Tag: benefit cuts

Americans Should Be Less Complacent About Social Security

Mary Pat Campbell

Link: https://www.discoursemagazine.com/p/americans-should-be-less-complacent

Excerpt:

In December 2023, Gallup released the results of its latest survey of Americans’ expectations of Social Security. Gallup has been conducting these surveys in essentially similar form for many years, and their latest results qualitatively resemble previous ones. They show a slight uptick in Americans’ optimism that Social Security will make good on future benefit promises, producing Gallup’s headline finding: “Americans More Upbeat About Future Social Security Benefits.”

Unfortunately, the optimism expressed by Gallup’s respondents is at odds with the reality of Social Security’s deteriorating finances, as evidenced by the worsening actuarial shortfall documented in its trustees’ annual reports. Never before have Americans had greater reason for concern that they will not receive the benefits Social Security is promising. The reason Americans are feeling blithe about Social Security’s future is not because of its actual condition, but because elected officials and media figures avoid a subject whose harsh realities contradict their preferred political narratives.

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Another recurring feature of the Gallup surveys is to question respondents as to whether they would prefer that Social Security solvency be restored by raising taxes or by “cutting” or “curbing” benefits. Whenever the question is phrased in such a way, Americans express a preference for raising taxes, a preference that increased in the latest poll. The rising preference for raising taxes may partially reflect the bigger-government tilt of young adults, combined with the large number of baby boomers on the verge of claiming benefits. However, a portion of that expressed preference has been present in every survey, and it is worth understanding why.

All Social Security survey responses tend to be extremely sensitive to the wording of questions and to background understanding of the program. For example, a previous Gallup poll showing majority opposition to proposals to “curb” benefits for middle- to high-income workers was contradicted by a contemporaneous poll finding that 59% of respondents favored slowing the rate of benefit growth for middle- to high-income workers. When proposals to moderate future benefit growth are accurately described as such, they tend to draw much more support than when proposals are described as “cutting” or “curbing” benefits. Language such as “cut” or “curb” implants the mistaken notion that such proposals would reduce benefits from current levels.

Author(s): Charles Blahous

Publication Date: 9 Feb 2024

Publication Site: Discourse Magazine

Does the GOP Want a Government Default So It Can Kill Social Security?

Mary Pat Campbell

Link: https://jacobin.com/2023/01/republicans-debt-ceiling-shock-doctrine-spending-cuts

Excerpt:

The debt ceiling is normally a dull topic, and many have understandably neglected to follow along. To recap, the debt ceiling is the artificial cap Congress places on the amount of money the government can borrow. As Secretary of the Treasury Janet Yellen and others have pointed out, there is little practical reason for the debt ceiling to exist at all. From a technical point of view, it is a formality to authorize the Treasury to pay bills the government has already incurred. Through creative accounting, the Treasury can keep paying for a few more months, and then it will have to stop unless Congress votes to raise the debt ceiling.

All sides agree that the US government deliberately defaulting on debts would be the financial equivalent of an atom bomb, causing immediate painful shocks across the world economy and unpredictable long-term effects. In order to avoid this scenario, voting to raise the debt ceiling is usually a matter of course — though the number of near and actual government shutdowns from Congress playing chicken with the ceiling have increased in recent decades.

But it might be different this time. As Politico reported last week, a number of former government officials who negotiated during previous standoffs over the debt ceiling think there’s much less room for a negotiated settlement this year.

The main reason is that, at least on the surface, House Speaker Kevin McCarthy is in a weak position, effectively held hostage by conditions that were imposed on him by the most extreme members of the House Republican conference during his election to speaker. Those conditions specifically require significant spending cuts in exchange for raising the debt ceiling.

….

Democrats also argue that though Republicans insist on reducing spending, they have refused to make specific demands for what they want cut. Here is where The Shock Doctrine might provide a hint of what’s to come. The idea of privatizing Social Security has been “lying around” since George W. Bush’s presidency. Joe Biden himself has a long, well-documented history of trying to cut Social Security and Medicare, though in public statements since 2020 he has consistently said he would not agree to do so.

