Hi everyone! First off, I apologize for missing my scheduled time to publish my diary, there was a delay in getting me the responses from both Congressman Ted Deutch (D. FL-21) and Senator Mark Begich (D. AK), authors of the Protecting and Preserving Social Security Act of 2013. Deutch is the author of the House version, HR 649:
Here's a quick summary of what the Protecting and Preserving Social Security Act of 2013 entails:
Both Congressman Deutch & Senator Begich's staffs took the time to answer the questions you submitted through my diary last week:
Tonight I present to you Congressman Deutch's responses to your questions about the Protecting and Preserving Social Security Act of 2013:
Can we get a little background on the Protecting & Preserving Social Security Act of 2013? What was it that influenced Congressman Deutch to draft such a bold plan to strengthen Social Security?
I want to protect the integrity of Social Security as a system that protects all Americans from utter destitution resulting from old age, disability, or the death of a breadwinner. To strengthen its fiscal future, we do not need to privatize it or cut benefits across-the-board. We simply need to restore fairness to the system by ensuring that high-income earners – including Members of Congress and CEOs – contribute to Social Security on every paycheck just like the vast majority of Americans do.
Your plan would seem to fill only MOST of the gap, what if anything do you propose for the REST of it? With a subtext being that under CBO scoring that remaining gap is suspiciously close to that which Chained-CPI would address.
I oppose cutting cost of living adjustments and reject the notion that they are somehow too generous. The fact is, in recent years these benefit adjustments have been nonexistent and totally ineffective at keeping up with seniors’ costs. That is why my plan adopts a more accurate cost of living adjustment formula and thus improves benefits for all retirees. According to a 2010 analysis completed by the Social Security Actuary, my plan does indeed close Social Security’s long-range solvency gap. However, there is no question that what is bad for the economy is bad for Social Security, and chronic unemployment deprives the system of previously projected revenues. Regardless of year to year projections, it is important that lawmakers on both sides of the aisle acknowledge the fact that Social Security is facing a modest shortfall. Depending on job creation and economic growth, Social Security will be able to fund full benefits into the 2030s, and 75 percent of all benefits after that.
Senator Bernie Sanders (I. VT) also proposed a plan to strengthen Social Security. It's the plan President Obama campaigned on in the 2008 election. Would you please outline the major differences between your bill and the Sanders bill? Why would you advocate that the Protecting and Preserving Social Security Act of 2013 is better plan to protect and preserve Social Security over Senator Sanders' plan?
The fact that those who put more into Social Security get more out of it is a strength and not a weakness. The Protecting and Preserving Social Security Act of 2013 represents the right set of reforms because it is aimed at returning fairness to the program and maintaining its integrity as social insurance. First, the law would phase out the cap on contributions within seven years until Members of Congress and CEOs contribute year-round just like everyone else. The bill lifts gradually the payroll tax cap over seven years, meaning that a worker earning $150,000 would only pay $321 more in FICA in Year 1 (about $13 per paycheck) and then an additional $321 annually through Year 7. The bill also ensures Social Security continues to pay out proportionately larger benefits to low- and middle-income retirees. Secondly, we must maintain Social Security’s integrity as a system of social insurance. It is not welfare and never should be. If we scrap the cap and demand more Social Security taxes from high-earners, they should earn more benefits for those contributions. This will maintain the integrity of the program.
What would be the largest benefit check for the richest of Americans, under the AMIE formula, that your bill would create?
This legislation provides for modest increases in benefits for the added contributions above the current cap. We drafted the HI-AIME formula to provide for a modest replacement rate for individuals earning high incomes. The insurance amount is calculated each year for high income earners. This avoids two potential scenarios that would result in lavish benefit checks. First, it prevents one good year of high income from pulling the benefit amount up for an individual that makes a middle income for most of his or her career. It also prevents individuals who make upper middle class incomes for most of their career from receiving exorbitant Social Security checks because all of the income earned under the current cap results in a benefit calculated under the current formula, while the added contributions result in the modest replacement rates under the HI-AIME formula.
