For more than 20 years, the Government Accountability Office has been warningthat the varioius Social Security funds would go broke in a matter of decades unless something is done to shore up the program.
Unfortunately, there are limited options when trying to address this crisis. You can employ a combination of raising the retirement age and/or increase the FICA tax. Other than that, you're rearranging chairs on the deck of the Titanic.
But President Obama – who is fully aware of the threat of insolvency – is now proposing that Social Security benefits be increased and wants the "rich" to pay for it.
The smartest guy in the room, right?
"And not only do we need to strengthen its long-term health, it's time we finally made Social Security more generous and increased its benefits so that today's retirees and future generations get the dignified retirement that they've earned," Obama said in an economic call to armsin Elkhart, Indiana. "We could start paying for it by asking the wealthiest Americans to contribute a little bit more."
The White House dismissed suggestions that Obama's statement marked any policy change.
"For many years - dating back to before he became president - President Obama has made clear that we need to strengthen Social Security," a White House official wrote in an email. "In his speech today, the president reiterated that as we ensure the program's solvency for generations to come, we should also enhance benefits so that Americans can retire with dignity."
But while Obama repeatedly called for ways to shore up the Social Security trust fund - including possibly taxing the rich - he said, as he ran for reelection in 2012, that he would not "slash benefits" or privatize the program.
However, it's unclear whether he has officially backed expanding benefits. In fact, in 2013, he endorsed a plan to change the way cost-of-living increases are measured for Social Security, to a formula known as "chained CPI," that would have slowed the growth of checks relative to inflation.
The proposal, an attempt to find compromise with Republicans, made liberals livid. They threatened to mount primary challenges against Democrats who signed on and delivered petitions with millions of signatures calling on him to drop the idea.
When the chained CPI idea disappeared from Obama's budget blueprint in 2014, progressives declared victory, and some say it has emboldened them in their more recent fight against a major Obama priority: the Trans-Pacific Partnership.
"If anyone has ever wondered what impact the grass-roots political revolution behind Bernie Sanders is having on the future of the Democratic Party, the sharp, populist progressive turn that President Obama made today on Social Security expansion should answer those questions," said Democracy for America chairman Jim Dean in a statement.
The trustees of Medicare and Social Security funds have estimated that the Disability Trust Fund will run out of money by this October. The president has proposed redirecting a small portion of the payroll tax to extend the life of the fund about 20 years. Congress has yet to act on the proposal.
As for the rest of Social Security, the GAO estimates that the program will go broke by 2034. Senator Orrin Hatch acknowledged the crisis and wants a bipartisan commission to recommend reforms.
Sen. Orrin Hatch (R-Utah.), the chairman of the Senate Finance Committee, said the administration should bring together a bipartisan coalition to propose reforms to the entitlement programs.
"Sadly, we have yet to see such an effort," Hatch said in a statement. "The President simply advocates kicking the can down the road to confront the impending disability trust fund depletion, by taking funds out of the retirement trust fund, which, itself, is headed toward depletion.
In the end, the president is proposing putting a Band-Aid on a gaping wound.
The president's idea to increase benefits at a time when insolvency is staring Social Security in the face is something akin to a man running toward a gasoline dump with a lit match. It's a pander, of course, but a very effective one. Old people vote. And many of them are unaware of the perilous state of Social Security's finances. All they hear is more money in their checks. The president and the Democrats know this and will demagogue the issue for all it's worth.
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