Content Tagged: Social Security

Social Security debates in Congress

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May 21, 2014

The political cartoons included in this blog are selected as tools to teach about public policy issues. Their inclusion does not in any way constitute an endorsement by Teachers College, Columbia University, of their point of view.

Political cartoons can be a powerful way to teach and talk about public policy issues in the classroom. They engaging, often funny, and they teach very complex ideas in a quick and intuitive way. We are so convinced of the value of political cartoons that, in addition to including them in many of our blogs, we feature posts that are all cartoons.

Using cartoons presents an opportunity to teach students media literacy, including the ability to detect point of view or bias. As a sequence, we strongly encourage students to study the cartoon carefully, analyze the specific context of the cartoon, and determine the cartoonist’s point of view. See the blog post of October 8, 2013 for a guide to using the political cartoons we have selected. The Library of Congress also has a a very useful Cartoon Analysis Guide.

 

Financial Advisor Magazine reported today that the Social Security Administration has warned Congress that if they don’t act soon regarding Social Security funding, up to a 25% decrease in Social Security benefits could become a reality.  They added that the SSA stated that disability reserves could be at $0 as soon as 2016.

Unfortunately, although there may be almost universal agreement that Social Security needs to be “fixed”, there is a LOT of disagreement on what that means and how to do it.  ThinkAdvisor offered a decent analysis of current Congressional views on fixing Social Security today – although what it seems to come down to is that “some combination of choices” needs to be made.

This understandably can get extremely confusing for high school students.  In fact, in my classroom experience, many didn’t even want to talk about Social Security because so many people have told them that it won’t exist for them upon retirement that they hold deep resentment towards having to pay in, even as teenagers.  The UFR US History lesson 3.1 can help students understand the history of Social Security, but also provides an extremely helpful scaffold for understanding the current dilemma.  It provides an excellent opportunity to also talk about inflation, the decrease in pensions and increase in personal retirement savings, and government funding for old age.

140607 600 Declining Social Security Benefits cartoons

Monte Wolverton, 2013

 

Another interesting point:  the following political cartoons are from 2004 – ten years ago!  Yet, what they show is very similar to what we’re facing today.  Have students analyze this – what does it mean?  How can this still be a problem in the US?

wolverton Monte Wolverton Cartoon for 03/01/2004 cartoons

Monte Wolverton, 2004

ramirez Michael Ramirezs Cartoon for 3/2/2004 cartoons

Michael Ramirez, 2004

wright Larry Wright Cartoon for 03/02/2004 cartoons

Larry Wright, 2004

powell Dwane Powells Cartoon for 3/1/2004 cartoons

Dwane Powell, 2004

 

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Payroll Tax Cut and Social Security Funding

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January 6, 2012


In a December 29th article for The Washington Post, Jia Lynn Yang discusses the impact the recent extension of the payroll tax cuts will have on Social Security funding. Yang states that nearly $100 billion will be transferred from the federal government’s general revenue pool to the Social Security trust fund. Although the tax cuts are supposed to be short-term, many lawmakers believe that the current political climate and economic sluggishness might allow for the perpetuation of tax cuts. Politicians pushing for the continuation of tax cuts with the intent of stimulating economic spending troubles economic experts. They believe that if this proceeds, then Social Security will “will lose its status as a protected benefit owed to every working American and instead become politically vulnerable, just like any other government program.” The program could become susceptible to federal initiatives and face possible funding limitations. According to Nancy Altman, co-director of the advocacy group Social Security Works, “all of a sudden Social Security will have to compete with every other program, whereas before it had its own dedicated revenue.”

Social Security trust fund has nearly $2.6 trillion, enough to pay the pledged benefits to retirees until 2036. This fund, Yang remarks, has been developed over time and accumulates its finances from the federal 12.4 percent payroll tax. Under this system, employers and employees each pay half of the tax (6.2 percent), yet the latest tax break lowered the share of employees by 2 percentage points and saved American families more than $900. From the article:

The pressure to cut the tax came from the country’s slow-growing economy. Last December, Republican lawmakers fought to extend the George W. Bush tax cuts, which were about to expire, while the White House pushed for a tax credit called Making Work Pay. Their compromise: a two-year extension of the Bush tax cuts, a year of extended unemployment benefits and a one-year payroll tax cut that effectively replaced Obama’s tax credit idea.

