcoming decade. The estimate from the nonpartisan Congressional Budget Office says that if Obama’s February budget submission is enacted into law it would produce deficits totaling $9.5 trillion over 10 years – an average of almost $1 trillion a year. Obama’s budget saw deficits totaling $7.2 trillion over the same period. The difference is chiefly because CBO has a less optimistic estimate of how much the government will collect in tax revenues, partly because the administration has rosier economic projections. But the agency also rejects the administration’s claims of more than $300 billion of that savings – to pay for preventing a cut in Medicare payments to doctors – because it doesn’t specify where it would come from. Likewise, CBO fails to credit the White House with an additional $328 billion that would come from unspecified “bipartisan financing” to pay for transportation infrastructure projects such as high speed rail lines and road and bridge construction. Friday’s report actually predicts the deficit for the current budget year, which ends Sept. 30, won’t be as bad as the $1.6 trillion predicted by the administration and will instead register $200 billion less. But 10 years from now, CBO sees a $1.2 trillion deficit that’s almost $400 billion above White House projections. The White House’s goal is to reach a point where the budget is balanced except for interest payments on the $14 trillion national debt. Such “primary balance” occurs when the deficit is about 3 percent of the size of the economy, and economists say deficits of that magnitude are generally sustainable. But CBO predicts that the deficit never gets below 4 percent of gross domestic product. That means that by the time 2021 arrives, the portion of the debt held by investors and foreign countries will reach a dangerously high 87 percent. “The President’s budget never reaches ‘primary balance,’ meaning that it fails to clear even the low bar the administration set for itself in justifying its claims of sustainability,” said House Budget Committee Chairman Paul Ryan, R-Wis. White House budget director Jacob Lew said in a blog post that “CBO confirms what we already know: current deficits are unacceptably high and if we stay on our current course and do nothing, the fiscal situation will hurt our recovery and hamstring future growth.” The estimate adds urgency to calls on Capitol Hill for action on runaway deficits that many economists fear – if left unchecked – could trigger a European-style debt crisis that could force draconian measures such as cutting federal benefits for seniors or forcing broad-based tax increases. Just on Friday, 64 senators – 32 in each party – signed a letter to Obama calling on him to take the lead in coming up with a comprehensive deficit reduction plan along the lines of a plan issued last year by his own deficit commission. That plan called for a comprehensive overhaul of the tax code that would trade dozens of expensive tax breaks for lower individual and corporate rates, curb Social Security benefits and clamp down on spending across the budget. “While we may not agree with every aspect of the commission’s recommendations, we believe that its work represents an important foundation to achieve meaningful progress on our debt,” the senators wrote. They said that “with a strong signal of support from you, we believe that we can achieve consensus on these important fiscal issues.” Conversely, the report is a sobering blow to House Republicans charged with developing a budget blueprint that could satisfy its core supporters in the tea party. Republican lawmakers had already acknowledged that they won’t be able to generate a budget that comes to balance by the end of the decade. Friday’s news makes that task even more difficult.

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Mitch McConnell: No Debt Increase Without Health Care, Social Security Cuts

