Fighting for Our Lives:
10 Big Lies About Social Security and Medicare, and the Coming Battle to Save Both Programs and Build a New Progressive Movement
A book proposal by Dave Lindorff
NOTE to readers: I have a proposal from Ig Publishing, a small progressive book publisher, to do this book, but the advance they are offering is way to small for me to be able to abandon the writing I do for a living to support my family, and to devote the uninterrupted two to two-and-a-half months necessary to travel, research, write and edit the complete book. Yet to be a significant factor in this coming year, when the battle over Social Security and Medicare’s survival will be raging, I must do the book in that time and get the book out to book stores and available on line by May or at the latest June. That’s the reason I’m turning to Kickstarter, and to you, the potential contributors to the project. I believe we can do this together, and create a book that will end up being a manual for building an unstoppable movement of aging Boomers like myself (I’m 62), and young people like those courageous kids who are building the Occupy Movement. Winning a decent retirement program for all generations, and winning Medicare for All, can be the cornerstone of a whole new progressive politics for America. Help me make this book, “Fighting for Our Lives,” a part of that struggle!
Please read on if you want a better idea about what this book will be, and then contribute whatever you can to help make it happen!
Thank you!
Dave Lindorff
Table of Contents:
Preface
A Looming Battle Royal
Introduction
A Short History of Social Security and Medicare: Attacked as Socialist and Communist from Birth
Big Lie Number 1
Social Security’s Going Bust and Won’t Be Around for Today’s Younger Workers When They Retire
Big Lie Number 2
Selfish, Greedy Baby Boomers are Robbing from Their Kids by Refusing to Agree to Social Security Cut-Backs
Big Lie Number 3
There is No Money in the Trust Fund, Just IOUs the Government Can’t Make Good on
Big Lie Number 4
Social Security is Bankrupting the United States
Big Lie Number 5
Social Security is a Lousy Investment and People Should Instead be Investing in Private Mutual Funds and ETFs
Big Lie Number 6
The Only Way to Fix the Social Security System is to Privatize It
Big Lie Number 7
The Baby Boom Generation is Going to Bankrupt Medicare
Big Lie Number 8
The Country Cannot Afford Medicare, Which is a Costly, Inefficient Way to Pay for Care
Big Lie Number 9
Canadians Hate Their Single-Payer Medicare System and Come to the US When They Need Treatment
Big Lie Number 10
Medicare is Socialism
Conclusion
The Fight to Save and to Improve Social Security and Medicare, and the Opening to Forge a New Progressive Political Movement
Introduction:
A Looming Battle Royal
On September 24, 2011, as a line of New York’s Finest, on orders of Mayor Michael Bloomberg, began moving against the youthful demonstrators holding a small piece of Wall Street turf on the eighth day of their occupation, one young woman, draped in the American flag and calling herself “Lady Liberty,” shouted out to the advancing cops, many of whom were typically older and sporting what might politely be called middle-aged paunches, “We’re fighting for you pension, we’re fighting for your Social Security, we’re fighting for you children and your children’s children! We’re fighting for liberty! We’re peaceful!”
She was right. In Ohio and Wisconsin, Republican governors and legislatures had just stripped public unions, including unions representing police and firefighters, of the right to bargain collectively, and all over the country, public pensions and health care benefit programs are under assault, and not just those of teachers and sanitation workers, but of public safety workers too. The police in New York City who were ordered to bust demonstrators in the city’s financial district had to be having mixed emotions as they acted on the orders of the city’s billionaire mayor, who has been taking a hard line on their benefits.
“Lady Liberty” is the worst nightmare of Wall Street and its bought-and-paid political backers in Washington come true: a sign that young people are starting to realize that their own future health care and retiree benefits are closely tied to those of the elderly and near elderly. If she and her friends on the street in Lower Manhattan manage to link up with another group — the massive population of Baby Boomers whose oldest members are just starting to hit retirement age and eligibility for Medicare and Social Security benefits even as those programs come under serious attack — we could see demonstrations and marches that could dwarf those of the 1960s and ‘70s. (Only this time, instead of having to face assault by Capital Police and Federal Marshals unarmed and unprepared as in the ‘60s, this protest era’s participants will be armed — with canes and walkers!)
The 2012 presidential election year is likely to be a decisive, even watershed moment in American history. After last summer’s dramatic stand-off on raising the debt ceiling, the equally dramatic downgrading of the U.S. government’s AAA credit standing by rating firm Standard & Poors, and the agreement between the White House and the divided Congress to create a 12-member “Super Committee” of six Republican and six Democratic members of the House and Senate to come up with nearly $1.2 trillion in spending cuts, it seems clear that both Medicare, the legacy of President Lyndon Johnson’s Great Society and War on Poverty, which has provided for the health care of America’s elderly and disabled since 1965, and Social Security, the most enduring legacy of the New Deal, are in grave danger.
For years, Republicans have inveighed against both programs. They attacked Social Security as a socialist or even a Communist plot when it was proposed in 1935 by President Franklin Roosevelt. They said the same thing about Medicare when Johnson proposed it 40 years later. Because both programs have become extremely popular, though, Republicans softened their criticism in later years, so that by 1981, President Ronald Reagan, who had once been hired by the American Medical Assn. (AMA) to attack the proposed Medicare bill in the 1960s, was calling himself a supporter of both programs. He actually appointed a commission headed by Alan Greenspan (later the chairman of the Federal Reserve), to come up with way to put Social Security on a secure financial footing for the influx of a wave of Baby Boomers retirees in 2011.
But all the while, pressed by Wall Street, which has been covetously eyeing the trillions of dollars in payroll tax payments piling up in the Social Security and Medicare Trust Funds, Republicans have been waiting for the opportunity to undermine and eliminate both programs.
At the start of George W. Bush’s second term in 2005, the first big such effort was made, with a proposal by the president to have a portion of the payroll tax paid by workers and their employers into the Social Security Trust Fund diverted into private accounts that would be managed by each individual. The pitch was that Social Security, which invests the funds in Treasury Bills paying at best perhaps 2% interest, was a “bad investment,” and that by instead investing in “markets,” people could do better. After all, the argument went, “on average” stocks go up by grow by 7 percent per year. The truth was that such a diversion, besides handing all those people’s retirement funds over to Wall Street’s gamblers and con men, would also effectively gut the funding for current and future Social Security recipients, effectively destroying the program.
That of course was in 2005, and the campaign, bitterly opposed by unions, retirees, most Democrats of all ages, and even many Republicans, failed. People had just experienced a market crash in 2000-2 where stocks fell by nearly 30 percent. Now, after the 2008 crash, in which stocks plunged by 43 percent, so badly that had you invested in in equities in 1999, your investment would have been worth less ten years later in 2009, not even factoring in inflation, it would be hard to find any sane person who would seriously advocate replacing Social Security with a stock fund.
Never mind. Having let the cat out of the bag, Republicans have continued their attack on Social Security, now claiming that the program is a “ponzi scheme” which won’t even be available for today’s young workers when it’s their turn to retire. They have taken to claiming that there is no real money in the Social Security Trust Fund, “just IOU’s from the government.” Never mind that those “IOUs” are actually US Treasury Bonds backed by the full faith and credit of the U.S. government and that if they were defaulted on, it would cause banks that value T-bills on their balance sheets as no risk investments, to go bust. Never mind that if the US reneged on its Treasury Bill debt to the Trust Fund, foreign holders of U.S. Treasuries, like China, Japan and Saudi Arabia, would go berserk and dump their trillions of dollars in T-Bill holdings.
Social Security’s enemies also continue to pretend that Social Security is just a kind of a badly-run government mutual fund, when it’s really more like a very efficiently run government pension–a substantial difference.
And they have renewed and intensified their attack on Medicare, which House leader Rep. Paul Ryan (R-WI), who heads the House Budget Committee, submitted a plan earlier this year to convert from a kind of single-payer insurance program, which it is and has been since its inception, into a voucher system. Under his scheme, instead of having Medicare pay their doctor and hospital bills, the elderly and disabled would receive a voucher with which they’d have to go out into the private market to try and buy insurance and health care on their own.
But even as Republicans have begun to mount serious attacks on these two pillars of what is left of the American welfare state, upon which hundreds of millions of Americans have counted or hope to count for their living expenses and their health care in their older years, Democratic politicians, including the president, have been caving in to demands to cut the two programs, all the while insisting that they are defending them.
Thus, when Republicans began making the national deficit a major issue, after the election of a Republican majority in the House of Representatives in 2010, President Obama, instead of standing foursquare in defense of those programs, obligingly appointed a Deficit Commission, and named as co-head of it former Wyoming Republican Senator Alan Simpson, a man who has been out to kill Social Security for most of his political career. Simpson promptly called Social Security “a cow with 310 million tits.” He wasn’t sacked from the commission, which has predictably called for a further raising of the retirement age and a significant lowering of the cost-of-living adjustment in annual social security benefits. The president, with the support of some members of his own party in the House and Senate, also pushed for a two-year cut, by 2%, in the employee payroll tax, as a “short term economic stimulus,” though this resulted in a loss of $240 billion for the Social Security Trust Fund ( a loss equal to almost 10% of the fund). He later, in 2011, called for reducing the payroll tax even further, this time cutting both the employee and employer tax from 6.2% to 3.1% for a year, a measure which if approved by Congress, would remove another even huger sum of money from the Trust Fund.
