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August 30th, 2010
Freethought San Marcos: Alan Simpson and the Social Security ‘milk cow’

Freethought San Marcos: A column
by LAMAR W. HANKINS

Years ago, when my dad was only 73, he told me about how he felt when Social Security started in 1935 and a few dollars was taken from his pay check at the Texaco refinery where he worked as a machinist in Port Arthur, Texas.  He was not happy about it.  But his attitude changed by the time he retired at age 62 and began drawing Social Security benefits.  Three years later, Medicare was added to his retirement benefits and he has lived a comfortable and enjoyable retirement for over thirty years.  He will turn 94 in October.  Without Social Security and Medicare, his life in retirement would have been measurably more difficult.  As a young man in 1935, he had no trust in Social Security.  Things aren’t far different today.

Many young people have bought into the arguments that Social Security will not be there for them when their time to retire comes around.  There is no reason this needs to be the case.  Ideologues opposed to Social Security on political grounds have spent decades trying to kill the program by spreading false information.  Not the least among them is the former senator from Wyoming, Alan Simpson, the co-chairman of President Obama’s bipartisan debt commission (the National Commission on Fiscal Responsibility and Reform), who recently made this remark about Social Security: “We’ve reached a point now where it’s like a milk cow with 310 million tits!”

Scott Burns, the no-nonsense, conservative syndicated financial adviser from the Dallas area, recently provided the following unvarnished information about Social Security:

  • It is the largest single source of income for retirees. Loss of the benefit would be catastrophic for most retirees. Even very affluent retirees would find their standard of living badly damaged if they no longer received benefits. A recent report found that Social Security accounted for 39.8 percent of income for those 65 and over.
  • The program has lots of money coming in. Employment tax collections in fiscal 2009 were $654 billion and accounted for 31 percent of all federal revenue.
  • Employment tax collections exceeded benefit payments from 1983 to the present. During those 27 years the surplus was spent by presidents of both parties and by Congresses controlled by both parties. They took our retirement savings and gave us IOUs from the Treasury. The Social Security trust fund is now nominally worth $2.3 trillion. The only problem: The Treasury has no money to make good on its bonds because our government is running a gigantic deficit.
  • Paying down existing federal debt is the only way that extra $2.3 trillion would have benefited future retirees. This would have required that the regular budget of the United States was balanced, an event that has occurred only three times in the last 50 years: 2000, 1999 and 1960. Then the employment tax surplus could have paid off our public debt, creating room for future borrowing.
  • We can’t blame it all on the politicians. When Social Security was created in 1935, the life expectancy at birth of American men was about 58 years. It has been growing since. It hit 74.9 years in 2005. It costs more to live longer.
  • Even under the worst-case scenario — that nothing is done to improve program funding — tax revenues will still cover 76 percent of benefits as far in the future as 2037.

In light of this information, Alan Simpson’s cow metaphor can be seen for what it is–an acid remark intended to make Social Security recipients seem as unsavory as  “welfare queens.”  Simpson has been a Social Security hater for decades.  Why Obama would appoint him to head an important commission on the future of social security attests to Obama’s propensity to find appointees that helped create a problem, expecting them to solve the problem.  But Simpson has no intention of improving the Social Security system.  He is one of the “drown government in the bathtub” Republicans.  He doesn’t believe in the program, despite its decades of proven worth and the vital assistance it has rendered to the elderly, the disabled, and those with renal failure.

The mission of the debt commission includes proposing “recommendations that meaningfully improve the long-run fiscal outlook, including changes to address the growth of entitlement spending and the gap between the projected revenues and expenditures of the Federal Government.”  If Simpson believes that the 44 years my father contributed to Social Security (including four years spent in the Army during World War II) makes him a tit-sucker, I was right to belittle Simpson’s ravings for the 18 years he was in the Senate.  He deserves about as much respect as someone who steals from a widow’s and orphan’s fund.

