Director Watch Will Hold Corporate Directors Accountable

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Thursday April 04, 2013 · 8:38 AM PDT

2013/04/04 · 08:38

Home Depot dumped its CEO Bob Nardelli at the beginning of 2007, just over six years after he took the position. During his tenure, the market value of Home Depot stock had fallen by 40 percent, according to one estimate. Lowe’s, the main competitor for Home Depot, saw its stock price nearly double over the same period. Yet, Nardelli walked away with $240 million for his efforts.

In principle corporate directors should be looking to hold down CEO pay in the same way that CEOs look to minimize the wages of assembly line workers, clerical workers, custodians and anyone drawing a paycheck from the company. CEOs justify these efforts by the need to maximize returns to shareholders. In the same vein, directors should constantly be asking if they could get a CEO of comparable skills for less money.

Corporate directors have badly failed in this responsibility in recent decades. As a result, the pay of CEOs and other top executives has exploded. CEO pay for Fortune 500 companies now averages over 300 times the pay of a typical worker. By comparison, in the 1970’s the average large company CEO received around 30 times the average worker’s pay.

In an effort to put some check on these bloated salaries CEPR - in partnership with the Huffington Post - will unveil a new website called Director Watch. The idea is to call attention to the directors who are not doing their jobs. This is information that the public should know. Many directors are well-respected figures with successful careers in academics, politics, business or other arenas. They are not living up to their reputations when they agree to contracts that allow poor performing executives to pilfer their companies.

ceprDC for Social Security Defenders

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Friday March 29, 2013 · 8:00 AM PDT

2013/03/29 · 08:00

by Dean Baker

The Very Serious People in Washington have been running around arguing that the country should be very worried about the aging of the population. The story is that we face an enormous crisis because the ratio of workers to retirees is projected to fall from 2.8 to 1 in 2013 to just 2.0 to 1 over the next two decades. This declining ratio is supposed to mean that our children will face an enormous burden in supporting a rapidly growing population of retirees.

While this projection produces much hand wringing and head nodding among the Very Serious People (VSP), fans of arithmetic know that it provides little basis for concern. The reason for the lack of concern is often given by the VSPs themselves. When pushing the scare story they often throw in the tidbit that the ratio of workers to retirees used to be 5 to 1 back in the 1960s.

Of course the country is far richer on average today than it was in the 1960s even though we have much lower ratio of workers to retirees. The secret is productivity growth. Output per worker hour is more than twice as much in 2013 as it was in the 1960s. As a result, we can both have a larger share of output diverted to supporting retirees and have higher living standards for both workers and retirees.

ceprDC for Social Security Defenders

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Tuesday February 05, 2013 · 7:07 AM PST

2013/02/05 · 07:07

The Honorable Kristi Noem
1323 Longworth House Office Building
Washington DC, 20515

Dear Rep. Noem,

In answer to a recent question on Social Security and the national debt, you stated:

“Social Security is running at a deficit today…We’re having to make up that deficit out of the national treasury. That’s why we have to shore it up.”

By law, however, Social Security can only spend money from its designated payroll tax or interest on the bonds in its trust fund. Therefore, it cannot contribute to budget deficits or the national debt. Currently it is spending interest from the government bonds it owns, in addition to its designated payroll tax receipts. It makes no more sense to say that this spending from interest contributes to the deficit than if you or I were to spend interest on government bonds that we owned.

Since by law, Social Security is financed by its own revenue stream, it seems peculiar that you would bring it up in the context of the national debt and deficits. Your constituents might be interested in knowing why you discuss Social Security in this fashion.

While Social Security is projected to face longer term-shortfalls, I assume you are aware that both the non-partisan Congressional Budget Office (CBO) and the Social Security Trustees Report show that Social Security will be able to pay full benefits into the 2030s and over 75 percent of benefits thereafter if no changes at all are made to the program.

If you are interested in ways to tackle the long-term solvency of Social Security I would be happy to discuss this with you. I hope you are more careful in the future when discussing Social Security, deficits and the national debt.

Sincerely,
Dean Baker, Co-Director, Center for Economic and Policy Research

Letter to Sen. Toomey on Threat to Force Government Default Unless Entitlements are Cut

ceprDC for Social Security Defenders

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Thursday January 10, 2013 · 8:15 AM PST

2013/01/10 · 08:15

The Honorable Pat Toomey
502 Hart Senate Office Building
Washington DC, 20510

Dear Senator Toomey,

In a recent interview on MSNBC, you said

“We Republicans need to be willing to tolerate a temporary, partial government shutdown which is what that could mean. And we have to get off the road to Greece, because that is a road that we’re on right now. We can only solve this problem by getting spending under control and restructuring the entitlement programs. This president doesn’t want to go there. We have to force it, and we’re going to have to force it over the debt ceiling.”

This appears to be a rather strong statement, which I would like to make sure that I am not misunderstanding. Are you saying that it is the intent of you and your fellow Republicans to force the government to default on its debt unless the president agrees to cut Social Security and Medicare, which together account for the vast majority of entitlements?

