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Wednesday, October 2, 2013

Obama – “I need a lever”

 

As a long time watcher of Social Security I was shocked (yes, shocked) at the recent Congressional Budget Office (CBO) report on America’s largest entitlement program. CBO concluded that the long term outlook for SS deteriorated substantially over the last twelve month. (CBO link)

CBO revised its assumptions regarding mortality. This is a huge variables for SS. With people living longer, they will receive more checks; this eats into the solvency of SS over a long-term period.

CBO concluded that one option to ‘balance’ the solvency of SS required an “Immediately and Permanent” payroll tax increase of 3.4% (Wow!). A year earlier, CBO stated that a payroll tax increase of 1.9% was required to balance SS. The change in the tax increase required is 70% higher than that reported just a year ago!

SS’s taxable payroll is equal to 36.3% of GDP. That comes to $5.8 Trillion for 2013. A 3.4% tax increase translates to approximately $200 Bn! A tax increase of this magnitude would absolutely sink the economy. There is no chance in hell that anything like that could (or should) happen. However, there are a variety of other alternatives to tweak SS that would not have the negative consequences of such a big tax increase.

 

Were it not for the fact that the country is managing its finances on a month to month basis, the rapidly growing problems at SS would be high on the list of problems that need attention. Clearly, the White House has read the CBO report. I wonder if the WH will use the deteriorating condition of SS as its “lever” in negotiating with Republicans over the budget and the debt limit.

Would Obama throw SS under the bus to achieve an extension of the debt limit and an end to the shutdown? Of course he would. Some things that might happen as part of a ‘big deal’ to buy a resolution of the immediate crisis(s):

I) Raise the cap on taxable earning- liberals love this.

II) Raise the retirement ageObama has already pushed for this.

III) Means test SS retirement benefitsRepublicans wanted this for Medicare.

IV)  Change the COLA inflation adjustment. Liberals hate this, Republicans want it, Obama has pushed for it.

If all four of these steps were adopted, it would have near Zero consequence to the economy for the next three years (all changes would be phased in). Obama would love that outcome.

What’s the most important thing for Obama? To end the debate over ACA. Would he trade ObamaCare for big changes to SS? In a New York minute.

 

As near as I can tell, there is currently no basis for a resolution to the budget impasse, and it looks like we are headed off the cliff on the debt limit. Something has to give. SS may be the lever that the Big O needs for a deal that saves his presidency. The Tea Party folks in the House will not vote for anything that allows ACA to continue, but there are a fair number of moderate Republicans who would trade SS for ACA. Nancy Pelosi (D-CA) would puke at this result, so would Harry Reid (D-NV. But if they apposed a deal, then they would be the ones responsible for a national default (Republicans would love this outcome).

Would Obama push his pals off a cliff to get a deal? The answer is that he has no other viable options.

 

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Note:

The “Non Partisan” CBO did not have to make dramatic changes to its mortality assumptions in September of 2013. The 5/13 SS Report to Congress did not have changes in its mortality rates, but CBO did. Why? CBO knew that it was teeing up SS with its revisions. Was the timing of the revisions related to the then pending crisis over the budget and debt ceiling? Who really has levers in D.C.? Technocrats?

 

Comments

  1. Something is Afoot says:

    Here’s another possible trend…..many more citizens opting to take SS at 62 rather than wait for higher payouts at later ages. I’ll bet it’s happening now. I should poll my peers about this.

    I’m 54 and about one year ago I was reviewing my SS statement of (future) benefits, pulled out the calculator and realized that I would be pushing 80 before it would become beneficial to have waited til 66 to start, for the higher payout. Yeessh. Plus who know what negative changes to that plan are down the pike.

    In my case, I have a good degree of control in managing earned income because I’m self-employed. So, pending more research/review of my options, I will likely begin drawing at the early date. A bird in hand is often a good plan.

  2. Bruce, aren’t they just burying the immediate problem with DI? Appendix A to the CBO report has some additional information. Over a longer period they can say DI expenditures will be reduced from current levels as a % of SS expenditures.