Instead of working to shore up the system, President Obama and his Democratic supporters in Congress have been actively undermining it!
As for Medicare, when the president, newly elected in 2008 with a mandate to solve the nation’s growing crisis of both soaring health care costs and a rising number of people–now close to 50 million–with no health insurance, instead of moving to expand the popular Medicare program beyond covering just the elderly and the disabled to cover every American (a proposal long supported by a majority of Americans), he went the other direction. He proposing a legally questionable and highly complex and costly “reform” program featuring a mandate that everyone either receive insurance through an employer or buy it privately, and cutting Medicare funding and funding for Medicaid, the program of medical care for the poor, in order to help pay for it all. It was a massive betrayal of Medicare, and a clear indication that he, and the Democrats in Congress, including many liberals, were not going to fight to defend that program.
So now we the people are faced with a battle to defend both Social Security and Medicare.
It is a critical struggle not just for those of us who are in the generation known as the Baby Boomers — the 77 million of us born between 1946 and 1974 — but for those as well who are already retired, those who will be retiring in 10 or 20 years, and for the young young, for most of whom retirement and major medical expenses may at the moment seem like a remote concern.
The political elites in Washington, Republican and Democrat, are counting on Americans being divided, by age, by income, and by the amount of attention we’re willing to pay to these issues.
163 years ago, Karl Marx and Friedrich Engels struck fear into the hearts of the ruling elites of Europe and the US with their evocation of a specter. In their case it was the specter of communism, evoking the image of hordes of rough and unkempt workers rising up to wrest control of nations and societies so long run by their oppressors.
Today, following an era of unmitigated greedy excess that has seen the wealthiest 20 percent of the American population gain ownership of 93 percent of the nation’s wealth, leaving the bottom 80 percent with just 7 percent of the national wealth to squabble over, at a time when the wealthy, and the corporations they control, have bought most of the politicians in Washington and in the 50 state capitals, the nightmare that troubles the sleep of the powerful is not communism. Rather, it is the political awakening of a long-quiescent generation, sometimes dubbed the Baby Boomers–those graying 50 and 60-somethings who in their youth once rallied and marched to challenge the culture of consumerism, to challenge the whole notion of dog-eat-dog competition, and to challenge and undermine a war in Asia that had dragged on for a decade, chewing up the lives of hundreds of thousands of them.
The obscenely wealthy, the executives and owners of corporate America, and their well-greased political servants in Washington, all have good reason to worry about this new generation of the elderly and near elderly, whose oldest members, born in 1946, are just reaching the age of eligibility for Social Security and Medicare. For not only are our numbers unprecedented (the author, born in 1949, is one of the senior members of this Baby Boom generation), but we have a history of political activism radically different from that of our parents–the current generation of pensioners.
Consider this: In 1994, one in eight Americans was over the age of 65. By 2030, when the last of the Baby Boomers born in 1964 will have become Medicare eligible, the ratio of those over 65 will be one in five. In terms of sheer numbers, in 2010, there were 40 million Americans aged 65 or older in a population of 310 million. By 2030, our numbers will have nearly doubled, reaching 72 million in a population of 370 million. This means that the elderly will grow from 13 percent of the population in 2010 to 20 percent of the population in twenty years. Given the acknowledged political power that the relatively docile and well-behaved elderly of today have achieved, it should be obvious that this next generation of elderly, with our youthful history of assertiveness and willingness to challenge and confront authority, will be a much more powerful force in American politics. And it’s not just those over 65. The American Association of Retired Persons (AARP), while hardly the senior advocacy group it purports to be, nonetheless does recognize the political potency of the elderly, and it starts recruiting its members when they turn 50, having recognized that 50 to 60 is about the age that people start to think, and to worry, about how they will survive when they are no longer working. If we were to add in just those who are over 50, we are already talking about over a third of the American population, and well over half the voting population.
We, the Baby Boomers approaching retirement age and eligibility for both Social Security and Medicare, together with our younger siblings and older offspring, are a sleeping political giant, only just beginning to stir and awaken to the grave threats that are being made to our future well-being and survival.
While the critics of Social Security and Medicare don’t talk about it — or only talk about it indirectly in terms of the huge costs that our unprecedented numbers will impose on those two pillars of the social welfare state — we Boomers pose a serious threat. But it is not a threat that we will bankrupt the system. What really scares them is the threat that we will upend the system. The fear of our political awakening from years of rank consumerism and from our focus on our families and our careers has Corporate America, Wall Street, and the conservative political forces that do the bidding of those powerful interests, frantically working to try and quickly undermine, weaken or destroy the two most successful social programs in the history of the country: Social Security and Medicare.
The picture at the moment is not pretty. Emboldened by the Great Recession that began in late 2007 and that continues today, which has caused the national budget deficit to explode, both the Republicans (almost all of them), and many Democrats, led by President Barack Obama, are talking openly about cutting back on Social Security and Medicare. They say this, and the media report their warnings uncritically, even though Social Security, fully funded by special payroll taxes and by a huge Trust Fund build up over three decades, contributes not a penny to the national debt, and even though Medicare is also still mostly funded by dedicated payroll taxes and a Trust Fund that is separate from the federal operating budget.
Many Republicans, echoing Rep. Ryan Paul (R-WI), chair of the House Budget Committee, openly say they want to kill Medicare. They secretly want to end Social Security too, by privatizing it, as President George W. Bush sought to do unsuccessfully in 2005. That, indeed, is the agenda of most of the corporations which fund lobbies like the US Chamber of Commerce, the National Assn. of Manufacturers, the Business Roundtable, etc. Oh, I know they say they’re only talking about “changes” for people who are under 55, or about “strengthening” the system, but that’s just for starters. The long-term goal is what it has been since Social Security was founded in 1936 and since Medicare was established in 1965: to kill the programs. The strategy is to first ruin or eliminate the programs for younger workers, and then to make them resent what we older folks still get. It’s a classic divide-and-conquer strategy. The next step would cut back benefits and raise costs for older citizens. Finally, after gutting them, they would eradicate both programs altogether.
Why the sudden urgency to openly attack Medicare and Social Security, when even the two programs’ worst critics concede that Social Security is fully funded through 2036, and that Medicare is largely funded through its trust fund through 2016? The reason for this unseemly haste is that the enemies of Social Security and Medicare, far more clearly than the rest of us, see that in another decade, when millions of us Baby Boomers will be counting on monthly Social Security checks and will have begun enjoying the benefits of the kind of single-payer medical system that Canadians of all ages have taken for granted since 1972, we will become an unprecedented political force to reckon with in defense of both programs. We, the soon-to-be-retired elderly, can either wait until then, after our enemies have successfully gutted the two programs we depend on, making it so we have to fight from scratch to recreate or restore them, or we can start organizing now to defend and improve them, and save ourselves a whole world of trouble.
Starting over from scratch is clearly a bad idea, so here’s my proposal:
Let’s start building a coalition, starting with the Baby Boomer generation, and moving on to older people and younger workers, reaching out through every conceivable organization–labor unions, churches, veterans organizations, alumni organizations, political party chapters, etc.– all with one goal: Defending and improving Social Security and Medicare.
Here’s a good slogan (think “Hey, Hey LBJ…”):
Obama Boehner, Listen to Me: Hands Off Social Security! Health Care Serfdom’s Got to Fall, Medicare for One and All!
The arguments in defense of both programs are simple. Social Security’s enemies are stoking fears, both among the elderly and the young, that the program will “run out of money” in 2036, because “greedy Baby Boomers” are supposedly going to take all the money, leaving nothing for their children when they retire. Technically it is true that if current demographic trends hold, the Trust Fund built up in advance of the wave of boomers, currently about $2.4 trillion, will be exhausted in about 2036, leaving FICA tax collections from current workers covering only about 75% of retiree Social Security checks. But the answer to that scare story is easy: Raise more money now.
If the cap on income subject to Social Security FICA taxes, currently set at $106,800, were lifted, so that all income was subject to the FICA payroll tax, there would be no shortfall in the Trust Fund at all for as far into the future as actuaries can reliably calculate. Better yet, if the tax were also applied to so-called “unearned” income from investments, either as a percentage of that income or as a transaction tax on every securities purchase (something that is common in European countries), not only would the fund be flush; we could actually be talking about improving benefit payments and/or even lowering the retirement age by a few years, thus opening up more jobs for younger workers. Of course, we could also add a tax on wealth–something that is also common in Europe and which even Donald Trump, back in 2000 when he was briefly running for president in an earlier incarnation as a Democrat, once suggested–in which case the retirement age could be lowered, or benefits raised, even further. (For those who consider the idea of a tax on wealth outlandish, consider that this is precisely what property taxes are–a tax on the wealth of those Americans who own homes or other property. We just don’t tax other forms of wealth, like hoards of gold or huge stock portfolios or other forms of riches. And of course, even when we do have something like a wealth tax, for example on property, the rich figure out ways to weasel out of it, like by declaring their entire vacation estate to be a “home office” or something!)
