[As we approach Labor Day… make this newsletter—one of the very few devoted to a progressive, accurate view of workers, labor and economics—a part of your colleagues and friends weekly intake! Share. And, of course, comment!]
LONG TAKE
Do you know what the word “insolvent” means? I bet you do—but it either is a mystery to “economic” reporters at The New York Times and/or they know what the word means but don’t care if the actual meaning of the word gets in the way of a long-time elite narrative: promoting a phony, non-existent crisis in Social Security, which, then, fuels the fires of “entitlement reform”, which means CUTS in benefits.
You can look at any dictionary you want and you will find roughly the same definition of insolvent: “a person or organization that is insolvent does not have enough money to pay their debts.”
Keep that in mind when you now read this paragraph from The New York Times story on the current state of the Social Security trust fund:
The Social Security Old-Age and Survivors Insurance Trust Fund will now be depleted in 2033, a year earlier than previously projected, according to the report. At that time, the trust fund will run out of reserves and the program will be insolvent, with new tax revenues failing to cover scheduled payments. The report estimated that 76 percent of scheduled benefits will be able to be paid out unless Congress changes the rules to allow full payouts. [emphasis added]
Now, I have bolded above the word “insolvent” and, then, the snippet that…is the opposite of insolvent. Raise your hand if it is painfully obvious to you, and any person who has a passing connection with the English language, that you cannot be INSOLVENT and, at the same time, be able to pay out over three-quarters of benefits. Doh! FFS!
It would be entirely appropriate to say that, at some point in the future, the current stream of funding for Social Security will mean that retirees will only be able to get 76 percent of promised benefits. It would be also fine to say that the reserve depletion will mean that the annual income to Social Security will mean it can only pay 76 percent of benefits. That is a challenge and there is a solution for that challenge (which I will get to). But, we are not even close to insolvency.
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In fact, here’s what the Social Security trustees say in their report:
After trust fund reserve depletion, continuing income is sufficient to support expenditures at a level of 78 percent of program cost for the rest of 2034, declining to 74 percent for 2095. [I added the emphasis]
So, actually, that’s pretty far from insolvent if you can still pay 78 percent of the program’s cost in 2034 and, then, pay, for the next 60 years, benefits at a shade lower level of 74 percent.
Let me be clear: The debate about Social Security is an important one. Folks should not face retirement even 60 years from now with less than 100 percent of promised benefits. In fact, the debate should be focused on *increasing* Social Security benefits which are too meager.
But, the program is not heading for insolvency.
This is just another example that shows quite clearly that The New York Times is not simply an “objective” “news-gathering organization” as many of its reporters like to smugly assert as a way of deflecting criticism. It’s a highly ideological organization, *especially* when it comes to economics—which most of these folks are blissfully unaware of. For years, the Times—and virtually every other major news organization—has pimped for so-called “free trade” and de-regulation because most of them learned in some basic Economics 101 class that “free trade” and deregulation are sacred, good things; CEOs and “business leaders” are roundly embraced—which is fundamentally how someone like Donald Trump dodges the stains of corruption, incompetence and repeated bankruptcy; union leaders are routinely called “bosses” because that’s a hard-wired pejorative.
So, here is how ideology blinds these folks when it comes to Social Security. Unmentioned in the article—not a word—is a very easy solution to not only meet the funding for current benefits but EXPAND Social Security beyond the paltry average monthly benefit of $1,540.
ELIMINATE. THE. CAP. ON. INCOME. SUBJECT. TO. THE. SOCIAL. SECURITY. TAX.
In other words, make richer people pay much more into the program.
Right now, any dollar above $142,800 in income is not taxed for Social Security. So, a billionaire basically stops contributing to Social Security probably on January 2nd every year, millionaires a little later.
It used to be that roughly 90 percent of all wages fell below the cap but, because of the gross inequality that is a central feature of the world we live in, that figure is now down to about 82 percent.
There you have it. The reason Social Security projects shortfalls (not INSOLVENCY!!!)—and the simple way of fixing it.
If only The New York Times felt any obligation to see it.
SHORT TAKES
Monday is Labor Day so it’s particularly putrid that on that very day up to 8.8 million workers will lose unemployment benefits—about 4 million or so who were getting Pandemic Unemployment Assistance (PUA), which was especially important to workers ineligible to receive traditional unemployment because they were not “traditional” workers; Federal Pandemic Unemployment Compensation (FPUC), which initially provided $600 per week and, then, $300 per week, to supplement the meager unemployment benefits amount provided by states; and, finally, the 3.3 million folks who will no longer get Pandemic Extended Unemployment Compensation (PEUC), which funded additional weeks of benefits when meager state benefits ran out.
