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Donald Trump Is Using the Coronavirus Crisis to Attack Social Security

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Image result for nancy altmanDonald Trump’s proposal to cut the payroll contribution rate is a stealth attack on Social Security. Even if the proposal were to replace Social Security’s dedicated revenue with deficit-funded general revenue, the proposal would undermine this vital program.

The proposal is a Trojan horse. It appears to be a gift, in the form of middle-class tax relief, but would, in the long run, lead to the destruction of working Americans’ fundamental economic security. While the goal of the proposal is stated in terms of fiscal stimulus, its most important impact, if not its intent, is to do what opponents of Social Security have been unable to do—end Social Security as we know it.

The supposed purpose of a reduction in payroll contributions is to address the coronavirus crisis. Tax cuts do not meaningfully address the coronavirus, or even the resulting market panic. We do want to ensure that people have the cash they need while they face massive uncertainties around employment and other costs. We want people to stay home as much as needed without having to worry about paying their rent or other costs. What we need most is a robust public health response, which the Trump administration is utterly failing to provide.

Alongside that vital public health response, there are better options for economic stimulus. These include a one-time progressively structured direct payment, restoring and expanding the Making Work Pay Tax Credit, or expanding the existing Earned Income Tax Credit and provide greater economic stimulus, are more targeted and equitable, and place no administrative burdens on employers. The only reason to support Trump’s proposal above those others is to undermine Social Security.

As revealed in this chart, cutting the payroll contribution rate is a deficient stimulus. Most of the benefit would go to the wealthiest Americans—including CEOs, senators, congresspeople, and members of the Trump administration—who are the least likely to spend the extra money. The other big winners are the nation’s largest corporations and other employers. The lower workers’ wages are, the lower their benefit. Moreover, those state and local employees who do not participate in Social Security would get nothing.


What Trump is proposing to cut, to be clear, are Federal Insurance Contributions Act payments. As the name indicates, these payments are not general taxes, but insurance contributions, or, in today’s parlance, insurance premiums. By law, they can only be used to pay Social Security insurance benefits and their associated administrative costs. Social Security has no borrowing authority. Consequently, Social Security does not and, by law, cannot, add even a penny to the deficit. If Social Security were ever to have insufficient revenue to cover every penny of these costs, those benefits would not be paid.

The late President Ronald Reagan eloquently explained, in his words, “Social Security has nothing to do with the deficit.” This proposal would change that, at least temporarily, if Social Security’s dedicated revenue were replaced with general revenue. (Of course, more accurately, the dedicated revenue would be replaced with borrowed money since the general fund is running unprecedently large deficits.)

The proposal would either undermine Social Security’s financing or employ general revenue, both of which would set the stage for future demands to cut Social Security. And it likely would not be temporary. When the cut would be set to expire, opponents of Social Security would undoubtedly characterize its expiration as a middle-class tax increase.

Too many Americans believe, understandably, that their Social Security contributions have been stolen. Using their contributions for economic stimulus would reveal that their elected officials indeed do not respect the fire wall between their contributions that are held in trust and can be used only for their dedicated purpose and the taxes they pay to the federal government that are held in the general fund and can be used for any constitutional purpose that Congress chooses.

On March 8, Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer released an excellent list of steps we should take to combat the coronavirus. Their plan includes paid sick leave, free coronavirus testing, and treatment for all. Our government should enact these measures, not undermine Social Security by slashing its dedicated revenue.


This article was originally published at Our Future on March 12, 2020. Reprinted with permission.

About the Author: Nancy Altman  is a writing fellow for Economy for All, a project of the Independent Media Institute. She has a 40-year background in the areas of Social Security and private pensions. She is president of Social Security Works and chair of the Strengthen Social Security coalition. Her latest book is The Truth About Social Security. She is also the author of The Battle for Social Security and co-author of Social Security Works!




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Why Retirement Insecurity Is the New American Epidemic

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The Dow Jones Industrial Average just dropped nearly 1,200 points in a single day because of the coronavirus’s impact on global trade, leaving many Americans sick with worry.

It’s not just a rapidly spreading, mysterious disease that made Americans feel vulnerable. The Dow’s freefall erased millions of dollars from retirement accounts and exposed another kind of epidemic—retirement insecurity.

There once was a time when the combination of company pension plans, Social Security and personal savings could carry retirees through their golden years.