March 11, 2011

WASHINGTON — President Barack Obama and the Senate’s top Republican both declared on Friday they want to take on the huge entitlement programs driving America’s long-term deficits – but their lines of attack differed sharply and that could lead to a showdown over government borrowing. Senate Republican Leader Mitch McConnell warned that GOP senators would not vote to increase the federal debt limit unless Obama agreed to significant long-term budget savings that could include cost curbs for Social Security, Medicare and Medicaid, laying down a high-stakes marker just weeks before the limit is reached. Obama said he also wants to tackle military spending and tax loopholes – issues on which he can expect Republican opposition. The president said at a news conference that he would be ready to dig into the nation’s long-term financial problems after he and lawmakers reach a deal on funding the government through September. Republicans and Democrats have been debating a short-term funding plan for weeks but are still far apart. “Republicans in the Senate will not be voting to raise the debt ceiling unless we do something significant about the debt,” McConnell told The Associated Press. “I don’t think he has to lay out in public exactly what he’s willing to do, but we need to begin serious discussions, and time’s a wasting.” Congress is expected to vote on a three-week stopgap measure next week to buy more time for negotiations on a longer-term budget bill. The House Appropriations Committee Friday afternoon released a measure that contains $6.1 billion in budget savings by rescinding unneeded money from the Census Bureau and other accounts, killing programs proposed for termination by Obama and emptying accounts set aside for lawmakers’ earmarks. The short-term spending plan involves day-to-day operating budgets – not major benefit programs like Medicare, Medicaid and Social Security that are seen by most budget experts as long-term contributors to the nation’s spiraling debt. The three programs will make up more than 40 percent of federal spending next year. If left unchecked, they will grow to more than 60 percent of federal spending by 2035, when baby boomers will be at least 70. “I think it’s very important, when we think about the budget, to understand that our long-term debt and deficits are not caused by us having Head Start teachers in the classroom,” Obama said. “Our long-term debt and deficit are caused primarily by escalating health care costs that we see in Medicare and Medicaid that is putting huge pressure on the overall budget.” He added, “We’ve got to make sure that we’re tackling defense spending, we’re tackling tax expenditures and tax loopholes, that we’re tackling entitlements.” The federal government’s tax revenues are at their lowest level in 60 years, when measured against the size of the economy, largely because of a weak economy and the extension of Bush-era tax cuts approved in December, according to the nonpartisan Congressional Budget Office. Republican leaders have steadfastly opposed moves to bring in additional money by closing tax breaks such as those designed to help businesses. McConnell has been pushing Obama – publicly and privately – to work on a bipartisan plan to rein in the massive benefit programs before they swamp the government. McConnell was purposely vague about he would address them in Friday’s interview. But by threatening to withhold votes to raising the debt ceiling, he gave the issue a new sense of urgency. Democrats cannot increase the debt ceiling without Republican support in both the Senate and House. The Treasury Department estimates the government will hit the $14.3 trillion debt ceiling sometime between April 15 and May 31. The administration has warned Congress that failing to raise the debt limit would lead to an unprecedented default on the national debt. A failure by the government to meet its debt obligations would drive up the government’s borrowing costs and also raise borrowing costs for private U.S. companies and consumers. “Even a very short-term or limited default would have catastrophic economic consequences that would last for decades,” Treasury Secretary Timothy Geithner said in a Jan. 6 letter to Congress. Obama did not address the long-term financial problems of Social Security, Medicare and Medicaid in the 2012 budget proposal he released in February, saying it will take time to create the political environment necessary for Democrats and Republicans to negotiate in good faith on such difficult issues. Many Republicans and some Democrats in Congress say now is the time to act, before credit markets force action by reducing their appetite for Treasury bonds. Rep. Paul Ryan, R-Wis., chairman of the House Budget Committee, said Thursday that House Republicans will address entitlement programs in the 2012 budget plan they will unveil in April. In the Senate, a bipartisan group of three Democrats and three Republicans meet weekly to discuss ways to address all of the nation’s long-term financial problems. “I applaud all of the discussions that are going on in the House and the Senate by well-meaning members,” McConnell said. “But without presidential leadership, nothing will happen. We will not get a result.” ___ Associated Press writer Andrew Taylor contributed to this report.

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Robert Siciliano: Tax Related Identity Theft Scams up 300%

March 10, 2011

Cases of stolen tax returns have surged over the past five years, leaving many identity theft victims struggling to recoup their lost refunds. Approximately 155 million tax forms are filed annually. This provides identity thieves with an opportunity to come out of the woodwork and steal from Americans who are just trying to pay their taxes correctly. A recent Scripps Howard News Service investigation analyzed more than 1.4 million ID theft records from the U.S. Federal Trade Commission from 2005 through early 2010. In it they found that fraud complaints about stolen tax return-related identity theft jumped from 11,010 complaints in 2005 to 33,774 in 2009. That’s nearly 300 percent. Thieves may steal victims’ refunds, trick them into disclosing Social Security or credit card numbers, or even pose as the IRS. Below is more information for those common and lesser-known tax scams to watch out for. Employment Identity Theft Scams : If you ever receive documentation in the mail indicating earned income that you are not aware of, it may mean that someone else has used your Social Security number to gain employment. Account Takeover Scams : If, when filing your tax return, you receive a letter from the IRS saying that you have already filed, it it likely that someone else has filed a fraudulent return on your behalf, in order to steal your refund. Tax Preparer Scams: In an old scam that’s still in play, tax preparers tell clients they must pay back stimulus payments, and then pocket the money. Ads are also placed by scammers posing as accountants to get your returns. Make sure you do research and choose your tax preparer wisely. Late Payment Scam: As people fall behind on their taxes, lists are created and are printed in the local paper as public record. Thieves can use these lists to call unassuming people and pose as collectors. Internet Phishing Scams: The IRS doesn’t send emails. Phony IRS emails that try to lure taxpayers into giving out personal information are a common scam. The messages are generally intended to convince recipients to provide personal or financial information that enables the perpetrators to commit credit card or bank fraud, or other forms of identity theft. Unless you are actively engaged in dialogue with an IRS agent, do not respond to emails or phone calls supposedly coming from the IRS. IRS Scams : If a scammer posing as an IRS agent ever contacts you, they may already have some of your personal information, which they can use to try to convince you that they are actually from the IRS. This data could come from public records or even your trash. The scammer will often put pressure on you to comply with their request, or even offer you a tax refund. Here are some suggestions to protect yourself and make sure that you get your return: 1. Protect yourself by filing early. It seems crazy to think that someone would fraudulently file taxes in your name, but it’s being done. Once they find a few W2s or other tax-related documents, they can file in your name and claim your refund before you’ve even begun the process. File before they do. 2. Secure your mail with a locking mailbox. Mail is stolen every day, and tax forms tend to include Social Security numbers, making them especially valuable to a thief. Don’t send out your tax return by sticking it in your home mailbox. Instead, take it to the post office or use a big blue post office drop box. 3. Protect your PC. Whether or not you file online, securing your PCs is essential. Make sure you have updated antivirus software, a two-way firewall, that you run spyware removal software regularly, and that your wireless Internet connection is protected with a network key. If you are ever a victim of a scam involving the IRS, you may be disappointed by the way it is handled by government agencies. They simply don’t allocate the resources to fix this problem proactively, nor are they adept at responding once it has occurred. The biggest issue is the thief’s privacy. Even if you think you know who is responsible, neither the IRS nor any other government agency will release that information. All you can do is follow the IRS’s instructions for resolving the issue. Be patient, as rectifying it may take many hours, days, or weeks. If you subscribe to an identity theft protection service, a fraud resolution agent may be able to help. McAfee Identity Protection includes proactive identity surveillance to monitor subscribers’ credit and personal information, as well as live access to fraud resolution agents. For additional tips, visit CounterIdentityTheft.com . Robert Siciliano is a McAfee consultant and identity theft expert. See him explain how a person becomes an identity theft victim on CounterIdentityTheft.com (Disclosures)

