Posted tagged ‘social security’

The Eastern Front?

May 22, 2017

Most historians cite Hitler’s decision to attacked Russia and opening a second front on the East as the crucial event which ultimately lead to Germany’s defeat in World War II. The argument goes that Germany spread its resources too thin and consequently could not win either in the west or the east. I wonder if history will repeat.

President Trump has a serious political and legal fight on his hands with regards to Russian Government involvement in the 2016 election. According to American security agencies, Russian entities did engage in hacking and dissemination of fake news during the campaign. After denying there was any Russian involvement, President Trump now asserts there was no “collusion” between his campaign and the Russians. The FBI and both the House and Senate have now investigations underway with the potential for serious political and criminal determinations. To make a matters worse and in true Roy Cohn style, the President fired FBI Director James Comey and told the Russian Foreign Minister that he had fired the “real nut job” (James Comes) and that would take pressure off this investigation. Hmmm.

Surprisingly this Russian investigation is not either the western or eastern front. Hmmm.

Instead, President Trump’s “western front” lays in his (and the Republican controlled House’s) tax cut proposals. The President is proposing “huge” cuts which will gift million and maybe billions to the wealthiest Americans. And, this Trump tax cut budget hole will need to be offset by budget cuts.

Therefore, the “eastern” (second) front will be Trump’s budget proposal itself.

Reports today say the President will propose sharp cuts to Medicaid in his budget proposal. Medicaid covers healthcare for the poorest of Americans and in many States covers millions of Obamacare newly covered Americans. While most Americans do not receive Medicaid benefits, these proposed Medicaid cuts signal the beginning of a wider attack, an all out attack upon healthcare coverage (America Health Care Act), followed by Medicare, and ultimately Social Security.

While tax cuts for the wealthy are shameful and unnecessary, offsetting these corporate and individual windfall tax gifts with cuts to programs used by the other 99% of Americans is mean spirited to the max.

Going for tax cuts is a mighty lift. Going for a huge reduction in government spending, particularly safety net and entitlement spending is an even bigger challenge. Going for both is likely to resemble a war with two fronts.

The Russian meddling investigation is a complication even Hitler did not have. While it is unlikely the President ever engaged directly with the Russians, it is not unlikely that several of his key staff and advisors did. The irony might turn out to be that any contacts with the Russians was really about potential future business deals (making money). not intent to sway the election.

The even larger irony might turn out to be that the President gets ensnared by coverup or obstruction activities (wanting the FBI investigation to simply go away) and not collusion with the Russians.  One would think the President would want, if only as an insurance policy, to boast high popularity ratings if the investigations were to turn political.  Offsetting tax cuts for the wealthy with entitlement cuts for everyone else may not appear popular as Americans think about things.  Hmmm.

It will certainly be hard fighting a war on two fronts.

When Businesses Desert Americans

March 1, 2014

There has been a shameful hue and cry over the Affordable Care Act.  Shamefulness arises from (1) the fact that Congress could not agree to go further and enact a single payer, universal healthcare system, and (2) the reaction of many businesses to cut hours or outrightly withdraw healthcare coverage rather than comply with the provisions of the ACA.

Many businesses claim they cannot afford the premium costs.    Other critics say the ACA is another step towards “socialized medicine”.  Hmmm.

Employers have not always provided healthcare coverage.  During WWII era wage and price controls, employers found that they could attract and retain employees if they offered healthcare (since they could not pay them enough).  This benefit has proven so popular that most Americans think employers and healthcare are a natural match.

There are down sides to employer provided healthcare.  One down side is the dependence upon “risk pools”.  Those who work and receive employer provided insurance are part of a large group of people (a pool) and as a result most experience a lower rate (the employer does).  The young and healthy are charged the same as the older and less healthy.  So most Americans learn to believe that health insurance is available to all and is not that expensive.

Consequently, Americans tend to disassociate themselves from what health benefits really cost.

A second downside occurs when someone becomes unemployed.  Suddenly insurance costs appear huge and should the person have had a pre-existing condition, they might not be able to afford the new premiums or even find an insurance company willing to write a policy.

So it is darkly humorous to hear people decry universal healthcare.  Their standard line is they do not want socialized medicine because they do not want the government to stand between them and their doctor.  Hmmm.  What’s the difference with your employer or your insurance company standing between you and your doctor?

And the even greater hoot is the American healthcare delivery system is not even close to the best in the world (for the average American).

Experts predict it is only a matter of time before the ACA will have to give way to further reforms.  While the ACA is projected to be less costly than pre-ACA, it is still too costly.  Socialized medicine, here we come.