There has already been a push to continue the tax cuts for 2012 largely due to the belief that ending them would lead to a reduction in economic growth by two-thirds of a percentage point. According to the article, Senate Majority Leader Harry Reid (D-Nev.) plans to develop a committee to ensure that the cuts will remain for the entire year. However, members of both Congressional parties have expressed their opinions on how the payroll cuts could negatively impact Social Security funding.

Teachers could use this article to link historical events to current issues facing the American government and its people. Students could research the development of the Social Security program under President Franklin D. Roosevelt and the basic guidelines of the program. They could then chronicle the changes it has experienced over past decades to better understand the present state the program is in. Past blogs should help them with their investigations and strengthen their understanding of the relationship between Social Security and the federal deficit.

Teachers can also ask their students about the benefits and disadvantages of the payroll tax cut. Questions to consider: How does the current tax break benefit employees? Employers? Does it have a positive or negative impact for one group or both? How do the tax cuts impact Social Security’s independent stream of funding? With the current changes, should Social Security receive more from the federal government’s pool of revenue than other programs? Why or why not? What might be some short-term and long-term gains for Americans? What might be some negatives? How does a reduction of payroll taxes spur economic growth and how might this reduce the federal deficit? Teachers and students should discuss these questions and others to strengthen their understanding of how payroll tax cuts impact Social Security funding as well as the multitrillion dollar deficit the federal government faces.

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Social Security Reform and the National Debt

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July 19, 2011

In a recent article in the Christian Science Monitor, Mark Trumbull reports on possible changes to Social Security as part of a deal to resolve the nation’s fiscal crisis.  In an attempt to orchestrate a “grand bargain” that would reduce future deficits and begin to pay down the national debt, President Obama has expressed a willingness to consider cuts to Social Security – an idea that Democrats typically oppose – if Republicans are willing to consider tax increases.

Trumbull notes that Social Security is “the most popular of federal programs and the bedrock of retirement security for the typical household,” but argues that the need for entitlement reform “reflects a reality that Americans also recognize.”  From the article:

Social Security needs to change if it is to remain solvent for future generations. And the urgency is rising. Already the program is paying out more in benefits than it draws in revenue – a pattern with no end in sight…

Social Security has captured headlines lately for another reason as well: If the two sides don’t reach a deal and the cap on federal borrowing is not raised, Obama raised the prospect in a July 12 statement that the government might not be able to pay out checks to beneficiaries (currently 56 million Americans) on Aug. 3.

These problems, however, are not without possible solutions.  Trumbull cites the Social Security trustees who recommended in their mid-May report that Congress make fixes in “a timely way so that necessary changes can be phased in gradually.”  He then details five possible solutions to the problems facing Social Security:

  • Increase the payroll tax
  • Increase the eligibility age
  • Eliminate the payroll cap
  • Reduce benefits to wealthy recipients
  • Adjust the cost of living allowance

Teachers could use this article as part of a lesson on Social Security and the national debt.  Students could be divided into groups and asked to research one of the five options listed above, guided by the following questions:  What are the pros and cons of this option?  Who benefits the most from this option?  The least?  Which interest groups, think tanks, or political parties publicly support this option?  Who opposes it?  Does this option work on its own or should it be used in combination with other options?  In your groups opinion, how likely is the implementation of this solution?

When students have completed their research, they could present their findings and participate in an in-class forum on Social Security.  Students should be encouraged to discuss which option (if any) has the greatest possibility for implementation and how it would impact different groups of Americans (retirees, workers, youth, etc).  Students should be encouraged to draw on their previous studies about Social Security, the budget deficit, and the national debt to further inform this discussion.

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Tax Cuts and Social Security

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December 21, 2010

A recent article in the Wall Street Journal examines the impact of tax cuts on the financial outlook for Social Security.  In addition to adding at least $900 billion to the national debt, the article contends that the latest tax deal weakens Social Security’s funding because “Social Security checks ultimately come from the same flow of tax dollars as all other federal spending.”  From the article:

If we don’t raise taxes, we are left with two options: a financial crisis, or deep spending cuts. Assuming we embrace the latter, that would mean going after Social Security and Medicare. After all, that’s where the money is. These two programs already account for a third of the entire federal budget, and that proportion is set to rise dramatically, as the population ages and the baby boomers retire.