Kevin McCarthy and other Republicans have repeatedly floated the idea of cutting the popular programs over the past year. While McCarthy appeared to abruptly back off the idea of cutting Social Security and Medicare as part of the debt ceiling negotiations on Sunday, his ambiguous promise to “strengthen” the programs without specifying what that means leaves plenty of room for privatization.

Author(s): Ben Beckett

Publication Date: 31 Jan 2023

Publication Site: Jacobin

France: Over 1 million march against raising retirement age

Mary Pat Campbell

Link: https://apnews.com/article/france-retirement-age-limit-protests-866eb86aea5cf0d39894b96d2888c26f

Excerpt:

At least 1.1 million people protested on the streets of Paris and other French cities Thursday amid nationwide strikes against plans to raise the retirement age — but President Emmanuel Macron insisted he would press ahead with the proposed pension reforms.

Emboldened by the mass show of resistance, French unions announced new strikes and protests Jan. 31, vowing to try to get the government to back down on plans to push up the standard retirement age from 62 to 64. Macron says the measure – a central pillar of his second term — is needed to keep the pension system financially viable, but unions say it threatens hard-fought worker rights.

Out of the country for a French-Spanish summit in Barcelona, Macron acknowledged the public discontent but said that “we must do that reform” to “save” French pensions.

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In a country with an aging population and growing life expectancy where everyone receives a state pension, Macron’s government says the reform is the only way to keep the system solvent.

Unions propose a tax on the wealthy or more payroll contributions from employers to finance the pension system instead.

Polls suggest most French people oppose the reform, and Thursday was the first public reaction to Macron’s plan. Strikes severely disrupted transport, schools and other public services, and more than 200 rallies were staged around France.

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Under the planned changes, workers must have worked for at least 43 years to be entitled to a full pension. For those who do not fulfil that condition, like many women who interrupted their career to raise children or those who studied for a long time and started working late, the retirement age would remain unchanged at 67.

Those who started to work under the age of 20 and workers with major health issues would be allowed early retirement.

Protracted strikes met Macron’s last effort to raise the retirement age in 2019. He eventually withdrew it after the COVID-19 pandemic hit.

Retirement rules vary widely from country to country, making direct comparisons difficult. The official retirement age in the U.S. is now 67, and countries across Europe have been raising pension ages as populations grow older and fertility rates drop.

Author(s): SYLVIE CORBET and JADE LE DELEY

Publication Date: 19 Jan 2023

Publication Site: Associated Press

Millions march in France against Macron’s pension cuts

Mary Pat Campbell

Link: https://www.wsws.org/en/articles/2023/01/20/fxax-j20.html

Excerpt:

Two million people struck or marched in protests yesterday called by union federations against President Emmanuel Macron’s pension cuts. Polls show around 80 percent of the population oppose the cuts, which would increase the minimum retirement age to 64 with a minimum pay-in period of 43 years. Strike calls were widely followed by rail and mass transit workers, school staff, and electricity and refinery workers, and 200 protest marches were held in cities across France.

Trade unions reported that 400,000 people marched in Paris, 140,000 in Marseille, 38,000 in Lyon, 60,000 in Bordeaux, 50,000 in Toulouse and Lille, 55,000 in Nantes and 35,000 in Strasbourg. Moreover, many smaller cities saw large turnouts that surprised police authorities. There were 25,000 in Orléans, 21,000 in Le Mans, 20,000 in Nice, 19,000 in Clermont-Ferrand, 15,000 in Tours, 13,000 in Pau, 10,000 in Chartres, 9,000 in Angoulême and 8,000 in Châteauroux.

Author(s): Alex Lantier, Anthony Torres

Publication Date: 20 Jan 2023

Publication Site: World Socialist Web Site

Social Security Needs Saving Again

Mary Pat Campbell

Link: https://www.wsj.com/articles/social-security-needs-saving-again-retirement-planning-wages-earnings-benefits-eligible-savings-11654631767?mod=opinion_lead_pos5

Excerpt:

— Raise the full retirement age further. Starting in 2028, it would go up by one month every half-year until it reaches 68 1/2 in nine years. That means that in 101 years (1935-2036) the full retirement age would have risen 3 1/2 years — far less than the increase in average life span over the same period.

