Key House GOPer Introduces Bill With Major Cuts To Social Security

FILE – In this June 4, 2013 file photo, Rep. Sam Johnson, R-Texas speaks on Capitol Hill in Washington. Millions of immigrants benefiting from President Barack Obama’s executive actions could get a windfall from the IRS, a reversal of fortune after years of paying taxes to help fund government programs they were banned from receiving. Armed with new Social Security numbers, many of these immigrants who were living in the U.S. illegally will now be able to claim up to four years’ worth of tax credits designed to benefit the working poor. For big families, that’s a maximum of nearly $24,000, as long as they can document their earnings during those years. (AP Photo/Charles Dharapak, File)

On December 9, 2016, Tierney Sneed writes TPM DC:

A key House Republican on the issue of Social Security introduced a bill Thursday that would impose major cuts to the program. The bill, the Social Security Reform Act of 2016, was introduced by Rep. Sam Johnson (R-TX), the chair of the House Ways and Means subcommittee on Social Security.

It would, among other things, gradually raise the retirement age from 67 to 69 on Americans 49 or younger at the present. It would change the formula that determines the size of a retiree’s initial payments. And it would switch the program to a less generous formula for raising payments according to cost of living increases.

Big picture, the most concerning element for many experts is that its approach to make the program more solvent rest entirely on cuts, and does not raise revenues for the Social Security Trust Fund, as some bipartisan proposals have. Across the political spectrum, solutions for long term solvency range from cuts-only approaches like Johnson’s bill to plans that achieve 75-year solvency by raising the current income cap on social security taxes.

“Ultimately, we are going to need something that’s a little more balanced between benefits saving and revenue changes in order to get a proposal that could pass Congress and get approved by the president,” said Shai Akabas, director fiscal policy at the Bipartisan Policy Center.

The cuts in the bill lean more heavily on high income-earners, but most workers would see cuts — some of them drastic — if Johnson’s bill became law.

The initial cuts come in the form of the two-year retirement age increase, which according to Paul Van de Water, a senior fellow at the left-leaning Center on Budget and Policy Priorities, amounts to a seven percent cut each year.

The changes to the formula to determine the initial benefit — known as the Primary Insurance Amount (PIA) — are more complicated and involve multiple moving parts. In general though, they negatively impact higher earners the most.

“The change in the formula, it’s structured so that it produces the largest decreases on benefits for the people with the highest pre-retirement earnings,” Van de Water said.

Almost all beneficiaries, however, would see reductions as time went on when compared to current law, due to the legislation’s use of a less generous inflation metric.

“That’s another cut in benefits, and one that grows the longer the person is on the benefit rolls,” Van de Water said.

Some low wage earners — particularly those who have participated in the workforce the longest — are shielded from these cuts due to an increase minimum benefit the legislation includes that acts as a floor for those at the bottom of the scale.

A letter from the Social Security Administration’s Chief Actuary gives a more concrete picture of what the legislation would like if implemented. On the low end of the scale, for retirees who have been in the workforce the longest, a 65-year-old who made an average of $12,280 (according to an established formula called AIME) after being in the workforce for 30 years would see his benefits increase by 9 percent when he retired in 2030, as compared to the current law. A 65-year-old retiree at the earning level who was only in the workforce for 20 years would see 19 percent decrease, however, in 2030. That cut would be 32 percent, if the 65-year-old was retiring in 2050.

Up the earning scale, the reductions continue. A 65-year-old middle-income earner, someone who earned an average of $49,121 after 44 years in the workforce, would see a reduction in her benefits of 11 percent when she retired in 2030, compared to the current law. The amount of reduction would increase the longer she stayed on the rolls: when she was 75 years old, for instance, the reduction would be 14 percent compared to current law, and 16 percent when she was 85 years old.

And the cuts get more severe the later a middle-income earner is retiring. If a 65-year-old at that earning level retired in 2050, her benefits would be 17 percent less than current law. By the time that retiree was 75 years old, they would be 19 percent less, and when she was 85, 22 percent less.

A 65-year-old at the top of the scale, a $118,500 average earner, would see his benefits cut by 25 percent when he retired in 2030, compared to the current law, and that reduction would grow to 55 percent compared to current law by the time the retiree was 85 years old. Likewise, those cuts get larger the longer the law is in place. The 65 year-old at the top of scale who retires in 2050 will see a 43 percent cut in his benefits, compared to current law, that will grow to a 74 percent reduction by the time he is 85.

Additionally the Johnson’s bill makes some notable cuts to spousal benefits, while introducing some means-testing provisions.

The Republican proposal comes as GOP lawmakers are in the midst of figuring out a plan to implement an Obamacare repeal, which, according to health policy experts stands to kick millions of their insurance. Hints that Republicans may consider Medicare privatization were met with a swift rebuke by Democrats, who vowed to go to war over the program. Many pointed out that President-elect Donald Trump campaigned on protecting social safety net programs.