As for Medicare, the ideal answer there is not to raise payroll tax collections that cover Part A (hospital care)–currently 2.9% of payroll, divided equally between employer and employee–or to increase current participant payments for “Medigap” coverage, but rather to expand the program to include coverage for all Americans. This idea might at first appears counter-intuitive. How can adding more Medicare-eligible people to a system already under financial stress reduce the problem?
The answer to this seeming absurdity has two parts. First of all, note that the overwhelming majority of the cost of Medicare currently comes from providing medical care to the oldest of recipients. Some 90% of Medicare expenditures go for treatment of the oldest 10% of beneficiaries and the sickest of the disabled. Even though their numbers are much greater, the other 90% of persons over 65, plus the rest of the permanently disabled, only account for about 10% of the total national Medicare bill. Extending Medicare down to cover younger Americans would actually add surprisingly little to the cost of the program on a per person basis, since the only categories of younger people who have relatively higher medical costs than the elderly are women of childbearing age who get pregnant, and very young children.
Secondly, while covering all Americans with Medicare would clearly raise the cost of the program, especially given that it would be adding people who had not yet contributed much, or in the case of children, anything, to the Medicare Trust Fund, the savings that would ensue from such an approach would offset most if not all of the cost increases. For example, if everyone were covered by Medicare, there would no longer be any need for Medicaid, except to cover the costs of nursing home care for those who were too poor to pay for it privately. That would mean a savings of several hundred million dollars per year. Another $100 billion would be saved annually by eliminating the Veteran’s health care program–no longer needed if all veterans were covered by Medicare. Also gone would be the hundreds of billions of dollars in “charity” care provided by hospitals that are required by law to care for the poor in their ERs. This care for people who are ineligible for Medicaid but who cannot afford health insurance has to be subsidized by states and counties, which means higher local and state taxes, and also, when unreimbursed, shows up as higher private insurance premiums, just as uninsured motorists raise the costs of auto insurance premiums for all properly insured drivers. Right there, we probably will have saved as much as the expansion of the Medicare program to a universal “single-payer” system would cost. But then, there would also be the huge savings that would result from the elimination of almost all private health insurance premiums paid by individuals and their employers, as well as the costly workers‘ compensation costs currently absorbed by employers. These savings would be felt directly by those workers who currently have to pay all or part of their insurance premiums, and indirectly as employers, no longer having to foot the bill for employee health benefits, would be pressed to pay higher wages to their workers. There would be other savings too. Medicare administrative costs are approximately 1-4 percent of program costs, while administrative costs in the private sector represent as much as 30 percent of costs. That huge waste of money, which has nothing to do with patient care (and in fact in the private sector goes in substantial part to denying care), would be eliminated with the expansion of Medicare to cover everyone.
There is a reason why the per capita cost of health care in Canada is roughly half what it is in the US: Canada has Medicare for all (the Canadian system is actually called “Medicare”). There is a reason why the U.S. has the highest costing medicare “system” in the developed world, bar none: it is the only such country that doesn’t have some kind of nationalized system of health care–whether state owned and run like Britain, or state-funded like Canada.
Of course, the other advantage of a Medicare-for-all approach is that it creates the broadest possible political support for the program. This is why in Canada, which has had conservative national governments the majority of the time since its Medicare program for all was instituted almost four decades ago, and also in many of its provincial governments, which administer the program, has never had that program threatened. It’s simply too popular, whatever the propaganda on the right here in the US may claim.
Actually, the idea of government-run medical insurance, which is what Medicare is both in the US and Canada, is popular here too. Poll after poll shows that Americans love Medicare. And it’s not just the elderly using the program who love it; their children and grandchildren love it too, because the program means that the medical costs of caring for their parents and grandparents don’t fall on them. It’s a program that works, and that has vastly improved the health of older Americans since it went into effect in 1965.
There may be more behind the current efforts by the right and corporate America to hobble or destroy Social Security and Medicare. The opponents of these key programs–both historic relics from a more progressive era — surely also recognize that a broad campaign in defense of secure retirement income and of government health insurance for all could become the rallying point for a resurgent progressive movement–one that could grab back our politics and our government from the narrow special interests that have hijacked them.
And they are right to worry. If we fight and win on Social Security and succeed in expanding Medicare to cover all Americans, who knows what other issues we could fight and win on!
The first order of business, though, will be combating the flood of lies being put out and spread in the corporate media about both Social Security and Medicare. Let’s look at ten of the biggest of these and knock them down one by one.
Chapter I
A Short History of Social Security and Medicare: Attacked as Socialist and Communist from Birth
“We put those payroll contributions there so as to give the contributors a legal, moral, and politicl right to collect their pensions…With those taxes in there, no damn politician can ever scrap my social security program.”
— President Franklin Roosevelt, as quoted by historian Arthur Schlesinger, Jr.
“The greatest gap in our social security structure is the lack of adequate provision for the Nation’s health. . . . I have often and strongly urged that this condition demands a national health program. The heart of the program must be a national system of payment for medical care based on well-tried insurance principles. This great Nation cannot afford to allow its citizens to suffer needlessly from the lack of proper medical care. Our ultimate aim must be a comprehensive insurance system to protect all our people equally against insecurity and ill health.”
— President Harry Truman, 1945
When President Franklin D. Roosevelt and his New Deal coalition tried to push the Social Security Act through Congress, it was bitterly opposed by Republicans, who labeled it a step towards socialism or even communism, and by the leaders of most corporations, who opposed the added taxes, claiming they would be “job-killing.” Medicare was similarly opposed in 1965, when President Lyndon Johnson and his Democratic majority in Congress tried to push it through as part of his Great Society and War on Poverty, with the American Medical Association hiring an actor named Ronald Reagan to denounce the idea as “the first step towards socialism” in America.
While the AMA has since come around to being a defender of Medicare, which has turned out to be a big source of physician income, and while Reagan as president, became a supporter of Social Security, and even appointed a commission early in his presidency that raised the FICA tax to build a trust fund in advance to cover much of the added future payouts for the coming wave of Baby Boom retirees (he also pushed back the retirement age for those Baby Boomers to 66 and 67), Republicans in general have continued their opposition, with many continuing to press for privatization of both programs. This chapter will trace the history of this opposition to the whole idea of publicly run pensions and health insurance.
It will also look at the remarkable successes of the two programs, noting that Social Security payments, which have reduced the number of elderly living in poverty from 50% in 1936 to 10% today, provide more than half the annual income for over half of the American population over 65, and 90% of the annual income of 43% of single people and 22% of married couples over 65., and that Medicare has vastly improved the health and longevity of the elderly, as well as of the permanently disabled.
Chapter II
Big Lie Number 1: Social Security’s Going Bust and Won’t Be Around for Today’s Younger Workers When They Retire
“It is a monstrous lie. It is a Ponzi scheme to tell our kids that are 25 or 30 years old today, you’ve paid into a program that’s going to be there. Anybody that’s for the status quo with Social Security today is involved with a monstrous lie to our kids, and that’s not right.”
— Texas Governor and GOP presidential hopeful Rick Perry
When I was just out of journalism school, and was trying to land a job as a reporter, my wife and I paid our bills in New York by working as temporary secretaries with an agency called Laurie Girls. As a Laurie Girl, I worked as a temp at a number of big firms, especially on Madison Avenue. There, while typing up advertising campaign documents for products like UltraBrite toothpaste, I learned about marketing concepts like the “Unique Selling Proposition.”
A unique selling proposition involves convincing the “consumer” that the product in question is not just better than the competition, but that it is unique. Convince people of that, and you are almost guaranteed to succeed in the marketplace.
Hundreds of billions of dollars currently get funneled annually into the Social Security Trust Fund (currently a pool of about $2.4 trillion dollars). Wall Street banks know that at 1-2 percent, this pile of assets could generate an enormous amount of fee income–$25-50 billion– for anyone who could get the right to “manage” it privately, but they have this obstacle standing in their way: Social Security has always had a truly “unique selling proposition,” namely that it is the only risk-free investment program in existence.
Think about it: Social Security is guaranteed for life to everyone who has worked, its payouts are guaranteed to be adjusted for inflation, and it has all kinds of added features, like a generous spousal benefit if your spouse didn’t work or worked little (and an even better spousal benefit if you should die first), dependents’ benefits for your kids, and also a disability feature that lets you collect significant monthly checks early and for life if you become permanently disabled and are unable to work. These are all what would be called “bells and whistles” for which you’d pay dearly with a private retirement plan, if you could even get such features at all. They come free with Social Security.
Added to that is the problem that Social Security has a captive market: virtually everyone in America is required by law to pay into Social Security, and so virtually everyone in America is also a beneficiary of Social Security.