On a totally different front, AOL recently opened another reason to look more closely at European socialized plans.  AOL decided it would change its pension plan (401k) where they would time their contributions to once a year.  This would save AOL money while eliminating the time value for the employee.  Instead of matching employee contributions monthly, AOL would do it once a year.  If the employee left AOL before the magic date, the employee would receive no matching contribution for that period.

While this is characterized as a cost control measure, it is fundamentally another step in businesses abandoning their role in a “national retirement” program.

European Countries have national retirement programs where businesses are required to withhold wages and fund a national plan that provides income once workers retire.  This could be called a socialized retirement plan.  Social Security is a smaller version of this.

The march towards social democracy is not a movement to abandon capitalism.  Rather it is the consequence of capitalism abandoning its responsibilities towards the health and welfare of workers.  When businesses construct business plans whose earnings satisfy shareholders and these earnings come at the cost of cuts to healthcare or retirement benefits, they are inviting the public to choose social democracy over the free market, “you are on your own” type of governing Americans are used to.

 

Retirement, What’s That?

May 13, 2013

John Bogle, founder of Vanguard, speaks of three “retirement” legs, Social Security, Defined Pension Plans, and Defined Contribution Plans.  The first two are broken but fixable.  The third is wounded and with continued misuse, won’t help either.  Boogle, however, remains optimistic.

Hmmm.

So what is retirement?  Normally, many of us think of the “golden years” when we can put our feet up and relax.  Or move to Florida and sit in the sun… or take that cruise we always heard about but never got around to taking.

Retirement is also that time when our employer tells us we no longer fit in the company’s future.  So sometimes the next move is becoming a Walmart greeter or finding an open park bench.  But what does one live on?

Social Security, a pension, and savings are the three Bogle is thinking about.   But is that enough for everyone?

Social Security is heading for the junk yard unless some modifications are made.  Tax revenue must be increased or payments must be reduced if Social Security is to remain solvent.  Increasing the earnings subject to Social Security withholding and changing the inflation formula have been proposed as easy fixes.  No fixes, big future problems.

Pensions are even a bigger problem.  In the past pension were the defined benefit type.  Each employee was promised a certain amount of money when he/she retired.  This promise was based upon the employer putting aside a certain amount of money and investing this money at say 8% per year.  Financially this approach would produce the promised retirement benefit.  So what is wrong?

Businesses as well as public service employers (States and Localities) unfortunately do not always grow and stay healthy.  Sometimes they suffer losses and choose to defer payments into the retirement fund.  Even more deadly, public and private employers cannot find 8% investment opportunities or the ones they find are deemed too risky.  So, less contributions and lower interest (more like 3-5%) make the formula for defined pension unworkable.

Define contribution plans were originally tax advantaged savings plans.  Employees save and often employers contribute too.  Defined contribution plans (401Ks) are now becoming the primary pension plan vehicle.  These plans are not only subject to the market return but are also tied to how much employees actual decide to save and whether they decide to “borrow” against their 401K.  How much will be there at retirement is an unknown.

Hmmm.  Worried?

Consider this.  The US average earnings is about $50,000 per year.  Lets say this person saves 10% each year ($5,000) and his 401K averages 3% return each year.  At retirement, the 401K will have grown to $245,000.  Investing that at 3% will deliver about $7,000 each year.  So retirement looks like social security plus $7,000 for the year.

Keep in mind that most Americans save far less than 10% per year, and most employee sponsored 401Ks have some employer contribution.  Therefore, the “average” person might accumulate retirement savings of about $250,000.  (hmmm, I wonder about their children’s college education and any wedding expense…)    Social Security payments of about $1,000 per month are reasonable estimates.  That equates to a monthly income upon retirement of about $1,600 a month.

Hmmm.

This example applies to the average.  It looks even bleaker for those earning less.  Playing with the numbers, one can see that a comfortable retirement means much higher income than the average of $50,000 per year.

So what’s the point of all this.

The US is a large country.  With over 300 million residents, there are a lot of people who will be looking at difficult circumstances in retirement.  Why then do we have a Congress that does not seem to see its role in engendering conditions where the average income can grow, and where rules governing the financial sector are enacted to ensure a fair shake for those dependent upon long term growth?

It is not Congress’ job to manage human behavior.  If people do not choose to save, this lies beyond the proper role of government.  What does not lie beyond, is the widening gap (as well as outright stagnation) of middle class income and that of the top 2%.  What also does not lie beyond Congress’ scope are sound Social Security and Pension systems.