A reminder: the economy is still millions of jobs short compared to the pre-pandemic level—and a further reminder that the collapse of the economy was a direct result of the incompetence of political leaders who variously ignored the pandemic and/or did not respond quickly or forcefully enough. Wage workers were simply collateral damage—while billionaires increased their wealth dramatically.
At the very least, this is very stupid economics—these programs helped tens of millions of people and injected $800 billion into the economy just in 2021 alone.
And, no, it’s an entirely absurd notion that people were sitting home pocketing unemployment benefits and leaving jobs unfilled—when states (primarily Republican-led states) ended benefits, labor force participation didn’t change much but the number of people going hungry rose dramatically.
Here’s the focus for the moment: the racism inherent in cutting people off these programs, as the National Employment Law Project observes—
The US labor market and unemployment insurance program were designed to prioritize white male workers. As a result, Black workers and other workers of color have faced racist hiring and firing practices, longer periods of unemployment, and over-representation among unemployment claimants.
Ending the temporary programs that addressed some of the gaps that kept Black unemployed workers and other jobless workers of color from acquiring unemployment insurance will have devastating impacts on these communities. Currently, Black workers experience 8.2 percent unemployment and Latinx workers experience 6.6 percent, compared to 4.8 percent unemployment for white workers. [Emphasis added]
Economically foolish, short-sited and racist.
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I am not here to die on the hill of the fight over whether to reappoint Jerome Powell as Chairman of the Federal Reserve Board. I just want everyone to consider whether the progressive energy now being expended to deny him another term as the chair is a good use of limited resources and bandwidth. \
It isn’t.
The upshot of the criticism of Powell has some validity. Namely, that he is weak on being tough on regulating banks and, just as important, that he has not made raising climate change as a financial regulatory threat a central piece of the agenda of the Fed. Fine. I don’t disagree. And Dean Baker has a cogent explanation of what the Fed could do on climate change.
BUT… the fundamental question is this: do you think there is even a sliver of a chance that Joe Biden will appoint someone dramatically better on regulation and climate change? The answer is 100 percent “no”.
Just as important, I would make three observations. For a Fed Chair, Powell has, and this is undisputed, been pretty steady in focusing on the crisis of unemployment during the pandemic. He has so far resisted the foolish cries of the inflation mongers who want him to cut back on the Fed’s support of the economy (mainly, in the form of large bond purchases and low interest rates). That has made a difference to untold number of workers.
Second, and maybe more important, if we have a beef about a failure of the Fed on regulation and climate change, then, that beef is with CONGRESS. Congress needs to direct the Fed on such issues through its legislative and oversight roles.
Last point: honestly, with limited time, the big short-term fight is pushing through the biggest possible infrastructure bills that will make a huge difference in the lives of millions of people. Keep the eye on that fight.
This, then, is just another in a long list of my criticism of progressive organizations: be smart about where to put energy and where to use the limited leverage we have.
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SALT=state and local taxes. You may remember this—when the GOP passed the Trump tax fraud bill (“fraud” because the arguments for the tax cuts were just one lie on top of another) it included a SALT cap of $10,000 on the deduction one could get on federal taxes for paid state and local taxes; it was partly seen as an attack on those living in higher-tax states that are “bluer”. That certainly sucked for people who were paying higher federal taxes who could not deduct the full amount of their state and local taxes.
But, here’s the conundrum. If you eliminate that cap, as a host of members of Congress from states like New York and California are pushing to do, it’s really bad policy right now—it would cost $100 billion in 2022 alone AND it would benefit disproportionately white, wealthier people because more than 85 percent of the benefits would go to the top five percent of people who earn more than $275,000-a year.
The Institute for Taxation and Economic Policy has three options to deal with this: Raise the SALT cap to $15,000/$30,000 which would, then, create a smaller hit on the federal budget; repeal the SALT cap for those with income below $400,000 which would, then, be in sync with Biden’s (unwise) pledge not to raise taxes for anyone making less than $400,000; and, finally, allow taxpayers to choose the $10,000 SALT cap or deduct SALT exceeding 8% of their income. I don’t think any of these are perfect but it’s worth you’all knowing what is being talked about.
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