Respectfully submitted by Lawrence E. Rafferty (rafflaw)- Guest Blogger
We have all heard the cries that so-called entitlement programs like Social Security need to be cut in order to “save” them from extinction. Now that I am 62 years of age, I have become more interested in the issue of Social Security’s solvency.
CEO’s have gotten involved in the process through the now infamous Fix the Debt campaign initiated and funded by Billionaire Pete Peterson and the parallel campaign started by the Business Roundtable. Both of these campaigns are supported by big business and CEO’s of large corporations with no concern where their retirement funds are going to come from.
“In the current budget debate, the loudest calls for Social Security cuts are coming from two lobby groups led by CEOs who will never have to worry about their own retirement security.
The report, titled Platinum-Plated Pensions: The Retirement Fortunes of CEOs Who Want to Cut Your Social Security,
points out that two organizations, Fix the Debt, a PR and lobby machine launched in 2012 and led by more than 135 CEOs of major corporations, and the Business Roundtable, a 40-year-old association made up of about 200 CEOs of Americas largest corporations, are involved in a protracted campaign aimed at cutting, and ultimately, gutting Social Security.
Platinum-Plated Pensions, written by Sarah Anderson, the Director of the Global Economy Project at the Institute for Policy Studies, and Scott Klinger, Director of Revenue and Spending Policies at the Center for Effective Government, found that the CEOs belonging to Fix the Debt and Business Roundtable are sitting on massive nest eggs of their own.” Bill Berkowitz
Maybe I am an exception, but I was amazed to read the report linked above to see just who is claiming that the only way that Social Security can be saved for us mere peons is by raising the retirement age and reducing benefits. Many of the CEO’s making this claim have millions in their own pension or retirement accounts.
“According to Platinum-Plated Pensions, The average Business Roundtable CEO has $14.5 million in his gilded nest egg, more than 1,200 times as much as the $12,000 median retirement savings of U.S. workers who are within 10 years of retirement.
Ten CEO members of the Business Roundtable (four of whom are also members of Fix the Debt) have corporate retirement plans valued at more than $50 million. Of these, three have retirement assets of more than $100 million.” Bill Berkowitz
Now, in all fairness, just because someone has no need for their Social Security benefits, it doesn’t automatically disqualify their opinions on the subject of improving Social Security for all of us. However, these CEO’s do not have a real stake in what happens to Social Security because if it exploded tomorrow, they still have millions in their own accounts.
The ideas that Fix the Debt and the Business Roundtable have offered do nothing to make it more equitable or make Social Security work better for all retirees. Their idea of a “fix” is to delay benefits and force poor and middle class workers to stay in the work force even longer.
They even claim that raising the minimum retirement age to 67 is necessary because we are all living longer. Even that claim is suspect. One economic expert has brought some sunlight to the living longer claim.
“Before I get there, however, let me briefly take on two bad arguments for cutting Social Security that you still hear a lot.
One is that we should raise the retirement age — currently 66, and scheduled to rise to 67 — because people are living longer. This sounds plausible until you look at exactly who is living longer. The rise in life expectancy, it turns out, is overwhelmingly a story about affluent, well-educated Americans. Those with lower incomes and less education have, at best, seen hardly any rise in life expectancy at age 65; in fact, those with less education have seen their life expectancy decline.
So this common argument amounts, in effect, to the notion that we can’t let janitors retire because lawyers are living longer. And lower-income Americans, in case you haven’t noticed, are the people who need Social Security most.” Paul Krugman
While I am hoping Mr. Krugman is correct that lawyers are living longer, his evidence seems to suggest that the Fix the Debt and Business Roundtable people are all wet. Could those millionaire and Billionaire CEO’s have some ulterior motive? Could the CEO’s efforts and money spent pushing their Fix actually be an attempt to prevent the country from taxing the wealthy on all of their income or reducing or eliminating many of their tax benefits that harm the economy and fatten their wallets?
I have often wondered why millionaires don’t have to pay Social Security taxes on all of their income like the rest of us who make less than the $113,700 maximum for 2013. When a CEO makes $20 million a year, that CEO pays Social Security taxes on the first $113,700. When someone makes $60,000 a year, they pay Social Security taxes on their entire income. Why shouldn’t Social Security taxes be paid on all income, no matter what the sources? Wouldn’t that be more equitable?
Mr. Krugman also suggests that part of the problem seniors are facing is that the 401k accounts that many of their employers intitiated have not earned what was necessary to retire on due to the market crash and employer greed and employees making poor financial decisions.
