Scaring Seniors…Again

Okay, let me get this straight: President Obama announced today that if a deal on the deb

t ceiling is not reached he cannot guarantee that seniors” Social Security checks will go out on August 3. Thus, in the world of political posturing, some 70 million Social Security and Veterans benefit checks that go out would be replaced with letters explaining that Social Security benefits cannot be paid because some evildoers in Congress want to prevent the federal government from making good on its obligations.

Let”s get real here. First of all, from August 3 to August 31, cash receipts to the treasury are expected to be around $172 billion. Suppose this money is used for paying mandatory budget expenses: This includes interest on the debt at $29 billion, Medicare and Medicaid at $50 billion, and Social Security benefits at $49 billion. Of course, entitlement programs are not chump change, but estimated revenues will cover them with more than $40 billion left over. This is not to say that there is no room for entitlement reform, but to threaten punishment of senior citizens because Congress cannot come to an agreement falls short of stealing somebody”s wheelchair. Those on the left criticize the right for balancing the budget on the backs of the most vulnerable, yet the President is

threatening to do just that.

And the cost of withholding Social Security checks? If letters of “default” are mailed instead, some 70 million would have to be mailed: say the cost of paper and printing is about 4 cents a page, the bulk mailing rate is 15 cents per letter, and a few staffers would administer them at $25 an hour for 40 total man hours. The cost to taxpayers of informing them that their taxpayer-funded benefits will come to a halt? About $13.3 million. Can we stop the insanity?

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Comments (3)

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  1. Tom says:

    All too true. It seems inevitable that something won’t be paid for if they can’t borrow the money to pay for it, but this move was clearly designed to turn the thumb screw on old people.

    It’s too bad it all fell apart when Republicans wouldn’t budge on defense spending and Democrats wouldn’t give up entitlements. FT ran an interesting analysis, saying basically that Republicans want everything and Obama seemed willing to compromise. I’m not sure Obama was sincere, but Republicans would have done well to raise the stakes instead of folding. Now they look like Pompey when Caesar invited him back to Rome…

  2. Sarah Onach says:

    Scaring seniors work, plain and simple. Shame on Obama for playing this tired but politically effective card, but shame on seniors (I am one!) for continuing to fall for it…and at the expense of their grandkids, no less.

  3. William W. Porterfield says:

    Basic data:
    US population 2009 – 309 million
    SocSec recipients 2009 – 51 million (16.5% of 309 million)

    What follows is a proposal to continue Social Security (SS) in such a way as to maintain its fiscal security and permanence without cutting off any recipients, lowering benefits, or raising the required contribution. At present, the SS OASI (Old Age and Survivors Insurance)fund is approximately in balance in the sense that current inflow of contributions equals somewhat more than current payments IF the “payroll tax” continues to be paid. It follows that as long as no more than the present percentage of the total population receives payments, the contributing-worker/retired-recipient ratio is adequate to fund payments indefinitely.

    Actuaries can make short-term forecasts of demographic data like “number of SS recipients in five years” quite accurately, so that, for instance, we can know the potential number of recipients for 2016 and the total population in 2016 with good reliability.

    We propose that SS payments be made, in perpetuity, to the oldest 16.5% of the eligible US population, which will keep the worker/retiree ratio large enough to fund the system forever. This will mean defining the age threshold for SS each year for those beginning payments five years later. The threshold would be defined in years and months as it now is. Obviously, if the shift were to be made instantly the age threshold would be exactly where it is now. Projecting forward five years, it is likely that the age threshold will be slightly higher than is currently projected–but the genius of the demographics is that the increase will be very small. Our proposed method of operation would be as follows: In November 2012 the SS would announce the age threshold for those planning to collect benefits for the first time in calendar 2018. That age would have been chosen by formula to yield a projected 16.5% of the 2018 population above that age. In November 2013, the SS would recalculate and announce the age threshold for those planning to collect benefits for the first time in calendar 2019; and so on annually.

    Note that the five-year future projection (before implementation) guarantees that whatever threshold results statistically, no retired person will ever lose SS benefits. Note also that a guaranteed eligibility age known five years in advance is time enough to plan the specifics of retirement. And finally, note that the fixed age-percentage definition means that as inflation occurs, the increased contributions will always allow an inflation increment in benefits–benefits will never be reduced.

    It is true that over an extended time of application, perhaps 20 years, the age of eligibility will increase more rapidly than is now projected (though we are in the middle of a programmed increase). But it will increase very slowly still, and in a predictable way. Of course, for the first five years the current rules would apply, and all those receiving benefits under the old rules would be guaranteed continuation. Those who would be just short of the current-rules threshold age might face a “notch” of a few months, but the size of the notch would be small (particularly since we are currently ramping the age up), and it would be known five years ahead for planning purposes.

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