It’s that time once again to have the GOP threaten to shut down the government. We’ve run up against the debt ceiling and now need to have the ceiling moved up (something that used to pass without much notice during the W years). But the ‘Freedom Caucus’ is in charge and they’re anxious to risk default by holding the debt hostage. Originally this was going to come about because of Planned Parenthood and the infamous baby parts videos. Now that even Republican governors are walking away from the issue, the right wing GOPers need a new reason to shut down the government and hold everyone hostage. Dammit, they made Boehner quit because he wouldn’t shut down the government anymore, and now nobody wants to be the House Speaker!
So now they’ve focused on a new target. If Obama wants to keep the lights on and the checks going out, he must agree to cut Social Security and Medicare. The Freedom Caucus folks must come away from a debt ceiling increase with something. Never mind that Social Security is part of a separate budget from the discretionary budget. I’ve tried to explain this before when writing about the War Resisters League’s April 15 protest against the IRS. Long story short, Social Security is funded by FICA, a separate tax that isn’t factored into your IRS bill. The only reason to go after Social Security would be to try and default on the trillions borrowed from the trust fund that is owed to the retirees. That process took off in earnest during the Reagan years, but the discretionary part of the budget owes SS several trillion dollars. The federal debt (from shortfalls in taxes to pay for discretionary spending, NOT from SS) is some $18T. We can’t stiff the T bondholders from China or Saudi Arabia, but we sure as shit can tell the retirees in our own country that it’s tough darts. And that’s the GOP plan.
Meanwhile, retirees are seeing zero cost of living adjustment (COLA) this year. This is under the rules set up years ago, and it’s based on the inflation rate. But as I’ve noted before, the inflation rate has been rigged. And surely there is inflation even within the federal systems–per the folks who created the meme about zero increase in COLA have nailed an important point. Some 30% of retirees are being hit with increases of 52% in their Part B premiums. They will also see bigger deductibles in their medical coverage. Obviously, the GOP has no interest in addressing this issue. But even if the Democrats figure out a way to provide a nominal increase in SS for this year, they have no interest in fixing the problem in the first place.
And why should they? The gaming of the cost of living adjustments for SS were undertaken by the Democrats’ favorite president, Bill Clinton. In an effort to ‘strengthen’ Social Security, Clinton put together the Boskin Commission (headed by Michael Boskin). And it was the Boskin Commission that made huge adjustments to the way CPI and inflation were counted, to the point where inflation had ‘disappeared’ by the late 1990’s. That not only reduced the value of a monthly SS check; it also set in motion the asset bubbles driven by Alan Greenspan and indirectly lead to the crash of the housing market (details here). There’s a 1999 explanation of the problems with the Boskin Commission adjustments here. Chris Martenson has created a series of videos called the Crash Course where he explains the gaming of inflation, oil prices, and debt. If you want to cut to the chase, cut to chapter 14, where Martenson lays out the Boskin Commission’s changes. Per Martenson, Here are the tools used to flatten SS checks:
Hedonics: which says that if your phone service cost $50 a month last year and just went up to $60 a month, there’s no inflation because they’ve made it faster and thus improved;
Substitution: If one thing gets expensive, people substitute something else for it, so the hit on the family budget stays unchanged. If grandpa used to eat tuna salad for lunch and now makes it with cat food, that’s not because of inflation. And grandpa is fine. Trust us. have a bite.
Weighting: Seniors spend nothing on some things (condoms come to mind) and only moderate amounts on others (most seniors aren’t as affected by inflation in housing prices, for example, because they don’t move very often). So change the priority of how they spend, and inflation goes away! (BTW, the reverse isn’t true–seniors consume more healthcare than anyone else, and health costs rise at double the rate of inflation. But that isn’t counted for in the computation of the COLA).
Thanks to all of this gaming, SS checks haven’t kept up with ‘real’ inflation for almost two decades. And while Democrats might concede that seniors need an adjustment for 2016, they aren’t going to roll back Boskin’s changes. Even if they wanted to, the GOP majority would never go for redoing the stats for the CPI–they’ve been gaming such stats since the Reagan years. Meanwhile, since salaries are the basis for FICA contributions (and hourly compensation has been falling for nearly a decade), the Congress is under the gun because FICA collections are shrinking below SS payouts. In the 50’s, some 80% of income was affected by FICA. Now, thanks to the 1% changing compensation to cap gains and self-incorporation, only 64% of all US compensation is captured under FICA.
Which brings me to my central point. If you’re approaching retirement age and you’re counting on either party to look after your interests, forget it. You will never retire. The GOP will openly fight the battle to push retirement age later and make SS contributions voluntary. The Democrats have been more subtle (credit to Clinton’s epic triangulation). They aren’t taking your SS away–they’re just using real inflation to make it worthless. It’s the kind of statistical brutality that characterized the inflation era of the Weimar Republic, which escaped obligations to veterans and pensioners by simply having inflation make the payments worthless.
Not coincidentally, the only person fighting for increasing SS is… well… you know who.