— Raise the early eligibility age. Since the 1960s, all workers have had the option of retiring at 62 with benefits reduced by around 25%. Most retirees now claim Social Security at 62, and the rising full retirement age strengthens the incentive to do so. Once it’s at 67, holding out for higher payments will mean giving up five years’ worth of benefits — a three-year gap will have widened to five.

If my first reform were enacted, the gap would grow further, to an irresistible 6 1/2 years. So Congress should return to the three-year gap by raising the early eligibility age to 65 1/2 as soon as possible.

— Change the way benefits are calculated for new recipients. At a 1983 White House Rose Garden ceremony, I sat next to a Senate member of the Social Security Reform Commission. I told him, “You can fix Social Security by not indexing the bend points for five years.” His response: “What the hell are bend points?”

Bend points determine how much your initial Social Security check will be. First they take the 35 years of your highest income. Thirty-five years ago, you were a junior employee and the dollar didn’t go as far. So each year’s wages are adjusted for inflation to compute an average monthly wage in today’s dollars.

Using the present rules, assume you’re retiring in 2022 and your average inflation-adjusted monthly wage is $6,572. Your first check would be $2,628.96 — 90% of the first $1,024 (or $921.60), plus 32% from $1,024 to $6,172 (or 1,647.36), plus 15% in excess of $6,172 (or $60).

The bend points are $1,024 and $6,172. They were $230 and $1,388 in 1982, when I wrote my constituent newsletter. The growth in benefits could be constrained by indexing the bend points every other year rather than annually for six to 10 years. In addition, the initial benefit should be based on 38 years of wages rather than 35, since Americans not only live longer but work longer, and the inflation-adjusted average wage should be discounted by 5%.

— Slow the growth of benefits for new and existing beneficiaries alike by changing the basis on which they’re indexed for inflation. All indexing of Social Security now uses the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W. Economists agree that the Chained CPI is the most accurate inflation index available. Between 2000 and 2020, the Chained CPI was around 0.3 percentage point lower each year than the CPI-W. The government uses Chained CPI to index income-tax brackets and the higher CPI-W to calculate government outlays, including Social Security cost-of-living adjustments — which leads both taxes and spending to rise more quickly.

— Withhold some Social Security COLAs from higher-income retirees. Those who report income of more than $60,000 (a threshold that itself would rise with inflation) from sources other than Social Security could be denied the COLA every other year for up to six years.

— Give the COLA not annually but every 14 or 15 months using the 12 months of lowest inflation.

— Tax Social Security income for higher-bracket taxpayers, and give them the option to forgo all or part of their monthly payment. The forgone amount could be deducted as a charitable contribution. In high-income-tax states, forgoing Social Security payments would incur little or no cost. Skeptics may be surprised by how many Americans will forgo a part of their monthly checks to assure the system’s solvency for their grandchildren. The election to forgo would be reversible annually.

— Raise the payroll tax by 0.1% of wages every other year — half from withholding, half for the employer’s contribution — for 20 years, a total tax increase of 1%.

Author(s): Rudy Boschwitz

Publication Date: 7 June 2022

Publication Site: WSJ

As Pension Goes Broke, Bankruptcy Haunts City Near Philadelphia

Mary Pat Campbell

Link: https://news.bloomberglaw.com/bankruptcy-law/as-pension-goes-broke-bankruptcy-haunts-city-near-philadelphia

Excerpt:

Decade after decade, Chester, Pennsylvania, has fallen deeper and deeper into a downward financial spiral.

As the city’s population dwindled to half its mid-century peak, shuttered factories near the banks of the Delaware River were replaced by a prison and one of the nation’s largest trash incinerators. A Major League Soccer stadium and casino did little to turn around the predominantly Black city just outside Philadelphia, where 30% of its 33,000 residents live below the poverty line. Debt piled up. The government struggled to balance the books.

Now, with its police pension set to run out of cash in months, a state-appointed receiver is considering a last resort that cities rarely take: filing for bankruptcy.

…..

