Legislative Hearing on the Social Security 2100 Act

Ways and Means, Legislative Hearing on the Social Security 2100 Act, July 25, 2019

Like our FY2013 Budget Submission, we will offer our comments based on small to large ball games, adding no ball as well. 

The no ball solution is to believe the authors of Social Security: The Phony Crisis from the Economic Policy Institute. They point out that if we look at the Trustee likely estimates rather than the conservative estimates they are required to submit, there is no need to change the law at all and that the proposal to do so was mostly a sales pitch for personal retirement accounts. This is closer to reality than we need to admit, although it does nothing for the low benefit received by many beneficiaries. 

The small ball solution is the incremental approach in the Act. It is what most analysts regard as the easiest to pass. It adjusts benefits, the retirement age, the inflation rate used and tax levels. It is perfectly reasonable and will foreclose the need for more basic reform as part of a larger tax reform package, such as the one we offer, the latest form of which is outlined in Attachment One as part of our Large Ball solution. 

The medium ball solution is to increase the minimum wage to $15 per hour – or by the time it is fully implemented (and it should be more quickly than proposed) $20. This will not affect employment for most people, as their individual productivity is almost certainly more per hour than the new wage – only monopsonist profits will decrease. Since these profits are essentially economic rent and therefore, market dysfunction, there is no need to subsidize employers in any way.  

To increase benefits, simply consider the higher rates as wage inflation and readjust all prior work experience by this inflation. Combined with some of the tax rate adjustments in the proposed Act, raising the minimum wage will increase future revenues enough to pay for higher benefits. Shortfalls could also be made up by revaluing the Social Security trust fund as well, committing more future income surtaxes and Asset Value Added Taxes (as described in Attachment One).  

The large ball solution, which should include the medium ball solution, is to lower the OASI tax ceiling so as to lower benefits without bend points, move Survivors Insurance for non-retirees, Health/Affordable Care Act payroll taxes and Disability Insurance entirely to a Subtraction VAT or Invoice VAT as described in Attachment One. A floor is also added so that EITC payments are no longer necessary. The S-VAT will include much higher Child Tax Credits, to be distributed with pay rather than at the end of the year, and the higher minimum wage will end the need to subsidize low wage employers at the public trough.  

The S-VAT is used if personal accounts are included – not to shift Social Security funds to prop up Wall Street but to foster employee-ownership with its significant benefits in both productivity and control over the workplace, as well as cooperative consumption. The I-VAT will fund current retirees, making such taxes border adjustable, while the S-VAT funds the new accounts, if this option is taken by workers and employers (who in time will be the same) or will continue to fund normal benefits. 

The issues having to do with the benefits of employee ownership and the funding of personal accounts are described in detail from prior comments in Attachment Two.  

For employees who do not possess adequate skills to be productive at the new wage, paid training shall be provided (funded through the S-VAT) through either government or employer programs (the latter as a credit to the tax). Between this training and the higher CTC, both Temporary Assistance to Needy Families and Food Stamps can be abolished. Health benefits would be provided to trainees and employees through the S-VAT as well through the health plan of the provider, which may be Medicare for All or a Single-Payer Catastrophic Plan with an additional Public Option. 

The most important points are that, rather than raising income caps on payroll taxes, all value added for an employer is taxed, both labor and profit and, because there is no way to separate out individual income contributions to the tax, each employee will be credited the same amount – which allows for higher benefits without bend points. Such taxes also have no ceilings, so the S-VAT rate can be lower than both current law and the proposed legislation. 

Finally, a word on the Section 204, the Social Security Trust Fund. This is simply window dressing. The reality is that any trust fund balances must still be loaned to the Treasury and reimbursed with general income tax revenues or additional borrowing (which, given our current debt crisis would not be advisable, see Appendix Three). 

In our first submission to Congress in May of 2010, we addressed Trust Fund reimbursement issues. They are particularly applicable given the proposed funding increases in the subject legislation (which, if passed, would continue to have workers subsidize lower income tax rates for the few). They remain especially true today. 

When Social Security was saved in the early 1980s, payroll taxes were increased to build up a Trust Fund for the retirement of the Baby Boom generation. The building of this allowed the government to use these revenues to finance current operations, allowing the President and his allies in Congress to honor their commitment to preserving the last increment of his signature tax cut.  This trust fund is now coming due, so it is entirely appropriate to rely on increased income tax revenue to redeem them. It would be entirely inappropriate to renege on these promises by further extending the retirement age, cutting promised Medicare benefits or by enacting an across the board increase to the OASI payroll tax as a way to subsidize current spending or tax cuts. 

Attachment One -Tax Reform, Center for Fiscal Equity, May 22, 2019 

Attachment Two – A. Employee-Ownership, March 7, 2019 

B. From Hearing on the 2016 Social Security Trustees Report 

Attachment Three - Debt, The Future is Calling: It Wants a Refund, 2019 

The Costs of Climate Change: From Coasts to Heartland, Health to Security

House Budget, The Costs of Climate Change: From Coasts to Heartland, Health to Security, July 24, 2019

We will repeat some of our material from June regarding flood insurance, however there is still much to be said.

