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Seniors to Congress: Protect Social Security

Hundreds of seniors, backed by community and labor groups, will perform the “Scrap the Cap Shuffle” in Federal Plaza tomorrow and deliver bags of bottle caps to congressional leaders to kick off a campaign to lift the cap on payroll taxes in order to strengthen Social Security.

The “Scrap the Cap” rally takes place at noon Tuesday, April 2, at the Federal Plaza, Dearborn and Adams.   Representative Danny K. Davis will participate, organizers said.

Delegations of seniors will attempt to meet with Senators Richard Durbin and Mark Kirk to urge them to oppose cuts to Social Security and focus on strengthening the program by lifting the limit on income levels subject to FICA taxes.

Currently income over $113,700 is exempt from FICA taxes.  “Scrapping the cap” would solve solvency issues for Social Security far into the future. The program’s trust fund now has a $2.7 trillion surplus, enough to fully cover benefits for at least 25 years.  And the fund is entirely separate from the federal budget.

Durbin in particular has backed implementing the so-called Chained CPI — which seeks to predict how consumers will substitute cheaper items when prices rise — and raising the retirement age.

“Older women, especially older women of color will suffer the most from switching to a Chained CPI formula,” said Audrey Douglas, vice chair of the Jane Addams Senior Caucus. “Senators Durbin and Kirk need to hear that older women have something to say about this issue.   Any cuts to Social Security are unacceptable.”

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Common sense on pension reform

Lots of gnashing of teeth over the failure of the legislature to “do something” about pension reform.

Some sensible sorts point out we’re probably better off without the plan put forward in the House, which would have been challenged in court and almost certainly found unconstitutional, since the vast bulk of its savings came from reducing the benefits of current state workers and retirees.

In Arizona, which has a constitutional provision like Illinois’s barring any diminishment of pension benefits, a recent reform plan was found unconstitutional – and the state was ordered to pay workers back with interest, points out Ralph Martire of the Center for Tax and Budget Accountability.

If there’s one thing we’ve seen this week it’s the wisdom of the 1970 Constitutional Convention in protecting state workers from lying, thieving politicians — and from honest, well-intentioned ones who try to fix their messes without seeing the big picture.

All the plans on the table are focusing on the wrong area of the problem, Martire says.  “We don’t have a benefits crisis, we have a debt crisis.” It’s the predictable result of the 1995 “reform,” which pushed the problem down the road by steeply backloading pension fund payments.

Stabilize the debt

CTBA has proposed amortizing the pension debt over 45 years, which would head off steep pension contribution increases now facing the state — and in fact reduce pension costs over time.

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Challenge to Durbin: Don’t cut Social Security

Dozens of clergy members will carry a golden calf symbolizing the idols of wealth and greed to Senator Richard Durbin’s office on Thursday, as a coalition of community groups demands that Durbin defend social programs – including Social Security and Medicare – in any post-election budget showdown.

So far Durbin has refused to sign a pledge – backed by Majority Leader Harry Reid and 28 other senators – promising to oppose cuts to Social Security, Medicare, and Medicaid.

“Durbin is missing in action on this issue,” said Jacob Swenson of the Make Wall Street Pay coalition. The Illinois senator is assistant majority leader and the Obama administration’s closest ally in the Senate.

Led by the clerical procession, members of the coalition will march from the Chicago Temple, 77 W. Washington, to Durbin’s office in the Federal Building, 230 S. Dearborn, at 10 a.m. on Thursday, November 8.

On Friday at 3 p.m., hundreds of clergy, students and others will rally at Pritzker Park, Van Buren and State, calling on Durbin to stand tough in budget negotiations.

Hardball

Following the failure of Durbin’s “Gang of Six” to reach a budget compromise in the summer of 2011, Congress passed a measure establishing a supercommittee to breach the impasse, with the threat of $1.2 trillion in automatic “sequester” cuts to military and domestic spending if they failed.  They failed, and the deadline to act under that measure looms.