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Alan Simpson Rants About ‘Snoopy Snoopy Poop Dogg’

March 7, 2011

Alan Simpson, co-chairman of President Barack Obama’s debt commission, furthered his penchant for colorful commentary Monday when he unleashed a rambling diatribe targeting what he characterized as a generation of disrespectful youth and their confused grandparents. “This is a fakery,” the former Wyoming senator said on Fox News, referring to retirement-age Americans expressing fears about having Social Security funds slashed. “If they care at all about their children or grandchildren, and sometimes I doubt that — I think, you know, grandchildren now don’t write a thank-you for the Christmas presents, they’re walking on their pants with the cap on backwards listening to the enema man and Snoopy Snoopy Poop Dogg, and they don’t like them!” Simpson has been a proponent of considering reforms to entitlement programs such as Medicare, Medicaid and Social Security in the effort to reduce the deficit, suggestions that so far appear to have been ignored in the Obama administration’s budget proposals. In February, Simpson exhibited his flair for the dramatic when he called the White House’s spending cut effort a “sparrow belch in the midst of the typhoon.” The deficit, he later said , was “a stink bomb in the garden party and it’s never going to go away.” The debt commission co-chairman also came under heavy fire last year after it was revealed that he had referred to the nation as “a milk cow with 310 million tits” in an email to the executive director of the Older Women’s League.

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U.S. Consumers Spending Less, Except On Cars

March 7, 2011

WASHINGTON — Consumers borrowed more in January to purchase new cars but were once again frugal with their credit cards, offering a mixed sign of their confidence in the economy. The Federal Reserve says total borrowing rose at an annual rate of $5 billion in January, or 2.5 percent, the fourth consecutive gain. Strong car sales drove the increase. The category that includes auto loans rose 6.9 percent. Credit card debt fell 6.4 percent in January, the 28th decline in 29 months. Americans had increased their use of plastic in December for the first time since the financial crisis. But they cut back the following month, even though a Social Security tax cut is giving most households an extra $1,000 to 2,000 this year. Combined, total consumer credit equaled $2.41 trillion, a slight 0.7 percent above a three-year low hit in September. Consumer borrowing is 6.6 percent below the high hit in July 2008. Analysts are predicting that consumers will borrow more in the months ahead, responding to the strengthening economy, a brighter outlook for jobs and the tax cut. The government reported Friday that the unemployment rate fell to 8.9 percent in February, the first time it has been below 9 percent in nearly two years. Households began borrowing less and saving more as they struggled to cope with the deep 2007-2009 recession. People trimmed their spending, which accounts for 70 percent of total economic activity, when the unemployment rate began to rise. The rise in auto loans marked the sixth consecutive month that this category has increased, reflecting a rebound in auto sales. Even if economists’ forecasts are accurate and borrowing does increase this year, analysts are not predicting that consumers will increase debt the way they had during the housing boom. During that time, households felt wealthier because of soaring home values. But when home prices fell, they cut back on borrowing. And the trend accelerated after job losses mounted and many people struggled to get their debt under control.

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John Boehner: Let’s Cut Entitlements

March 4, 2011

House Speaker John Boehner said Thursday that he’s determined to offer a budget this spring that curbs Social Security and Medicare, despite the political risks, and that Republicans will try to persuade voters that sacrifices are needed.

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Big Retail Companies Require Job Applicants To Disclose Their Age