The article goes on to describe the benefits of Social Security in comparison with other forms of retirement savings.  Social Security is a lifetime income annuity, “making sure you don’t outlive your savings, even by a single year.”  It also offers inflation protection (an option not available from most insurance companies) and is guaranteed by the federal government.  In the past, many Americans depended on company pension plans but now “Social Security is the only inflation-adjusted annuity they know.”

Image Source: Social Security Online

The article concludes with statistics from the Employee Benefits Research Institute concerning Americans’ retirement savings:

Fewer than half of workers have even saved $25,000, and only a third have saved as much as $50,000. Forty-four percent have saved less than $10,000, and a quarter have basically saved nothing at all… If we want to cut Social Security, even prosperous middle-class Americans need to save much, much more. Starting about 20 years ago.

Teachers could use this article to help students understand the importance of Social Security to American retirees.  Students could begin by discussing the larger questions underlying this issue:  What is the role of the federal government in providing for its citizens’ after they retire?  How do our answers to that question shape our opinions about Social Security?

Other questions students could examine include:  Do citizens’ expectations play a role in this discussion (i.e. are people not saving as much because they expect to receive Social Security payments)? Why might politicians be reluctant to talk about this topic?  How does this topic affect the budget deficit and national debt?  These questions will help students better understand the role of Social Security in the American economy and help inform their opinions about this complex and important topic.

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Growth-Oriented Fiscal Responsibility

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September 28, 2010

In a recent blog on TheHill.com, David Kendall and Jim Kessler of the progressive think tank Third Way argued that it is time to “make some difficult choices” concerning the federal budget deficit and the national debt.  They cite CBO reports that project only 2% real GDP growth over the next 20 years and predict that by 2030, sixty-eight cents of every federal dollar will be spent on Medicare, Medicaid, Social Security, and interest on the debt.

Though Kendall and Kessler note that “Congress has been loath to cut spending”, they believe there is “a promising path to fiscal responsibility even in this polarized political environment.”  Their plan is based on economic growth, calling it “the tonic the American public needs to accept the necessary cuts in entitlement spending to get the deficit under control.”  Kendall and Kessler go on to describe five core elements in their growth-oriented deficit package:

  • Government Reform: “By making employees and employers contribute equally to retiree pensions, the taxpayer would save more than $250 billion by 2030.”
  • Social Security: “A very slow raise of the retirement age, a more accurate COLA adjustment based on a better inflation measure and a small increase in FICA contributions would just about save Social Security.”
  • Healthcare Reform: “The president’s reform package took some critical first steps, but left on the table are end-of-life care, medical malpractice reform and pay-for-performance for providers.”
  • Reduce Government Giveaways: “Congress should also cut agriculture subsidies by one-fourth, sunset all rifle-shot tax breaks and allow amendments to cut earmarks to go toward deficit reduction.”
  • Invest in Growth: “Money saved from eliminating subsidies and tax breaks would fund critical new spending such as a National Infrastructure Bank, college tuition tax credits and energy innovation.”

By following these steps, David Kendall and Jim Kessler believe that the American public might be willing to accept the “tough choices” that must be made to reduce the federal budget deficit and the national debt.

Teachers could use this outline to open up classroom discussion about solutions to our fiscal crisis.  Students could be divided into five groups, each assigned to one of the core elements of the Kendall/Kessler plan.  The students could present research about their assigned element and predict whether or not it would achieve the proposed results.  Students should also research opposition to this proposal and explain alternative points of view as part of their presentation.  Ultimately, students could write a response to the authors of this blog, either supporting or opposing their plan.  As students come to understand the multiple points of view on this topic, they will begin to form their own opinions about the best way to address the national debt.

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Baby Boomers and the National Debt

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September 21, 2010

In the October issue of The Atlantic, Michael Kinsley writes about the legacy of the Baby Boom Generation and their opportunity to “redeem themselves by saving the American economy from the fiscal mess that they, and their fathers and mothers, are leaving behind.”  Kinsley argues that Baby Boomers have big shoes to fill following their parents’ “Greatest Generation” legacy of victory in World War II.  Filling these shoes, he says, will require something big and patriotic, “and it ought to be accomplished by the time the last Boomer turns 65, which would be 2029.”  From the article:

It would be nice to give our country the wisdom and self-discipline to stop running up the credit card. And we should try. But it’s unlikely that we can remake the national character (including our own) in 19 years. What we can do is offer a lecture and a fresh start. We should pass on to the next generation an America that’s free from debt. Instead of ignoring it, or arguing endlessly about whose fault it is and who should pay for it, Boomers as an age cohort should just grab the check and say, “This one’s on us.”

