Social Security & Medicare Notes

Elaine Chao as Used Car Salesperson

The following is a speech by Elaine Chao attempting to sell us on Bush’s Social Security ideas. It seems to have been written by a door-to-door or used car salesman. This is from the Dallas Morning News, an extremely conservative Texas Newspaper.

I offer you the article (her speech) with my explanations of what she is really saying. I underlined some items to highlight them.

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Elaine L. Chao: A real cure for Social Security

Program is on an unsustainable path; Bush has the solution in a 3-part plan
12:07 AM CDT on Wednesday, May 4, 2005

Over the last 60 days, I have joined the president and other Cabinet members in traveling across the country to talk with citizens and community leaders about strengthening Social Security. We have heard very personal concerns expressed about the challenges of America's aging population and a keen awareness of how important Social Security is to our seniors. As this phase of our national dialogue comes to a close, the president has laid out his vision for moving forward with bipartisan Social Security reform.

The demographic trend of there being fewer workers in proportion to retirees is, in the coming decades, going to make the current Social Security system unsustainable.

[See also below where she makes the same statement but in more detail. She discusses 16 people paying for each beneficiary. That is a highly misleading statement because it is based on the period when Social Security was being phased in, compared to the time after it was fully functioning.]

Social Security is a "pay-as-you-go" system (i.e., today's workers are taxed to support today's retirees). Some people think there is a Social Security trust fund in which the government is holding their money in an account with their name on it. But as the president has explained, it just doesn't work that way.
Social Security taxes that aren't being spent on today's retirees are being spent on other government programs.

[But the money is invested in Federal Treasury Bonds. It isn't GIVEN to the government, it is legally LOANED. The law requires that it be repaid!

So we can't trust US Government Bonds to be repaid?? US federal debt is the safest single investment in the world! When economists need to use the default-free interest rate for calculations, they use the interest rate paid by US Federal Treasury Bonds, which is what the Social Security Trust Fund is invested in.

The 14th Amendment to the Constitution states "Section. 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned." Bush himself said in his Press Conference that if a person with a private account wanted a secure investment he could invest in US Treasury Bonds. Why would they do that if the government wasn't going to pay the money when the bonds are cashed?

Besides, most of Bush's wealth is currently invested in those same Government Bonds he claims are just pieces of paper. See Talking Points Memo and Bush's May 2004 financial disclosure form.]

In 1950, there were 16 workers paying taxes for every retiree. Today, there are three workers paying taxes for every retiree. In 2040, there will be only two workers paying taxes to support each Social Security recipient. Because people are living longer in retirement, the declining ratio of workers-to-recipients will become a crushing financial burden.

[The statement "When Social Security started there were 16 people paying in for every one receiving, now it is only 3.3 paying in for each recipient." is a totally misleading statement. When there were 16 people paying in to 1 receiving, the program was only starting and few people were qualified to receive benefits.

The program reached 3.3 people paying for each one receiving in 1975 when all the eligible elderly were receiving, and the ratio has stayed at 3.3 for the last 30 years. That was the planned situation. It is not a problem. See The Easy fix to Social Securities' minor problems - by Robert Ball .]

America is far from alone in facing these challenges. At a recent summit of labor ministers of the world's most developed nations, it was evident that aging populations and retirement security are among the top challenges facing developed nations.

[Really? Note here and below that you cannot track back the items she claims. No references. This is pure politician-speak.]

Declining birthrates have left most developed countries without enough younger workers to pay into the system that supports the retirement of older workers. As a result, retirees in France, Germany, Italy, Japan and Russia are facing the prospect of substantial benefit cuts. Workers in these countries are facing the prospect of retiring later and making substantially larger pension contributions. Their dilemma is a cautionary tale of what will happen to us if we don't face up to the solvency problems of Social Security now – before there is a crisis and while modest adjustments can still solve the problem.

[None of this is documented here, and if there is a problem in some other country it is not likely to be comparable to that of the U.S.]

The president outlined three goals at his recent prime-time news conference to help guide Congress as it begins work on legislation to solve this problem: ensure that future generations receive benefits equal to or greater than today's seniors; protect those who depend on Social Security the most; and replace the empty promises being made to younger workers with real money.

[Nice words. Politicians' promises are worth what on the market today?? Especially promises by George "WMDs in Iraq" Bush?]

As the president noted, most of the future under-funding problem can be solved by holding the growth in benefits for wealthier seniors at the rate of inflation, while allowing benefits to grow faster than inflation for low-income workers. That way, everyone would be assured of getting at least what today's retirees are receiving, and lower-income seniors in the future would receive even more than under the current system.

[Right. Convert the system to a welfare system for low income retirees, and let future Congresses cut the benefits when money gets tight. Since the Middle Class will already have been screwed out of their benefits, they are not going to fight for it. If the middle class don't get full anticipated benefits, the Social Security System is dead, and the only issue is when it occurs.]

In order to make the system a better deal for younger workers, the president has proposed "Voluntary Personal Retirement Accounts." They would empower young people by allowing them to invest a small portion of their Social Security taxes in a conservative mix of bonds and stocks or a risk-free Treasury Bond account. Workers would own these accounts and could leave them to their children.

[Of course neither Bush nor Chao mention the fact that this will require massive federal borrowing, on top of the current free-spending, wild-borrowing administration finances, and it will be paid back with the "Clawback" that is likely to take away more than many beneficiaries will ever receive. Molly Ivins weighs in on Bush & Social Security .]

It's worth repeating that for seniors at or near retirement, there would be absolutely no change in Social Security.

[Right. These are the people who vote regularly, so they try to set them outside the changes they are proposing in order to leave the more promising voters. But these people have children and grandchildren Elaine Chao and G. W. Bush are trying to shaft. Again, like other promises made by Bush, this one only lasts until January 20, 2009. That's at best.]

America honors and respects its senior citizens in many ways. None is more meaningful than strengthening Social Security. This administration is committed to ensuring that it will be there not only for today's retirees, but for their children and their grandchildren – providing the safety and dignity in retirement that they deserve and have earned.

[More political-speak. There is nothing here that could be construed as a promise Ms. Chao would have to live up to. ]

U.S. Secretary of Labor Elaine L. Chao is a member of the president's economic team, which recently finished a two-month tour traveling around the country to talk about the president's plan to strengthen Social Security. She met with The Dallas Morning News' editorial board. Her e-mail address is executivesecretariat@dol.gov.

This is a sales pitch with as little verifiable fact as possible. High emotion (fear) and very low factual content. Go see The Easy fix to Social Securities' minor problems - by Robert Ball
for a discussion of the severely overstated threat the administration is trying to push, the relatively minor probability that it actually does exist (or might not - if the conservative assumptions are overly pessimistic there is no problem and if it does exist, the simple, low cost and far from difficult set of solutions that can easily be implemented. With those simple, minor solutions Social Security will be sustainable into infinity.

Bush's proposed solutions are extremely expensive, as well as totally unnecessary. Don't let him waste any more of your money on unnecessary Social Security 'fixes'. We are already going to be stuck for a long time paying for his unnecessary war in Iraq.

posted by Richard @ 2:31 AM