March 1, 2011

Ruth Lyons, 59, was born on April 28, 1951. But after two and a half years of not even being able to get an interview for a job, she decided that her new “job application birthday” was going to be March 19, 1969 — just as an experiment. “They’re asking for your Social Security number and date of birth on applications now, which I don’t think they have a right to do unless they’re hiring you, and you don’t have the option of not filling them in,” she told HuffPost. “You either fill them in right, or you lie, and I’m all for lying.” Several of the nation’s biggest employers, including Target, Kroger and Home Depot, require job applicants to disclose their date of birth in the online application, a practice that employment discrimination lawyers say seems a little fishy. “It’s not per se discrimination to ask for your date of birth or age or some other age-identifying information on a job application, but when there’s a claim that EEOC’s investigating, we’re going to closely scrutinize what we see on the form,” said Ray Peeler, a senior attorney at the Equal Employment Opportunity Commission. “It definitely makes the EEOC look a little harder at what’s going on.” Kroger’s online application says that a candidate’s birthday is used “to ensure compliance with laws and regulations governing the employment of minors or establishing age requirements for certain tasks,” and that the age of anyone 21 years old or older “will not be seen by the hiring manager.” Human resources representatives at Target and Home Depot told HuffPost an applicant’s age is only used for the purpose of background checks after the person has been hired. But Susan Heathfield, a human resources expert who regularly writes and consults on hiring issues, said a company should never ask for a person’s specific age or Social Security number until after that person is hired. “I am stunned to hear that they’re asking for people’s ages in applications,” she told HuffPost. “They should know better. As an employer, you do not want to put yourself in a position where anything you do could be conceivably discriminatory.” Older workers, especially those that have been out of work for any significant period of time, are having an increasingly difficult time landing jobs in the recession because employers have their pick of younger candidates. A recent Pew report found that those who are older than 55 are most likely to remain jobless for a year or more, and the number and percentage of age discrimination charges filed with the Equal Employment Opportunity Commission have grown noticeably since 2006, rising from 16,548 charges, or 21.8 percent of all such EEOC filings, to 22,778, or 24.4 percent, in fiscal year 2009. “Some older employees just look old,” Heathfield said. “And it’s so darn subtle — an older person can come in for an interview and not get the job, and they’ll be informed that a more qualified candidate was hired. They’ll never know or be able to prove that two or three people on that committee kept thinking, ‘This person’s really old.’ I’d hate to be looking for a job right now, truthfully.” Heathfield said that while she wouldn’t recommend lying about one’s age on a job application, she believes there are other ways to avoid filling in a date of birth or Social Security number. “I usually tell people, ‘Write in all zeros, and say in the written section that you’ll be happy to supply those numbers if your application reaches the point of a background check,’” she said. Lyons believes lying about her age helped her land a job. She says she applied to work at a local retail store a handful of times since being laid off from her job as a florist in September 2008, but never heard back from them until she filled out an application with her fake birthday. “I lied to get past ‘Go’ and got past ‘Go,’ and then it was my experience and winning personality that took me the rest of the way,” said Lyons, who landed the job on the spot. “It may be a fluke, but it worked for me!”

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White House Acknowledges ‘Real Impact’ Of Cuts To Energy Assistance Funding

February 14, 2011

WASHINGTON — The Obama administration acknowledged on Monday that its proposal to slash funding for heating assistance to the poor would, in fact, hurt the poor. “This is a very hard cut,” White House budget director Jacob Lew said during a press conference. “This is a cut that has real impact.” The White House’s proposed budget for fiscal year 2012 halves funding for the Low Income Home Energy Assistance Program, reducing its allocation to $2.5 billion from just over $5 billion. LIHEAP doles out money to states, which then hand it over to local relief agencies, which review personal financial data to ensure that applicants for the assistance really need it. Eligible applicants have the money credited to their accounts with the local utility company. Roughly 8.3 million people used the program last year. Its target population is the elderly and the disabled. The National Energy Assistance Directors’ Association, a group that represents state aid officials in Washington, estimated that the reduction would amount to 3.1 million households going without assistance on heating and cooling costs (not 3.5 million, per a previous estimate). “I thought the administration would draw a circle around the social safety net for low income families. I thought we were part of that safety net,” NEADA director Mark Wolfe said. “These are families who, without LIHEAP, will fall behind on their bills or cut back on basic essentials because they don’t have any discretionary income.” Nearly two-dozen people who use the program told HuffPost in emails and phone interviews what LIHEAP has meant for them in recent years, and what they thought of Obama’s decision to sacrifice its funding to appease deficit hawks. “Obama was supposed to have this image that he was for the everyday person,” said Karrin Herring, a resident of Beaver County, Pa., who said she received $300 from LIHEAP in the fall to pay her heating bill. “It helped me out and I was glad to get it, too.” Herring, a 56-year-old middle school registrar, is disabled with avascular necrosis in her knees. She said she’s still in the president’s corner, despite her frustration over LIHEAP. “For him to go straight to a program like this, especially when there are so many unemployed people out here now, a lot of times through no fault of their own, and more people needing the LIHEAP, I just couldn’t understand why he would even think about this program in particular. They can find someplace else to cut some money if they really wanted to.” Christie Graber of Council Bluffs, Iowa, said she just recently qualified for $350 in assistance for her heating bill after applying for LIHEAP for the first time. Graber, a 60-year-old former event planner, said she gets by on $1,035 monthly Social Security disability checks. “I think he can cut other places,” she said of the president’s proposal to cut LIHEAP. “I’m very disappointed. I campaigned for him. I believed in him. I was thrilled. I had tears in my eyes watching the election results come in … I don’t think he should cut help to the poor.” Michele Tracey of Sun City, Calif., said LIHEAP has paid her electric bill for four or five months during the summer for the past three years. “There’s a lot of people more hurting than us, but that program is one of the really helpful programs. California’s not a real cheap state to live,” said Tracey, 50. She said she and her husband, who is 62, support their family-of-four with his Social Security disability payments supplemented with money she makes as an occasional substitute teacher. “It really helps,” she said. “If it goes, I’ll sure miss it.” Lew defended the decision to cut LIHEAP funding, citing declining energy prices. “Going back to 2008, the program was funded at roughly $2.5 billion,” Lew said. “We had a huge spike in energy prices, and the program doubled to $5 billion. We’re now at a price level that’s close to where we were before that increase. looking at our fiscal challenges, we can’t straight line the program at $5 billion. We went back to the level it was at when prices were roughly the same.” It’s true that energy prices have declined, but as has been pointed out by opponents of the cuts, the economy is in worse shape than when the funding was increased in 2008. “It’s done an enormous amount of good for a lot of people,” Lew said. “It was meant to be a grant program that the states administered. Balancing our fiscal challenges and the funding change from 2008 until now, we made the tough decision. We said in the documents and the budget that we will keep our eyes on what prices go and what the need of the future is, but we can’t cruise at a historic high spending level when we’re trying to make these very difficult savings. In terms of investing in the future, we’ve been very clear that we need to create more opportunities to invest in education, in innovation, and in billing the infrastructure for the future, so we’ve had tough tradeoffs.” The administration’s proposal is not about to skid through Congress. A bipartisan bloc of 32 senators has already insisted that the White House back off the program.