Congress could just repeal sequestration and start over, Swenson said.  The current impasse revolves around Democrats’ insistence on a mix of tax revenue and budget cuts to address the deficit, while Republicans oppose any tax increases whatsoever.

President Obama has to check his propensity for preemptive compromise and “play hardball,” said Swenson.  Specifically, he said, Democrats can win if they are willing to allow the Bush tax cuts – all of them – to expire.

“We’d like to keep them in place for people earning under $250,000, but if you’re not willing to let them expire, you don’t have political leverage,” he said.  “The Democrats haven’t taken the strong bargaining position they need to take.”

Durbin: raise retirement age

Obama has backed the recommendations of the Simpson-Bowles commission, which Durbin supported, including raising the retirement age to 69 and reducing cost of living adjustments for Social Security; the plan would also lower the tax rate on top incomes.

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Warning on Social Security, Medicare cuts

Seniors, people with disabilities, and the poor shouldn’t be pushed over a “fiscal cliff” manufactured by politicians.

That’s the message of a coalition of senior, disability, community and labor organizations that is hosting an accountability sessions with local members of Congress, Tuesday, October 30, 4 p.m., at the Chicago Temple, 77 W. Washington.

Representatives Danny Davis and Jan Schakowsky have confirmed their attendance, and others are expected, said Gary Arnold of Access Living.

Sponsors of the event include Access Living, Illinois Alliance of Retired Americans, IIRON, Jane Addams Senior Caucus, Jobs With Justice, and the Lakeview Action Coalition.

They’ll ask legislators to oppose cuts to Social Security, Medicare, and Medicaid in any resolution of the impasse over the debt ceiling to be considered in Congress after the November 6 election.

Neither Democratic nor Republican proposals – nor automatic cuts set to go into effect if no deal is reached – are good options, said Tom Wilson of Access Living.

Democrats would reach deficit reduction goals with a mix of heavy budget cuts and increased taxes on the wealthy; Republicans have proposed only spending cuts.  A “sequestration” plan if no deal is reached would involve 8 percent across-the-board cuts in domestic and military spending.

“Any of the solutions they’re talking about would drive us right back into recession, throw a lot of people out of work, and send the economy into a downward spiral,” said Wilson.

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In Springfield, no solutions

Sad to say, nothing they’re doing or talking about in the General Assembly will have a significant impact on the state’s chronic budget crisis.

Not draconian Medicaid cuts, not possible pension cuts or casino expansions.  The legislature is barking up the wrong trees, and doing it over and over.

That’s because the state doesn’t have a spending problem.  In real terms, Illinois has been steadily cutting spending on education, human services, health care, and public safety for the past decade.  Medicaid is not the problem: general revenue funds going to Medicaid are down over the past five years.

According to Ron Baiman of the Center for Tax and Budget Accountability, Illinois is one of the nation’s wealthier states, looking at the state’s gross domestic product per capita.  But it has been one of the nation’s lowest-spending states, looking at state spending as a percentage of GDP.

So the problem isn’t overspending, and cutting doesn’t get us closer to a solution. The problem is a regressive tax system that doesn’t tax where the money is.

Regressive

Illinois has one of the most regressive tax structures in the nation.  As noted here last year, the bottom 20 percent of households pays twice as much of their income in state and local taxes as the top 20 percent does.

Even the flat income tax is regressive, since it imports all the federal tax code’s loopholes; of the current nominal rate of 5 percent, households earning over $1 million a year pay an effective tax rate of just 2.1 percent – the same as households earning over $10,000.  The squeeze is on the middle.

And especially with the surge of income inequality in recent decades, that means the state asks more and more from people who are doing less and less well, and fails to capture the gains of economic growth, which are increasingly found at the top.

It can’t go on forever.  At some point Illinois leaders are going to realize there’s no alternative to a progressive income tax.  The constitution, which mandates a flat tax, will have to be amended.

All our neighboring states have progressive systems – and that’s the reason their budget problems are so much less than ours.  If we took Iowa’s income tax rates and applied them to Illinois’s tax base, we’d raise $6 billion more a year – and 54 percent of taxpayers would get a tax cut averaging 24 percent, according to CTBA.  If we took Wisconsin’s we’d raise $3.6 billion more a year and cut taxes for more than half our residents.