This is not a left-right, democrat-republican, progressive-conservative issue.  For Congress, until America’s largest growing segment (the retired), are adequately protected from financial ruin, all other issues pale in comparison.

Disillusionment

April 30, 2013

The GOP seems to be incapable at times of getting out of its own way.  Every day some Republican Congress member will speak out and create another embarrassment for the GOP.  At this frequency, one would expect Democrats to be solidly in line for regaining both the Senate and the House leadership.  Yet, that is not the case.  Why?

The Washington response is “gerrymandering”.  It is certainly true that a lot of Republicans enjoy safety representing what are called “safe districts”.  These districts are a testimony to voter indifference and apathy.  Most gerrymandered districts make no sense and one end of the district has almost nothing in common with the opposite end other than being likely to vote Republican.  (States where Democrats control the State House follow the same practices if necessary.)

“Gerrymandering” is not why Democrats are not cleaning the floor with the GOP.

Voters hear the GOP chorus singing less government, more individual freedom, and lower taxes.

Hmmm, doesn’t that sound good?

When Democrats point out that “less government” means less Medicare for the elderly, less Medicaid for the poor, and less Social Security for the disabled and retired, for a moment voters get it.  The GOP is about more freedom for the wealthy and less service for the rest.  So, this should be a slam dunk, out with the GOP, in with Democrats.

Not so quick.

Voters also read about the VA, about relief for Hurricane Sandy, and about delays in the Affordable Care Act (Obamacare) roll out.  How can any sane person think well of government (especially one with a Democrat chief executive) when it takes over one year for a veterin to find out if their disability claim will be considered?  Why is it a full six months after the devastating storm has promised relief not arrived?  And, why is the Affordable Care Act tittering on the edge of financial collapse (or gigantic rate increases)?  Why can’t government deliver promised services?

I would suggest that our elected officials, Republican or Democrat, have little if any interest in seeing that existing government services operate as advertised.  Congress members ironically prefer to intervene for one of their constituents rather than try to fix the service for the benefit of everyone.  Being a hero and rescuing someone is more beneficial than working to prevent problems and helping others who do not live in ones voting district.

The bottom line is that voters have little faith that Democrats will do any better if given the keys to Congress again.  For voters, it is Tweedledee, or Tweedledum.

Voters must send a different message to their representatives.  The message is “focus on making current government services “world class” in cost, quality, and service.  We send soldiers off to war, it is intolerable that their claim for Veterans benefits should be ignored.  Aid to victims of national disasters is not a one time event.  There is no excuse for not having agencies perform due diligence (like insurance companies) and release relief funding in a 60 day period.  And, the biggest and most obvious, is why should the US settle for per capital health care costs which are twice that of most all other modern industrial countries, not insure everyone, and deliver mediocre outcomes for the rest?

Until voters send this message, our country will continue to drift into mediocrity.

 

Thinking Beyond The Front Page

January 14, 2013

Most of us have heard the phrase, “religion is the opium of the masses”.  Karl Marx wrote these words.  He was describing this social convention which took the everyday person’s eye and mind off of the otherwise tough life they were facing.  When I read the newspapers or listen to the 7/24 talking heads, I am reminded of this phrase.

In America today, life is far better (materially) than Marx’s times.  We have both so much and so much more opportunity.  Yet, I wonder whether Americans worry about what could lie just around the corner?

Capitalism is hard at work.  Bankers and Investment CEOs are making unheard of amounts of money each year.  A millionaire used to be a rare and admired person.  Today, even a billionaire is just another person scrapping to make a buck.  But we don’t talk much about these very wealthy people or the systems that enable and allow this much accumulation of assets.

Instead the 7/24 media blasts us with other issues to worry about 

  • Congressional gridlock
  • Citizens United
  • Obamacare
  • Syria and Benghazi
  • Smaller government
  • Secure Borders
  • Entitlements

and many other equally unenlightening reports results.

Is anyone thinking about what’s around the corner?

