In the recent Wikileaks revelations confirming Hillary Clinton’s duplicity, one of the clearest disclosures of her policy plans concerns her intention regarding Social Security. She stated that she would return to the position of the National Commission on Fiscal Responsibility and Reform, charged with producing recommendations for reducing the deficit, i.e. cutting government social spending.
The Commission, or “Simpson-Bowles committee” -named after co-chairs former Wyoming Republican senator Alan Simpson, and Erskine Bowles, former Morgan Stanley board member and chief of staff under Bill Clinton- was appointed by Obama in 2010. Among its members were some of the most persistent deficit hawks. Most significantly, the Commission was stacked with leading enemies of Social Security flailing their arms over the “impending insolvency” of the program. The day before his appointment as co-chair, Simpson said in an interview with the Washington Post: “How did we get to a point in America where you get to a certain age in life, regardless of net worth or income, and you’re ‘entitled’? The word itself is killing us.” (Feb. 17, 2010) In a later e-mail he described Social Security as “a milk cow with 310 million teats,” and had characterized its beneficiaries as “greedy geezers.” Bowles’s record was in line with Simpson’s. He had earlier negotiated with Newt Gingrich how best to cut safety net programs. The ultimate objective was to privatize Social Security.
In a rare moment of candor, a then-editor of The New York Times, Fred Brock, wrote an article critical of the Social-Security-is-going-broke alarmists titled “Save Social Security? From What?” (Business section, November 1, 1998). Brock attributed the faux hysteria to “hidden agendas…..Wall Street would love to get its hands on at least some of the billions of dollars in the Social Security trust fund . . . But knowing that the idea [of full privatization] won’t fly politically, [politicians] are pushing for partial privatization, in which individuals would invest a portion of their contribution in the stock market, all in the name of rescuing the system.”
Bowles’s efforts to undo Social Security through “partial privatization” began during the Clinton regime. The left-liberal economist Robert Kuttner, in his 2007 book The Squandering of America, detailed how Washington elites of both Parties had been planning to weaken Social Security since the Clinton Administration. Steven Gillon’s 2008 book The Pact included letters and interviews with reliable sources illustrating Bill Clinton and Newt Gingrich’s collaboration to get Congress behind a plan to begin turning Social Security’s so-called trust fund over to Wall street, which would manage, for a fee, retirees’ benefits. Clinton’s Treasury Secretary Robert Rubin had prodded the president to work with Gingrich not merely to reduce benefits and extend the retirement age, but to begin the privatization of Social Security. Clinton appointed Bowles as his intermediary. But the Monica Lewinsky scandal caused both embarrassed Congressional Democrats and Gingrich to distance themselves from Clinton. The privatization plan fell apart.
A waiting game was now under way.
Hillary Clinton’s speeches to the captains of finance strongly imply that she would resume the project of privatizing Social Security. Hers will be a gradual, stealth approach. The opening salvo will be further cuts in benefits and extensions of the full-benefit retirement age. But these alone will not satisfy Wall Street. The privatization plan will be resurrected, first in the form of legislation once again to begin “partial privatization.” In the end, the objective will be to turn the program into a broker’s-fee-for-service plan entirely in the hands of Wall Street. Retired workers will no longer be unqualifiedly entitled to Social Security benefits. Their fortunes will be tied to the vagaries of the stock market and other speculative ventures favored by brokers. And retirees will pay for this “service.” There will be no refunds when the market goes belly-up.
What Do Retirees Now Get From Social Security?
Because so many seniors have scant savings and have been employed in low- to middle-wage jobs, poverty threatens the majority absent government income supplements raising them above the poverty line. 1 in 3 working Americans has zero retirement savings, and the median working-age couple has a mere $5,000 in retirement savings. The Social Security Administration reminds us that “Social Security is the major source of income for most of the elderly.” (1) It is in fact the federal government’s biggest domestic program, paying benefits to around 1 in 6 Americans and to over 90% of the elderly. With Social Security benefits in decline as the retirement age is steadily raised, the future portends especially hard times for old folks and for the population as a whole, because the elderly are a growing percentage of the entire population.
An outstanding feature of American society well before my 20 year old daughter reaches middle age will be a serious poverty plague among the growing numbers of the elderly. This is evident in the current state of Social Security and the most reliable projections for its future.
Social Security benefits are conspicuously modest. In the countries included in the Organization for Economic Cooperation and Development average public pension benefits replace about 61% of median earnings. The corresponding figure for the U.S. is 37%, after subtracting (escalating) Medicare premiums. The U.S. ranks 26 out of the 30 OECD nations in this respect. The average retiree receives $1,328 a month in Social Security benefits. A third of beneficiaries receives 90% of their income from the program and 61% receive more than 50% of their income from the program. It is a telling indication of the niggardliness of the median household income that paltry Social Security payments kept 22 million from poverty in 2015. Thus, without Social Security benefits, 41% of elderly Americans would have incomes below the official poverty line, whereas with the program, “only” 9 percent do.
Social Security also benefits the non-elderly, and they too will be hit by Clinton’s announced offensive. More than 1 million children were lifted from poverty last year. Some received benefits because a parent died or became disabled or retired, and some live with relatives who receive Social Security. (2) Some 12 million disabled persons received benefits in 2015. According to the Social Administration itself, “That is barely enough to keep a beneficiary above the 2014 poverty level ($11,670 annually).” (3) All in all, without Social Security 20.5% of the total population would be in poverty; because of the program, “only” 13.5% are in poverty. The total number lifted out of poverty by Social Security in 2015 is 22,090,000. (4)
The Simpson-Bowles Recommendations for Social Security
The figures above make it clear that Clinton’s planned attack on Social Security will significantly raise total poverty, particularly among the elderly, the disabled and children. Clinton’s planned revival of Simpson-Bowles virtually guarantees this outcome. What were the recommendations of the National Commission on Fiscal Responsibility and Reform? The emphasis is on cutting benefits by three means.