Social Security is completely unrelated to the federal deficit, as Burns points out, and has been self-supporting and will continue to be so far into the future.  With some minor tinkering, Social Security can be self-supporting for the next 75 years.  Contrary to the opinions of some of its critics, it has not been a Ponzi scheme, as the facts make clear.  In a Ponzi scheme, new participants pay money to be used to pay older participants.  Social Security has paid for itself for the last 75 years and can easily do so for an equal amount of time if it is modified reasonably by people who see its value, not those who would destroy the most successful financial assistance program ever devised in the US.

Simpson has not been content to falsely attack Social Security; he has also said that soon our grandchildren will be living in chicken coops.  Simpson admits that the money borrowed from Social Security by every President and Congress since 1936 (including the ones he served in) is backed by the full faith and credit of the United States, but Simpson doesn’t want it paid back.  He is willing to recommend that the government default on this debt to the Social Security Trust Funds (Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund).  Simpson believes that the purpose of the Social Security program is to “take care of the lesser people in society.”  I suppose anyone who has not been a US Senator with a generous pension is a lesser person to Simpson.  To characterize such a view as elitist would be a gross understatement.

Simpson is a nasty person filled with bile and venom against ordinary people and those who want to make the government a functional system that meets the needs of the greatest number.  Others have suggested that Simpson has irrevocably tainted the debt commission’s work; that he has infected its deliberations with poisonous invective, just as he has now subjected us all to his belittling fulminations.  It is fair to question whether, under these conditions, it is possible for any good to come from the commission’s work.  Perhaps it would be better to start over with a group not led by someone hostile to the very idea of government and disdainful of the masses of the people.

As best I can figure from research at the Senate website, former Sen. Simpson’s 18 years of work in the Senate and his Social Security payments likely yield him federal benefits in excess of $70,000 a year, far more than my “lesser” father got when he retired after 44 years of work.  And Simpson may get additional pension benefits from the government of Wyoming for his work in the Wyoming legislature.

Simpson’s biases call into question how serious the conclusions of the debt commission will be, or at least how seriously we should take them.  When you put a vocal, vituperative misanthrope in charge of an important task, the result can’t be good.  Just as Obama’s choices for other financial jobs in his administration have proven to be less than stellar, so has it been for his choice for co-chair of the debt commission.  Perhaps some day Obama will learn that beltway and financial sector operatives are not the best choices for correcting their own mistakes.

In the meantime, some of us have learned from experience that the value of Social Security is its function as an income security safety net, which has made this country more civilized and more humane, helping many millions live with a modicum of dignity when disease and old age begin to catch up with them.  This is a view that someone living on a senate pension and life-time health benefits might not appreciate.

© Freethought San Marcos–Lamar W. Hankins

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7 thoughts on “Freethought San Marcos: Alan Simpson and the Social Security ‘milk cow’

  1. My mom died giving birth to me and I recieved social security checks for 18 years. I went to colege on the dividends because my Dad was wise and nice enough to put all the money into a mutual fund and never spent any of it. Its worth 85,000 dollars today and isn’t controlled by anyone but me.

  2. Mr. Lamar Hankins, congratulations on an article that explains the benefit of social security for everyone, just not the elderly. Mr. Simpson sounds like a foolish, hateful old man who seems to be ungrateful for the blessings that living to old age in this country has afforded him. How many people are fortunate to serve in congress,retire receive a substantial pension and Tricare Health insurance? I am one of those seniors who suffer renal failure at age sixty.I had a personal disability policy, savings, 401K, but hugh medical expenses deplete all my resources. Therefore if it was not for Medicare and Social Security I would not have been able to live the life I am living now. Since I am a six year post-kidney transplant patient,I am thankful for Social Security and Medicare!

  3. Deflation, Not the Deficit, is the Most Serious Economic Worry

    In deflation, prices spiral downward and it is difficult to stop.
    It leads to Depression. The warning signs of deflation now occurring:
    • Consumers are not buying because they lack money and confidence.
    • Inventories are large.
    • Companies are discounting prices of brand products.
    • Lenders have much money, but are reticent to make loans.
    • Business owner are not expanding because they do not know future money policies and tax structure,
    • Unemployment remains high, because companies will not expand.
    • Falling interest rates on bonds.
    • The moderate state of the stock market is the only positive indicator, and there is risk of another serious decline.