  3. Stephen McIntyre says:

    Actually it’s easy to discern what is happening. The folks I know that are hitting 62 I am 58, are signing up as fast as they can and not waiting till they are 66 or older for the simple reason they can see the handwriting on the wall as far as future SS Benefits are concerned.
    Most folks can now see that benefits will have to be cut on all entitlement programs once the full force of the Baby Boomers hit the system, some 60 to 80 Million folks and there are not enough workers behind us to pay the freight for our group. So get while you can and as much as you can is the mantra here.

  4. DID U SEE THAT,The president says Washington Redskins name is “offensive” As i said this administration is the most RACIST bunch to come down the pike ever seen.If allowed to continue,Washington and the whole country will look like Detroit.God help us,because soon the dollar will not.The entire US Govt is a game of musical chairs,while the country burns.When the music stops,and the fed stops printing,we the people are toast.With your knowledge BK I wish you would address this race to the bottom once again.Thanks

  5. Social Security is the PRIVATE PROPERTY of the WORKING AMericans that paid for it. It is NOT an “entitlement” as our SCUMBAG politicians keep trying to label it in order to equal it to welfare. WE PAID FOR IT. The POS politicians STOLE the surpluses and OWE us $2.6TRILLION. Social Security is PRIVATE PROPERTY.

    • Most of you are misinformed about SS. You have listened to the gov.’s misinformation campaign and believed it. FDR needed money for his New Deal. The Question is, how do you raise taxes in a depression? You sell the public on a new Old Age Retirement scheme. Of course, you have to pay into it for 4 yrs. before you can draw on it. Whoopie, free money for the gov. to spend. FDR and every Congress has spent that money before the ink was dry. You remember the Senators on TV telling Americans that we have to protect the SS Lockbox. HAHAHA–What lockbox? There never was a lockbox, just a bunch of file cabinets full of non-negotiable securities from the Treasury. HAHAHA. But as Sen. Barry Goldwater said, as I remember, “…you’re going to get your social security check every month. You may not be able to buy any thing with it, but you’re going to get it every month…” or something to that effect. Of Course, People do get a SS check, after all, you have to keep the Con going. When the money coming in to SS is less than the money going out, the game’s over. Congress has always thought of it as their money not your money. It IS an entitlement, it is WELFARE, Arnold, you may not like it, but it is! Read the book “The Biggest Con”. Get enlightened, Arnold.

      So, how do you raise taxes in a depression without incurring the wrath of the American voter? As it was before, it is as now. You sell the American bumpkins on free healthcare. Walla, a big tax increase for a desperate, cash strapped gov . And you thought it was FREE. HAHAHA. I can’t contain my laughter. HAHAHA! What a bunch of dumb smucks. No one ever lost money betting on the stupidity of the American voter.

      • Homer … thanks for the tip on the book, I may get it.

        But, before you go ripping Arnold a new one you might want to get YOUR facts straight.
        Who said FREE healthcare? Crikey, where do you get your info?

        Partakers of that plan will be paying monthly premiums. Not free. And the premium numbers that I’ve seen are more than what I pay for private insurance. So, what has the potential to be a real problem is how many VERY SICK people sign up for it. I’ll bet the govt estimates of that were low b/c it helps sell the plan. And then…..SURPRISE!

        • M. Thatcher—-“Democrat Voters Confused: ‘I Didn’t Realize I Would Be The One Who Was Going to Pay For It Personally'” “Back in 2008, when then-candidate Obama promised Joe the Plumber and the rest of America that he intended to spread the wealth around, most democrat and liberal voters embraced the notion of wealth redistribution under the guise of equality. A universal health care plan, that would be free for all Americans, was the promise from the candidate of hope and change.” Mac Slavo–SHTFplan.com
          http://www.shtfplan.com/headline-news/democrat-voters-confused-i-didnt-realize-i-would-be-the-one-who-was-going-to-pay-for-it-personally_10072013

          Maggie, The whole bill of sale was free healthcare. Much reduced premiums from your current healthcare provider. No rationing or single payer, you can keep your own doctor. Etc, etc, etc…
          All of it economically impossible. Claptrap from Obama, the Liar. Embraced by the feely-good populous voting yokels. I should add-greedy yokels. It all goes to prove that P.T. Barnum was right. Obama Care, aka, The Affordable Care Act, is the biggest tax grab by a corrupt gov. in 80yrs.