In the years after the housing-market crash, three California cities, Detroit and Puerto Rico all went bankrupt, in large part because of retirement-fund debts. Such pensions are now being tested again, with the S&P 500 Index tumbling over 20% this year and bonds pummeled by the worst losses in decades.

….

Michael Doweary, who was appointed receiver of the city in 2020, is exploring options such as eliminating retiree health care, cutting the city’s costs for active employees’ medical benefits and reducing the city’s pension and debt-service costs. 

But that’s virtually certain to draw resistance from employees, who would need to approve such changes. In February, Pennsylvania’s Department of Community and Economic Development gave Doweary the power to seek bankruptcy protection for Chester if such steps fall through. 

“The answer is not to go to people and say we promised you if you work here for 25 years we’re going to give you post-retirement medical benefits, and then take it back,” said Les Neri, a former president of the Pennsylvania Fraternal Order of Police who is currently working with Chester’s officers. “At least current officers can make a decision to accept it and stay, or reject it and leave.”

Author(s): Hadriana Lowenkron

Publication Date: 17 Oct 2022

Publication Site: Bloomberg Law

Young Versus Old Will Define Fight Over Public Pensions

Mary Pat Campbell

Link:https://www.washingtonpost.com/business/young-versus-old-will-define-fight-over-public-pensions/2022/10/06/d4fae69a-4566-11ed-be17-89cbe6b8c0a5_story.html

Excerpt:

Younger workers are mostly excluded from those benefits, and few believe pension funds will be around to pay them at retirement time anyway. So younger workers want salary increases rather than promises. Also, portable, employee-directed accounts like 401(k)s rather than large and ever-increasing contributions to black-hole public pension systems. The fight in 2023 may be more between younger and older public employees than between united public employees and taxpayers.I think young employees will score their first victory after many years of getting pushed down. It will be short-term inflation then that applies lethal pressure in a tight labor market, not stock prices, interest rates or even longer-term expectations of price increases. Wages will have to be raised for public employees, who will refuse burdens from past underfunding or benefit cuts that apply only to them. The alternative is unacceptable declines in public services as the best employees quit, job openings go unfilled and qualifications for new hires are lowered.The most heavily indebted states, with the worst credit ratings and biggest pension funding shortfalls, may not be able to pay these increases. While 2022 should be a good revenue year for a majority of state and local governments, heavily indebted states with big pension-funding gaps need to brace for some serious headwinds. Illinois already spends 11% of its revenue to service debt. Increased yields on its bonds could double that to 22% as debt is refinanced, even if the state runs balanced budgets.

The temptation to cut benefits for retirees may be overwhelming. While these people can (and will) yell and scream, that’s easier to accept than a teachers’ strike or a police slowdown. Current employees can be offered generous wage increases and portable pensions. Reducing actuarial pension liabilities will please creditors and rating agencies. Taxpayers will appreciate being spared. In many states, cutting benefits will require a constitutional amendment or other legal heavy lifting, but with enough incentive, that can be done.

I expect something like Social Security reforms. A cap will cut benefits for people receiving the highest pensions, and states will put tax surcharges on benefits for high-income people even if they have moved out-of-state. Copays and deductibles will be increased for health coverage.

The first state to try this will face strong legal challenges, a nationwide union counteroffensive and significant in-state political resistance. But with enough fiscal pressure it may happen. If state administrations can keep current public employees on the sidelines, via wage increases and benefit restructuring, it might succeed.

Author(s): Aaron Brown, Bloomberg

Publication Date: 6 Oct 2022

Publication Site: Washington Post

‘We Don’t Have Actuarial Numbers Relative To This Amendment’: Illinois’ Tier 2 Pension In Their Own Words

Mary Pat Campbell

Link: https://www.forbes.com/sites/ebauer/2022/02/20/we-dont-have-actuarial-numbers-relative-to-this-amendment-illinois-tier-2-pension-in-their-own-words/

Excerpt:

In Illinois, this resulted in a Blue Ribbon Pension Commission under Gov. Rod Blagojevich, which issued a report in 2005 with some recommendations which were adopted and others which, well, never saw the light of day. As might be guessed, the changes actually implemented were small scale, but included an anti-spiking measure, a reduction in the guaranteed interest rate used to calculate a minimum pension benefit, and a reduction in the categories of state employees eligible for the more generous alternative formula. This legislation, Public Act 94-0004, also required that any new benefit increase henceforth must be paired with a corresponding funding increase, and must sunset after five years (though recall that this didn’t stop the legislature from increasing benefits for Chicago Firefighters or non-Chicago Police and Fire pensions, both of which involve the state dictating benefits and localities funding them).