How to shake these potential private pension investment customers loose from the Social Security System? There’s only one way: Wall Street has to convince a majority of Americans that Social Security is not secure, and thus destroy its “unique selling proposition.” And so the we get the Big Lie that Social Security is going to go belly up in 2036.
It is all a big lie though. Social Security cannot go bankrupt because it is a legislatively mandated program funded by the United States Government. It would take an act of Congress to default on the promise to pay disabled and elderly beneficiaries their statutory benefits, or even to deny those benefits to today’s younger workers. And just as today nobody in Congress has the temerity to call for reducing Social Security checks to current retirees, no one in Congress will dare to do so come 2036, if it should turn out that the Trust Fund is depleted at that point (something that is by no means certain in any event). The truth is that the idea of Congress stiffing retirees is even more unlikely in 2036 than today, because in 2036, the pool of people who will be collecting Social Security benefits by that time will be almost double the number who are receiving checks today. And they will all be voters.
Dean Baker, an economist with the Progressive Policy Institute, debunks the “Ponzi scheme” charge quite effectively. First he notes that the basis for a Ponzi scheme is deception, whereas Social Security’s finances are completely transparent. Second, he notes that the program is currently projected to be able to pay all benefits for the next 35 years even with no changes at all, and that it could pay 75 percent of promised benefits indefinitely after that even with no changes in funding. Meanwhile, a tax increase amounting to less than five percent of projected wage growth over the next three decades would allow Social Security to pay all promised benefits indefinitely. Raising taxes on just the wealthy by eliminating the cap on income subject to Social Security taxes — currently just $106,000 — would do the same thing even more painlessly.
Here’s the truth: Unless current elected officials in Washington are allowed to kill or undermine the program, a person born in 1970 can be fully confident that he or she will be receiving a full monthly Social Security check beginning the moment he or she files for retirement, and until death…
This chapter will go on to explain how Social Security payouts are calculated, why there is a need to come up with more revenue to pay future retirees, what the various solutions to the shortfall in the Trust Fund might be, and what the impact is of each solution, if implemented now, in five years, or in 10 years.
Chapter III
Big Lie Number 2: Selfish, Greedy Baby Boomers and Seniors are Robbing from their Kids and Grandchildren by Refusing to Agree to Social Security Cut-Backs
“Americans have got to understand that we are paying present-day retirees with the taxes paid by young workers in America today. And that’s a disgrace. It’s an absolute disgrace, and it’s got to be fixed.”
— Sen. John McCain (R-AZ), while running for president in 2008
“I think this is the greediest generation.”
–Alan Simpson, co-chair of the president’s Deficit Commission and a
former Republican senator from Wyoming
The enemies of Social Security are pushing the falsehood that the only way to “save” the Social Security system is to either reduce benefits or raise the retirement age–or a combination of both. Because the main opposition to Social Security is coming from the business lobby, they aren’t even talking about the third alternative of raising the FICA tax on current taxpayers, since the employer pays half of that, and their whole motivation is to get out from under the whole payroll tax burden. Having limited the available options for “saving” Social Security to two, both of which come off of the generation about to retire, these purported “saviors” of Social Security then chastise Baby Boomers for being opposed to either solution.
“I think this is the greediest generation,” said Alan Simpson, the former Republican Senator from Wyoming who was named co-chair to President Obama’s deficit commission, in an interview with a newspaper reporter in his home state. His comments reflect a common refrain among conservative politicians and pundits, that we Baby Boomers are greedy and that by demanding the Social Security benefits we paid in for during our working lives, we are “stealing” from our children and grandchildren. As Simpson inelegantly put it , referring to allegedly greedy retirees and would-be retirees, “Social Security is a milk cow with 310 million tits.”
The truth is, far from being greedy and robbing the next generation of workers, Boomers, for the first time in the history of the Social Security system, actually paid in advance into the Trust Fund in anticipation of the bigger drain on funds that would come when they all began to retire, at which point there’d be fewer younger workers paying into the system. Back in 1983, recognizing that the unprecedented wave of people born in the post World War II era would lead to a wave of retirees, Congress and the White House, under President Ronald Reagan, on the recommendation of a bi-partisan commission appointed by Reagan and headed by Alan Greenspan, later head of the Federal Reserve Bank, raised the FICA tax from 9.9% to 10.8%, and ultimately to 12.4%, paid half by employees and half by employers. This increase in funding built up a huge $2.4-trillion Trust Fund balance–one that was designed to be run down once the wave of Boomers began to retire (a point alarmist critics always fail to mention)…
This chapter will go on to analyze and debunk the lies that are central to this tactic of blaming Baby Boomers for supposedly “robbing” the next generation, lies which are routinely being bandied about by groups like the Cato Institute, the Heritage Foundation, and others, and reported uncritically in the corporate media. It will also explain why the reforms and tax increases made in 1983 still leave the Trust Fund short–the primary reason being that people are living longer than anyone anticipated at the time.
Chapter IV
Big Lie Number 3: There is No Money in the Trust Fund, Just IOUs the Government Can’t Make Good on
“Where is the money? Frankly, there is no money in the Social Security Trust Fund…The Social Security fund, if you went and looked at it today, it simply is an IOU backed by the taxpayers of the United States saying all that money that we borrowed we are going to promise that we will put it back some day.”
–Former Rep. Sylvester Turner (R-Tx) speaking on the floor of the House
This particular whopper is particularly popular on the Right, and among the Tea Party crowd. It is based on the notion that because the Trust Fund has been invested in US Treasury system, it has no actual cash to cover its checks. It only gets its money by redeeming those bonds, which means the US Treasury has to buy them back, providing the money to the Fund to pay the monthly benefit checks.
The critics of Social Security claim that these bonds, actually viewed by investors around the world as among the most secure of all investments besides perhaps gold or diamonds, can “never be repaid,” and are thus effectively worthless.
This is a ridiculous claim however. If the US were to default on its obligation to pay the interest on, and to redeem mature Treasuries, borrowers in the US and around the world, including countries like Japan, China and Saudi Arabia, which collectively own trillions of dollars worth of US Treasuries, would worry about the intrinsic value of their own holdings, and would rush to cash them in, causing a total collapse of the US debt market, of the US dollar, and of the US economy.
It is certainly true that in order to redeem the vast store of Treasuries in the Social Security Trust Fund, the government will have to either print a huge amount of new money — as the Federal Reserve and the Treasury have been doing during the current crisis to prop up the banking system — or raise new taxes more or less drastically, depending upon when the public agrees to bite the bullet. But this is no surprise. America has a growing older population, and it will cost money to provide for it. Failure to do so would not only be unconscionable; it would shift the burden onto individual families, which almost nobody wants.
Chapter V
Big Lie Number 4: Social Security is Bankrupting the United States
“Social Security threatens the entire economy.”
— Billionaire financier and former Nixon Commerce Secretary Peter Peterson
The Right denigrates Social Security by calling it an “entitlement” program, as though entitlement were a dirty word. In fact, however, it’s an appropriate term for Social Security, because Social Security benefits are something that every American who has worked for the requisite 40 quarters (10 years) is “entitled” to. People who receive Social Security benefits have paid payroll taxes to earn those benefits, and they are just as “entitled” to them as any worker is “entitled” to a paycheck for a day’s or a month’s work. The benefits earned through years of payroll tax payments are calculated based upon the number of years worked and the amount of FICA taxes paid into the system. Retirees are “entitled” to their benefits because, as John Hausman used to say in that iconic Smith Barney ad, “They earned them.” They’ve earned them every bit as much as if it were a private annuity which the person had bought, or a private pension to which the person and her or his employer had contributed.
But more importantly, the argument that Social Security is “bankrupting” the US is completely bogus, since current Social Security benefit checks to retirees and the disabled are still being funded entirely from current FICA taxes and and from the huge Social Security Trust Fund and the interest it is earning, and that situation will continue to be the case for decades to come–in fact for a whole generation to come. As a result, those benefit payments have absolutely no effect on the federal deficit. (By the way, one question that never gets asked is: Why are Republicans, and the conservative Democrats too, who are so eager to act now to whittle away Social Security because of a problem that may arise a quarter century hence, at the same time so singularly uninterested in the looming disaster of climate change, a much scarier and more certain threat (Even the Pentagon has said climate change is a grave national security threat)? Why aren’t they trying to act now to solve the looming crisis of “peak oil,” which we know will arrive fairly soon if it hasn’t already begun, causing oil prices to go through the roof? Why aren’t they worried about the collapse of the US education system, that is producing a whole generation of poorly educated citizens unable to compete in the global economy?
It could certainly honestly be argued that someday, decades from now, if nothing is done to increase the Social Security Trust Fund, the system could conceivably be forced to draw on general revenues to meet promised benefit payments to retirees, or else to reduce their benefit checks by some amount, but that is a far distant problem, and one that is still easily addressed by a remedy as simple as raising the income level subject to FICA taxation. Furthermore, the sooner that step is taken, the less the tax burden on employers and employees would have to be. Yet what the critics of Social Security do is precisely that: put off any effort to increase current funding to solve the problem early.