First, the retirement age would be increased. The then-retirement-age of 66 was to be increased to 67 by 2022 for people born in 1960 and later. Early retirees would be able to claim reduced benefits at 62. The Commission recommended that both the full and the early eligibility age would continue increasing after 2022. At an unspecified time before 2050 the early eligibility age would rise to 63 and the full retirement age would increase to 68. By 2070 the early eligibility age would reach 64 and the full retirement age would climb to 69.
The recommendations would force the elderly either to work full time into the years when their physical capacities have undergone normal decline, or stop working when their bodies tell them that persistent work effort is bad for their mental and physical health and thus suffer the penalty of reduced benefits and an even lower standard of living. The recommendations amount to escalating cruelty to the elderly.
What may not be obvious at first glance is that any increase in the full retirement age entails a cut in benefits for each and every retiree irrespective of the age at which they file. (5) Because the full retirement age is the age at which full benefits are paid, so that workers who file sooner collect permanently reduced benefits and those who file later get larger benefits, raising the retirement age means that the early retiree suffers a deeper reduction and the later retiree gets a smaller increase. The economic security of everyone in the system is jeopardized whenever the retirement age is raised. And Social Security “reform” means gradually raising the retirement age.
Clinton’s announced plan means a wholesale assault on the entire elderly population.
The second means of cutting benefits consists in changing the formula for determining payments so as to reduce benefits.
The third way the Committee would lower benefits is to reduce cost-of-living adjustments. The idea is to devise a different measure of inflation in order to lower cost-of-living adjustments by 0.3 percentage points a year. A number of tricks have been effected to underestimate inflation and hence lower the estimated cost of living. E.g., the substitution hypothesis assumed that when the price of hamburger went up the typical consumer would substitute chicken in the “basket of goods” stipulated to reflect the cost of living. Hence, the measure would not count a rise in the price of ground beef as inflation. What was actually measured was the cost of maintaining a declining standard of living.
All these strategies functioning to put the squeeze on seniors are implemented on top of a system whose basic structure already fails to do what it is allegedly intended to do, to protect the elderly’s buying power. In addition to fudging inflation estimates, the weight attached to various components of the basic market basket of goods is skewed against the elderly, precisely in order to depress Social Security payments. Older Americans tend to spend a greater portion of their budgets on medical care and housing than do younger people. Yet less weight is assigned to medical care and housing costs, which have risen more than 7% and 5% respectively since this time last year, and more weight to gasoline, which has declined deeply over the same period. And because the Consumer Price Index excludes the spending patterns of those over the age of 62, it does not include one of the fastest growing costs for retirees, rising Medicare premiums. It is as if the idea was to hit the elderly especially hard. As if indeed.
It is no surprise, then, that the scandalously inaccurate estimates of increases in the cost of living actually increase the cost of living for everyone, especially seniors. The COLA increase for 2017 will be a niggardly 0.3%. From 2010 to 2016, the COLA was increased, respectively, by the following percentages: 0.0, 0.0, 1.7, 1.5, 1.7, 0.0 and 0.0.
Clinton vs. Obama on the Simpson-Bowles Recommendations
Obama opted not to endorse all of the recommendations of the Commission but to “build on the fiscal Commission’s model.” (6) He accepted most of the major tenets of the Commission but went slower on their implementation. Austerity measures would be implemented over 12 years instead of 10. But he adhered to one of his principal reasons for putting the Commission together, that Social Security benefits would soon increase deficits to unsustainable levels. He supported the Commission’s aim to cut Medicare and Social Security. But his Social Security and Medicare cuts would be smaller than the Commission’s recommendations.
Clinton will at the least swallow whole the Simpson-Bowles recommendations. All stops will be pulled. The woman holds popular sentiment in contempt, so public disapproval will count for nothing. Let us not forget that a principal function of neoliberal policy is to do away with democratic government, a requirement if the distribution of private and public resources is to be consistently to the benefit of the plutocracy. Those most dependent on government assistance -the elderly, the unemployed and the disabled- will be hit hard.
The elderly tend to be more politically active, at least with respect to voting behavior. Their demographics are noteworthy. Between 2012 and 2050, the United States is expected to experience considerable growth in its older population. People 65 and over represented 14.5% of the population in the year 2014 but are expected to grow to be 21.7% of the population by 2040. (7) By 2050, the population aged 65 and over is projected to be 83.7 million, almost double its population of 43.1 million in 2012. By 2060 there will be about 98 million older persons, more than twice their number in 2014.
The elderly are growing both in number and as a percentage of the population. They will be hit very hard under financialized neoliberal capitalism. Will they quietly bemoan their fate, or will they be among the historical descendants of Occupy and the Sanders movement, making up a growing force of resistance to an increasingly austere and repressive (dis)order?
(1) Social Security Administration https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf
(2) Center on Budget and Policy Priorities http://www.cbpp.org/blog/social-security-lifts-22-million-americans-out-of-poverty
(4) Census Bureau Current Population Survey, March 2016 http://www.bls.gov/cps/
(5) See (2) above.
(6) Jackie Calmes, “Obama’s Deficit Dilemma,” The New York Times, February 27, 2012