Does your bill increase the average benefit?
Our bill will phase out the cap on contributions and will provide for a modest increase in benefits to those who earn income above the current cap. This will cause a slight increase in the average benefit. All benefits, however, will be improved with a more accurate cost of living adjustment formula.
Does your bill increase the minimum benefit Check?
No. The benefit calculation for those earning incomes under the current cap will not change.
Women would be particularly hurt by Chained CPI. Does your bill address the generally lower benefit woman receive?
We have a lot of progress to make as a society in terms of income inequality between men and women. Women on average live longer then men but earn less over their lifetimes. Our legislation replaces the current COLA index with CPI-E, a measure that more accurately tracks the expenses of seniors and disabled beneficiaries. We need to be vigilant about protecting women from a benefit cut that would only compound the impact of that inequality after retirement.
People with much higher incomes often have options as to how their income is described for accounting purposes. will your lifting of the cap calculations be affected if, for example, many high-income individuals suddenly start receiving a much more significant portion of their compensation as, say, stock dividends or capital gains rather than wage/salary income?
The Buffet rule deserves full consideration in Washington, however it is important to keep Social Security separate from the overall tax debate. This bill scraps the cap on contributions as a tax on wages.
Will this proposal add a new bend point, or will all contributions above the second bend point continue to generate benefits amounting to a 15% income-replacement? What do you predict will be the effect on the perception of legitimacy of Social Security when in a few years someone qualifies for benefits - in 2012 dollars - of $10,000 per month plus, of course, $5,000 for his/her non-working never-worked spouse?
Our bill adds two bend points. The replacement rate for income from the current cap ($113,700) to $250,000 is 3 percent, and the replacement rate for income above $250,000 is 0.25 percent. The HI-AIME formula prevents exorbitant benefit payments to high-income earners, while at the same time maintaining the integrity of the system by paying added benefits for contributions above the current cap.
And do you see a problem in the apparent trend that those receiving the lowest monthly benefits receive them for disproportionately fewer years as compared to those who receive the highest benefits? In other words, doesn't it seem possible that SS will be paying $1,200 a month to a lot of people for 50 or 60 months of post-retirement life while paying those $10k benefits for 300 or 360 months?
The Protecting and Preserving Social Security Act of 2013 uses a separate benefit formula for income above the current cap called the HI-AIME. This prevents exorbitant benefit checks to those who earn extremely high salaries by adding two new bend points and replacing that income at a lower rate. To maintain fairness in the system, those who will be taxed for income above the cap like every other American will also receive added benefits for those contributions. Recent reports of longer life expectancy for wealthy individuals confirm the need for a commitment to public health and policies that grow the middle class.
Your plan calls for adjusting cost-of-living increases with a Consumer Price Index specifically for the elderly which was created to more accurately measure the costs of goods and services seniors actually buy. What if one isn't elderly? What if one is a relatively young vet? the chained plan is very destructive to va benefits if they are included because it compounds over a longer period of time (a very bad thing if one is disabled at 18 in Afghanistan).
Using CPI-E does not pose the same threat of compounding cuts to those disabled at a young age. The method of calculation is the same as the current COLA, but under CPI the relative importance of certain expenditure categories is higher. The two most notable categories are housing and medical care. Those same categories are more important for disabled beneficiaries as well. By focusing on these expenditure categories we can ensure that benefits will keep pace with the costs that matter most to all beneficiaries’ budgets.
Does Congressman Deutch agree that the Chained CPI is a cut to Social Security?
The Chained CPI is nothing more than a benefit cut. Only in Washington would anyone look at the meager cost of living adjustment system we have and argue it is too generous. Not only would would the Chained CPI reduce benefits, the impact of the cuts would compound as retirees get older—a three percent cut after six years and a six percent cut after 20 years. This would hit our most vulnerable seniors the hardest. It is not a more accurate measure of seniors’ cost of living. We should be considering the CPI for the Elderly. CPI-E is like the current index, but more heavily weights the costs that seniors spend money on like housing and medical care.