This lie about Social Security bankrupting the nation is a powerful political argument however, because the average American does not understand the complexity of the US federal budget, or how Social Security is funded through an entirely separate, dedicated payroll tax. Here in this chapter, I would go to the critics of the program — especially those like the Koch brothers, who are behind the politicians attacking Social Security, and behind the Tea Party “movement,” and to conservative think tanks like the Cato Institute, the Heritage Foundation and the Hoover Institution, to get their arguments in their own words, before rebutting them with the help of experts like economists Robert Reich, Dean Baker, Paul Krugman and James Galbraith.
Chapter VI
Big Lie Number 5: Social Security is a Lousy Investment and People Should Instead be Investing in Private Mutual Funds and ETFs
“If you are 50 or younger, Social Security as we know it is a lousy investment.”
–Pete du Pont, millionaire former Republican governor of Delaware and policy chair of
the National Center for Policy Analysis, a right-wing think tank
Ex-Gov. du Pont offered up his lie about Social Security being a bad investment in 2001 when his corporate-funded think tank was backing then President George Bush’s fledgling campaign to gut the program and replace it, at least partially, with investment funds that individuals would have “control” over. By 2010, of course, those private funds, had they been created, would have been smaller than when they started out, and today his claim looks pretty silly. But that’s not the main problem with du Pont’s assertion. Nor would it matter to du Pont and the politicians on the right who are attacking Social Security.
What they are doing is deliberately making a false comparison, in order to confuse the public.
The lie that Social Security is a bad investment is based upon two misconceptions, or better, two deliberate falsehoods, given that many of those who make the claim actually know better.
The first falsehood is that because the Social Security Trust Fund is invested in long–term Treasury Bonds, which currently pay only about 3% interest, barely above the level of inflation, Americans who pay their payroll taxes into that fund are losing out over what they’d be getting if they could instead have put that money into a mutual fund, or perhaps into junk bonds.
President George W. Bush, when he made his ill-fated effort in 2005 at the start of his second term of office, to convince Americans to let the government privatize Social Security, made just this claim saying, “You’re always better off investing your retirement money than letting the government do it.” (Of all people, Bush, whose investment history included some real fiascos that required his father or wealthy investors to bail him out, surely knew better!)
Of course, that was in 2005, when the stock market was roaring ahead. By late 2008, however, at the end of Bush’s second term, thanks in large part to his own and the Federal Reserve Banks policies of deregulation of Wall Street and encouragement of a real estate bubble, the markets had collapsed, crashing rapidly by 43% and taking until mid-2011 to fully recover. Many people who needed money during that period, either for their retirement, or to pay for medical costs or to buy a house, or just to survive unemployment, suffered terrible losses. Others, who understandably panicked as markets tanked, and who moved their funds out of stocks and into safe, insured certificates of deposit, lost vast sums too. Furthermore, it turns out that the old adage that a broad, diversified portfolio of stocks like, say, the S&P 500, held over the long term, tends to appreciate by an average of 7% per year, depends very much on what long period one is picking. The ten-year period from 1999 to 2009 turns out to have been a “lost decade” during which the value of the S&P 500, including dividends paid, actually declined slightly (and actually lost substantial value when inflation is factored in).
But even if one takes a good period for markets, it turns out Social Security looks pretty good, even as an investment. Stanley Loge, a defense industry analyst who retired in 1994 after working for 45 years, all the time paying into the Social Security system, ran a test to see how his Social Security “investment” had paid off, relative to what he could have done investing privately. Here’s what he discovered:
Toting up all the FICA taxes he had paid into the system, and adding to that the interest earned from the Treasury Bills that his money had been invested in by the Social Security Administration, he came up with a total fund at retirement of $261,372. He then calculated what those same tax revenues, if invested over all that time in the 30 Blue Chip stocks that make up the Dow Jones Industrial Average, would have done, and came up with a figure of $255,499. In other words, over that whole period of a working life, Social Security’s “investment” of Loge’s funds outperformed the Dow by $5873.
Timing plays a big part here, naturally. Had Loge begun working 10 years later, and had he retired in 2004 instead of 1994, the Dow would have done much better than the Social Security Administration did with his taxes. If he’d begun working 15 years later, and retired in 2009, though, his private portfolio would have been a sad joke and the Social Security Administration trustees would have looked brilliant.
But that gets to the second misconception: Social Security is not a mutual fund. It is more akin to an annuity, if anything, which is an insurance product that someone buys, giving up the money in return for a promised plan of regular payments. The monthly benefit payout that a beneficiary receives for life from the Social Security Administration is calculated based upon the amount of money paid into the system, and also on the age at which the worker retires. For example, if someone opts to retire at the earliest possible age of 62, the benefit paid is only about 75% of what it would be if the person waited until the current “full” retirement age of 66. And those who wait beyond 66 get an extra 8% added to their monthly benefit check for each year of delay, up to age 70.
A person who works for 45 years, paying into the system all along, and who retires at 66, would need to live to 83 to get back what he or she paid in FICA taxes. Critics of Social Security argue that that’s a bad bargain, because many people die before reaching 83. But they’re forgetting, or deliberately failing to note that that’s only part of the story. (Note: Theoretically, based upon actuarial tables, a typical retiree makes out about the same whether he or she takes early retirement and a lower benefit payment, or waits and retires later and gets a bigger monthly check, but for those who are healthy, who can work longer and want to, and who have a family history of longevity, obviously waiting to retire, and getting a bigger monthly Social Security check for the rest of one’s life is a good idea, just as for those who are ailing, hate their job, and/or need the money, retiring earlier might make sense.)
Say the person is the primary earner in the family, and the spouse had a much smaller income, and consequently a much smaller Social Security benefit. The system allows the spouse to receive the larger earner’s check as a death benefit, beginning at age 60, or younger if there are minor children in the family, after the higher earner dies. Or suppose the worker in question became disabled and was unable to work for a year or longer at a much younger age. He or she would be eligible to received a substantial Social Security monthly benefit for life from the point the disability was established. No private retirement investment vehicle does any of this. Social Security also provides substantial monthly benefits to minor children when a worker in the system who is the parent of minors dies or becomes disabled–another benefit not available with any private investment.
Unless all this and other benefits are factored into the calculations–and the critics of the system never do that–it is simply a lie to say that Social Security is a “bad investment.”
Chapter VII
Big Lie Number 6: The Only Ways to Fix the Social Security System is to Privatize It
“Our nation’s Social Security Trust Fund is depleting at an alarming rate, and failure to implement immediate reforms endangers the ability of Americans to plan for their retirement with the options and certainty they deserve.”
— Rep. Pete Sessions (R-TX) and Chair of the National Republican
Congressional Committee, introducing a bill in the House called the Savings
Account for Every American Act (S.A.F.E.) to allow working Americans to
opt out of Social Security payroll taxes and instead pay into a privately
managed investment fund.
There are two reasons that the right wing and the corporate world want to privatize Social Security. The big one is simply because employers don’t like having to pay all that money in FICA taxes, which amount to 6.2% of payroll, and even double that if one believes, as many economists do, that the “employee” share is actually being paid by the employer, on the theory that employees bargain for their pay or make a decision about whether to accept a job offer based upon the take-home pay, not the full paycheck amount.
The other big lobbyist group pushing hardest for privatization of Social Security is the financial services industry, which these days basically means the same “too-big-to-fail” banks that dominate the whole financial sector. These companies, and giant insurance companies and smaller independent brokerage firms that make their money by running mutual funds, selling annuities, and making stock trades, look at the trillions of dollars in FICA tax funds going into the Social Security Trust Fund and see only all the fees that they could be collecting if only they were in charge of managing it on a private basis. Even the 1.5% fee typically charged by a basic mutual fund, if charged on the $2.4 trillion of invested assets currently handled by the Social Security Administration, would be nearly $40 billion, and there are lots of other charges and fees they’d be collecting on top of that, especially on stock trading and on wealth management accounts.
A major problem with privatization, though, is that there is no way to predict how well it would work for individual people. Those who invested most of their savings when stocks were low, and who happened to reach retirement when they were high might make out really well, but those whose best earning years fell during a prolonged bear market, such as we saw during the first decade of this millennium, might find themselves with little to show for their thrift. And if Congress put in place appropriate rules to minimize fraud and other risk to investors, there is no reason to expect that their private savings would outperform what the current government-run investment approach has done–but at a much higher administrative cost. The truth is that the Social Security system is incredibly efficient. It has run for 75 years and never missed a payment to beneficiaries, and its cost of operation is less than 1% of assets–a figure that not one private pension system can boast, and that no investment house can come close to.
But the other thing is, there are actually plenty of ways to “save” Social Security, if in fact it needs “saving” at all.