“Today, however, workers who have any retirement plan at all generally have defined-contribution plans — basically, 401(k)’s — in which employers put money into a tax-sheltered account that’s supposed to end up big enough to retire on. The trouble is that at this point it’s clear that the shift to 401(k)’s was a gigantic failure. Employers took advantage of the switch to surreptitiously cut benefits; investment returns have been far lower than workers were told to expect; and, to be fair, many people haven’t managed their money wisely.” New York Times
What do you think is needed to strengthen Social Security for all workers? Paul Krugman and many Senators like Sen. Elizabeth Warren agree that we should be talking about strengthening Social Security and not cutting it. Some of the CEO’s mentioned above who have millions in their own retirement accounts have actually run up deficits in their own employees retirement accounts, but yet they still claim cutting benefits and extending the minimum retirement age are the way to go.
“While gilding their personal pensions, many Roundtable CEOs have allowed massive deficits to grow in their employee retirement funds:
- Of the Business Roundtable CEOs whose firms provide pension funds for their workers, 10 have deficits in these funds of between $4.9 billion and $22.6 billion.
- The Roundtable CEO with the largest deficit in his companys worker pension fund is Jeffrey Immelt of General Electric, with $22.6 billion. Immelts personal retirement fund is worth more than $59 million, the sixth-largest among Roundtable CEOs.” Bill Berkowitz
Are these CEO’s merely doing an end run in an attempt to steer Social Security funds into the private sector? Are they trying to steer the discussion away from taxing more income to strengthen Social Security? What do you think and who do you believe?
DavidM says: I will keep using the word fraud to mean something that is not what people claim it is.
Under that definition, you are a fraud, because you are claiming Social Security is not what Social Security itself and all of the Government claims it is. You cannot show any document from the SSA claiming it is a savings account or investment in retirement, yet you continue to claim they do say that. You are the utter fraud, by your own definition.
So blinded by your hatreds you are willing to lie to promote them.
Tony C wrote: “You cannot show any document from the SSA claiming it is a savings account or investment in retirement, yet you continue to claim they do say that. You are the utter fraud, by your own definition.”
I have never claimed any such thing. I have said that the way it is presented to people leads many to believe that they are investing in their retirement, but the truth is that Social Security is actually structured like a Ponzi Scheme, which is a pay-as-you-go system. Furthermore, Congress can take away Social Security with the stroke of a pen, end it completely, and that is perfectly legal. Let’s see how many people yell fraud if that were to happen. Such would reveal how many do not understand Social Security.
That stay-at-home woman who has to borrow from her husband for something she wants and then is divorced by him may have to forfeit any claim on assets from the marriage should he decide to divorce her. He may claim rent for her time in his house. She also won’t be eligible for social security b/c she didn’t pay anything in. If they were married long enough, she may be eligible when he dies.
pete,
It takes a perceptive man to notice that mistake.
😉
Elaine@6:02 pm
i believe you misspelled the last word in your comment. the word should begin with a “z” not an “h”.
DavidM,
So, again, just to clarify…you have applicants for a job that requires skill and training who simply beg you to pay them minimum wage? And you do.
I just want to get this straight.
Ok, they have training and they are skilled, and yet, they insist on being paid minimum wage. To prove to you that they can hack it. Hmmmm.
Or maybe…
You’re able to lure in desperate people, put them on commission, and you charge them for their training and equipment, in which case collecting minimum wage for the amount of time they spend in your salt mine would actually be a raise in pay.
I think I’m ready to solve the puzzle. You’re a real estate broker. In Orlando.
Suddenly, I’m filled with empathy for you.
I’m sure it’ll pass.
Gene, Elaine, et al.
You guys are wasting your time trying to explain both the English language and the concept of insurance to the willfully ignorant and selfish.
David: *Biff!!* *BAM!!* *Crassshhh!!* *Booomm!!* *Smash!!* *OOOOFFFah!!*
David,
No, I just understand the meanings of “wrongful” and “criminal” within the proper context. Apparently you don’t understand synonyms though.
wrongful /ˈrɒŋfʊl, -f(ə)l/
adjective
(of an act) not fair, just, or legal:
You also seem to misunderstand the use of “or” as a non-exclusionary conjunction instead of a logical operand. In relevant part:
or /ɔː/
conjunction
1: used to link alternatives:
2: introducing a synonym or explanation of a preceding word or phrase:
Emphasis added for the hard of understanding.
To wit: “wrongful or criminal deception” is being used with “criminal” acting as a a synonym or explanation of a preceding word.
Oops.