Tax cut

The Illinois constitutional amendment will have a straightforward appeal: nearly all taxpayers’ rates will go down.

CTBA has fashioned a proposal for a progressive tax system for Illinois that raises an additional $2.4 billion yearly (even after allowing for increased tax avoidance by wealthy taxpayers) and reduces the tax rate for 94 percent of taxpayers.

Everyone earning under $150,000 would get a tax cut.  Starting to sound good?

It’s not even very tough on the wealthy; CTBA figures the effective tax rate (after deductions, credits and offsets) would top out at 6.3 percent for those earning over a half million a year.

There’s other money the legislature is leaving on the table, as it cuts public services to the bone.  A restructuring of the corporate income tax in 2001 – an unsuccessful attempt to encourage job growth — means most Illinois corporations pay no income taxes.

And an antiquated sales tax which applies to goods but not services – so if you buy a lawnmower and gas to mow your own lawn, you pay a sales tax, but if you hire a lawn service you don’t – costs the state between $500 million and $1 billion a year.

Corporate welfare

Then there’s corporate welfare – an area in which Illinois is a leader.  The Responsible Budget Coalition identified six corporate tax loopholes which don’t make economic sense — and where Illinois departs from federal policies and practices in other states — costing Illinois nearly $700 million a year.

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Seniors plan civil disobedience to protest Social Security cuts

Joined by hundreds of supporters from community and advocacy groups – and from Occupy Chicago – dozens of seniors will block traffic Monday morning to protest proposed cuts to Social Security, Medicare, and Medicaid.

Following a rally and march starting at Dearborn and Adams at 10:15 a.m. on Monday, November 7, they’ll blockade the intersection of Jackson and Clark outside the Federal Plaza at 11:30 a.m..

The groups will meet later with Senator Durbin and members of the local congressional delegation “to demand a federal budget that strengthens the social safety net for low-income families” and that leaders “solve the revenue crisis by raising taxes on millionaires and closing loopholes for banks and big corporations,” according to a release.

According to reports, both Democrats and Republicans on the Senate “Supercommittee” considering a deficit reduction deal have proposed cuts to Social Security, Medicare, and Medicaid.

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State of the Union and Social Security

Retirees in Illinois will be watching tomorrow’s State of the Union address and paying particular attention to indications of President Obama’s commitment to Social Security, said Barbara Franklin, president of the Illinois Alliance for Retired Americans.

Franklin is one of 30 state alliance leaders who recently signed a letter to Obama calling on him to “renew the nation’s commitment” to Social Security (pdf).

“We’d like to see the president speak up for strengthening Social Security,” Franklin said.

“It’s probably the most successful federal program, it’s funded by employees and employers, and it hasn’t contributed one dime to the deficit,” she said.

The Social Security trust fund currently has a $2.6 trillion surplus and is fully funded through 2037.

Seniors were “put on notice” when Obama formed a fiscal responsibility commission – saying “everything is on the table” — and appointed co-chairs known for their advocacy of Social Security cuts, which the commission ended up endorsing, Franklin said.

Obama has remained neutral on the plan, but Senator Richard Durbin’s vote for the proposal was viewed as representing the administration’s wishes.  Durbin spoke up specifically in favor of raising the retirement age.

Last month Robert Kuttner wrote in Politico that administration officials were urging Obama to endorse the commission’s plan in the State of the Union address, but the New York Times now reports that such an action is unlikely.

At Huffington Post last week Kuttner said “progressives…can take some credit for warning [Obama] off Social Security cuts.”

Polls showing opposition to Social Security cuts across the political spectrum – with 70 percent opposed to raising the retirement age — may have had some effect.

But in recent weeks two “centrist” think tanks with ties to the administration have released reports calling for Social Security cuts.  The Third Way, the old outfit of Bill Daley, the new chief of staff, issued a “solvency plan” which calls for $2 in benefits reductions for every $1 in additional revenue.  It calls for raising the retirement age and reducing cost of living adjustments.