First of all, let’s start with the problem: the surprising health of the Baby Boom generation–which suggests longer expected lifetimes for us and for future generations–means that the system reforms of 1983, which required us Boomers to pay more FICA taxes in advance of our retirement to ensure adequate money in the Social Security Trust Fund to cover our benefits payments, and which pushed back our year for full retirement benefits slightly, were inadequate. It now appears that when 2036 or 2037 rolls around, at current rates of FICA tax payment inflows and benefit outflows (and assuming US economic growth averaging only a historically low 2% per year) the Trust Fund will be exhausted. If nothing were done, retirees would then either be limited to getting only 75% of their promised checks –the amount of FICA tax revenue that would be getting paid into the system by workers at that time (politically impossible), or the US Treasury Department would have to cover the difference, either by raising income taxes and/or corporate taxes, or by borrowing more money.
What the critics don’t mention is that even this problem would be temporary. Remember, by 2036, the youngest Baby Boomer, born in 1964, will be 72, and unless life-spans continue to rise significantly between now and then, which is not likely, will only be around for another six years on average. After that, things will be smoothing out, with current workers’ FICA taxes more or less covering current benefit payments to retirees, which is the way the system has generally operated through most of its earlier history–with the brief exception of the years when the Reagan reforms required Baby Boomers to pay more into the Trust Fund than was being paid out in benefits.
So what we’re really talking about is the need to come up with the money between now and 2036 to be able to cover 25% of the Social Security benefits bill for about another decade. It’s a lot of money, to be sure, but there’s still a lot of time to accomplish this in–a quarter of a century to get ready, to be exact.
And there’s a lot of money to be had, primarily by taxing the rich–something polls show most Americans would be only too happy to do. The only obstacle to doing so is the rich, who own most members of Congress and are demanding that they keep taxes low for them.
As of now, the FICA payroll tax is applied only to wages and salaries of less than $106,800 a year. Someone who earns $206,800 in a year pays the same FICA tax as someone who earns $106,800, because the higher earner pays no tax on the additional $100,000. Analysts say that just lifting the ceiling on income subject to FICA taxes to $250,000 would eliminate most of the shortfall right through the lifespan of the Baby Boom generation. Eliminating the ceiling altogether, so that all income was subject to the FICA tax, would not only eliminate the shortfall completely; it would allow Congress to increase benefit checks, perhaps focusing on those with lower incomes to start with, or to lower the retirement age, either to 65, where it used to be until 1982, or perhaps even lower, say closer to 60, where it is in many countries. The idea of subjecting all income to the FICA tax isn’t that strange, actually either. The Medicare tax, which is 2.9%, divided equally between employer and employee, does not have a cap, for example. All income is subjected to this tax. The “fairness” argument against applying the FICA tax to all income–namely that wealthy people who earn more than $106,800 a year wouldn’t get any added benefits upon retirement for the extra money they paid into the Trust Fund–could as easily be made for Medicare, since the wealthy don’t generally end up getting any sicker than the middle class or the poor (actually, they probably get less sick), and are hardly getting the same return on their taxes paid into the trust fund, and yet we go ahead and tax all their income at 1.45% for Medicare, and tax their employers by the same amount, anyhow.
Another option to bolster the Trust Fund would be to do what many countries in Europe and Asia do, and levy a tax on investment income, either by raising the capital gains tax or by applying a small tax to every short-term stock or bond transaction. (This of course would not significantly affect people who were investing in deferred savings plans for retirement, and if there were concerns about taxing their gains when they withdrew funds for retirement needs, there could be an exemption in the tax law.)
Clearly privatization is not only not the only solution to Social Security’s problems. It is the worst possible solution. It is no solution at all, actually, since it would leave some people destitute. And there are a whole lot of other solutions that could make a good system even better…
Here I would go into other solutions and tweaks that could be made in the system to improve it.
Chapter VIII
Big Lie Number 7: The Baby Boom Generation is Going to Bankrupt Medicare
“The problem is Medicare goes bankrupt in nine years unless we do something to save it. It won’t be there for future generations like my generation.”
–Rep. Paul Ryan (R-WI), chair of the House Budget Committee, and author of
a bill which would eliminate Medicare and replace it with a voucher system
A recent Associated Press story reported that the new wave of retirees born between 1946 and 1964 is already starting to get what is expected to become a tsunami of knee and hip replacements. It is a first sign of the huge increase in demand that is coming for Medicare benefits as this Baby Boom generation reaches the Medicare eligibility age of 65, when the federal government will have to begin paying some 80% of the medical bills of this uniquely large demographic group of Americans.
Given that there are almost no cost controls over healthcare, and that health care inflation has been consistently running at two, three and even four times the rate of general inflation for decades, Medicare is facing much greater financial strain than the Social Security system. The current projection is that by 2016, the Medicare Trust Fund, which has been fully covering the costs of Medicare Part A (the part that pays for hospital care) and 75% of Medicare Part B (the part that covers doctors’ bills) will be entirely depleted, and the government will have to start shouldering the bill for the balance of the cost of retiree health care (after payroll taxes and the premiums paid by the elderly for Medigap insurance and drug benefit premiums), using general tax revenues.
That however is a far cry from saying that Medicare is, or will be, “bankrupt.”
In 2010, total Medicare taxes paid by workers into the three Trust Funds that comprise the Medicare Trust Fund came to $590 billion. Retirees also paid about $30 billion in premiums for Medigap and Medicare Part D (drug benefit) gap coverage. That same year, payouts to hospitals, doctors, drugstores and other medical providers totaled $650 billion, for a net deficit of $30 billion, which had to be paid out of the trust fund and from general revenues.
Now $30 billion is a lot of money in the abstract, but then again, it’s also only about a quarter of what the US military is spending each year in Afghanistan, so an easy way to fund the Medicare deficit would be to just end the war in Afghanistan…and to not start another unfunded war (there has been no tax increase to cover either the Iraq War or the Afghanistan War over the course of the past decade–in fact taxes have been cut over that period).
$30 billion is also an amount slightly less than half of the $64 billion that Pentagon weapons systems on order increased in price by in 2010 over 2009. In other words, by cutting back on the inflation in the cost of weapons programs by 50%, for example on the F-35 joint-strike fighter plane that is now expected to cost $1 trillion over ten years of production and operation, and which is now 50 percent over budget (with $11 billion spent just on development in 2010 alone), Medicare could be fully funded for well past the demise of the last Baby Boomer. Eliminating those programs, which even many defense experts say should be done, would free up even more money.
Another approach would be to raise the tax on Medicare–currently set at 1.45% for employer and 1.45% for employee. An additional 1% tax, divided equally as 0.5% more for employer and employee, would more than cover any shortfall, if it were applied soon, adding over $180 billion to the Trust Fund in 2012 alone. The amazing thing is that, despite all the media focus on tax protesters howling that their taxes are too high, a solid majority of Americans have been telling pollsters consistently that they would prefer to pay higher taxes to keep Medicare strong over seeing the program cut back or destroyed.
Actually, the main problem facing Medicare isn’t that tax revenues are too low or that the Trust Fund is almost depleted. It’s that lobbyists for the medical industry have prevented the Medicare administration from aggressively negotiating lower prices from health care providers. In the case of the new drug benefit (Medicare Part D) passed by a Republican Congress during the Bush/Cheney administration, the government was flat-out barred in the language of the act from doing any price negotiation. This restriction alone has cost taxpayers and the Medicare program hundreds of billions of dollars already, and will continue sucking money out of the system and spitting it out into the hands of pharmaceutical companies and their shareholders for as long as it remains in place. Meanwhile the American Medical Association, the doctors’ lobby, has kept Medicare physician reimbursements unreasonably lucrative too.
Chapter IX
Big Lie Number 8: The Country Cannot Afford Medicare, Which is a Costly, Inefficient Way to Pay for Care
“If you look at how the government runs VA hospitals and Medicare and Medicaid, you can see that the whole system is inefficient.”
— Rick Scott, Republican governor of Florida, former CEO o f Columbia/HCA, the nation’s largest for-profit hospital chain
The lie that the country “cannot afford Medicare” is based upon two false premises and one article of faith. The first lie is that it pretends that health care costs as charged by providers–the hospitals, doctors, pharmacies, therapists and medical equipment makers who deliver health care services for a price–will continue to rise at their historic rapid clip. The second lie is that Medicare’s critics only count as health care costs those expenses that are borne by the government and that are financed by taxes. The article of faith — and it is about as true as the latest faith-based prediction of the Apocalypse — is an unquestioned conviction that the government is always more inefficient than the private sector.
Looking at the first false premise, the truth is that Medicare, because it is so huge–dwarfing even the largest of the private health insurance companies–is in a unique position to bargain with health care providers to force down the prices they charge for their products and services–if it were only allowed to. Doctors and hospitals simply cannot afford to ignore or reject as patients the vast numbers of elderly whose bills are paid by Medicare. If the government were to stand up to the lobbyists, and demand fair pricing by doctors, hospitals, pharmaceutical firms and other providers, it could push down prices dramatically, and encourage private insurers to do the same, lowering costs for everyone. That is in fact what the Medicare program in Canada does, and it’s why Americans who travel up to Canada can get name brand drugs so much more cheaply. It is also why health care in general in Canada is so relatively inexpensive compared to the US.