In recognition of the small nature of these changes and the very large debts still remaining, the bill also created yet another commission, with no effect, and in subsequent years, still more commissions met. In 2009, the Illinois Pension Modernization Task Force held a series of public meetings, but produced no majority-approved report, only a work product with findings and minority reports.

It is in that context that the Illinois Tier 2 pension system came into being — which avid readers will recall is a new set of benefits for public-sector employees in Illinois hired after January 1, 2011, a set of benefits with changes made that “looked good” to legislators at the time but had no actuarial review, and as a result will sooner or later fail the “safe harbor” test, in which state and local public pensions must provide better benefits than Social Security in order to opt out of the Social Security system. And why didn’t the law have an actuarial review? Because it was created behind closed doors — which makes it all the more worthwhile to repeat the exercise of reading the legislative transcripts of the day it was brought to the floor of the Illinois State House and Senate for a vote.

Author(s): Elizabeth Bauer

Publication Date: 20 Feb 2022

Publication Site: Forbes

‘I’ll be robbed twice in one lifetime’: Retirees fearing financial disaster wait for pension rescue

Mary Pat Campbell

Link: https://www.marketwatch.com/story/ill-be-robbed-twice-in-one-lifetime-retirees-fearing-financial-disaster-wait-for-pension-rescue-11630018883

Graphic:

Excerpt:

A law passed in Congress earlier this year promised to reverse some of that damage by offering taxpayer-funded financial assistance to certain troubled pension plans like Podesta-Smallen’s, allowing them to restore benefits to retirees who suffered cuts. But the implementation of the rescue plan has been met with a barrage of criticism from plan trustees, participants and members of Congress who say it’s too tight-fisted with the financial assistance and could leave some plans in a worse financial position than they are in now.

….

When the American Rescue Plan was signed into law in March, many of these struggling plans and retirees with sharply reduced benefits thought their troubles were over. The law is expected to provide about $94 billion to eligible multiemployer plans through a financial assistance program designed to stabilize the plans for decades to come and reinstate previously reduced benefits.  

The sense of relief was short-lived, plan trustees and participants say. The Pension Benefit Guaranty Corp., the federal agency charged with protecting the retirement incomes of participants in private-sector defined-benefit pension plans, in early July released regulations detailing the formula for calculating the financial assistance for troubled plans.

In interviews and more than 100 comment letters to the PBGC, plan trustees, consultants, participants and lawmakers say that the rule’s stringent approach to calculating financial assistance means that many plans receiving the assistance won’t make it through the next 30 years as Congress intended, and some won’t even get enough money to cover the benefits they must restore as a condition of getting the cash.

Author(s): Eleanor Laise

Publication Date: 30 August 2021

Publication Site: Marketwatch

Puerto Rico debt restructure plan threatens public pensions

Mary Pat Campbell

Link: https://thehill.com/homenews/state-watch/542318-puerto-rico-debt-restructure-plan-threatens-public-pensions

Excerpt:

A federal control board created by Congress to address Puerto Rico’s debt on Monday filed a restructure plan that threatens a 10-percent cut to public pensions without any deal with retirees.

The board presented a 233-page plan that would reshuffle at least $35 billion in public debt and more than $50 billion in public pension liabilities, The Associated Press reported.  

The proposal, which was filed in U.S. court, includes an up to 8.5 percent cut to monthly pensions of at least $1,500 to help the territory deal with the biggest U.S. municipal bankruptcy filing in history. The board said it received “substantial” support for the plan from creditors, specifically those who have more than $13 billion worth of bonds.

Author(s): Justine Coleman

Publication Date: 9 March 2021

Publication Site: The Hill