Does Social Security contribute to the deficit?
Opponents of Social Security use the term “unified budget” to make it appear as though Social Security will add to deficits when the trust fund is used to pay benefits as baby boomers retire. In fact, Social Security operates off budget, with its own independent revenue stream.Through the payroll tax, workers contribute to Social Security, and benefits are paid out to seniors, survivors, and disabled Americans. These contributions are invested in the most secure bond the world has ever known - U.S. Treasuries.
By claiming the Social Security should be accounted as part of a “unified budget,” opponents of the program aim to absolve Congress of its responsibility of paying for the policies that drove us into the current federal budget deficit. Those policies include two wars that were never paid for, huge tax cuts for the wealthy that were never paid for, and government that condoned irresponsibility on Wall Street that sank our economy into a deep sea of red ink. These are the sources of our federal deficit. Not Social Security.
Social Security has faced political attacks since its inception. When Republicans charge that Social Security is a Ponzi scheme, or that it is bankrupting the federal government, they highlight the precise reason Social Security was created with an independent revenue stream off-budget in the first place. As President Franklin Roosevelt said, “We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program."
Do you have a plan to advance this legislation though committee and beyond? If so, what are some details of how that plan will be effective.
Senator Mark Begich and I are committed to moving this legislation forward. We must make clear to the American people, to our colleagues, and to the media that using Social Security as a bargaining chip is unacceptable. There is a better way. As he works to advance his plan in the Senate and I seek bipartisan support for the proposal in the House, we need the American people to stand up loudly and strongly for Social Security. It is important for us to unite behind a plan for Social Security that maintains its historical integrity, and that is why I am so pleased to have a broad coalition of labor, health, and seniors advocacy groups support this plan.
Senator Dick Durbin (D. IL) recently called for a commission to look into Social Security. Senator Tom Harkin (D. IA) believes this commission will only come up with ways to proposing making cuts to Social Security. Do we really need another commission to see if Social Security contributes to the deficit?
Social Security does not contribute to the deficit and we do not need another commission to investigate a myth. However, if a commission is formed to explore reforms to Social Security then it is time for defenders of the program in Congress and at the grassroots level to showcase what real progressive reform looks like. The Protecting and Preserving Social Security Act extends solvency, improves benefits, ensures fairness, and stays true to the system’s historical mission.
Can it be possible to reform Social Security without cutting benefits? We could start by streamlining the Social Security Administration operations, enhancing IT infrastructure, etc.
The Protecting and Preserving Social Security Act of 2013 strengthens the financial future of the program without raising the retirement age or slashing benefits. Historically, Social Security has been the most efficient government program—never failing to get benefit checks out on time with extremely efficient use of limited operational resources. The SSA has already moved to electronic payments by direct deposit and prepaid debit cards. These changes will not only save the Administration money, but beneficiaries will be better protected from scammers and identity thieves. There is of course more that all governmental agencies can do to streamline operations and become more technically officiant. However it is important to note that the Social Security Administration is already coping with cuts imposed by Congress. I am concerned that additional funding cuts will only exacerbate problems brought up to me by my constituents, such as exorbitantly long lines at local Social Security branch offices.
I'd like to thank Congressman Deutch and his staff for taking the time to answer our questions and for his ongoing efforts to both save and strengthen the safety net. I hope this interview answered a lot of the questions you may have about the Protecting and Preserving Social Security Act of 2013. If you'd like to get more information on HR 649, please contact Congressman Deutch's office:
And please sign Roger Fox's petition telling President Obama to not agree to cuts to Social Security as part of a Grand Bargain:
I will have Senator Begich and his staff's responses to your questions soon.