Kinsley cites a 1999 study estimating that $41 trillion will transfer from parents to children and grandchildren between 1998 and 2052.  He argues, “If we could collect just 20 percent of the alleged $41 trillion about to pass through two generations, that would be more than $8 trillion.”  This money, he believes, could be used to pay down the national debt.

Kinsley creates the scenario of an elderly person who dies leaving $500,000 to his or her children.  He argues that this person’s need for Social Security, designed to protect the elderly from poverty, never materialized and therefore all the Social Security funds they received should be returned to the government.  He writes that the government has two ways to induce this behavior:

One is to legally require it. The other is the kind of combination of negative and positive inducements that supporters of national service tend to favor. Maybe returning the unused portion of your parents’ Social Security could become a social norm. Fashion and peer pressure might be more effective than a law.

Teachers could use this article to stimulate classroom discussion about paying down the national debt.  Students could begin by exploring a fictitious scenario:  Imagine that a wealthy relative passed away, leaving you an inheritance of $1 million.  What percentage of that money, if any, would you be willing to pay in taxes to reduce the national debt?  Would your opinion change if you knew that everyone who received an inheritance would be paying the same percentage?  For those willing to pay taxes on this inheritance, what led you to that decision?  For those unwilling to pay taxes on this inheritance, what (if anything) would it take to convince you otherwise?

Following this discussion, students could read the articles written in response to Kinsley’s piece and discuss which author makes the most logical arguments.  Some students may conclude that the debt does not need to be paid down at all, and they could write a justification for this argument.  Other students could develop their own proposals for paying down the debt, determining which avenue – legal requirements, peer pressure, or some combination thereof – would be the most likely to succeed.  The class could then discuss which of these proposals is the most realistic and whether or not they believe it could be implemented.  This activity will help students understand the multiple points of view concerning the national debt and develop their own ideas in response these opinions.

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Social Security Reform

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August 24, 2010

In a recent Wall Street Journal article, Laura Meckler discusses “proposals to raise the retirement age and… other steps to shore up the finances of Social Security”.  Meckler notes that the White House commission is looking for concessions from both parties, as potential plans include both cuts to benefits and increases in taxes.  From the article:

In addition to raising the retirement age, which is now set to reach age 67 in 2027, specific cuts under consideration include lowering benefits for wealthier retires and trimming annual cost-of-living increases, perhaps only for wealthier retirees, people familiar with the talks said.

On the tax side, the leading idea is to increase the share of earned income that is subject to Social Security taxes, officials said. Under current law, income beyond $106,000 is exempt. Another idea is to increase the tax rate itself, said a Democrat on the commission.

Meckler summarizes the points of contention between liberals and conservatives, but quotes representatives of each side who feel that compromise is possible.  President Obama is quoted in the article, saying that “modest adjustments” must be made to Social Security “in order to strengthen it.”  Meckler also discusses the role of special interest groups in this debate and compares proposed changes to Social Security with changes made in European countries’ retirement programs.

Social Security Poster, 1939 (Source:  www.ssa.gov)

Teachers could use this article to help students understand the competing points of view concerning Social Security reform.  To help students follow the debate, the class could make posters outlining liberal and conservative arguments.  An additional poster could be made that outlines the concessions each side makes as they move toward consensus.

The students could present additional articles about Social Security reform on a weekly basis, updating the “consensus” poster to track the progress (or lack thereof) toward reform.  This activity would help students understand how each political party approaches the discussion and whether the tone of the debate changes leading up to and following the elections in November.

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The Future of Social Security

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August 19, 2010

In a recent New York Times editorial, Paul Krugman makes a strong argument against cuts to Social Security.  Krugman calls the proposed cuts an “unnecessary, unfair and… cruel attack on working Americans”.  He argues that the hostility toward the program is less about “dollars and cents” and more about “ideology and posturing”, and that “underneath it all is ignorance of or indifference to the realities of life for many Americans.”

