Raising the Social Security Retirement Age

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Wednesday, July 07, 2010 at 4:24 pm

According to Brian Beutler at Talking Points Memo, Republicans and — new development here — Democrats are getting behind the idea of slowly raising the retirement age. The change would go into effect only for workers who are middle-aged or younger now, all as part of a plan to reduce the national debt. Currently, workers can start receiving benefits as early as 62, with full benefits kicking in between 65 and 67, depending on the worker’s year of birth. The average lifespan is around 79 years.

Beutler reports that House Speaker Nancy Pelosi (D-Calif.) is not on board, but many other Democrats are coming around to it:

The strongest backer of this plan is House Minority Leader John Boehner, who recently told a Pennsylvania newspaper, “I think raising the retirement age going out 20 years so you’re not affecting anyone close to retirement, and eventually getting the retirement age to 70 is a step that needs to be taken.”

There’s no big surprise there. The Republican minority in the House doesn’t have a lot of power, but if Boehner had his druthers, he might well take things quite a bit further. He’s the one, after all, who won’t take Social Security privatization off the table if Republicans retake the House.

It’s the Democrats who have progressives feeling queasy. House Majority Leader Steny Hoyer explicitly put the idea on the table as well in a speech last month. “We should consider a higher retirement age or one pegged to lifespan,” Hoyer said.

One way or another, this looks to be a massive issue in the next year, as Congress looks to the Obama administration’s deficit commission, the Bipartisan Commission on Fiscal Responsibility and Reform, for debt and deficit solutions. Commissioners seem likely to recommend raising the retirement age, cutting benefits for wealthier Americans or expanding the Social Security tax — or some combination thereof. If 14 of 18 commissioners agree on the change, Congress has promised to vote on it. The AARP, MoveOn.org and the Campaign for America’s Future, among other organizations, have said they will oppose members of Congress who vote for certain changes to Social Security.

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allenwsmithphd
Comment posted July 7, 2010 @ 9:41 pm

All the talk about raising the Social Security retirement age in order to reduce the deficits ignores the most serious and urgent Social Security problem–the fact that the government has “borrowed” or “stolen” every dollar of the $2.5 trillion generated by the 1983 payroll tax hike.

Social Security is funded exclusively by FICA taxes. Not a single dollar has ever been taken from the general revenue fund to pay Social Security benefits. Thus, Social Security has not contributed a dime to the budget deficit or the soaring national debt. The 1982 Greenspan Commission on Social Security reform foresaw a problem when the baby boomers retired, beginning in about 2010, unless corrective action was taken. The commission recommended a hefty hike in payroll taxes that would require the baby boomers to prepay most of the cost of their own benefits, in addition to the customary practice of paying for the benefits of the generation that preceded them. The recommendations of the commission were enacted into law as part of the Social Security Amendments of 1983.
Thus Social Security was fixed in 1983. That fix would last until at least 2037, with no action, IF the intent of the 1983 legislation had been followed. In addition to the short-term deficit in this year’s Social Security budget (which was caused primarily by the severe recession), Social Security payroll tax revenue will fall short of benefit costs annually, beginning in 2016. This was all planned for in the 1983 legislation. The payroll tax hike has generated $2.5 trillion in surplus revenue that was supposed to be saved and invested in real marketable Treasury bonds to build up a large reserve in the trust fund with which to pay benefits to the baby boomers. If the plan had been followed, Social Security would now have $2.5 trillion in “good-as-gold” marketable Treasury bonds in the trust fund which the Social Security trustees could resell as necessary to raise the needed money to pay full benefits until 2037.
The REAL Social Security problem is that politicians developed a severe case of “sticky-finger” syndrome when the first surpluses began to show up in the second Reagan term. Since the money would not be needed by Social Security for another 30 years, these politicians just decided to put the money in the general fund and use if for other programs. That illegal practice has been continued to this very day. Every dime of the Social Security surplus has been spent and replaced with non-marketable IOU’s, which are akin to a note that a bank robber might leave behind in the empty bank vault, stating how much money he has stolen.