No longer. Most companies eliminated defined-benefit plans providing a reliable income stream and implemented 401(k) plans that leave workers at the mercy of stock market volatility, like the kind that rattled investors recently and crushed workers in 2008.

Today, Americans have so much angst about the future that about 29 percent of baby boomers, 36 percent of Gen Xers and 77 percent of millennials fear they’ll never be able to retire or will have to work past normal retirement age.

Americans work hard so they can provide for their families and enjoy retirement. But no matter how carefully they plan, their retirements depend on factors beyond their control.

Patricia Cotton, a home health aide in Maryland, lost half of her $150,000 investment nest egg in the 2008 recession and retired 12 years later than planned.

In all, Americans lost about $2.4 trillion in retirement earnings during the second half of 2008, and the average household lost a third of its net worth.

Cotton was one of many who experienced losses so severe that they had to work longer than intended. The memory of the 2008 recession still gives Americans retirement jitters, and stock market drops like we’ve just seen compound the fear.

Before 401(k) plans dominated the retirement landscape, companies provided defined-benefit pensions. Workers earned specific—defined—amounts based on their wages and years of service. When workers retired, the employer provided those amounts no matter how the stock market fared.

But now, even workers and retirees with these plans can lose what they earned. For example, 1.3 million Americans are in about 150 multiemployer pension plans at risk of collapsing.

These plans, enrolling workers from two or more companies in fields such as transportation and paper, lost investment earnings in the 2001 and 2008 recessions. Some companies also used bankruptcies to wriggle out of pension obligations. Now, the plans owe more money to beneficiaries than they have coming in.

Because of financial problems plaguing her late husband’s plan, Mary Fry saw her pension cut by more than half, to $1,514 a month, in her early 70s. “It’s worrisome,” she said, “and I don’t think I need worry in my life right now.”

The U.S. House last year passed the Butch Lewis Act, a measure that would provide low-interest loans to save multiemployer plans, but Senate Republicans refuse to consider it.

Instead, Republican Sens. Chuck Grassley of Iowa and Lamar Alexander of Tennessee want to prop up the plans with higher taxes on workers and retirees. Workers didn’t create the problem, but Grassley and Alexander expect them to fix it.

The senators also want to impose hefty new fees on multiemployer plans, something that would push even the healthy ones into financial ruin.

Meanwhile, pensioners agonize about losing houses or paying medical bills if their plans fold. Others try to conserve as much as they can.

Alan Ebert, a United Steelworkers (USW) member who retired about four years ago from a Louisiana paper mill, is in a multiemployer plan at risk of insolvency in 10 years.

He wants to put off collecting Social Security as long as he can. Retirees who delay collecting benefits after their eligibility dates get bigger checks when they do tap into the system, and Ebert hopes to maximize his Social Security in case his multiemployer plan fails.

But Social Security also is imperiled. Some Americans fear it won’t even be around when they’re old enough to retire.

If Congress fails to bolster the trust funds within about 15 years, the program will have to reduce benefits by about 20 percent. That would impoverish millions of retirees.

Mass retirement of baby boomers stresses the program. By 2030, Social Security will have 44 recipients for every 100 workers paying into the system, up from 35 recipients per 100 workers in 2014. But that isn’t the only reason for the funding crisis.

Rich people don’t pay their fair share in Social Security taxes. That’s left billions in badly needed funding on the table.

Federal law ostensibly requires Americans to pay 6.2 percent of their wages in Social Security taxes. However, earnings above $137,700 aren’t taxed at all. That means millionaires and billionaires really pay a Social Security tax of less than 1 percent.

While average Americans pay Social Security taxes all year, a person making $1 million stopped contributing on February 19. Bigger earners finished even earlier.

Making millionaires and billionaires pay Social Security taxes at the same rate as ordinary Americans would stabilize the program.

Under the current, broken system, the rich feather their own nests at everyone else’s expense. They enjoy cushy retirements while average workers struggle to provide for the present, let alone the future.

Because of decades of stagnating wages, many workers live paycheck to paycheck. Some juggle multiple jobs.

They’re saddled with medical bills and college debt and can’t afford an unexpected $400 expense.

Many Americans have nothing to bank for old age.

Roberta Gordon, for example, worked all of her life. But she held a variety of low-paying jobs that provided no pension, meager Social Security benefits and zero savings.

So, at 76, Gordon spent her Saturdays working at a California grocery store, handing out food samples for $50 a shift. She got her own groceries at a church food bank.

