As part of our continuing relay of the Economists for Peace and Security's Barnard Schwartz Symposium, today on the podcast we relay the keynote of Barbara Kennelly, a long-time and effective warrior for the cause of Social Security.
That Social Security, perhaps the oldest and most successful government program in history, should continually be the object of reactionary venom is quite unfortunate, both for social security and for the credibility of the Right Wing.
Created literally out of nothing during the leanest times of the 20th Century, Social Security is repeatedly castigated for not pre-funding its benefits. In fact, as Kennelly points out here, during times when the program WAS growing its trust fund, the operating side of the budget was borrowing every dime of the surplus to fund its low tax rates.
Robert Barro made his name on the so-called Ricardian equivalence, which was the highly ... well, let's call it ... preposterous theory that the public from small to large were rational -- economic speak for having the prescience of Nostradamus -- and realized that when taxes were cut, they would have to rise in the future, so the public large and small saved against that contingency and basically washed out the stimulus benefits. We saw then that people did no such thing, but that pales to the fact that the government will do no such thing -- CAN do no such thing, according to the Right -- as to raise taxes. Taxes will not have to go up, because the government will renege on its bonds held by Social Security.
That is the choice, renege on its bonds, "Default" is the term we use for it when we talk about Greece, or pay full benefits to recipients, since the financing is adequate -- let's see, solvent into the 2030's.
So, with that rather lengthy introduction, let's turn to the introduction of James K. Galbraith and then to Barbara Kennelly.
James K. Galbraith:
I’m very happy at this moment to be able to introduce our first keynote speaker. We’re very privileged to have, as a speaker, one of the country’s great authorities on the Social Security System. Congresswoman Barbara Kennelly served 23 years in electoral office and 17 years in the United States House of Representatives. She was the first woman to serve as Chief Majority Whip, and only the third in history to serve on the Ways and Means Committee, which speaks well of her, and not so well of the Ways and Means Committee. During the 105th Congress, she was the ranking member of the subcommittee on Social Security. After serving in the Congress, she was counselor to the Commissioner of the Social Security Administration, that commissioner being my dear friend and former LBJ School colleague Ken Apfel. She has since become the President and Chief Executive Officer of an extremely important enterprise, the National Committee to Preserve Social Security and Medicare. Having said that, I just welcome you, Congresswoman Kennelly. Many thanks for being here.Barbara Kennelly:
Thank you very much. I never consider myself an expert or an authority on Social Security. Having been in elective office for 23 years, I knew a little about a lot of things, but not an expert at Social Security, but I have them in my office. I have a number of experts on Social Security and Medicare. Today, I would like to talk about these important programs, not merely as budget issues, but put faces behind the numbers. The National Committee Members are these faces. National Committee to Preserve Social Security and Medicare have three million members and supporters.
These people come from all walks of life, of all political persuasions, but what they have in common is their absolute passion to protect Social Security and Medicare.
This summer in August, we celebrated the 75th anniversary of Social Security. It gave us a very wonderful opportunity to reflect on the importance of this program. I will recall to you Franklin Delano Roosevelt’s words when he signed the Social Security Act: “We can never insure 100% of the population against the accidents and vicissitudes of life. But we have tried to frame a law that will give some measure of protection to the average citizen and to his family against the loss of his or her family, against the loss of a job, or against a poverty-ridden old age.” This was a bedrock promise that President Roosevelt made. The whole idea was after a lifetime of work, Americans would protect seniors in their retirement.
Social Security was never meant to be a welfare program - certainly not - or a charity. It’s an earned benefit, built on twin goals of equity and adequacy. We pay in during our working years; I’m sure all of us here pay in, as I do. We get return when we retire. I am so always amazed that people don’t know how really not exactly generous are Social Security benefits. The average benefit of Social Security is $14,000. For women, it’s just a little below $12,000. That’s really not much to live on, but what it does is let seniors have a life of dignity and independence.
Social Security really has been our nation’s jewel. It’s been a very important and popular program, until very recently, with almost everybody. It lifts half of individuals who are retired out of poverty. Family benefit is a family benefit, not just a retirement benefit; it’s a family benefit, whether the breadwinner has retired, died or is disabled. One out of three of the beneficiaries – and we don’t often talk about this – are not seniors; they’re either disabled or they have left their families and the Social Security is needed. Social Security is the only program with an automatic cost of living increase. It keeps up with inflation. It’s especially critical to the oldest of the old, mostly women who really didn’t have a lot of resources. By the time they get older, they’ve run out of those resources. Social Security is incredibly important to them. Those 85 and older who really need Social Security is the fastest-growing demographic in our population.