  • Congressional gridlock teaches future generation that their government officials are useless and their laws should not be respected.
  • Citizens United teaches that free speech is much freer with money.  Truth and principles are no longer important.  Just paper the airwaves with propaganda.
  • Obamacare, while a moral and ethical step forward, is woefully lacking in delivering world class health care.
  • Syria and Benghazi lay out clearly how different regions of the world can be, and the futility of outside influence when most of the population is uneducated and poor.
  • Smaller government is a misnomer.  Entitlement spending has nothing to do with the size of government.  What is needed are answers to how to provide healthcare with affordability and dignity for all, and how to continually find more efficient means to provide government services.
  • Secure Borders is a triumph of sloganeering.  There is actually a problem with undocumented Mexicans and solutions lie in making documentation straight forward and available.
  • Entitlements usually means Medicare and Medicaid, and Social Security.  Medicare and Medicaid is healthcare for those with fixed incomes and those who cannot afford insurance.  Reform healthcare for everyone and the problem disappears.  Social Security is a small problem today but one that has the potential to become much larger.  Let’s discuss smart modifications.

The current headlines provide the opium for the masses and take their eyes off the consequences and the root causes of today’s real problems. A wide group of special interests benefit from keeping these topics in the 7/24 headlights.  These interests do not want us to see beyond the front page.

 

Is This About Boehner Being Speaker?

December 20, 2012

The Speaker of the House of Representatives is John Boehner.  On January 3, 2013, he might be reelected by his Republican majority, or he might not.  If not, Boehner will be just Representative Boehner, a smoker, a golf enthusiast, and a fan of tanning salons.

The alleged positions of President Obama and Speaker Boehner are so close even a first grader could find the middle and reach a compromise.  For some reason, these two can not.

Obama and Boehner are two men who also know the consequences, at least short term, of reaching no agreement by year end.  The general public will be mad and the stock markets will be furious.  Beyond the fiscal cliff issue, failure will signal two more years of total gridlock in Congress.  Public opinion on the value of government (not its services) will be in the toilet.

Here’s one take.

Suppose Speaker Boehner and the President announce an agreement.  Let’s say it is taxes up for those earning $500,000 or more, increase in dividends and capital gains taxes, and changes to Medicare and Social Security plus some other miscellaneous cuts.  The deal is about $2 trillion over 10 years.

The House votes on these measures and Speaker Boehner cannot deliver enough Republican votes for the measure to pass.  Come January 3rd, it will likely be Speaker Cantor.

From Boehner’s eyes, ending his Speakership for $2 trillion (roughly $200 billion a year) when we are sporting $1 trillion a year deficits might not seem a good bet.  Narrowly viewed, he is probably correct.  Viewed more broadly, the fiscal cliff is a surrogate for Americans believing their government can be effective.  Even a small step is important.

The 7/24 talking heads have told us repeatedly that we are watching Kabuki theater.  The ending is already known and what we are watching is the dancing that leads up to it.  I am beginning to think that is not the case.

Agreement by year end is a goal which can cement John Boehner’s legacy.  If he agrees to a compromise and gets it passed in the House, Boehner will clearly be seen as an effective leader.  If the compromise fails in the House, Boehner will be seen as a courageous leader who deserved better.

 

 

 

Are The Woods Big Enough?

December 5, 2012

Congress, years ago, passed legislation that established Medicare, Medicaid, and Social Security.  These programs were intended to ensure that Americans, whether they were retired or disabled or just unlucky and in the grip of poverty, would have health care and financial assistance to ease old age or tough times.  These programs were not gifts, but were a payout from funds collected from all Americans.  The government was supposed to be an administrator and not the rich uncle.  Hmmm.

Over the years much has changed.  More recently, while the rich have gotten richer, Congress has consistently stepped away from its responsibility to keep these programs on their intended goals.  Congress has also been woeful keeping adequate funding in place.  Now Congress’ past malfeasance has caught up. Congress seems to be weighing the value of tanks instead of maintaining health care for the poor and the elderly.  How can Congress members sleep at night?

First, Congress members refer to Medicare, Medicaid, and Social Security as entitlements.  This pejorative term poisons the atmosphere immediately.  It suggests that recipients are entitled to take and prefer not to give back.  The term turns a blind eye to recognition that America is the richest country in the world and that other modern industrial countries have similar programs.

Second, Congress can fix this dilemma through higher (or new) taxes and adopting some sensible modifications.  Instead, many in Congress seems more willing to denigrate Medicare, Medicaid, and Social Security and imply that hard work (read personal savings) is all that is necessary to attain health care or pension relief.  For the top 2% this might be close to true.  For most of Americans, unless Medicare and Medicaid are eliminated in favor of Universal Health Care for all Americans, the future is not very bright.

Native Americans are said to have practiced a form of healthcare Congress seems to be moving towards.  When native Americans got old and could no longer hunt, they simply walked into the woods.  In the woods they were no longer a burden upon their family or their tribe.  Hmmm.

What an elegant solution.  Maybe Congress is really thinking.