Passing the Butch Lewis Act is one step the Senate can take to ease Americans’ retirement insecurity. Making the rich contribute their fair share to Social Security is another commonsense move Congress owes the American people.

Right now, many worry that their resources will expire before they do.

This article was produced by the Independent Media Institute. Reprinted with permission. 

About the Author: Tom Conway is international president of the United Steelworkers (USW).


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Facing Retirement With Fear

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Glen Heck spent 28 years sweating in a Campti, La., paper mill that he likes to say was “hotter than nine kinds of hell.”

But now, Heck’s sacrifice may have been for nothing because his multiemployer pension plan is one of about 150 nationwide set to go broke. If that happens, the 78-year-old Heck will have to find a cheaper, lower-quality health plan and keep the beef herd he’s itching to sell.

The Democratic-controlled House passed—with bipartisan support—a commonsense plan to save Heck’s pension and those of another 1.3 million workers, retirees and widows. But Republican leaders in the Senate refuse to consider it.

In the meantime, the futures of workers and retirees like Heck hang in the balance. Many face retirement with fear instead of anticipation.

Multiemployer pension plans like Heck’s include workers from two or more companies in industries such as transportation, entertainment, construction and paper. Employers make contributions for workers as part of their compensation. Heck and others often give up wage increases or other benefits to fund those plans.

Many of the 1,400 plans nationwide are still healthy. But through no fault of workers or retirees, about 150 are struggling.

Recessions in 2001 and 2008 cut the plans’ investment earnings, and some corporations used bankruptcies to evade pension obligations. Deregulation forced less-competitive companies out of business, straining the plans’ resources.

Now, they owe more money to beneficiaries than they have coming in, and they’re at risk of collapsing. The PACE Industry Union-Management Pension Fund (PIUMPF)—Heck’s plan—is one of them. According to recent projections, the fund will be insolvent in as few as 10 years.

Under the bill passed by the House, the Butch Lewis Act, the Treasury Department would loan money to troubled plans. The plans would use the money to meet their obligations to retirees, and they would repay the loans over 30 years.

The federal government already has an agency, the Pension Benefit Guaranty Corp. (PBGC), to pay benefits to retirees when multiemployer plans crumble. But it’s no substitute for the Butch Lewis Act.

PBGC provides only a fraction of the benefits beneficiaries earned. Also, so many plans are imperiled that the PBGC’s insurance program itself is at risk of collapse.

If plans fail, workers and retirees will lose as much as 98 percent of their benefits. The Butch Lewis Act would ensure that they receive the money they earned, not pennies on the dollar.

Heck, a former officer with United Steelworkers (USW) Local 13-1331 in Campti, knows widows of paper workers—one with a small child—who’d be financially devastated without their late husbands’ pensions. He knows a retiree with major health problems who’d have no way of paying medical bills without his pension checks.

“He’s just worried to death about it,” said Heck, who worked at the paper mill under a handful of operators, including current owner International Paper.

Cedric McClinton, president of Local 13-1331 and a technician at the paper mill, said pensions are the main source of retirement income for many workers and retirees. If those benefits get cut, there’s no easy way to make up the difference.

“You’re either looking at working longer—and who wants to work until you’ve got one foot in the grave and the other on a banana peel—or you’re looking at making concessions after you’ve worked all that time,” McClinton said.

Workers worry about downsizing their homes, giving up travel plans and going on government assistance programs.

“We talk about these things all the time,” McClinton said. “It’s real.”

Instead of passing the Butch Lewis Act to fix the pension crisis, Senate Republicans introduced legislation that would make the problem worse.

Sens. Chuck Grassley of Iowa and Lamar Alexander of Tennessee want to increase the premiums that retirement plans pay PBGC—something that would push currently healthy plans into financial ruin and put more workers’ retirements in jeopardy. The added costs also would propel some employers into bankruptcy, costing workers their jobs.

Grassley and Alexander also want to increase taxes on pensions, taking a bigger slice of the benefits workers earned and imposing a greater burden on retirees unable to afford it.

Workers and retirees didn’t create the pension crisis. But Grassley and Alexander want them to pay for it.

“That’s mind-boggling,” fumed Travis Birchfield, who’s lobbied for the Butch Lewis Act on behalf of Evergreen Packaging workers represented by USW Local 507 in Canton, N.C. “We’ve done bailouts and tax cuts for millionaires and billionaires, and then working people can’t get a damn loan?”