I think some of you probably, knowing this audience, certainly paid attention the Census Bureau poverty data that came out last week. We saw poverty increase for children. But what we saw was the only group to experience a decline in poverty was seniors. Why was this? One of the reasons is in 2009, we had an exceptionally high cost of living adjustment; 5.8% was the COLA. That was the result of the spike in oil prices, and when the formula was figured as a benefit. The other reason, the $250 stimulus; the big stimulus bill that we had, included a $250 check to seniors. This shows how close seniors are to poverty, in that these two changes could make sure that they didn’t go into poverty. I have to tell you something: unless the Congress acts, we’re not going to have a COLA this year or next year. I will tell you, I don’t think we’re going to see a 5.8% spike as we did two years ago.
I can’t discuss Social Security without discussing Medicare. For many seniors, Medicare is their single out-of-pocket expenditure. Part B premiums are deducted from Social Security from the check, and many seniors kind of think of these programs together. Medicare provides healthcare to a population shunned by the insurance companies. I represented Hartford, Connecticut, the former insurance capitol of the world, for 17 years. I understand insurance. I can tell you, the insurance industry had no, no, no interest in covering seniors because they have too many claims. Insurance companies have to be responsible for profits and to their shareholders. Medicare provides health insurance to a population that was shunned and now it covers these benefits. Today’s Medicare is affordable insurance to elderly with disabilities. But having said that and how important Medicare is, we have to remember that Medicare uses the same doctors, the same hospitals, the same MRI machines as our whole healthcare system. A senior now spends an average of 40% of Social Security benefit on out-of-pocket expenses. We need to contain costs across the board. We can’t just look at Medicare for cuts.
That’s why my organization supported the Healthcare Reform Bill. I have never in all my years seen a piece of legislation that had so much information and much of it directed to seniors. That was because seniors care so much about Medicare, and also because seniors vote in midterm elections. Of course, many of what was going on in the healthcare reform had political implications. Seniors were bombarded with distortions, half-truths - and I have to tell you something - outright lies. I don’t care how many times you read the Healthcare Reform legislation, you cannot find death panels; they were never there. Let me tell you, when seniors are polled, they still believe there are death panels, and this is very harmful to the program. National Committee, my organization, spent millions helping members to understand the truth, and we have no political agenda. Our membership is split one-third Republican, one-third Democrat, and one-third unaffiliated. But we know that the status quo was not an option for Medicare. You just can’t cut Medicare without the rest of healthcare being addressed. If we do, providers will withdraw from the program, and as a result, seniors will have a very difficult time finding a doctor. The Affordable Care Act was a unique opportunity to strengthen Medicare while slowing the cost of healthcare. And it protects access for seniors while keeping Medicare affordable. Let me tell you something: it’s not a perfect bill; most of them aren’t. But it’s a beginning on Medicare reform and healthcare reform.
Those who were opposed to the whole idea of healthcare reform, before the ink was dry on the President’s signature, they are talking repeal. I will tell you right now: no matter what happens in the fall’s election, we’re not going to have repeal because the President would not sign any veto of Social Security, but there’s lots of ways to undermine this program. You can chip away at the less popular provisions, which has already begun. Small business can’t stand the reporting regulations. They’re absolutely hated by small businesses. But if the legislature hadn’t done that, $13 billion would be lost to preventive healthcare. Individual mandates, those aren’t popular either; in fact, they’re hated by many people. But without it, the economics of the whole healthcare bill wouldn’t work.
We really have to pledge to keep some of these popular positions. When I say pledge, I think many of you saw last week that the Republicans have a new pledge. What it does, it includes little pieces of repeal of Medicare. It’s a prohibition against insurance company rescissions and preexisting condition denials. Very popular, but if you look at them, and attack them singly, there’s a chance they could pass. What you also have to worry about is starving the program of resources. Health reform is unbelievable, if you read the bill - an unbelievable amount of regulation. Congress could refuse to appropriate the money for the regulation, and that could stop healthcare in its tracks. Many provisions don’t take effect till 2014. That’s plenty of time to organize repeal activities. Those of us who believe a country as advanced as the United States of America should have a robust social insurance program… but I have to say to you this morning, and you that care enough to come to a meeting like this, I think those of us who believe in social insurance will have to fight to keep these programs.