I first discovered the great Social Security scam more than ten years ago while doing research for my book, “The Alleged Budget Surplus, Social Security, and Voodoo Economics.” I have been waging a relentless campaign to expose the scam ever since against much organized resistance by groups that do not want the people to discover the truth about Social Security. I have been warning about the Social Security fraud for longer than Harry Markopolis tried to warn the SEC about the Madoff fraud, with the same lack of success. I need help from conscientious citizens who care about the future of Social Security. Please visit my website at http://www.thebiglie.net to learn more.

Allen W. Smith, Ph.D.
Professor of Economics, Emeritus
Eastern Illinois University


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allenwsmithphd
Comment posted July 7, 2010 @ 10:48 pm

In order to provide more information than I was able to include in my first post, I am posting a recent article of mine on the subject.

Was the Social Security Money “Borrowed” or “Stolen”?

In December, the Obama deficit-reduction commission will make recommendations for budget cuts that will then be voted on, with an up or down vote, by the lame-duck Congress. Already, there is much speculation that Social Security will be one of the big targets. The rationale for cutting Social Security seems to be that, during such difficult economic times, everything should be a candidate for the chopping block, and that the public should support such cuts out of a sense of patriotism.

The flaw in this argument is the fact that Social Security has not contributed a dime to the budget deficits or the soaring national debt. Social Security is funded exclusively by payroll taxes (also known as FICA taxes), paid into the fund by working Americans. In 1983, the payroll tax was increased substantially in response to the recommendations, the previous year, of the Greenspan Commission on Social Security Reform. Prior to 1983, Social Security had operated on a “pay-as-you-go” basis with each generation responsible for paying for the benefits of the generation that preceded it. The 1983 legislation changed the nature of Social Security funding. In addition to paying for the benefits of the preceding generation, as was customary, the baby boomers were also required to pay additional taxes to partially pre-fund their own retirement. The net result is that the baby boomers have paid more into Social Security than any other generation. Yet, they are often made scapegoats and blamed for the Social Security funding problem. I am not a baby boomer, but I am very sympathetic to them. They are getting a bum rap.

The intent of the 1983 legislation was to generate large Social Security surpluses for the next 30 years that were supposed to be saved and invested, in order to build up a large reserve in the trust fund that could later be drawn down to pay benefits to the baby boomers. The 1983 payroll tax hike has generated more than $2.5 trillion that is supposed to be in the trust fund. If the trust fund actually held this amount in real assets, full Social Security benefits could be paid until at least 2037 without any changes. Unfortunately, none of the surplus revenue was saved or invested in anything. It was all spent, by the government, on wars and other government programs without making any provisions for repaying the money.

Over the past 25 years, five presidents, and the members of Congress, have participated in the great Social Security scam. All Social Security contributions made by working Americans, except the amount which was needed to pay current retirement benefits, has been funneled into the general fund and used for non-Social Security purposes. Some like to say that the government just “borrowed” the money during the time period when it was not needed to pay benefits. But borrowing implies repayment, and no provisions for repayment have been made. The government did not enact future tax increases that would automatically kick in when the Social Security money was needed. Neither did they enact legislation that would end other spending programs once the Social Security money was needed so the money could be transferred to the trust fund. The government spent the Social Security money, pure and simple, without making any provisions for future repayments. The IOUs in the trust fund are not marketable, and they could not be sold to anyone even for a penny on the dollar. The Social Security trustees confirmed the worthlessness of the IOUs in the 2009 Social Security Trustees Report with the following words:
“Neither the redemption of trust fund bonds, nor interest paid on those bonds, provides any new net income to the Treasury, which must finance redemptions and interest payments through some combination of increased taxation, reductions in other government spending, or additional borrowing from the public.”

In order for Social Security to pay full benefits after 2016, it will be necessary for the government to begin repaying the money it has spent on other things. This will mean increased taxes and/or additional borrowing. Neither of these is politically popular, and there is no assurance that future politicians will be willing to raise taxes to pay for the irresponsible behavior of past politicians. If the money is not repaid in full, with interest, it will have been stolen by the government from working Americans who paid into the fund.