          Maggie, I ain’t the only one saying it. It was all spelled out by many people in 2008, who were ridiculed incessantly by the Main Street Media. Holy Cow, what they said is all coming true.
          The American people were sold and then force to accept a bill of goods, thanks Obama, Harry and Nancy. You can be sure when you are forced into a bill of goods, the person forcing you will get the better end of the stick.

          • Homer – I agree with most of what you say and P.T. Barnum was definitely a sage observer.

            But, it’s just rather disingenuous at this point to refer to it as FREE healthcare. The people in the plan will be paying premiums, co-pays and have deductibles. So, in actual fact, the plan is not free to enrollees. (Yes, we can discourse about who will be subsidizing all that, etc., etc.)

            • Maggie–You just don’t get it. It is not about HEALTHCARE. It’s about raising taxes. Unfortunately, you are going to get less healthcare, less access to it (it is called rationing) and more cost to you personally (no the rich ain’t agonna pay for it). Look, Maggie, when healthcare was introduced by companies into the workforce, it was the cheaper substitute for a pay increases as healthcare cost were minimal. The workers soon realized that it was basically free and took full advantage of it. Demand increased and supply stayed almost the same. It’s Economics 101 When that happens prices go up and no gov. central planner can change that. Now healthcare costs are a major budget item for most companies and they don’t like it. So, they are going to shift healthcare and pension cost onto the public.

              Economics is built into the human mind. Economics just reflects what humans are, not the other way around. Obama Care increases demand, (If I pay for it, I’m dammed well going to use it is going to be the mantra) that’s where rationing comes in. Instead of the free market rationing through prices where you have control, a central planner is going to ration for you where you have no control. The gov. has taken another freedom away from you! Where is the increase in supply of doctors and nurses and facilities? Progressives don’t care about this. There objective is to squeeze as much money from you as you will stand. It is not about healthcare it is about raising taxes. I rub “Free Healthcare” in the voters face because that is the way it was billed and the menial voters should be reminded of how stupid they were.

  6. Obama and his handlers would do anything to avoid losing ground on their agenda of creating a socialist state by end of Obama’s last term. If he succeeds then it wont be his last term he will appoint himself for life. Is that what you idiots out there who voted for him want. Much of this could have been surmised when he first ran for office. Just look at liberation theology itself and the church he went to for 28 years, his association with Bill Ayers who murdered people with bombs, etc. This was known before anyone cast a vote for him. And like a big fat tick, he has been burrowing himself into America’s skin ever since. Its far more difficult to reverse these kind of mistakes than it is to avoid them.

    • Major –
      After the last 4 presidential elections smelled very fishy to me (in 2008, not really surprising that Barry beat McCain but, that he beat Hillary!…and that he could win at all given his stunning inexperience), I did a bunch of research and have decided that (in recent times anyhow) we voters don’t elect the Presidency. It’s decided elsewhere and the ultimate outcome is a managed one.

      You’ll find lots of interesting reading using keywords: vote flipping, election fraud, vote rigging, election manipulation, etc. Our Dude in Chief is a puppet.

  7. with 23 more years with obama in the presidential palace…does anyone really think that SS will be around…..it is ‘broke’…only iOU’s from congress via worthless t bonds….and all current SS tawes coming in are used for spending by the criminals in congress..THE CONgress and its spending..both parties…are the problem..they just tell you it is something else and too many people have believed them for far to amny years…they lie and steal money by spending it….most have entered their elected office not wealthy…now most are very wealthy….and they keep getting elected to steal and lie some more…yes even your elected official……