On the 25th anniversary of Social Security, Frances Perkins, the hero, Labor Secretary of Social Security said, “One thing I know. Social Security is so firmly embedded in the American psychology today that no politician, no political movement, no political group could possibly destroy that act and still maintain our democratic system. It is safe. It is safe forever, and for the everlasting benefit of the American people.” Well, that may no longer be true. The forces are at work undermining Social Security, and they’re using legitimate fear about the deficits as the weapon to undermine the program. There are those that are in very important positions that claim we can no longer afford Social Security. I have to tell you this. I’m appalled as anybody that we have a deficit of $1.5 trillion. I can remember when $200 billion was looked at as a real problem. What’s happening is, running surpluses [unintelligible]. We have been running surpluses in the Social Security system that have been masking the real amount of the deficits, as we well know. What we have to know is also that Social Security has not added one thin dime to the deficits. Americans have completely always contributed to the program and expected to have Social Security when they retire. It is a very safe retirement instrument. The treasury bonds are backed by the full faith and credit of the United States of America.
The problem is, the enemies of Social Security don’t want to honor these – they won’t say it – but they don’t want to honor these bonds. Fiscal hawks’ drumbeat is that we can’t afford it. The truth of the matter is, they don’t want to honor the bonds. Policymakers may be listening. You know why? The President appointed a fiscal committee. That fiscal committee has been moving very rapidly. Now do we know what the fiscal committee has been suggesting? Not much because, oh, they have their public meetings by law, but the subcommittee meetings are held with no publicity whatsoever. So we don’t know what these deliberations in secret are going to do to our program. We have to plan by what they’re going to do, and this is what we know; because we have public statements by people like Mr. Bernanke and others who are saying, everything should be on the table. But the only thing that we see on the table are cuts in benefits. The Fiscal Commission won’t meet again until after the election; in fact - I get a kick out of it - the date for the next meeting, I think, is November 3; election day is November 2. Usually you’re pretty tired after the election, and I don’t know exactly how many people are going to attend this meeting. But what they have on the commission, a strong group of people who really don’t believe in Social Security. I’ll tell you, they’ve made it very clear that they don’t want to raise revenues. They just don’t want to raise revenues. If you don’t raise revenues, you’ve got to cut benefits and if we raise the age to 70, benefit could be cut by almost up to 40% or 40%. That becomes a poverty wage.
Another thing we hear a lot about is changing the way we index the formula of benefits. It’s a complicated idea. It sounds progressive. But over the time, it breaks the important link between contribution and benefits that Social Security has had for 75 years. It could leave everybody once again with a poverty level benefit. I’m not one - and I really am not one - who would never support any reductions. I won’t just say, “Don’t touch it; touch everything else, but don’t touch Social Security.” What I say is, when they’re only talking about Social Security, I want to ask the commission, “Why don’t we hear about anything else? Until we hear about other things, we can’t have an intelligent conversation about what’s going to happen.” Social Security is not only important to seniors; it’s clearly going to be important to our children and our grandchildren, and retirees in the future. Right now, only one-half the workforce has a retirement plan, a 401(k), and only one-half of those people are putting in the maximum amount. What we have is a situation where Social Security will never be more important, and the members who are pushing cuts in Social Security claim that they don’t want our children or our grandchildren to have this debt. The fact of the matter is, our children and our grandchildren are going to need Social Security. Social Security is so special. It is no investment risk. Checks go out regardless of the market. Checks went out when we had Katrina. People had to go from Louisiana to Texas; Social Security found those people, and got their checks. After 9/11, Social Security, it was there for those people who were left without the breadwinner. It was there in a matter of weeks. The benefits increased, keep increasing to keep up with the cost of living. That’s something we have to, have to protect.
I know that this symposium is to find solutions for budget problems. And as long as benefit cuts are all that’s on the table, I don’t see how we can have an intelligent conversation. We should decide what services we want, and then figure out how we’re going to pay for them. The commission is going backwards, picking an arbitrary funding target and then squeezing programs into it. I will tell you, there’s a real disconnect between fiscal hawks and the American people. The National Foundation has recently taken a poll - we didn’t take the poll; we paid the University of New Hampshire, which has a very good reputation on poll taking, to take a poll. What we saw, people absolutely back the Social Security program. We also saw something interesting. People are more willing to pay a higher payroll tax rather than cut benefits. Even young people very blithely would say, “It’s not going to be there.” Millions of dollars have been spent. To tell young people that Social Security isn’t going to be there - for the first time when asked this question, they say, worried that it’s not going to be there, but they think it should be there. We’re going to have to start up a campaign again, make cutting Social Security really something that we have to protect against.