As for the second false premise — the claim that the country can’t afford Medicare — this has to be placed in a larger context. For starters, suppose for a moment that Medicare were converted into a voucher program for assisting with the purchasing private insurance, as proposed in the spring of 2011 by Rep. Paul Ryan (R-WI). The whole idea of Ryan’s voucher program is to whittle down the cost of the program. Clearly, the dollar amount of these vouchers will be inadequate for buying full insurance coverage, which will be very pricey for an elderly person, so we will inevitably find the elderly–particularly the low-income elderly– paying much more out of pocket for co-pays and deductibles. Either that or they will be forced into HMOs where they will be denied much-needed care. The result will be that already financially strapped elderly people will be forced to pay more their health care, or they will have to be seek financial assistance from their children, who will have to shoulder the costs themselves, returning things towards where they were before Medicare was established. Ryan will have lowered the government’s cost of health care, but not the cost of health care for the American people.
But we can take this further. Suppose that instead of eliminating Medicare, we were to expand the program, either gradually, starting with people 55 and older, and then 45 and older, and so on down to children, or else opening it up all at once to cover everyone. Clearly that would make Medicare much more expensive for taxpayers. But that’s hardly the end of the story. It’s only the beginning.
Think about it. If everyone in America were covered by Medicare, it would mean huge savings in other areas of government expenditure. For example, there would be no more need for the $100 billion in health care currently provided through the Veterans Administration, since all veterans would be eligible for Medicare. Likewise there would be no more need for Medicaid to pay for hospitals and physicians for the poor. Slightly over half the cost of Medicaid, about $100 billion a year, is financed by the federal government, with the other half financed by the 50 states, but either way, that $200 billion a year it is paid for by US taxpayers. About half of this amount goes to pay for nursing home care for people who cannot afford it, but the other half is for medical care, which would no longer have to be covered, since everyone would be on Medicare. Another several hundred billion dollars in charity care is provided by hospitals to people among the 50 million who are too well off to qualify for Medicaid, but who cannot afford private insurance. Some of that money comes from county and city taxpayers, but most is simply cost-shifted onto charges billed to private insured patients, who see it show up in the form of higher insurance premiums which are in turn paid by them or by their employers, or both. So already we’ve saved about $400 billion a year in other programs by expanding Medicare to cover everyone.
Of course, the big savings would come with the elimination of private insurance and the hundreds of billions of dollars in premiums that are paid annually to insurance companies by individuals and by their employers.
In the end, the cost of extending Medicare to cover everyone would be far less than all these combined savings.
As for that article of faith in the private sector that it will always being more efficient than the public sector at running anything, it is readily debunked by looking at the extraordinary amount of money the private insurance industry spends just on overhead and paperwork — 20-30% or more of total health care expenditures. Medicare in contrast spends just 4% of its budget on overhead.
Meanwhile a big reason for Medicare’s costs being as high as they are is fraud by the private sector–the hospitals and doctors, pharmaceutical firms and nursing homes that bill Medicare for their services. And Gov. Scott, quoted at the top of this chapter, should know. He was CEO of Columbia/HCA when it settled with the Justice Department for $1.7 billion in Medicare fraud — the largest such fraud in the history of the program (Scott, rather incredibly, claimed he “didn’t know” his company was massively defrauding the system, but he was summarily dumped by the company’s board of directors in 1997, shortly after the FBI raided the company’s offices in seven states.)
There is a reason why the US pays nearly 20% of GDP for healthcare, while Canada, which has a program of provincially-managed national health care insurance called Medicare which covers the costs of health care for every Canadian, only spends half that — about 10% of GDP, while achieving better health statistics in every category, from life expectancy to infant mortality.
In fact, not one single country with any kind of national health insurance plan or national health service, however organized, pays anything close to what the US pays, either as a share of GDP or on a per capita basis, for the health care of its citizens, and those countries have the added advantage that everyone has access to medical care. Meanwhile the US has nearly 50 million people who are struggling along with no medical insurance, and no access to health care except for a public hospital emergency room.
The truth is that with health care costs continuing to soar in the US, we cannot afford not to expand Medicare to cover everyone.
Chapter X
Big Lie Number 9: Canadians Hate Their Single-Payer Medicare System and Come to the US When They Need Treatment
“There’s no proof that single payer, socialized medicine has ever been beneficial. That’s why in Canada we find many people leave and come here because we do have more freedom here than they have in Canada and you don’t have to wait in lines.”
— Rep. Ron Paul, (R-TX), Libertarian presidential candidate and candidate
for Republican presidential nomination, and a physician
A few years ago, when I was on a speaking tour to promote my book Marketplace Medicine about the for-profit hospital system, I found myself being interviewed by a talk-show personality on a public interest show airing on the New York City NPR affiliate WNYC. It was a call-in program, but so far, nobody was calling in despite my best efforts to be controversial. The host was openly antipathetic about “socialized medicine,” and brought up the Canadian system as an example. “Canadians hate that system,” he asserted, echoing a claim opponents of Medicare continually push. “When they get sick or have an injury, they run down here to the US to get treatment.”
Suddenly his call-in board lit up. He looked pleased and started fielding the calls. They were all Canadians living in New York, though, and were indignantly calling in to defend their country’s health system! Most echoed one man who said angrily, “What are you talking about? We Canadians love our Medicare! I feel sorry for our American friends here in New York. When they get sick, they have huge bills. When my wife or I get sick, we hop right in the car and head to Montreal to get care. We get seen right away, get excellent treatment, and don’t pay anything.”
The truth: Canadians love their country’s single-payer Medicare health system. A Harris Poll conducted in July 2009 found 82% saying they favored their system over the U.S. system, with only 8% saying the U.S. system was better. In 2004, Tommy Douglas, the founder of Canada’s health system Medicare model, was voted the Greatest Canadian in a nationwide contest. And to top it off, the most scientific study of alleged health care “tourism” from Canada, done for the peer-reviewed journal Health Affairs, found that the number of Canadians who came to the U.S. for medical care was “infinitesimal,” particularly when compared to the millions of Canadians who are routinely cared for by the health system in Canada. Far more Americans figure out ways to go to Canada to buy cheaper drugs, or to get medical care, than Canadians who come to the US to get medical treatment here.
But don’t trust a Canadian. Take it from the American executives of Canadian subsidiaries of American companies. I wrote an article for the magazine Treasury & Risk once a few years ago, in which I interviewed the executives of GM Canada, Ford Canada, IBM Canada, and the Canadian subsidiaries of several other big Fortune 500 firms. They were unanimous in praising the Canadian Medicare system, and some actually regaled me with positive stories of availing themselves of Canada’s system themselves when they or their children had been sick or injured. But more than that, they had collectively formed a lobbying organization to push the Canadian Parliament to increase funding for the program, and even to add long-term care and other coverage to it!
Several years ago, GM Canada’s CEO Michael Grimaldi sent a letter co-signed by Canadian Autoworkers Union president Buzz Hargrave to a Crown Commission considering reforms of Canada’s 35-year-old national health program. That letter said, “The public healthcare system significantly reduces total labour costs for automobile manufacturing firms, compared to their cost of equivalent private insurance services purchased by U.S.-based automakers.” The joint labor/management letter also said it was “vitally important that the publicly funded healthcare system be preserved and renewed, on the existing principles of universality, accessibility, portability, comprehensiveness and public administration,” and went on to call not just for preservation but for an “updated range of services.” I discovered that the CEOs of the Canadian units of Ford and DaimlerChrysler–both US corporations — wrote similar encomiums endorsing Canada’s national health system.
Curiously, their home company CEOs and lobbyists back in the U.S. at the same time were all on record as opposing the idea of single-payer health care in the US. Go figure.
Stew Low, a spokesman for GM Canada, says stateside criticisms of the Canadian system are overblown and tend to come from people “with an axe to grind.” He says, “Both the U.S. and Canadian systems have their challenges, and Canada’s system clearly needs some improvement, especially in the form of higher investment, but in general, people here have ready access to healthcare. I can walk into any ER and get treated quickly. My kids are active in sports and get hurt, and they always get treated right away.”
In fact, for every Canadian who tries to jump the cue for some treatment by coming down to the US to pay for service, there are probably 10 Americans who go the other way, into Canada, to try and cadge cheaper brand-name drugs or to get care that they are being denied in the US. Documenting this scientifically, a study by Steven Katz et al in the magazine Health Affairs found that in fact the only real Canadians using U.S. health care were “snowbirds” and resident aliens, while a number of U.S. patients were going to Canada to get cheaper care for such uncovered treatments as LASIK eye surgery.
Chapter XI
Big Lie Number 10: Medicare is Socialism
“Medicare is socialism.”