Uncertainty gnaws at Birchfield’s co-workers. Some in their 60s are thinking about retirement, but hesitate because of the pension crisis.

“They’ll ask us, ‘what do you think is going to happen?’ We can’t answer those questions,” Birchfield said.

McClinton and Birchfield pounded the halls of the Capitol to share members’ stories and concerns. But Senate Republicans fail to get the message.

Pensions aren’t perks or “extras.” Workers earned these benefits, and they rely on that money being there during their golden years, just as members of Congress count on receiving taxpayer-subsidized pensions when they leave office.

Failing to pass the Butch Lewis Act means consigning 1.3 million Americans to meager retirements. Some will fall into poverty after supporting themselves all of their lives. Many already see their dreams slipping away.

These hard-working men and women deserve immediate Senate passage of a responsible bill that safeguards their futures.

“Nobody’s trying to get rich here,” Birchfield stressed. “We’re just trying to get our retirements.”

This blog was originally published by AFL-CIO on February 14, 2020. Reprinted with permission. 

About the Author: Tom Conway is international president of the United Steelworkers (USW).


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Labor Department wants to reward financial advisors at the expense of consumers

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The Labor Department would like to delay a rule that would require financial advisors to act in the best interest of their customers and their retirement accounts.

The federal court filing, made on Wednesday, said the department wants to delay implementation of the rule to July 2019. The full implementation of the rule is currently set for January 2018.

In February, President Donald Trump ordered a review of the Obama-era regulation. Financial companies and lobbyists representing them have opposed the rule. On the same day of the order, White House advisor Gary Cohn, who is a former Goldman Sachs executive, told the Wall Street Journal he thought it was a “bad rule.” Congress has introduced bills trying to kill the rule on multiple occasions.

Right now, there are two standards investors must be aware of — the fiduciary standard and suitability standard. A financial advisor operating under what is called the “suitability standard” is only required to make sure a client’s investment is suitable for the client’s finances, age, and risk tolerance at that point in time, but they don’t have a great legal obligation to monitor the investment for the client.

But under the fiduciary standard, an advisor has to keep monitoring the investment as well as the customer’s overall financial picture. Under the fiduciary standard, advisors also must disclose all of their conflicts of interest, fees, and commissions. Essentially, this makes it more difficult for advisors to push investments that will make them money but may not be in the best interest of their clients.

Retirement plans have changed a lot since the 1970s, when more private workers were enrolled in defined-benefit plans funded by their employers that promised a certain monthly benefit once they retired. Now more people have defined-contribution plans, which don’t promise a specific benefit for people when they retire, requiring them to contribute money to an account they are responsible for. Only 10 percent of workers older than 22 have a traditional pension and only 6 percent of Millennials do. Most workers have to choose how to invest these contributions and manage their own retirement savings but most Americans aren’t knowledgeable on investment decisions.

A 2016 Prudential Investments survey of more than 1,500 Americans showed 42 percent of Americans surveyed didn’t know how their assets were allocated in their portfolios, and 40 percent said they didn’t know how to prepare for retirement. Investment terms are often difficult to understand and investors may be overwhelmed by choices.

The financial industry argument against the rule is essentially that a commission system is necessary to pay for financial advice for the average investor, despite the adverse incentives it creates. Gary Burtless, an economist and senior fellow at the Brookings Institution, has disputed this argument.

“This claim does not seem terribly compelling. There are alternative ways to compensate financial advisors that do not create an obvious conflict between the interests of advisors and retirement savers,” Burtless writes.

The financial industry tried to persuade the public that investors were up in arms over the rule. The Financial Services Institute claimed that consumers sent over 100,000 letters with opinions on the rule. But Money reviewed 100 of the letters FSI claimed were from investors, and found that 64 percent came from financial advisors and people involved in financial companies.

The Trump administration would have to jump through numerous hoops to reverse the progress made on the rule, however, just as Obama officials did when they first wanted to advance the rule. The final rules were issued last year, but first the department took thousands of public comments, held four days of hearings, and 100 stakeholder meetings. The administration would have to field all of these comments and go through this process again to justify whatever changes it would make. It took about six years for the Obama administration to advance the fiduciary rule.

This article was originally published at ThinkProgess on August 10, 2017. Reprinted with permission.

About the Author: Casey Quinlan is a policy reporter at ThinkProgress. She covers economic policy and civil rights issues. Her work has been published in The Establishment, The Atlantic, The Crime Report, and City Limits.


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