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Scott Bittle and Jean Johnson: Fiscal Follies: Tackling the National Debt in 500 Words or Less

February 11, 2011

Since we write about public opinion and believe strongly in public engagement , we’ll be the first to admit that much of the public is woefully uninformed about the federal budget and the country’s choices for getting a handle on its mushrooming national debt. Most Americans know it’s a problem, and they want it fixed. After that, things get a lot hazier. Unfortunately, the country’s leadership has now frittered away much of the time we could have used to educate the American people on this issue. President Obama is submitting his proposed budget Monday , and Republicans are already putting out their counter-plans , but neither has really laid the groundwork with the public for the implications of the spending cuts or tax increases that are necessary if we really want to get our finances under control. Now we really need to get a move on, and the electorate is both unrealistic and cranky. So here goes. Here’s what Americans really need to know (in 500 words or less): We have to start now because this could get ugly really fast. In about 10 years, the federal debt will be as big as our entire economy –100 percent of GDP. We’ll be spending more on interest payments than on defense. Just cutting what people normally think of as “big government” won’t do it. In 2010, the deficit was about $1.3 trillion. Eliminating the Departments of Education, Energy, Agriculture, Transportation, HHS, and HUD entirely would save less than $300 billion . We would still have a trillion dollars worth of red ink. Income tax rates are lower now than they have been for most of the last four decades. In the 1970s, top tax rates were twice as high. We’ve extended current rates for two years while the economy improves. After that, they need to be on the table. Yes, Social Security and Medicare are part of it. In as little as 10 years, government auditors say that spending on Social Security, Medicare and Medicaid, plus interest on the debt, could suck up more than 90 cents out of every tax dollar. There would be almost no money for anything else. It’s time to stop the blame game. The federal budget has been in the red for 31 out of the last 35 years , and both President Bush and President Obama added trillions of dollars to the debt. There’s enough blame to go around. It’s finding solutions that matters. Don’t fall for the bogus Beltway debate over “tackling the budget” versus “focusing on the economy.” It’s a false choice. We have to do both, and we can decide on changes now that kick in once the economy improves. There are hundreds of different proposals that would help. The big choice for most of us is whether to go with one that focuses on cutting spending even in popular areas to keep taxes low, or one that preserves popular programs, but raises taxes instead. Nearly all reasonable plans include some of both. Be ready to compromise. To solve this problem, we’ll all have to live with something we don’t like. Refusing to compromise means more delay, and that’s the one thing we can’t afford. If we act quickly and responsibly, we can do this.

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Eric Schurenberg: Can We Please Stop Talking About the Social Security Trust Fund?

