Questions, but no answers, from Obama on Social Security

September 27, 2012

Will President Obama cut Social Security benefits if he is re-elected? You wouldn’t think so, judging by his campaign rhetoric. But the trouble is, we don’t know much detail beyond his campaign stump speeches.

Medicare and Social Security, he said to a cheering crowd at AARP’s national convention last week in New Orleans, “are bedrock commitments that America makes to its seniors, and I consider those commitments unshakeable.” Vice President Joe Biden has been just as emphatic, issuing a “guarantee” during a Virginia campaign appearance last month that there would be no changes to Social Security in a second Obama term.

But the AARP crowd – and all voters – should listen a bit more carefully to what the president says about Social Security. It may then become clear how much he isn’t saying.

It is possible that Obama is keeping his options open for a big deal on deficit reduction that could include Social Security benefit cuts – reductions that could trim benefits for today’s seniors – and reduce them substantially down the road for working boomers, Gen Xers and Millennials. Some Senate Democrats fear this could occur as early as the lame-duck session of Congress following the November election.

While Mitt Romney would be far worse for Social Security – he has supported its privatization, and he still supports a higher retirement age and benefit cuts for high-income seniors – voters still deserve more detail on how far the president would go to maintain Social Security in a second term.

When I pressed an Obama campaign spokesman on this point last week, he pointed me toward written remarks from the past two years by two key White House officials.

White House Budget Director Jack Lew wrote in a February 2011 op-ed that Social Security problems are unrelated to the national debt and that reforms to the program should be addressed separately from deficit negotiations. Gene Sperling, director of the National Economic Council, said in a speech earlier this year that the president “disagrees” with the Simpson-Bowles proposals on Social Security.

Compared with the president’s full-throated promise on the stump to “never turn Medicare into a voucher,” these on-the-record statements leave plenty of wiggle room for possible cuts. So I posed a handful of questions last week to Adam Fetcher, deputy national press secretary for the Obama campaign. Unfortunately, I didn’t get very far.

Q: As a candidate for president in 2008, President Obama promised that he wouldn’t cut benefits, raise the retirement age for Social Security or reduce cost-of-living adjustments (COLA). Is he still committed to those promises?

Fetcher didn’t provide a direct answer, other than to point to a statement by the president of key principles for Social Security reform. The principles promise not to “slash” benefits for future generations, but Fetcher declined to say what would qualify as slashing. Would the president accept cuts smaller than a “slash”? Would he accept cuts of any kind? We don’t know.

Likewise, the principles also promise not to reduce “basic benefits” for current retirees, but that isn’t defined further.

Q: What is the president’s position on the three Simpson-Bowles proposals that would cut benefits: slower benefit growth for high earners, a gradual increase in retirement ages and lower cost-of-living adjustments?

Again, Fetcher provided no direct response. And here’s where the details can really matter – both for current retirees and future generations. Simpson-Bowles recommended changing the yardstick of inflation used to set annual COLAs.

Most Social Security reforms are phased in gradually, but this one would start hitting current retirees immediately. The COLA reform translates to a cut of 0.3 percentage points per year. That may not sound like much, but the effect compounds over the course of retirement into a substantial benefit cut. For example, a worker first claiming benefits at 62 would see a cumulative cut in monthly benefits of 8.4 percent by age 92, according to the National Academy of Social Insurance.

On higher retirement ages, Simpson Bowles recommends lifting the full retirement age based on increasing life expectancy. Early retirement ages also would rise. That would be an across-the-board benefit cut over time, since higher retirement ages raise the bar for getting full benefits, with the biggest burden falling on today’s youngest workers.

For example, the full-benefit retirement age already is rising from 65 to 67 under reforms passed in 1983. When that change is fully implemented (for anyone born in 1960 or later), new retirees will see their monthly benefits cut about 14 percent from what they would have been if the full-benefit age had remained 65.