My understanding is just fine. It is your understanding that is once again insufficient. If any of those words confuse you? That would just be par for the course apparently.
Gene H wrote: “Apparently you don’t understand synonyms though.”
I understand synonyms just fine. Apparently you don’t. Following are a list of synonyms for fraud. Based upon this, I will keep using the word fraud to mean something that is not what people claim it is.
http://www.macmillandictionary.com/thesaurus-category/british/Something-that-is-not-real-or-true
You are free to keep using the definition of criminal deceit if you like, but that is a much more narrow definition than how it is commonly used.
Taint nothing wrongful ’bout Social Security fer as I kin see. Then agin, I’m jest a little old retired ladee who worked outside the home. Mebee workin’ addled my ladee brain.
Elaine, the same thought passed through my mind. That lucky woman whose husband GIVES her grocery money!
davidm2575
1, December 2, 2013 at 9:15 am
Elaine M – the cartoon you shared seems to ridicule people who look at government like the Santa Claus myth. They think the money and gifts are magically available and expect them always to be there for them for free. It kind of makes Ayn Rand’s point for her, but perhaps some people don’t see it.
*****
We “see” it fine…the hatred of altruism that Ayn Rand espoused. She accepted both Social Security and Medicare. It was there for her…in her time of need. I’d guess that she didn’t perceive those two programs as fraudulent.
DavidM wrote: It is like you having a wife who doesn’t work outside the home and you loan her $100 for something she wants and then a year later she pays you back $101.46 with money you gave her to buy groceries.
*****
Now there’s an analogy for the 21st century! That sounds like some men’s idea of a perfect world. Loaning a stay-at-home wife money for something she wants. That woman should present her breadwinner husband with a bill for her services: food shopping, meal preparation, doing the laundry, cleaning the house, and various and sundry other things that she does for her hero.
DavidM: The element of fraud enters the picture when an investment firm leads people to believe that they are investing their money, but in actuality, the return on the investment is paid from the money invested by others.
I think you are lying. Please show us a SSA or government document that does that. Provide a link. Prove it, or stop lying.
DavidM wrote: “The element of fraud enters the picture when an investment firm leads people to believe that they are investing their money, but in actuality, the return on the investment is paid from the money invested by others. That is a Ponzi Scheme. It is what Bernie Madoff did. He started an investment firm in 1960, did some trading in the beginning, but mostly paid off investors with money from other investors. He operated this way for almost 50 years, managing billions of dollars. He focused on charities because they were less likely to try to pull all their money out. There were people who tried to warn others about what Madoff was doing, but it had about as much effect as when people warn about how Social Security is setup under a similar model. Nobody listens. About half the investors in Madoff’s firm never lost any money, but a lot of others did. Social Security has a much larger base of investors, and they are forced to invest, so it will be able to operate a lot longer than 50 years. Just as many people were content with Madoff’s investment business and his strategy for getting 12% returns, many will be content with Social Security.”
Tony C wrote: “I think you are lying. Please show us a SSA or government document that does that. Provide a link. Prove it, or stop lying.”
Here is one link where the GAO was asked to compare Social Security to a normal investment strategy. It discusses the differences between Social Security and normal investments and the difficulties that arise in comparing them.
Social Security
Issues in Comparing Rates of Return with Market Investments
http://www.gao.gov/assets/160/156681.pdf
Some quotes:
“The current Social Security program is not designed to pay interest on
workers’ contributions the way banks pay interest on a savings account; it is not a system of individual savings accounts. Rather, Social Security is financed largely on a “pay-as-you-go” basis, in which each year’s revenues are primarily used to pay that year’s benefits. Contributions are not deposited in interest-bearing accounts for individual workers but are
instead credited to the Social Security trust funds. Under current law, the trust funds must invest any surplus funds in interest-bearing federal government securities. However, the benefit payments to any given individual are derived from a formula that does not use interest rates or the amount of contributions but, rather, uses average lifetime earnings.”
“In technical terms, Social Security provides a “defined-benefit” pension, not a “defined-contribution” pension. A defined-benefit pension provides a benefit based on a specific formula generally linked to each worker’s earnings and years of employment. In contrast, a defined-contribution pension resembles an individual savings account; retirement income from this type of pension depends on the total amount of contributions to the account and any investment earnings. As an example, 401(k) accounts are a type of defined-contribution pension.”
“In the case of variation by birth year, Social Security’s average implicit
rates of return have fallen continuously since the beginning of the
program. According to an SSA study, inflation-adjusted returns averaged
more than 25 percent annually for Social Security’s first retirees in the
1940s and are estimated to average roughly 4 percent for today’s retirees, roughly 2 percent for baby boomers, and 1 percent for those who will be born 40 years from now. … This decline in rates of return is primarily a natural and anticipated consequence of the maturing of a pay-as-you-go system.”