My guess is that threatening default of the debt as a way to force cuts to Social Security and Medicare is not popular with the country as a whole or your constituents in Pennsylvania, but of course that is your prerogative as an elected official. It would be helpful to everyone if you could clarify your position on this issue.

Sincerely,
Dean Baker
Co- Director, Center for Economic and Policy Research

Letter to Rep. Rooney on Social Security, Medicare Reform Comment

ceprDC for Social Security Defenders

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Thursday December 13, 2012 · 1:27 PM PST

2012/12/13 · 13:27

The Honorable Thomas J. Rooney
1529 Longworth House Office Building
Washington, D.C. 20515

Dear Representative Rooney:

Last week, the Washington Post reported that you stated, “If there are truly real entitlement reforms that are going to preserve Social Security and Medicare for generations to come, it’s going to be very difficult for me to oppose” higher tax rates for the rich.

With all due respect, the Congressional Budget Office projects that even if Congress makes no changes to the program at all, Social Security can pay full scheduled benefits through the year 2034 and close to 80 percent of scheduled benefits for the rest of the century.

In the case of Medicare, the program is projected to be able to pay full benefits through the year 2024. The cost controls put in place by the Affordable Care Act pushed this date eight years further into the future, from 2016, and reduced the long-term projected shortfall by more than two-thirds.

In contrast, most recently proposed "entitlement reform" plans would cut Social Security and Medicare benefits by comparable, or even larger, amounts. Considering these facts, I find it difficult to ascertain what the word "preserve" means in this context.

As you continue to deliberate over Social Security and Medicare, I hope you and your staff will have the opportunity to further review the design and finances of the programs. If you would like any additional background, I would be happy to assist you.

Sincerely,

Dean Baker
Co-Director, Center for Economic and Policy Research

The Economics of Social Security in the Presidential Race

ceprDC for Social Security Defenders

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Wednesday October 24, 2012 · 6:52 AM PDT

2012/10/24 · 06:52

Dean Baker
The Guardian Unlimited, October 24, 2012

See article on original website

It is remarkable that Social Security hasn’t been a more prominent issue in the presidential race. After all, Governor Romney has proposed a plan that would imply cuts of more than 40 percent for middle-class workers just entering the labor force. Since Social Security is hugely popular across the political spectrum, it would seem that President Obama could gain an enormous advantage by clearly proclaiming his support for the program.

But President Obama has consistently refused to rise to the defense of Social Security. In fact, in the first debate he explicitly took the issue off the table telling the American people that there is not much difference between his stand on Social Security and Romney’s.

On its face, this is difficult understand. In addition to being good politics, there are also solid policy grounds for defending Social Security. The Social Security system is perhaps the greatest success story of any program in U.S. history. By providing a core retirement income, it has lifted tens of millions of retirees and their families out of poverty.

It also provides disability insurance to almost the entire workforce. The amount of fraud in the system is minimal and the administrative costs are less than one-twentieth as large as the costs of private sector insurers.

ceprDC for Social Security Defenders

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Thursday May 03, 2012 · 10:10 AM PDT

2012/05/03 · 10:10

The Honorable Johnny Isakson
131 Russell Senate Office Building
United States House of Representatives
Washington, DC 20515

Dear Senator Isakson:

In a recent appearance before the Fayette County, GA Chamber of Commerce, you said “…Social Security and Medicare are contracts with our government. They are contracts, not gifts. They should not be invalidated but they must be reformed. Social Security is going broke in 2034 and we have to fix it.”

While the program does face a shortfall in the 2030s, the reality is that Social Security benefit payments will not ‘go broke’ in 2034. While the Social Security trustees report shows that the program only be able to pay full scheduled benefits through the year 2033, at which point the trust fund would be depleted, there will still be an enormous amount of revenue coming into the system each year. (The projections of the Congressional Budget Office are more optimistic and show that Social Security will pay full benefits through 2038.) After that, even if Congress makes no changes to the program whatsoever, Social Security will still be able to pay over 75 percent of the full benefit. The payable benefit after the projected date of trust fund depletion will still be higher than the benefit received by retirees today, so the system would be far from broke.

As you continue to discuss Social Security, I hope you and your staff will have the opportunity to further review the design and finances of the program. If you would like any additional background on this, I would be happy to assist you.

Regards,
Dean Baker
http://www.cepr.net

Letter to Rep. Tom Cole: Social Security is Not 'Closing in on Bankruptcy'

ceprDC for Social Security Defenders

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Monday February 13, 2012 · 12:03 PM PST

2012/02/13 · 12:03

The Honorable Tom Cole
2458 Rayburn House Office Building
Washington, DC 20515-3604

Dear Representative Cole:

In a recent column calling for entitlement reform, you wrote that Social Security is “…closing in on bankruptcy.” This is not true. The latest projections from the Congressional Budget Office (CBO) show that Social Security will be able to pay full benefits through the year 2038 and will be able to pay almost 80 percent of full benefits for decades afterwards.

