With the interim ‘debt ceiling/government shutdown’ agreement reached last week between the Obama administration and the Teaparty-driven US House of Representatives, the real negotiations on deficit cutting—aka Austerity American Style—are about to begin again, now that the Teaparty has retreated on its demand to defund Obamacare.
A committee will now recommend further spending cuts by December 13, with a deadline in January 2014. The next debt ceiling deadline has been pushed even further out, to February 7, 2014. That means the parties will clearly now focus specifically in the coming months just on deficit cutting.
At the center of coming negotiations will be hundreds of billions of dollars in proposed cuts to social security and medicare, in exchange for a longer term debt ceiling extension beyond the November 2014 midterm congressional elections.
In the ‘ mix’ for an agreement may also be big corporate tax cuts in exchange for token, ‘smoke and mirror’ tax loophole closings, as Tax Code legislation moving through Congress comes to a concurrent vote.
Both Obama and the Republicans in the House were agreed last summer, before the Teaparty faction upset the negotiations agenda in September by injecting the Obamacare issue, to proceed toward cutting ‘entitlements’ and seeking Tax Code Overhaul.
With the Teapartyers in temporary retreat, Boehner and the Republicans have now returned to their initial strategy of this past summer of demanding entitlement cuts for a budget deal. And Obama is prepared to meet them half way, already on record to date to cut social security and medicare in his 2014 budget by $630 billion, as well as on record to cut the top corporate tax rate from 35% to 28%.
For my analysis of Obama’s 2014 Budget—which includes hundreds of billions in social security-medicare cuts—listen to my June 5, 2013 radio show, Alternative Visions, commentary at the following url:
See also my June 2013 blog entry and analysis of Obama’s Budget, plus the longer historical piece on US deficit cutting entitled, ‘Austerity American Style’.
It is important for readers to know that neither social security nor medicare are facing a long term financial crisis. A closer look at the 2014 budget and at reports by social security-medicare trustees shows that problems exist for financial of Social Security Disability Insurance (SSDI) within the social security program, but do not the retirement benefits program in social security. Nevertheless, Obama is proposing to cut future social security retirement benefits. Similarly, problems exist with funding for Part D prescription drugs program within medicare, which has never been funded by a tax since its inception in 2005 and under which drug companies are allowed to price gouge everyone on drug costs. But Medicare’s basic hospital and physicians, Part A and Part B, programs are fully funded for the next decade.
For a clarification of the real status of social security and medicare, watch my 35 minute video presentation earlier this year to the Progressive Democrats of America in San Francisco, on this topic. That video is available on my website at:
http://www.kyklosproductions.com/videos.html (note: click on the TV icon that is second from the top, for the PDA presentation).
It is time to get the facts straight, before the hype and lies start to flow once again in the run up to the next deficit cutting-tax cuts for the rich deal that is now on the agenda once again.
Dr. Jack Rasmus
October 21, 2013
Dr. Jack Rasmus @drjackrasmus
Jack Rasmus 
SOCIAL SECURITY
What’s it all about?
PREFACE: Before one is able to solve a problem, one must recognize, understand, and analyze the problem until one has the requisite information and facts to make the best conclusion to mitigate or resolve the problem.
PROBLEM: Regarding Social Security (SS), it appears that, given the current structure of the program, funds necessary to support the program will be insufficient within a given number of years.
WHAT CAUSED THE PROBLEM? The SS program was never actuarially sound due to its original structure (1% of first $3,000 wages) as a Ponzi scheme (FDR may have thought that over time, adjustments would be made to fix the program). Over the years, changes have been made, but only to enable a delay in the inevitable. The problem has been exacerbated by such phenomena as being entitled to receive SS after only being in the workforce for 40 quarters, not all workers paying into the program, et cetera.
SHOULD THIS PROBLEM BE RESOLVED BY ENDING IT? The question is whether or not this program is appropriate. Does it seem rational that the workers who have participated in the workforce for 40-45 years should be entitled to retirement benefits?
Congress, over many years, has issued its many stamps of approval of stimulating retirement funding, e.g., defined benefit and contribution programs, Individual Retirement Act, 401k program, et cetera.
Obviously, Congress is not perfect (as evidenced by its shortsightedness regarding its “retirement” legislation and the unintended consequences) and may have been wrong in issuing these “stamps of approval”, but the probability is about 99.9% that our legislators were correct, thus a logical conclusion should be that the SS program should not be eliminated.
SHOULD THE SS PROGRAM BE MODIFIED? Although less so now than 65 years ago, the SS program remains a quasi-Ponzi-like situation, thus it must be modified.
HOW SHOULD THE SS PROGRAM BE MODIFIED?
The program includes revenue and obligations.
Presently, the revenue is generated by charging workers 6.2% of his or her wages, up to a maximum of $106,800 per year plus a matched amount by the employer. http://www.ssa.gov/planners/maxtax.htm#maxEarnings
Had the maximum limits, per the hyperlink, been $106,800 since inception, there would be hundreds of billions of additional funds within the SS trust fund. Further, if there had been no maximum, the fund would have benefited by additional hundreds of billions. Lastly, had all income, including passive income, been subjected to this “tax on income”, there would be even more funds.
There must be a substantial reason why only earned income has been subjected to this “tax upon income” and why there has been and remains a limit upon the amount subject to this “tax upon income”.
Another “interesting” factor is that not all wage earners are subject to this “income tax”.
If the above had been done, every retiree would have an account that was fully funded to the extent his or her choices could be: rollover into a self-directed IRA, an annuity, etc.. This “asset” would not disappear upon death, i.e., it would be included in one’s estate.
The bulk of the obligations are paid to retirees who have reached the applicable ages.
In December 2009, 64% were retired workers, while 15% were disabled workers, 8% were children, 8% were widows, widowers, and parents, and 5% were spouses.
There could be an excellent argument that only payments to retired workers should be paid from the fund, while these other payments should come from the general fund.
NOTE: If it were appropriate for a company to fund retirement obligations for its employees, why would a nation not fund the retirement of its workers?
The obligations would be no less valid than those for defense, education, et cetera.
As a competitive benefit, if the funds were an obligation of the federal government, the cost of producing goods and services would be reduced, which would enable companies to be more competitive regarding Japan, Inc., China, Inc., Brazil, Inc., et cetera. This would, also, be valid regarding the delivery of health care, i.e., any costs, which can be shifted from above the line to below the line would enable companies to be more competitive.
CONCLUSION: By far, the best modification would be for a change from charging workers and employers to single-payer government funding.
Until the change can be effected, legislation should be passed, which would assess this taxation on all income, earned and unearned, without limitation.
The answer to the above question regarding the reason why only earned income has been subjected to this “income tax” and why there has been and remains a limit upon the amount subject to this “income tax” should be apparent and intuitive, i.e., the upper income earners would pay more. This, in essence, is why politicians, both Democrats and Republicans, and “talking heads” have been “tenderizing” the People.
I ask everyone to contact his or her Representative and both Senators to inquire as to how much of our massive current federal deficit of approximately $1.6 trillion is attributable to Social Security. The answers will astound most.
HINT: The answer is ZERO!
mz
April 12, 2011
Modified June 15, 2011
photish, gmirl,
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