Since Social Security would be fully funded until at least 2037 if the government had not used the money for other things, the only reason that politicians are advocating cuts in Social Security benefits is the fact that the government does not have the money with which to pay its debt to Social Security. Given the fact that Section 13301 of the Budget Enforcement Act of 1990 made it a violation of federal law to use Social Security revenue for non-Social Security purposes, it is hard to justify using the word “borrow” to refer to any of the Social Security money spent after 1990, even if it is eventually repaid.

Allen W. Smith, Professor of Economics, Emeritus, Eastern Illinois University, has been battling economic illiteracy and government economic malpractice for the past 30 years. For the past decade, he has been engaged in a relentless effort to alert the public to the fact that the government was raiding the Social Security trust fund and using the money to pay for wars and other government programs. The author of seven books, Dr. Smith has appeared on CNN, CNNfn, CNBC, and more than 170 radio talk shows. He holds a Ph.D. degree in economics from Indiana University.


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Sheclipse
Comment posted August 29, 2010 @ 9:09 pm

When FDR and his administration created Social Security, they passed laws to protect it. One was that the Social Security surpluses could not be put into anything but non marketable US savings bonds. That was because the US treasury bonds are the safest investment in the world.

Until recently interest rates would keep up with inflation.

Once you or I or Social Security buys a treasury bond, the govrnment gives us a bond and they take the money. They can do anything they want with the money.

What is important is they need to pay it back as the money is needed. A good caring government would not have put us in this deficit mess.


Shirley Potts
Comment posted September 14, 2010 @ 2:23 pm

Ask anyone you know and the most discussed reason for why they are disgusted with our elected officials it is undoubtedly the fiscal irresponsibility that caused the need to steal our hard earned wages from Social Security.

Phrase it or twist it if you like. It is stealing.

And now they want us to work laborious jobs until we die to pay for their irresponsible thievery.

How little all of this affects governent workers, who do have are making the higher salaries, have better healthcare, and are sitting pretty with the pensions.

Naturally this slave labor for the elderly will result in increased healthcare costs as well as untold filings for disability.

Fine with our politicians because, once again, they will not be tracked down as the source of all of this misery.


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Mcconn746
Comment posted October 10, 2010 @ 12:08 pm

We Boomers re-elected our Congressmen who raided the SS money box 95% of the time and we enjoyed the fruits of that money. AARP is a big part of the problem for mis-information. I cut up my card.

Many of you are ticked off because they want to take “our money”. Grow up folks. The money is gone. It has been spent. We need to replace our Congressmen. I have had not association with a Tea Party but I do vote their endorcements. Christie for President.


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Attagirl2
Comment posted January 20, 2011 @ 10:23 pm

Many of you are ticked off because they want to take “our money”. Grow up folks. The money is gone. It has been spent”.

Mcconn746, it seems you are the one who needs to “grow up”..or get a brain or something, because if the “money is gone” it needs to be paid BACK. back..No one “gave” them the money, it was “loaned” and as with all loans, it needs to be repaid…..
And yes it is “our money”, paid twice, as a matter of fact…..The baby boomers, in fact, are the only generation thus far who have not only paid for their parents’ retirment, they paid for their OWN as well due to the 1983 decision arrived at by Ronald Regan, Patrick Moynihan and Alan Greenspan that stipulated that the social security payment tax be RAISED to avoid a future shortfall…Do your research, Mr. McConn….We would be the biggest fools on the planet if we allowed the rich who raided our coffers to keep that money instead of paying it back.


Attagirl2
Comment posted January 20, 2011 @ 10:23 pm

Many of you are ticked off because they want to take “our money”. Grow up folks. The money is gone. It has been spent”.