President Roosevelt signs the Social Security Act into law on August 14, 1935
(Source: www.socialsecurity.gov)


Krugman argues that Social Security does not face a clear and present danger in regard to funding, and that increasing the retirement age only helps white-collar workers.  From the article:

Social Security has been running surpluses for the last quarter-century, banking those surpluses in a special account, the so-called trust fund. The program won’t have to turn to Congress for help or cut benefits until or unless the trust fund is exhausted, which the program’s actuaries don’t expect to happen until 2037 — and there’s a significant chance, according to their estimates, that that day will never come…

The currently fashionable idea of raising the retirement age even more than it will rise under existing law — it has already gone from 65 to 66, it’s scheduled to rise to 67, but now some are proposing that it go to 70 — is usually justified with assertions that life expectancy has risen, so people can easily work later into life. But that’s only true for affluent, white-collar workers — the people who need Social Security least.

Krugman’s editorial on the New York Times website generated over 600 comments in three days.  While some of these comments are not suitable for classroom use, many of them are well written, logical, and articulate arguments both in favor of and in opposition to Krugman’s point of view.  Teachers could collect 2-3 comments that support each side of the debate and use them to inform students’ participation in a “Structured Academic Controversy” (see description of a Structured Academic Controversy at teachinghistory.org).  This activity will help students better understand the debate about the future of Social Security and begin to form their own opinions about the topic.

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The True Amount of the National Debt

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August 16, 2010

In a recent blog for the Christian Science Monitor, Stefan Karlsson asks, “Is the US debt $13 trillion – or only $9 trillion?”  The question centers on the debate about intragovernmental debt, that is, government debt held by other government agencies.  Intergovernmental debt currently stands at $4.5 trillion, primarily related to the Social Security trust fund.

The United States’ gross debt (including intragovernmental debt) currently represents 91% of the nation’s gross domestic product.  If you exclude intragovernmental debt, the United States’ debt only represents 60% of the nation’s gross domestic product.  In his blog, Karlsson poses the question and gives his opinion about the proper accounting of the national debt.  From the article:

“The argument for excluding intragovernmental debt may seem convincing at first glance: why should you include debt which is an asset for another government agency, thus being no net liability for the government as a whole?

Assuming that it doesn’t represent some external liability for the government agency that holds it, this would indeed be a valid argument for excluding it. But at least in the case of the U.S. government the vast majority of it does in fact represent external liabilities.

…these assets are supposed to cover future payments of Social Security to senior citizens, it is not valid to subtract the holdings of the Social Security trust fund, or any other intragovernmental holding that represents similar external liabilities, from estimate of government debt.”

Teachers could use this article in a class discussion about what should and should not be counted when calculating the national debt.  Students should be encouraged to find articles that reference different dollar amounts for the national debt.  Which articles reference a $9 trillion national debt or a debt level at 60% of the gross domestic product?  Which articles reference a $13 trillion debt or a debt level of 91% of gross domestic product?  How do these articles differ in tone?  Do the authors reach similar or different conclusions concerning the proper response to the debt?

After the students have a better understanding of the different sides in this debate, they should write a response to Stefan Karlsson’s blog, in which they either support or oppose his position.  Students should be encouraged to cite evidence supporting their opinions and provide logical, coherent arguments for their beliefs.  This activity will help students understand the debate surrounding the social security trust fund and allow them to participate in public discussions about the future of the program.

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Social Security and the National Debt

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March 23, 2010

In a recent New York Times article, Jackie Calmes reports that Social Security reform could be the next big item on President Obama’s agenda.  From the article:  “While its looming problems are not of the scale of those afflicting Medicare, it [Social Security] now stands as the likeliest source of the sort of large savings needed to bring projected annual deficits to sustainable levels, many budget analysts agree.”

Teachers could use this article as part of a lesson about Social Security’s influence on the federal budget deficit and the national debt.  The article describes multiple factors that may shape political discourse about Social Security, including newly-formed political alliances like Social Security Works, reports and recommendations from the president’s debt-reduction commission, and Congressional hesitancy to address such a controversial issue prior to the November elections.  Students should identify these factors and discuss which will have the greatest influence in the debate about Social Security reform.

Another important issue for students to discuss is the question of when to act on Social Security reform.  The article presents competing arguments for immediate and delayed action concerning Social Security.  Students should debate these opinions and weigh the pros and cons of each option.  This discourse will help students understand the impact that Social Security has on the national debt both today and in the future.

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