— Rand Paul, Republican senator from Kentucky, and a physician
“If you don’t oppose [the Medicare bill], this program I promise you, will pass just as surely as the sun will come up tomorrow and behind it will come other federal programs that will invade every area of freedom as we have known it in this country until one day as Norman Thomas said we will wake to find that we have socialism, and if you don’t do this and I don’t do this, one of these days we are going to spend our sunset years telling our children and our children’s children, what it once was like in America when men were free.”
— Ronald Reagan, in a paid recording titled “Ronald Reagan Speaks Out
Against Socialized Medicine,” funded by the American Medical
Association in a 1961 campaign against legislation to found Medicare
It’s hard to know whether the long-standing right-wing charge that Medicare is socialist or is the start of a slippery slope towards socialism is simply a craven attempt to take advantage of the visceral and irrational fear of the word that has been grafted into the DNA of most Americans by the time they finish elementary school, or is the result of a genuine ignorance of what socialism is, and of how the Medicare system works.
There is certainly such a thing as socialized medicine, and if you want to check it out, there are three places you can see it at work readily. One is in Cuba, where all health care is a state function like education, where all hospital and health delivery systems are government-owned, and where doctors all work on salary. Another is Great Britain, where the National Health Service operates much the same way. All British citizens have free access to doctors of the National Health, and when they go to a National Health hospital, the care is free too. Drugs are dispensed for free at the hospital dispensary, and doctors are on government salary. Unlike Cuba, Britons have the option of paying for private health insurance and can then use private hospitals and physicians, but the vast majority prefer to use the NHS. The third place you can find and check out socialized medicine doesn’t require dodging U.S. State Department restrictions on travel, or even buying a plane ticket. Just visit a US Veterans Administration hospital. VA hospitals are owned and run by the federal government, and the doctors are all salaried employees of the VA. I have known plenty of veterans, including some in my own family. Most who are eligible for VA care readily choose Veterans hospitals and clinics over private physicians and hospitals, and with good reason: the care is good and the price is right (free or a minimal co-pay).
Medicare is something quite different from socialized medicine, though. With Medicare, eligible recipients of Medicare coverage chose their own private doctors, and almost every doctor in America accepts Medicare payment as payment in full. Hospitals are also run either by local public agencies or privately on a for-profit or not-for-profit basis, and are reimbursed by Medicare based upon fees established by the government, in negotiation with the industry. The entire delivery system is basically private, with the exception of some public hospitals run by municipalities or by public universities and their medical schools. All Medicare amounts to then, is a government-run payment system, or, in essence, a government insurance program, in which the “premiums” are, for the most part, paid as a tax by workers before they reach 65. Then there are some Medigap coverages that people have to buy to cover the remaining unpaid portion of their bills. (That’s a part of the program that needs improvement. In Canada there is no such private extra insurance required. Medicare pays everything there after a small annual premium or tax set at the provincial level.)
There are a lot of things you could call Medicare, but socialism is not one of them. The same is true of the Canadian Medicare program, which also relies upon private hospitals and private physicians, with citizens having freedom of choice as to which physicians they want to use, and which hospitals they want to go to when they need one.
Conclusion:
The Fight to Save and to Improve Social Security and Medicare, and the Opening to Forge a New Progressive Political Movement
“And it’s one, two, three, what are we fightin’ for?”
— Country Joe McDonald
The looming battle to save Social Security and Medicare, the two biggest legacies of the liberal political era that began in the early 1930s with President Franklin D. Roosevelt’s New Deal, and ended in the late 1960s with the end of President Lyndon Johnson’s Great Society and the election of Richard Nixon, begins in earnest in the 2012 presidential election year. This battle presents us with both a crisis and an opportunity.
The crisis is that tens of millions of current retirees and hundreds of millions of Americans of all ages have been counting on these two programs to protect them from destitution in their old age and to assure them that they will be able to get the medical care they need as they suffer all the infirmities that inevitably accompany the aging process. Millions of people who are permanently disabled, too, are depending upon these two programs. Without them, we return to an era, not seen since the years of the Great Depression and before, when being old basically meant being destitute, and when hospitals were often little more than
poorhouses where people went to die.
The opportunity is that this fight to save these two programs, which will necessarily be fought, primarily, by the same generation that half a century ago was standing up to soldiers with fixed bayonets on the Mall of the Pentagon, facing down ranks of tactical police force officers mounted on huge horses, or standing behind shields, wielding clubs and armed with tear gas canisters and guns, all in order to end a terrible and criminal war in Indochina, could serve as the core of a new progressive politics. It is a struggle that could well unite these veterans of the ‘60s Counterculture and Peace Movement with workers of all ages, with frustrated and alienated young people, with struggling minority groups, and with oppressed women, with the Labor movement, as well as with an older generation of retirees–their parents.
Such a massive coalition, all fighting together as one for the goals of a secure old age retirement system, and of health care for all through an expansion of Medicare to cover people of all ages, would have the potential to move well beyond just those two issues. In coming together as a huge national progressive movement, we could also begin to seriously address the accelerating destruction of our environment, and indeed of the living earth itself, we could finally confront and challenge the grasping power of corporations, which have turned everything into a commodity. We could move to radically reform the corrupted political system, which has devolved into a corporatocracy that no longer feels any need to act in the public interest. We could end the wholesale dismantling of the domestic economy, with the subsidized shipping of jobs overseas. We could halt the the impoverishment of working people. We could finally reverse the undermining of the nation’s once-vaunted educational system. And finally we could begin to dismantle the enormous national war machine and end the endless cycle of foreign wars that are devastating families and sucking up the nation’s blood and treasure.
All political and social movements need a focus around which to build solidarity and upon which organizing and mobilization can be based. Defending Social Security and pushing not only to save Medicare but to broaden it to cover everyone, together perfectly provide that common focus and sense of purpose.
Almost everyone worries about retiring, and about how she or he will pay for the costs of food and shelter and health care when there is no longer a job, health benefits or a steady income. This is all the more true today in the depths of a seemingly endless recession. Making things worse, now that corporations have almost completely done away with the old “defined benefit” pensions that used to be the norm for working people, and have often done away with health insurance benefits, too, even for current workers. For most Americans today, Social Security will be the primary source of income in old age, and Medicare will be the health plan. Already, for 43% of single people over the age of 65, Social Security checks represent 90% of their annual income, and for half of all retirees those checks represent more than half of their income. The number of people who have their retirement health care covered in part by a health plan from their former employer is minuscule and shrinking by the day. This is a desperate situation that will only get worse. One’s family home can no longer be counted on to provide an income cushion, and the latest huge recession, which has not ended, and which already blew a gaping hole in most people’s private savings for retirement, blasted an even bigger hole in the argument of financial industry propagandists that private investment in stocks and bonds was the way people should save for their dotage.
With home prices in the gutter and in many areas still falling, and with real unemployment hanging at around 20 percent, with no sign that terrible number will shrink much for at least several years, if ever, it will be years, and maybe decades, before people will buy that fairy tale again.
Meanwhile there is Social Security and Medicare under serious attack. It shouldn’t be hard to build a political movement to fight back and rescue these popular programs from the corporate vandals and wolves, and their paid servants in Washington, who want to steal our benefits and shred our safety net.
The problem is that the enemies of both these programs are not isolated to one party. There are plenty of enemies of Social Security and Medicare in the Democratic Party too, which collects at least six times as much in campaign donations from corporate PACs dedicated to gutting these programs as it does from labor organizations and other groups who want to defend them.
This means that any broad movement to defend and fight for better Social Security and for an expanded and better Medicare program for all Americans needs to be organized outside of the two-party system, much as the Civil Rights and Anti-War movements of the ‘50s, ‘60s and ‘70s were organized outside of that two-party system when both parties were anti-civil rights and pro-war (Oh yeah. They both still are!).
We will need to use all the political and social and religious organizations we can muster — trade unions, churches, school alumni associations, social clubs, small business groups, neighborhood associations, and the like — to spread the word.
We will also need to raise hell!
This is not a battle that can be won by sending email letters to members of Congress or to the White House. It is not a battle that can be won by making phone calls, or by going to “meet your Congresswoman” constituent events.
It will take commitment, disruption and confrontation.
We will need a million people marching in the street in Washington and in state capitals, the older among us with our canes and walkers, ready to use these if need be against ranks of armed police and maybe even National Guard troops. And not just once, but as often as necessary until we win.
We don’t have to destroy the two-party system, though in my view that would be a desirable thing, and maybe such a movement could lead to such a result. We Baby Boomers, back in the anti-war days, certainly didn’t destroy the two-party system with the anti-war movement (though many political analysts and historians have argued that we did fatally wound the Democratic Party), but we did end the draft, and ultimately we helped end the war too. And we can do this too.
We can build a movement that can save and improve Social Security, and we can bring an end to corporate, you’re-on-your-own health care, replacing it with Medicare for all. And as we create the popular movement to accomplish those two things, we can keep rolling forward and do much more with it, too.
No wonder the powers that be are worried, and are frantically working to vitiate these two popular programs.
They should be worried.
This chapter, or a subsequent appendix, would include short profiles and contact and website information on all the groups and organizations around the country that are working to defend Social Security and Medicare.