Notice this last sentence! The government admits that the decline in solvency of Social Security is a natural and anticipated consequence of the maturing of a pay-as-you-go system. This is exactly one of the criticisms of Ponzi Schemes.
Here is an SSA article that admits how people get the wrong idea of Social Security being an investment to which they are entitled. It explains how the SCOTUS settled the issue by establishing that entitlement to Social Security benefits is not a contractual right.
http://www.ssa.gov/history/nestor.html
“There has been a temptation throughout the program’s history for some people to suppose that their FICA payroll taxes entitle them to a benefit in a legal, contractual sense. That is to say, if a person makes FICA contributions over a number of years, Congress cannot, according to this reasoning, change the rules in such a way that deprives a contributor of a promised future benefit. Under this reasoning, benefits under Social Security could probably only be increased, never decreased, if the Act could be amended at all. Congress clearly had no such limitation in mind when crafting the law. Section 1104 of the 1935 Act, entitled “RESERVATION OF POWER,” specifically said: “The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress.” Even so, some have thought that this reservation was in some way unconstitutional. This is the issue finally settled by Flemming v. Nestor.”
…
“… Mr. Nestor’s benefits were terminated. He appealed the termination arguing, among other claims, that promised Social Security benefits were a contract and that Congress could not renege on that contract. In its ruling, the Court rejected this argument and established the principle that entitlement to Social Security benefits is not contractual right.”
BFM: I also agree there are real criticisms to be made; there are people getting SS I do not think should be getting it, and the opposite: people denied social security disability that I think are entitled to it. There is the question of whether the trust fund could be better invested in safe but higher paying venues; at least compensating for inflationary pressures. I think they should be; and could significantly reduce taxation if they were (even to zero).
Despite SSA’s claim of 1% overhead, which sounds small to a layman, as a professional businessman it actually sounds high to me for the function performed (although I may not be aware of the full extent of fraud attempts that need to be investigated or monitored). The vast majority of their work (99.5%) is automated and automatable; it is cutting checks or making a deposit in an account.
None of that makes SS a fraud perpetrated on the populace. It makes it par (or better) for the course in any system serving over 50 million people.
“The claims against Social Security seem to be based on very narrow, personal and idiosyncratic use of terms.”
Part and parcel of my point, bfm. However, since we are talking about a legally mandated system, I still must object to a colloquial use of the term “fraud”. A perceived inefficiency, either real or imaginary, is not the same thing as fraud. Which brings us to . . .
“In a sense, that is too bad because, while I broadly support Social Security, I do believe there are some real criticisms to be made.”
Don’t get me wrong. I agree with that statement. Like most complex systems, SS has room for improvement. However, I don’t think destroying it or cutting it in a mass fashion constitutes improvement.
“There were people who tried to warn others about what Madoff was doing, but it had about as much effect as when people warn about how Social Security is setup under a similar model. Nobody listens.”
Oh, they listen.
They just know it’s a ridiculous assertion not based in fact but rather in political ideological dogma.
David,
fraud
n. the intentional use of deceit, a trick or some dishonest means to deprive another of his/her/its money, property or a legal right. A party who has lost something due to fraud is entitled to file a lawsuit for damages against the party acting fraudulently, and the damages may include punitive damages as a punishment or public example due to the malicious nature of the fraud. Quite often there are several persons involved in a scheme to commit fraud and each and all may be liable for the total damages. Inherent in fraud is an unjust advantage over another which injures that person or entity. It includes failing to point out a known mistake in a contract or other writing (such as a deed), or not revealing a fact which he/she has a duty to communicate, such as a survey which shows there are only 10 acres of land being purchased and not 20 as originally understood. Constructive fraud can be proved by a showing of breach of legal duty (like using the trust funds held for another in an investment in one’s own business) without direct proof of fraud or fraudulent intent. Extrinsic fraud occurs when deceit is employed to keep someone from exercising a right, such as a fair trial, by hiding evidence or misleading the opposing party in a lawsuit. Since fraud is intended to employ dishonesty to deprive another of money, property or a right, it can also be a crime for which the fraudulent person(s) can be charged, tried and convicted. Borderline overreaching or taking advantage of another’s naiveté involving smaller amounts is often overlooked by law enforcement, which suggests the victim seek a “civil remedy” (i.e., sue). However, increasingly fraud, which has victimized a large segment of the public (even in individually small amounts), has become the target of consumer fraud divisions in the offices of district attorneys and attorneys general.