    To prevent deflation and a depression requires getting money into the hands of those who will spend it quickly.
    • Protect Social Security and improve Medicare and Medicaid.
    • Extend unemployment insurance benefits.
    • Continue rewards to first time home buyers.
    • Prevent foreclosures.
    • Prevent unfair mortgages.
    • Pass laws which encourage lending and expansion of businesses.
    • Extend and improve education and retraining.

    Funding of these programs should be provided by major progressive changes to the tax structure.
    The Federal Reserve should aim for 2% inflation.
    A recent survey found that Wall Street economists, two to one, see deflation as a big threat.
    Because of our ability to innovate and produce, the deficit is not a worry according to many economists.
    Regressive ideas from the Deficit Reduction Commission, including a Federal value added tax, should not be made law.

    Sincerely,

    Albert A. Gabel
    Professor Emeritus
    Ohio state University

  4. What if we let every taxpayer borrow a million dollars at .25 percent interest and they all buy treasuries just like the banks get to ?

  5. It seems people assume that if SocSec goes away people would not save for retirement. Let me take the money and invest it as I see fit. Shut down the program while keeping the promised benefits for those receiving benefits or about to do so.

    Heck offer a lump sum “buyout”.

    If I just put that money in CDs at 2% I will be getting what is expected in return from SocSec AND provide capital that can be used to grow the economy.

  6. James 1:27 

    27Religion that God our Father accepts as pure and faultless is this: to look after orphans and widows in their distress and to keep oneself from being corrupted by the world.

  7. Albert A Gabel’s opinion, “warning” of deflation is a very interesting read. To most who read it, they must think that the sky is falling down around them. Dont be fooled. Professor Gabel’s ideas are rooted in a very liberal form of economics, called Keynesian economics. The basis of which is that government knows better than the private sector when it comes to the economy. He letter starts off that the deflation is the biggest worry, not the deficit. How fitting, since one of the key components of Keynesian econimics is more and more deficit spending.

    Mr. Gabel continues, “It leads to depression.” This is completely false. A study done in 2004, by the Research Department at the Federal Reserve Bank of Minneapolis, completed by Andrew Atkeson and Patrick J. Kehoe looks at a 100 year period in history, covering 17 different countries, looking at deflation in regards to leading to a depression. Excluding the Great Depression, they found that in 73 instances of deflation, only 8 times did deflation lead to a depression. Depressions happen much more frequently with inflation then with deflation. Mind you, no country has had a deflation in the post-WWII era.

    Then Mr Gabel continues with a wide array of proposals to fix the “problem” he sees with the country. Problem is that this list could have been faxed to him from the White House by the current administration. Everything entailed, boils down to one thing, expanding the role of government. Plain and simple. Such is the theory behind Keynesian economics.

    Lastly, the funding aspect of Mr Gabel’s proposal is a tired failure in modern liberalism, “…major progressive changes to the tax structure” Doesn’t take a genius to figure that one out. Tax the rich. Problem is, that this is what Keynesian economics needs to be feasable. Taxing the individuals who would in turn invest their capitol into their businesses and in turn hire more workers is prevented from doing so, and causes the private sector’s growth rate to fall. This allows for the notion that government and the public sector can and should step in and inact policy, because the private sector has failed. Well the private sector fails, because of the over taxed burden placed upon it by the governement, in the forms of tax hikes such as the cost of the new healthcare fiasco.

    Mr Gabel’s letter is wrought with progressive, socialistic ideas that have failed time and time again. The founder of Keyesian economics, John Maynard Keynes, is quoted as saying, “governments should solve problems in the short run rather than waiting for market forces to do it in the long run, because “in the long run, we are all dead.” Problem is, when has the government solved anything?

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