January 31, 2011

Nothing get clicks from seniors like a scary story about Social Security, and the Associate Press supplied a real granny-grabber last week: ” Social Security on Pace to be Drained by 2037 .” Hyper-ventilating off on a new report from the Congressional Budget Office , the headline managed to seize a topic of key interest and entirely miss the point. To understand what’s wrong with such a headline, you need to grasp one fact: Social Security is, ultimately, just another pay as you go government transfer program. That is, we tax Peter to pay Paul. The Treasury raises money with taxes and debt and distributes some of it to seniors, survivors, and disabled people according to formulas embedded in the Social Security law. Your benefits are safe as long as voters agree that transferring that much money to seniors is better than transferring it elsewhere, or letting taxpayers keep it. Simple. What makes it seem complicated is that Uncle Sam’s accountants treat Social Security like a closed ecosystem. Unlike other government programs, it has its own tax — this year a 10.4% slice of your wages (4.2% from you and 6.2% from your employer) officially called the FICA tax-and every year the Social Security trustees estimate how long the system’s inflows from FICA and other revenues will cover its outflows. But where the system really turns murky is with the trillion-dollar Social Security trust fund , an accounting phantom that has launched a thousand half-cocked headlines like AP’s. Social Security experts like Eugene Steuerle of the Urban Institute regard it as a trillion-dollar distraction. “I try to avoid the trust fund debate,” he writes in an email. “Social Security is mainly a pay-as-you-go system.” There is a massive trust fund — and this is one case where your definition of “is” really matters — only because FICA has pulled in much more than Social Security needed for the past 27 years. The government treated the FICA surplus the same way it treats all tax revenue: It spent it on aircraft carriers, interest on the debt, haircuts for Congressmen, and all the other purposes of government. The surplus, along with imputed interest, is recorded on the government’s ledgers. That ledger entry is the trust fund. What does the trust fund do? The Social Security Administration itself describes it as ” budget authority .” That is, until the fund runs out, the program can order the Treasury to come up with the money to pay benefits, even if FICA taxes don’t cover benefits (and they don’t, starting this year), without asking Congress for more money. What the trust fund doesn’t do is change how the Treasury pays for benefits: Trust fund or no trust fund, we still have to tax Peter to pay benefits to Paul. If Peter’s FICA taxes don’t cover Paul’s benefits, the shortfall has be made up out of Peter’s other taxes, or by borrowing. All that matters is how much we want to support seniors, not whether government accountants say the trust fund is a $2.6 trillion or 50 cents. In the kind of Social Security post you should pay attention to, “The Truth about Social Security Cuts” CBS MoneyWatch writer Carla Fried argues persuasively that voters (including most Tea Party members) support Social Security so strongly that benefits are in zero danger in the short run. Certainly, no politician has enough of a career death wish to propose stiffing anyone now retired or even within 10 years of retirement. The question anyone younger than 50 needs to ask is, how long will that popularity last? At some point, as the population ages and seniors absorb an ever larger share of spending — not just in Social Security, but also in Medicare and Medicaid — voters may simply choke on elderly entitlements. (Remember at that point we may simultaneously be choking on interest payments on the debt.) Ironically, the best way to protect benefits for younger workers today is to embrace gradual changes in the program starting today — thus avoiding more draconian cuts in a crisis a decade or more hence. In the meantime, forget about when the Social Security trust fund will be “drained.” Indeed, forget about the trust fund altogether. It’s irrelevant. As with all the fiscal challenges we face, Social Security’s biggest risk is failure of political will. There’s no trust fund for that.

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Jason Alderman: Taxes Follow You Into Retirement

January 26, 2011

Wouldn’t it be nice if, after decades of hard work, scrimping and saving, you could retire and no longer have to worry about paying taxes? But that’s about as likely as the Cubs winning the World Series. Even if your income drops significantly after retirement, chances are you’ll still be taxed on a portion of it. And, depending on where you choose to retire and your income sources, you’ll probably also face additional taxes on everyday purchases, real estate, capital gains, inheritances — the list goes on. Here are a few tax-related issues to consider when budgeting for your living expenses during retirement: Taxes on Social Security benefits. Most people can begin collecting Social Security benefits as early as age 62, although if you draw benefits before your full retirement age, your benefit amount may be reduced significantly. “Full retirement age” is 65 for those born before 1938 and gradually increases to 67 for those born in 1960 or later. (To calculate your full retirement age by birth year, click here .) Keep in mind, however, that even though many states don’t tax Social Security benefits, they are counted as taxable income by the federal government. So, depending on your overall income, you may owe federal income tax on a portion of your Social Security benefit. The formula is complicated, but basically: Single people whose combined income from all sources is less than $25,000 are not taxed on their Social Security benefit. (“Combined income” is adjusted gross income plus nontaxable interest earned plus half of your Social Security benefits.) For combined income between $25,000 and $34,000, you will be taxed on up to 50 percent of your benefit. For income over $34,000, up to 85 percent of your benefit may be taxable. For married people filing jointly: benefits are not taxable for combined income below $32,000; benefits between $34,000 and $44,000 are up to 50 percent taxable; benefits over $44,000 are up to 85 percent taxable. For more details, read the IRS’ Tax Topic 423 and Publication 915 . Working and Social Security. Some people find that after opting to collect a reduced Social Security benefit before full retirement age, they can’t make ends meet and must go back to work. But this can backfire: If your wages are more than $14,160 a year, you will lose one dollar of Social Security benefits for every two dollars you earn over that amount. (Note: Investment income doesn’t count.) If you’re scheduled to reach full retirement age during 2010, the benefit reduction will drop to $1 for each $3 you earn above $37,680 until the month you reach full retirement age. After that, there is no further reduction. So, if you think you’ll need to continue working to make ends meet, it might be wiser to hold off on collecting Social Security until you reach full retirement age. Be aware, though, that these benefit reductions are not completely lost: Your Social Security benefit will be increased upon reaching full retirement age to account for benefits withheld due to earlier earnings. One last point about taxes and Social Security: Any wages you earn after you’ve begun to collect Social Security retirement benefits are subject to Social Security and Medicare taxes, regardless of your age. To learn more, read How Work Affects Your Benefits at the Social Security website. Taxes on IRA and 401(k) withdrawals. After age 59 ½, you can start withdrawing balances from your IRA or 401(k) without paying the 10 percent early withdrawal penalty. However, don’t forget that you will pay federal (and state, if applicable) income tax on the withdrawals — unless it’s a Roth plan, whose contributions have already been taxed. Other taxes. Some people move to another state after retirement thinking they’ll lower their tax burden. For example, seven states do not tax personal income (although another two do tax dividend and interest income). And five states charge no sales tax. But because property, inheritance and fuel taxes and other cost-of-living expenses vary significantly by community, you should only consider such moves after doing thorough research. The Retirement Living Information Center features breakdowns of the various kinds of taxes seniors are likely to pay, state by state, including taxes on income, sales, fuel, property, inheritances and other items. You may want to consult a financial planner long before retirement to make sure you fully understand all the many tax and income implications. If you don’t have one, the Financial Planning Association is a good resource. Bottom line: Be sure to include taxes among the many expenses you need to plan for at retirement. This article is intended to provide general information and should not be considered legal, tax or financial advice. It’s always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation. To participate in a free, online Financial Literacy and Education Summit on April 4, 2011, go to Practical Money Skills .