extrinsic fraud
n. fraudulent acts which keep a person from obtaining information about his/her rights to enforce a contract or getting evidence to defend against a lawsuit. This could include destroying evidence or misleading an ignorant person about the right to sue. Extrinsic fraud is distinguished from “intrinsic fraud,” which is the fraud that is the subject of a lawsuit.
intrinsic fraud
n. an intentionally false representation (lie) which is part of the fraud and can be considered in determining general and punitive damages. This is distinguished from extrinsic fraud (collateral fraud) which was a deceptive means to keeping one from enforcing his/her legal rights.
And the OED definition . . .
fraud /frɔːd/
[mass noun]
wrongful or criminal deception intended to result in financial or personal gain:
What do all of these have in common?
An element of criminality in pursuit of personal gain, financial or otherwise.
There is nothing illegal or specifically unconstitutional about SS. The Greed Merchants tried that tack back in the late 30’s shortly after SS became law in 1935. They, oh what’s the word, failed.
Since SS is a legal assertion of government authority, your assertion that you are relying upon some colloquial usage for the term “fraud” is in itself prime facie ridiculous. You are simply using “fraud” as an important sounding and wholly inaccurate substitute for “something you don’t like”.
English!
You should get some.
@Gene H.
I think you have told a fair amount of truth here. But I do think you could also throw in the use of terms related to investment and investing.
While I have no problem with the description given for investment, I do object to the claim that any broader use is inaccurate, misleading or – well – fraudulent.
The claims against Social Security seem to be based on very narrow, personal and idiosyncratic use of terms.
In a sense, that is too bad because, while I broadly support Social Security, I do believe there are some real criticisms to be made.
But they are not being made here – which is not helpful to any of us.
Gene H wrote: “fraud /frɔːd/
[mass noun]
wrongful or criminal deception intended to result in financial or personal gain:”
Gene, you overlooked or do not understand the word “or” in the definition, and the OED offers another definition which you conveniently omitted.
Bron: Unlike a mugger, you are entitled to and benefit from the services provided by taxes. The money is spent ON you, if not by you. You are entitled to Social Security, including disability. You should be a net recipient of tax dollars, not a source of them at all; and the rest of us (collectively speaking) do not begrudge you any benefits you receive, or anybody else with just bad luck needs.
Taxation on excess income from labor is the most equitable way of funding the government, which must be funded to be able to protect our Rights and create an environment in which excess income is even a possibility. You don’t get that environment for free, and it is entirely equitable that those benefiting the most from that environment will suffer the least hardship in paying for it; as long as that doesn’t change the actual rank of their income within the Society (e.g. the 700th largest income remains the 700th largest income after taxes; and taxation does not change anybody else’s rank position either).
RAFFLAW:
“to compare social security benefits to mugging is outrageous.”
How so? Do I have a choice to not pay? Is the money going to be spent by me? No.
So a mugger who takes your money and gives it to the poor is ok by you?
Just because society says something is legal and moral doesnt make it so. It used to be moral and legal in some Greek city states to throw babies over a cliff if it would benefit society.
Taxation on income from labor is not right, the founders chose other methods to raise revenue.
DavidM says: You ignore the economic effects of the policy and the conflation of terms.
No I don’t. You are mistaken.
DavidM says: Terms from positive economic activity is used for non-economic activity, just like a Ponzi Scheme does.
No, they aren’t. The SSA is perfectly clear about what is going on, and that participation is mandatory. People have not overthrown that law (although there is always some fools trying to do so), and people collect benefits.
DavidM says: You insist on using only your peculiar tunnel vision and not look at the facts being put in front of you.
As is par for the course, you accuse me of the crime you commit. You want it to be a fraud that it isn’t, so you invent falsehoods and lies and attempt to redefine words and falsely portray actual frauds, all to try and make Social Security seem like one. You are the one with a peculiar tunnel vision that refuses to look at the many facts put before you. Social Security is not a fraud, it is not a lie, it is not a pyramid scheme, it is not a Ponzi scheme, it is not deceptive in the least regard.
Nor does it have to be; it is the law, and unlike any fraud scheme, it doesn’t have to convince anybody or mislead anybody with any falsehoods in order to collect its funding. The proof of its efficacy is all around us, in the form of retired people collecting social security and spendable money. The only people that doubt social security are those duped by political liars like you, that dislike the tax for their own selfish and greedy reasons, and lie about it, or the gullible that repeat lies told about it.