The Center for American Progress has called for reducing COLA and making benefits more “progressive” – which means reducing benefits for people who earned $55,000 a year and up.

And Republicans can also be expected to press for cuts.

“I’m not sure Washington truly understand what it means to live on $325 or $400 a month,” as some Social Security recipients do, Franklin said.  “Most retirees are relying on their Social Security, and they simply cannot take any benefits cuts.”

Many seniors “don’t really understand what these [proposals] are,” but if they start moving, “there’s going to be a huge uproar in this country from seniors,” she said.  “For so many seniors, this is their income.”

She questioned the practicality of a “hardship exemption” from higher retirement ages for workers in physically demanding trades, noting that it now takes two years to get approval for Social Security disability benefits.

Franklin would like to see Obama reject his commission’s proposals.  She’d like to see him reiterate the position he took as a presidential candidate, when he opposed benefits cuts, opposed raising the retirement age, and argued that lifting the cap on incomes subject to the payroll tax would solve Social Security’s long-term problems.

“If you do that, you have enough money into the next century,” she said.

The Campaign for America’s Future has helpfully provided a short video of Obama’s earlier statements:

Obama tax plan – a threat to Social Security?

One element of the tax deal reached by President Obama and Republican leaders – a one-year reduction of the payroll tax by 2 percent – has Social Security advocates raising dire warnings.

The Strengthen Social Security coalition cites the “high likelihood” that the cuts will be extended when the first year is up – which will occur at the beginning of a hard-fought election year.  The $120 billion appropriation from the federal budget to reimburse the Social Security trust fund will be increasingly vulnerable “in a political environment dominated by debates on federal deficits.”

That could “result in a huge revenue drain to Social Security,” opening the door to “deep cuts in benefits for the middle class and eroding its support for the program,” according to an analysis by the coalition.

“We’re very concerned, and we’re keeping an eye on it,” said Emily Stuart of Illinois Alliance of Retired Americans.  ARA is a member of Strengthen Social Security.

Nancy Altman of Social Security Works says “the innocent-sounding payroll tax holiday…will lead inexorably to killing Social Security.”

She says it’s “unfathomable” that a more conservative Congress will fail to extend the cut when it expires.

Ryan Grim at Huffington Post found evidence for this among several Republican senators.  “Once something like this goes into place, a year from now, when it expires, it’ll be portrayed as a tax increase,” Senator Bob Corker (R-Tenn.) told him.

“There’s always a tendency to continue those things,” said Senator George Voinovich (R-Ohio).  “Once something comes in, it’s very difficult to change it.”

A permanent 2 percent cut in payroll tax would add significantly to the program’s long-term shortfalls, and “the pressure to cut Social Security in a slow, gradual way for younger workers will be enormous,” Altman writes, with changes in benefits forumlas that “would gradually and inexorably eviscerate the benefits of the middle class.”

The payroll tax cut replaces President Obama’s Make Work Pay tax credit, which offset employee payroll taxes for the first $8,100 of income.  Curiously, the payroll tax cut was proposed by Republicans in January 2009, and the Center for Budget and Policy Priorities compared it to Make Work Pay at the time.

CBPP found that Obama’s program had much greater stimulative effect because it got more money in the hands of low- and moderate-income taxpayers, who are more likely to spend it.  With the payroll tax cut, higher earners get much more than others.

Indeed, the New York Times notes that shifting from Make Work Pay to the payroll tax cut means taxes will actually go up for individuals making less than $20,000 and couples making less than $40,000.

The Times estimates that at least a quarter of tax savings in the Obama-Republican package will go to the top 1 percent of the population.

Meanwhile, Republicans blocked renewal of $250 annual supplemental payments to seniors who face a second year without cost-of-lliving increases in Social Security checks.

The payments are needed because Social Security cost-of-living calculations don’t take sharply rising health care costs sufficiently into account, Stuart said.



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