Likewise, Democrats were quick to condemn the GOP Social Security overhaul proposal. Even before most news outlets had picked up on the legislation, House Minority Leader Nancy Pelosi (D-CA) put out a statement slamming Johnson’s bill.

“Slashing Social Security and ending Medicare are absolutely not what the American people voted for in November,” Pelosi said. “Democrats will not stand by while Republicans dismantle the promise of a healthy and dignified retirement for working people in America.”

http://talkingpointsmemo.com/dc/republican-bill-social-security-cuts

Social Security is based on taxable earnings from JOBS in the form of payroll taxes. Because the function of technology is to “save” labor or in other words shift from labor intensive production of products and services to the non-human productive capital input, jobs are increasingly being replaced by human-intelligent machines, super-automation, robotics, digital computerized operations, etc.

President Obama stated: “What’s at stake is whether this will be a country where working people can earn enough to raise a family, build a modest savings, own a home, and secure their retirement.” As long as working people are limited by earning income solely through their labor worker wages and rely on their Social Security benefits, they will be left behind by the continued gravitation of economic bounty toward the top 1 percent of the people that the system is rigged to benefit. Working people and the middle class will continue to stagnate, resulting in a stagnated consumer economy. More troubling is that this continued stagnation will further dim the economic hopes of America’s youth, no matter what their education level. The result will have profound long-term consequences for the nation’s economic health and further limit equal earning opportunity and spread income inequality. As the need for labor decreases and the power and leverage of productive capital increases, the gap between labor workers and capital owners will increase, which will result in upheaval. Dependent on a tax on wages and salaries, Social Security will falter as tectonic shifts in the technologies of production destroy and devalue jobs.

The majority of Americans, dependent on labor worker wages, no longer think that jobs and labor wages will return suddenly—if at all—and at a livable earnings level, that the value of their homes will re­bound, or that their limited retirement funds will soon be fully restored. Americans are scared but attribute their worsening finances to job losses, reduced hours, wage givebacks, and overall reduced earnings. They do not understand the role of productive capital driven by technological innovation and science and the requirement for them to become capital owners whose productive assets do their work, as well as labor workers, to earn a viable economic future. And until we, as a society, understand how wealth is produced, how consumers earn the money to buy products and services and the nature of capital ownership, we will not be able to set a course to obtain an affluent quality of life for middle and working class citizens, where everyone “can earn enough to raise a family, build a modest savings, own a home, and secure their retirement.”

Unemployment is high, and will continue to be so, and there is an accelerating displacement of labor workers by technology and cheaper foreign labor, resulting in greater economic uncertainty and unstable retirement incomes for the average American citizen––causing the average citizen to become increasingly dependent on government wealth redistribution programs.

The stark reality is that we are in a depression reflected in rising unemployment and underemployment and instability that we will never escape from until we change our economic policy. Increasingly, more Americans will not be able to ever purchase a home, due to the packed inflationary wage and welfare base factored into the cost of building homes, which inflate prices, and will be forced to rent their entire life or depend on government living assistance––not able to accumulate equity that can help to sustain them in their retirement years. And this is the new reality now facing people in the middle class. The uncertainty of holding onto a good job is frightening to an increasingly wider base of middle-class working citizens. When you factor in the average non-salaried worker, even with a government-mandated minimum labor wage rate of $10.00+ per hour in some states, the outcome is grim. Never mind that consumer demand continues to dwindle because of insufficient income, solely tied to labor worker wages. The impact of the decline in consumer demand due to declining labor worker wages is that production will decline or desist without sustainable consumer demand.

The solution is to CREATE new OWNERS of wealth-creating, income-producing FUTURE productive capital assets. Unfortunately, conventionally, most people do not have the right to acquire productive capital with the self-financing earnings of capital; they are left to acquire, as best as they can, with their earnings as labor workers. This is fundamentally hard to do and limiting. Thus, the most important economic right Americans need and should demand is the effective right to acquire capital with the earnings of capital. Note, though, millions of Americans own diluted stock value through the “stock market exchanges,” purchased with their earnings as labor workers, their stock holdings are relatively miniscule, as are their dividend payments compared to the top 10 percent of capital owners.

What historically empowered America’s original capitalists was conventional savings-based finance and the pledging or mortgaging of assets, with access to further ownership of new productive capital available only to those who were already well capitalized. As has been the case, credit to purchase capital is made available by financial institutions ONLY to people who already own capital and other forms of equity, such as the equity in their home that can be pledged as loan security––those who meet the universal requirement for collateral. Lenders will only extend credit to people who already have assets. Thus, the rich are made ever richer, while the poor (people without a viable capital estate) remain poor and dependent on their labor to produce income. Thus, the system is restrictive and capital ownership is clinically denied to those who need it.

The solutions can be found in the Agenda of The Just Third Way Movement at http://foreconomicjustice.org/?p=5797, Monetary Justice reform at http://capitalhomestead.org/page/monetary-justice and  the Capital Homestead Act at http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ and http://www.cesj.org/learn/capital-homesteading/ch-vehicles/

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