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Robert Reich: The State of the Union and the Federal Budget: Investing in America’s Future

January 24, 2011

Word has it that the president will be emphasizing “improving American competitiveness” in his State of the Union Address Tuesday night. As I’ve noted , the term is meaningless — but it’s politically useful. CEOs and many conservatives think it means improving the profitability of American companies. Liberals and labor unions think it means increasing export jobs. Neither touches at the heart of the matter. Hopefully, the president will. Over the long term, the only way to improve the living standards of most Americans is to invest in our people — especially their educations, skills, and the communications and transportation systems linking them together and with the rest of the world (infrastructure). In the global economy, the only “asset” that’s unique to any nation — and that determines its living standard — is the people who comprise it. Almost everything else moves across global boundaries at the speed of an electronic impulse. (Money is available to any major business from anywhere around the world. Any entrepreneur can rent or purchase additional office or factory capacity, and the most up-to-date machinery, instantly from anywhere. Commodities, supplies, and components can be summoned almost as quickly from anywhere.) That’s why spending on education, infrastructure, and basic R&D (which educates our people in the technologies and processes of the future) is fundamentally different from other categories of government spending. These outlays are really investments in the future productivity of our people. Here’s where the debate over the deficit comes in. If the federal budget were organized sanely, it would be divided into three parts: (1) Past obligations, (2) Current needs, (3) Future investments. Past obligations reflect payments Americans have made over the course of their lives in the expectation of receiving social insurance (mostly Social Security and Medicare) when they retire. These past obligations need to be honored because they’re based on implicit contracts between the public and the government. If such contracts are to be altered, they should be altered only for future generations who haven’t yet entered into them. Current needs reflect everything we want today in order to remain safe and healthy (from national defense through Medicaid). The current needs budget should be balanced each year. It’s appropriate that we pay for all our current needs through our current taxes. But future investments are qualitatively different. There’s no problem with borrowing in order to finance such investments. While it might be irresponsible for a family to go into debt in order to finance a worldwide cruise, it could be equally irresponsible for the same family not to borrow money in order to help finance their kids’ college. In fact, borrowing in order to increase future productivity is sensible — up to the point where the return on the investment is no longer higher than the cost (principal plus interest) of the loan. Ideally, the federal budget would be divided along these lines — past, present, and future. And the future, or “capital,” budget (containing spending on education, infrastructure, and basic R&D) would be separated from the rest, with its own system for “scoring” — that is, evaluating — whether the likely return is worth the cost. It won’t be an easy call in every case, of course, but the Congressional Budget Office and the OMB take on much harder ones. Who knows? The president may even propose something like this tomorrow night. Robert Reich is the author of Aftershock: The Next Economy and America’s Future , now in bookstores. This post originally appeared at RobertReich.org .

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Stewart Acuff: Dying to Work

January 22, 2011

It is 9 pm on a very cold Philadelphia night as I sit down to write this. I’ve just returned from a closed casket viewing of my 19-year-old union brother Mark Keely who was blown up in a gas main explosion three nights ago. Three other union members of his work crew were burned from head to toe. Brother Mark was 19 and had been on the job just five months. Death and horrible injury is a daily possibility for members of the Utility Workers Union of America. Our members are the first of the first responders cutting off the electricity and gas so firefighters and police officers can so their jobs. No one knows how many lives Brother Keely and his crew saved with their ultimate sacrifice. Hundreds and hundreds of union members were at St. Cecilia’s Catholic Church tonight — gas workers and utility workers and cops and fire fighters and machinists and on and on. I cried as I hugged Mark’s Dad and Mother and greeted member after member with Local Union President Keith Holmes. Mark’s death is a stark reminder that America’s workers go to the job every day risking their health and their lives. 17 of us die every week. My mother died of a massive heart attack in her classroom six months before her retirement. Yet those who blather and blabber about how American workers live too well and how we have to compete with the poorest and most exploited workers in the world and how we have to raise the Social Security retirement age never have to get off their asses at their desk with the best view of whatever city they are in. Mark Keely worked hard every day of his working life. He deserved to live a full, rich life like all other workers. But until we realize that working families deserve the best of life–not material riches but dignity and respect and safety, too many of us will die before our time.