As you point out in your column, the CBO noted that higher projected costs for Social Security, Medicare, and Medicaid stem partly from aging and partly from “rising costs for health care.” In fact, it is easy to show that the latter – our broken private health care system – is the main problem. The United States pays more than twice as much per person for health care than the average in other wealthy countries. If Americans paid the same for health care as people in other countries, we would see budget surpluses over the long term, not deficits.

As a member of the House Appropriations and Budget Committees, it is crucial that you accurately describe vital programs like Social Security and its relationship to debt and deficits. If I can provide you with further information or background on this, I would be happy to do so.

Best Regards,

Dean Baker

Letter from Dean Baker to Newt Gingrich: Privatized Social Security is not the Answer

ceprDC for Social Security Defenders

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Thursday January 26, 2012 · 9:36 AM PST

2012/01/26 · 09:36

The Honorable Newt Gingrich
3110 Maple Drive
Atlanta, GA 30305-2650

Dear Speaker Gingrich:

I have seen you refer to the privatized Social Security system in Chile several times as a model for the United States. I believe that you would not hold this view if you were more aware of the details of the Chilean system.

First, you have often claimed that the Chilean system is voluntary. This is not quite right. The system is mandatory for workers in the formal sector. However like most countries in Latin America, Chile has a large informal sector where participation is de facto voluntary. (The Chilean military and policy forces are an exception to this rule. They were allowed to remain under the traditional defined benefit system. This presumably was in part due to the fact that the program was put in place under the Pinochet dictatorship.)

ceprDC for Social Security Defenders

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Tuesday January 17, 2012 · 1:32 PM PST

2012/01/17 · 13:32

Dean Baker
Truthout, January 16, 2012

As we approach budget time, we can look forward to another burst of handwringing by the Washington elites, who will once again tell us about the need to cut Social Security and Medicare. News stories and opinion columns will be filled with solemn pronouncements about how these programs must be curtailed before they drive the nation to bankruptcy.

We can look forward to that famously deceptive graph showing how the costs of Social Security, Medicare and Medicaid are projected to soar as a share of the economy over the next two or three decades. Those with good eyes will notice that it is the cost of Medicare and Medicaid that are soaring, not Social Security.

This is primarily due to the projected explosion of private sector health care costs, not the impact of aging on the cost of the programs. That would lead honest people to focus on the need to get U.S. health care costs in line with costs in every other country in the world, but no one ever said that the Washington elites were honest.

But this is old hat. We know that the elites tell stories to advance their agenda. What is worth noting – and celebrating – is that thus far they have failed.

ceprDC for Social Security Defenders

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Thursday January 12, 2012 · 12:40 PM PST

2012/01/12 · 12:40

The Honorable Rick Santorum
PO Box 37
Verona, PA 15147

Dear Senator Santorum,

While campaigning recently, you said that the nation must act immediately to save Social Security. You suggested, among other things, raising the normal age of retirement for Social Security. In defending your statements, you asserted that ”… Americans over the age of 65 were society’s poorest age group in 1937, when Social Security was created. Now that group is the wealthiest.”

In fact, there is no need for immediate cuts to Social Security. Both CBO projections and the reports of the Social Security trustees show that the Social Security trust fund will be able to pay full benefits for the next 25 years. And even if Congress makes no changes whatsoever to the program, it will still be able to pay about 80 percent of full benefits from then on. As it stands, the normal retirement age for Social Security is scheduled to gradually increase to 67. Needlessly raising it further would result in significant cuts in benefits (raising the normal retirement age by an additional year amounts to roughly a 6 percent cut per year).

ceprDC for Social Security Defenders

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Tuesday January 10, 2012 · 8:21 AM PST

2012/01/10 · 08:21

Mark Weisbrot
The Guardian Unlimited, January 10, 2012

The American Economic Association’s annual meetings are a scary sight, with thousands of economists all gathered in the same place – a veritable weapon of mass destruction. Chicago was the lucky city for 2012 this past weekend, and I had just finished participating in an interesting panel on “The Economics of Regime Change,” when I stumbled over to see what the big budget experts had to say about “The Political Economy of the U.S. Debt and Deficits.”

The session was introduced by UC Berkeley economist Alan Auerbach, who put up a graph of the United States’ rising debt-to-GDP ratio, and warned of dire consequences if Congress didn’t do something about it. Yawn.

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Director Watch Will Hold Corporate Directors Accountable

The Demographic Horror Story and Other Children’s Tales

Letter to Rep. Noem on Social Security and Deficits

Letter to Sen. Toomey on Threat to Force Government Default Unless Entitlements are Cut

Letter to Rep. Rooney on Social Security, Medicare Reform Comment

The Economics of Social Security in the Presidential Race

Letter to Sen. Isakson: Social Security Is Not 'Going Broke'

Letter to Rep. Tom Cole: Social Security is Not 'Closing in on Bankruptcy'

Letter from Dean Baker to Newt Gingrich: Privatized Social Security is not the Answer

Time Is On Our Side: The Survival of Social Security

Letter to Rick Santorum: Elderly Are Not the Wealthiest Americans

Economists May Contribute to a “Lost Decade” for America