Mcconn746, it seems you are the one who needs to “grow up”..or get a brain or something, because if the “money is gone” it needs to be paid BACK. back..No one “gave” them the money, it was “loaned” and as with all loans, it needs to be repaid…..
And yes it is “our money”, paid twice, as a matter of fact…..The baby boomers, in fact, are the only generation thus far who have not only paid for their parents’ retirment, they paid for their OWN as well due to the 1983 decision arrived at by Ronald Regan, Patrick Moynihan and Alan Greenspan that stipulated that the social security payment tax be RAISED to avoid a future shortfall…Do your research, Mr. McConn….We would be the biggest fools on the planet if we allowed the rich who raided our coffers to keep that money instead of paying it back.


Carmank
Comment posted January 21, 2011 @ 8:11 pm

The republican cowards did not mention SS or medicare in their debt reduction plan. They left that to the democratic fools whose reduction plan included this nonsense . SS does not add a single dime to the deficit and the dems are committing political suicide taking this issue on. All the FL folks will only know that the dems had it in their plan, while the repugs went after everything else. The repugs seem to be digging the holes deeper, but the dems instead of avoiding the dangers, seem to be helping to path the way to Obama’s dfeat in 2012. I will tell you right now I will not vote for a democrat who continues this lie of using SS to rduce the deficit while allowing tax cuts for the rich to remain intact.


CarmanK
Comment posted January 21, 2011 @ 8:21 pm

That is not true. You know not of what you spak. The SS trust fund is safe and funded through 2025-37. A simple fix for the boomers is to raise the wages contrbution level. The right wanted to privatize SS so that Wall Street would have more american dollars to invest and make profits or not with. They want their hands on the dollars, and there has been a concerted effort to dupe or guilt the american public into accepting privatization as a fix. It is not. And if there is an attempt to alter SS, inevitably there will be an attempt to “privatize a part or all of it”. Medicare is a well run social health care program. And if the bushies had allowed medicare to negotiate RX drug prices, instead of protecting big pharma, medicare would be on much sounder gound. Wall Streets wants SS dollars to play with, NOT NOW< NOT EVER. by the way, I have been disappointed with AARP for not standing firmer on this issue. They have let some of the corporatists their actions of late and it is not in the best interest of their membership.


Wm. R. C.
Comment posted January 21, 2011 @ 11:13 pm

If Social Security were examine by auditors the way private pension plans are,the auditors would conclude that it is an unsustainable ponzi scheme. Let’s face it boys and girls, those of us drawing SS are on the receiving end of the scheme. Let’s weep for our children and our grandchildren. Hiking taxes or repealing the 13th Amendment will not save SS. Raising the age at which one can draw benefits can. When SS was started the average life span was 66 years, only one year greater than 65. Today the average life span is about 80 years. It doesn’t take a rocket scientist to understand the basic problem posed by this cold fact. Another fact: A huge percentage (25%?) of payments are made to people with “disabilities.” Again, boys and girls, what constituted disability in 1935, when most work involved much physical labor, is a far cry from work today, when most of it is done at computers and desks in air-conditioned offices. I know many people who are drawing “disability” from SS who could work in today’s workplace if “disability” were re-defined. In any case, let’s weep for our kids and grandkids, people who truly understand the ponzi scheme.


ERmauer
Comment posted January 23, 2011 @ 5:18 pm

I think raising the age of retirement is reasonable since we are living longer IF we are living longer since the upcoming generation’s problem with obesity may make that change in the future. It also would require creating enough jobs for our youth since the older folks would be working longer. How about removing the cap on income level for social security task? My husband and I fall in the rich enough to need to pay the increase category, we just don’t see that we need to be increasingly richer than those less fortunate


Patti
Comment posted January 28, 2011 @ 7:36 pm

No problem. Just give me a check for every hard-earned dollar, adjusted for inflation, that I put into the system over the years, nothing more, nothing less. Entitlement program? You mean like my personal Savings Account is an “entitlement program”? Yeah…I guess you could say that I feel entitled to get my money back. Makes sense, doesn’t it? Managed correctly, it should be at least double what I put in over the span of my career, which means I should have a check for about $300,000 right about now. I’ll be lucky if I see $50,000 of what I put in.


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