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Obama To Renominate Nobel-Prize Winning Economist To Fed

December 23, 2010

WASHINGTON — President Barack Obama will resubmit the failed nomination of a Nobel Prize-winning economist to the Federal Reserve, even though he faces even stronger opposition from the next Congress. The nomination of Peter Diamond fizzled when the Senate adjourned Wednesday without acting on it. But the White House said Thursday that the president will press ahead on the nomination. Diamond, a professor at the Massachusetts Institute of Technology, is an authority on Social Security, pensions and taxation. He shared the Nobel Prize in economics that was awarded in October. But Senate Republicans have opposed his nomination, questioning his practical experience and research. Republicans will hold six additional seats in the next Senate, making Diamond’s confirmation even more difficult. The Fed often operates with vacancies on its board. The board has seven seats but hasn’t had every seat filled since 2006. Chairman Ben Bernanke and the board’s other members belong to the Fed’s main policymaking group, the Federal Open Market Committee. The committee sets interest rates and makes other policies that influence economic growth, employment and inflation. The Senate Banking Committee had approved Diamond’s nomination in November and sent it to the Senate for consideration. It was the panel’s second attempt to overcome Republican opposition. Obama struggled to get Bernanke himself confirmed to a second term in the last Congress. Bernanke, a Republican, faced a backlash over the Fed’s role in bailing out Wall Street firms during the financial crisis. That angered ordinary Americans and stirred a wave of Senate opposition. Bernanke was ultimately confirmed by a 70-30 vote. It was the slimmest margin ever for a Fed chairman.

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Tax Cuts Raise Expectations For Economy In 2011

December 22, 2010

WASHINGTON — Expectations for economic growth next year are turning more optimistic now that Americans will have a little more cash in their pockets. A cut in workers’ Social Security taxes and rising consumer spending have led economists to predict a strong start for 2011. Still, most people won’t feel much better until employers ramp up hiring and people buy more homes. Analysts are predicting economic growth next year will come in next year close to 4 percent. It would mark an improvement from the 2.8 percent growth expected for this year and would be the strongest showing since 2000. “Looking ahead, circumstances are ripe for the economy to develop additional traction,” said Joshua Shapiro, chief U.S. economist at MFR Inc. in New York. He is estimating growth for 2011 to be above 3.5 percent. The economy grew at a moderate pace last summer, reflecting stronger spending by businesses to replenish stockpiles, the Commerce Department reported Wednesday. Gross domestic product increased at a 2.6 percent annual rate in the July-September quarter. That’s up from the 2.5 percent pace estimated a month ago. While businesses spent more to build inventories, consumers spent a bit less. Many analysts predict the economy strengthened in the October-December quarter. They think the economy is growing at a 3.5 percent pace or better mainly because consumers are spending more freely again. Still, the housing market remains a drag on the slowly improving economy. The National Association of Realtors reported Wednesday that more people bought previously owned homes rose in November. The sales pace rose 5.6 percent to a seasonally adjusted annual rate of 4.68 million units. Even with the gain, sales are still well below what analysts consider a healthy pace. Even if analysts are right about 2011 being a better year for the economy, growth still wouldn’t be strong enough to dramatically lower the 9.8 percent unemployment rate. By some estimates, the economy would need to grow by 5 percent for a full year to push down the unemployment rate by a full percentage point. Even with growth at around 4 percent, as many analysts predict, the unemployment rate is still expected to hover around 9 percent. The third-quarter’s performance marks an improvement from the feeble 1.7 percent growth logged in the April-June quarter. The economy’s growth slowed sharply then. Fears about the European debt crisis roiled Wall Street and prompted businesses to limit their spending. “It sure looks like the `soft patch’ is over,” said Nariman Behravesh, chief economist at IHS Global Insight. In the third quarter, greater spending by businesses on replenishing their stocks was the main factor behind the slight upward revision to GDP. Consumers boosted their spending at a 2.4 percent pace. That was down from a 2.8 percent growth rate previously estimated. Even so, consumers increased their spending at the fastest pace in four years. The slight downward revision reflected less spending on health care and financial services than previously estimated. More recent reports from retailers, however, show that shoppers are spending at a greater rate in the final months of the year. Companies are discounting merchandise to lure shoppers. A price gauge tied to the GDP report showed that prices – excluding food and energy – rose at a 0.5 percent pace in the third quarter, the slowest quarterly pace on records going back to 1959. Americans have more reasons to be confident. Stock prices are rising, helping Americans regain vast losses in wealth suffered during the recession. Job insecurity remains a problem, but the hiring market is slowly improving. And loans aren’t as difficult to obtain for those with solid credit histories. Even with the improvements, though, consumers are showing some restraint. In the past, lavish spending by consumers propelled the economy to grow at a rapid pace. After the 1981-1982 recession, the economy expanded at a 9.3 percent clip. Consumers increased their spending at an 8.2 percent pace. Consumers have yet to display that level of confidence in the economy. While hiring is improving, employers still aren’t adding enough jobs to lower the unemployment rate. Even with stronger economic growth anticipated for next year, analysts predict it will still take until near the end of this decade to drop unemployment back down to a more normal 5.5 percent to 6 percent level. The government’s estimate of GDP in the July-September quarter was its third and final one. The government makes a total of three estimates for any given quarter. Each new reading is based on more complete information. GDP measures the value of all goods and services – from machinery to manicures – produced within the United States.

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