Despite being stacked with opponents of Social Security, the National Commission on Fiscal Responsibility and Reform�s report, otherwise known as the Simpson-Bowles Report, did not garner enough member votes to be automatically taken up by Congress. The report provides, nevertheless, an indication of the tactics of those who wish to reduce Social Security�s role in national retirement provision and thereby increase the amount of national retirement savings that are funneled through the financial services industry and its 401(k)-like accounts.
Most commentary on the Social Security part of the report centered on its recommendation to raise the normal retirement age from 67 to 69. Far more damaging, though, were its recommendations to reduce benefits by an average 21% and change the formula for determining the distribution of them among income groups.
Social Security Benefits Under Current Law and Reduction Proposed by National Commission on Fiscal Responsibility and Reform
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Current Law                             Proposed Law
Income     Benefit     Replacement  Benefit         Replacement
income       %                    income                    %
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$Â 9,000Â Â Â Â Â $Â 8,100Â Â Â Â Â Â Â Â Â 90%Â Â Â Â Â Â Â Â Â Â $Â 8,100Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 90%
$ 38,000Â Â Â Â $17,380Â Â Â Â Â Â Â Â Â 46%Â Â Â Â Â Â Â Â Â $16,800Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 44%
$ 64,000Â Â Â Â $25,700Â Â Â Â Â Â Â Â Â 40%Â Â Â Â Â Â Â Â Â Â $19,400Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 30%
$107,000Â Â $32,150Â Â Â Â Â Â Â Â Â Â 30%Â Â Â Â Â Â Â Â Â Â $21,550Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 20%
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Source: Calculated from The Moment of Truth: Report of the
National Commission on Fiscal Responsibility and Reform,
December, 2010, Figure 11
As the table indicates, the benefit formula would be changed so that middle and upper middle class participants would suffer steeper cuts in benefits than working and lower class ones. The Commission disingenuously touted this as a �progressive� reform.
In fact, it was a change that would have the effect of undermining middle and upper middle class political support for the program, which has been crucial to its success. It is well known that Social Security has survived the attacks of privatizers precisely because it enjoys a cross class base of support.
That attempt to undermine Social Security failed for the moment. But it was immediately followed by another when President Obama with the support of Congress gave a one year reduction of the payroll tax for Social Security from 6.2% to 4.2% for employees. While the money will be replaced by revenue from other parts of the budget, it sets a dangerous precedent as the first such reduction in the history of the program.
A year from now when the reduction expires, Republicans will undoubtedly push to make it permanent, thereby weakening the program�s financing and creating a self-fulfilling prophecy that it is fiscally unsustainable�all as preparation for still another push for privatization.
–James W. Russell
Thanks for establishing this very important web site and blog. Americans need to understand the seriousness of the attacks on Social Security and become involved in holding our elected officials (i.e. our public servants) accountable for protecting this cornerstone or our democracy and economy.
I agree. The Washington Post has published two opinion pieces urging Democrats to cut Social Security benefits in the name of reducing the national deficit. Social Security is not a part of the national deficit, though. It is a separate account. But the campaign is on as the opponents of Social Security smell blood. We have to make sure that the Democrats, including Obama, don’t go along with this.
I agree wholeheartedly. We need to put pressure on the Democrats and, most importantly, President Obama. The troublesome thing about Obama is that no one really knows (at least to my knowledge) if he will stand in the way of further, more permanent cuts on Social Security. There is reason to worry. Most people don’t seem to realize how much money that the financial services sector gave to Obama’s 2008 presidential campaign.
This table from Opensecrets.org shows the top contributors to Obama’s campaign: http://www.opensecrets.org/pres08/contrib.php?cid=N00009638&cycle=2008 (Opensecrets.org is a great source on campaign finance statistics.) As you can see from the table, Obama’s second highest campaign contributor was Goldman Sachs. Three of Obama’s top seven campaign contributors were large, Wall Street investment banks. Of Obama’s top twenty campaign investors, five of them were Wall Street banks and the combined investment of those banks amounted to $3,449,317. If you look at the top contributors per candidate in the 2008 election, you will see that the contributions from the securities and investment industry to Obama’s campaign almost doubled the contributions to McCain’s: http://www.opensecrets.org/pres08/indusall.php?cycle=2008
So, will Obama stand in the way if more commissions (like the Bowles-Simpson deficit reduction commission) advise for further cuts to Social Security? Obama would have to risk upsetting the financial sector which supported him in resounding fashion during the last election. I think that the Republicans will test his mettle on this issue and force him to either do what is right or do what will get him more campaign contributions in 2012. I hope that the Democratic leadership in the Senate acts responsibly to protect Social Security before any bill proposing cuts to it ever gets to President Obama’s desk.
Do you people have a facebook fan page? I looked for one on twitter but could not discover one, I would really like to become a fan!
There will be a page up shortly on Facebook.