I look at you people and so many people, even people who collect Social Security don’t understand the program. What we have to have is people who are interested in the future of this country going around and helping us about Social Security. I for years have been working with Social Security. You have talked to a newspaper that had one person to cover Social Security; that’s no longer true. I was on a panel with a woman that wrote, The Woman That Gave Us Social Security; it’s a wonderful book – the New Deal, excuse me - about Frances Perkins. This woman got a Nobel Peace Prize when she was working at The Washington Post. I said to her, “Why did you leave The Washington Post? We need you so definitely at this time.” She said, “Barbara, I couldn’t stand it.” She said, “They’re reacting now to their advertisers, and many of their advertisers are arch conservatives. So therefore, they’re very careful that they make them happy.”
We must preserve Social Security for future generations. Before I end, let me give you a little bit of history. In 1983, I was on the Ways and Means Committee. We had a real problem. Because the way the formula was written, and because of inflation that had been so high the past years, we had a problem. We didn’t know if those checks were going to go out. We were really worried, and we knew we had to do something. Something else was happening. We had the baby boomers coming. One of the key people on the commission says, “Nobody knew the baby boomers were coming.” I don’t know what was the matter with him because they were in their late 20s and in their 30s. We raised that payroll tax, and these people worked all their adult lives, paying into the Social Security System. That surplus was building up so they would have really prefunding their benefits. We thought about it; what do you do with that surplus? What do you do with that surplus? What better to do than put it in government bonds. Now we’re hearing, “We’re not going to honor those government bonds.” We’re hearing that Social Security is going flat broke, that the government bonds are worth nothing.
Let me tell you something: those are government securities. They’re the same as the bonds that we sell to our international neighbors, to Citigroup, to well-off people. I’m wondering, are they saying to us, “We will honor those bonds, but not honor the bonds that people paid in month after month, month, month?” I don’t think so. The difference between ’83 and now is the people who were on the commission, and the people who were in the House Ways and Means Committee believed in the program, and were willing to work hard to make that program work, and they did. And the program since then has not only worked; it’s built up to surplus. The difference is now, we have people in decision-making places – and I’ll name one of them because he drives me crazy – Representative Paul Ryan. He’s got a roadway to fix the whole country. One of those ways is to absolutely privatize Social Security. We had that fight in 2005. I watched the President go around the country, and talk about privatization. He went to 60 cities. We kept hoping he’d go to more. Because every time he talked about privatization, more people realized, “No, we can’t do this.” There were a number of reasons against privatization, but even just this idea that the transition costs would be so high that the solvency question would not be addressed.
Speaking of solvency, the whole point of fixing Social Security, and our actuaries now say that the program has enough money, if we honor the bonds, to 2037. After 2037, it can only pay 76%. People are acting like all of a sudden, there’s no workers. Money is coming into Social Security all the time. Is there a shortfall? Yes. Would I be more than willing to work hard to see that we look at the solvency issue? Yes. But what the commission says, what the executive order says, is that any savings found in this study of budget problems, any savings goes toward deficit reduction. Just say they raise the cap; everybody’s saying, that’s a good way and probably is a more fair way. But that money wouldn’t go towards Social Security; it would only make the solvency problem worse. It would go through a deficit reduction.
What we have here is a real difference of opinion. And what we have here are those people who were detractors of Social Security when we began the program, remained detractors of Social Security. Nancy can tell you, there were there in 1983 when we were doing reform. They were there… a guy named Pete Peterson, a very successful man. He made his money in an equity firm in Wall Street. He has given his adult life… For some reason, he just can’t stand Social Security. So this year, he gave a billion dollars to a group, the Peterson Foundation, to work towards solving the deficit problem, but really work hurting Social Security. We should be worried; we really should be worried. I believe in democracy, and differences of opinion. I also think, having studied it, looked at it, heard about it, campaigned against privatization, I also feel committed to future generations - not just today’s retirees - to have a strong social insurance program. Every other developed country has.
You hear things about, we’re like Greece. Greece had the most unbelievable, favorable benefits - much, much too high. We don’t have anything like that. Other countries are raising the age. Let me tell you something, France is having a big fight over raising the age from 60 to 62. We’re at 67 and we’re being told that maybe 70 is a good age. What I really ask you to do is get involved. Talk to your newspapers. Talk to your Congress members. Talk to other people to explain that, yes, the deficit is terrible, yes, the debt is terrible, but Social Security didn’t cause it, and we still need Social Security now and we’re going to need it for future generations. I thank you for coming to an event like this because obviously you care about the future of the United States of America.