Romney and Paul Ryan would go much further. Romney expressed support for privatization in his 2010 book No Apology, along with several other ideas that would lead to sharp benefit cuts. And Ryan proposed allowing younger workers to divert part of their FICA tax contributions to private accounts as recently as 2010 in his “Roadmap for America’s Future.”

No wonder, then, that Paul Ryan was nearly booed off the stage at AARP last week. President Obama got a warm reception from the crowd – but where Social Security is concerned, the approval could be premature.

PHOTO: U.S. President Barack Obama waves at the end of an election campaign rally at Kent State University, Ohio, September 26, 2012. REUTERS/Jason Reed


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how do you compare one party who pledges to eliminate social security (and all other public programs) with another party who understands it has to continue and will do whatever is necessary to maintain it?

Posted by jcfl | Report as abusive

Take the cap off of wages subject to social security. That solves the vast majority of its problems.

Posted by weneedchange | Report as abusive

I am amazed that many still have the idea that privatized Social Security accounts would actually work for very long. There used to be a rule of thumb investors would use. My father told me this: Don’t risk any money you can’t afford to loose. So I never invested because I never thought I had any money I could afford to loose. Of course, now, I have very little money,period! Maybe I under-did it?

If Social security funds were privatized then the entire economy of the US and perhaps the world would have to be put under even stronger than Chinese government regulations to ensure there could never be a crash.

People should become used to the idea that money is an abstraction. It is part substance and part idea and the part that is idea – the bulk of it’s existence in any modern economy – is actually a matter of numbers in ledgers. They can vanish in an instant. It is subject to rumors and innuendo and panic attacks. I have a hunch some of it is so insubstantial it doesn’t even live long as ink on paper or even electronic charges on hard drives.

And the trouble with precious metals is they cannot easily be made abstract enough to prevent the world from sinking to dark ages levels of economic activity. And they can be subject to panic attacks too. Precious metals can become too valuable. The housing crash is proof that anything can be made too valuable. And nothing has value if there aren’t enough people who want it at the price you want.

I think Bill Clinton is right that this country needs a vibrant middle class or the whole economy will, sooner or later, collapse on itself. Social Security helps to support a middle class.

Posted by paintcan | Report as abusive

Obama is crushing the social security trust fund right now through the zero interest rate policies of the Federal Reserve Bank. Yields on contributions to the fund are falling below the ‘official’ rate of inflation right now.

Such reductions in interest income can only be made up be cutting benefits or raising FICA taxes.

Posted by sangell | Report as abusive

For all the rhetoric on which party is worse for Social Security, the real truth is that neither Obama or Romney, or the Dems or the Repubs can or will do much to change it. Why, because Congress controls what happens to SS, no one else.. And Congress is split, badly..

Obama knows that he’ll have to accept a SS ‘deal’ with lower benefits to get his tax plan, he’s just not admiting it because if he does – He Loses; Romney also knows Congress will never ‘privatize’ SS, AARP would never go for it – He’s already Lost; it’s all just Campaign BS..
Here is what is going to happen regardless of which of those 2 clowns in in the whitehouse;
– Higher payroll and medicare taxes (2013);
– Higher tax cap on SS along with a gradually increased retirement age and lower COLA (2014);
– Higher Income Tax rates for middle class and the Rich (2013);
– Higher Cap Gain tax rate for investment income (2013);
– Sluggish growth and high Unemployment >8% (2013 – ?);
– Significantly lower Fed Spending, but not lower than 22% of GDP which becomes the ‘new norm’ (2014);
– Economy falls back into recession by 2014;
– Inflation increases to 4%/year by 2014;
– Hillery announces in late 2014 she’s forming ‘a committee to explore a potential candidacy’…
– Obama endures 4 more years of gridlock, no growth and increasing inflation and becomes universally recognized as a failed president.. with 8 years of no meaningful accomplishments..
– America suffers from 16 years of ‘bookend presidents\'; two Losers in their own way.. End of Story.. Very sad..

Posted by texas100 | Report as abusive