On warming in general, there is no doubt that it is man-made. While there was a warm period around the first millennium, we came to it gradually. Industrialization may have ended what is called the Little Ice Age, but that warming is sudden and has dire consequences. We do not know that it will stop the way it did in the Middle Ages, indeed, it is not likely to, which makes these hearings vital.

Starting with the coasts, there will be sea level rise. Indeed, the flooding shown in Vice President Gore’s latest film shows how bad it is getting. The wealthy don’t seem to care, because they have flood insurance. From last month: The most basic step to at least get wealthier taxpayers on board (including the upper-middle class) is to cap flood insurance benefits to a level where beach houses properties  can no longer be insured. Even that small step could never be enacted. Too many donors have beach houses.

The heartland is currently more likely to experience draught. While no-till farming can help, soil conservation programs are constantly facing the chopping block, making these problems worse. Farming is by nature, not mobile for family farmers, although corporations can relocate more easily to wetter and colder climates, while migrant workers are, by nature, mobile – although this opens a different can of worms which we addressed recently to this Committee.

It may be that agriculture must become an indoor venture, adding a new meaning to factory farming. Advances in stem cell research may even lead to an end to animal husbandry entirely. Beef cells have been grown, with mixed results, although adding cloned fat, sinew, blood and bone may give us a decent hamburger yet. 3D printing may even give us steak, ribs and the rest. A mission to Mars may accelerate research here, especially if colonization is planned. As the former Director of Colony Planning for 1000 Planets, I assure you that this kind of innovation is possible, including smaller scale systems for household food production.

The real obstacles to both Mars and home farms is financial. Mars can be handled by moving NASA appropriation to the DoD line items, as we mentioned in our comments earlier this year to the Committee in the Defense budget.

At the household level, the cost of such systems is out of reach for most families in capitalism. The interest costs alone are prohibitive and the concentration of income, especially profit, at the top of the system destroy the chance of economies of scale at the household level.

A shift to employee cooperative ownership changes that. Profit becomes retirement saving and income for the many and finance is replaced by debt in terms of standard labor hours, with no profit center for interest. Indeed, the same cooperative can produce external sales and internal consumption of most goods, including government services. Attachments One and Two explain the tax structures to get there and further explain how such ownership can work, including how it can be quickly expanded through tax policy.

Industrial and environmental food production will end the abuse of the planet caused by what we call modern agriculture. Without these changes, Food, Inc. will lead to pandemics caused by resistant bacteria. With them, farmland can be replaced with grasslands and forests so that the planet can breathe again.

Cooperative ownership will also allow for improved transportation, from electric cars with central control through a grass covered roof deck. Alternative from community solar and win to eventual Helium3 fusion will end carbon emissions. Indeed, it may even take us to cooling if we go too far. I am willing to risk it.

Health needs agreed urgent for the poor who receive substandard health care, have obesity from carbohydrate rich diets caused by low SNAP allocations and substandard housing. Bad housing can mean no air conditioning while poverty makes energy consumption unaffordable in a warmer environment. People will die from overheating and asthma. I almost did in rural Ohio as a teen with asthma, no health care and no central air. Many others have not survived and the carnage continues and accelerates.

In the current economy, one must be at the 90th percentile to stay even with inflation. Capitalism does not raise all boats and leaves the working class in constant fear of slipping into poverty. Instilling that gear is, sadly, more a feature than a flaw.

Cooperation internally will lead to cooperation and ownership internationally, with the systems explained above going global. This will lead to enough global community to shift resources from defense to science, including habitat improvement, both in terms of products and manufacturing methods. A wider economy also leads to better education and the discovery of more natural genius now stifled by poverty.

Not cooperating magnifies the health problems experienced here. Poorer population and those in the Pacific, from China to Indonesia and Australia may be subject to coastal inundation as well as less fresh water. Some futurists predict that in the future, wars will be about fresh water. Less warming and better closed system environments end these dangers.

As sea levels rise, coastal inhabitants, both here and abroad, become the new refugees. Imagine three billion people needing to migrate, sometimes expanding into other nations. Think of China relocating to the west and the potential pressure on the Russian border. Destabilize India, Russia, China and Indonesia and the entire planet is in crisis. One that we cannot avoid unless we change now.

It seems that these problems are as depressing as those of migration as detailed previously. Indeed, migration and inequality issues as experienced at our southern border will become global.

Have a nice day.

If we do not act, it will become progressively harder for most of us to have such days. The rich will try to manage, but systemic global inequality at current levels is impossible to maintain much longer. Consumerism will no longer hold off more drastic redistribution. The Earth simply will not let us.

Attachment One – Tax Reform – May 22, 2019
Attachment Two – A. Employee-Ownership, March 7, 2019, B. From Hearing on the 2016 Social Security Trustees Report

Promoting Elder Justice: A Call for Reform

Senate Finance, Promoting Elder Justice: A Call for Reform, July 23, 2019

This testimony is largely a restatement of our comments from the March 6th hearing, Not Forgotten: Protecting Americans Abuse and Neglect in Nursing Homes. We welcome any legislation on this topic, although we will take this opportunity to remind the committee of our proposals. 

Our asset value added tax and income surtax, which will fund withdrawals from the Medicare Trust Fund, which should be phased out when Baby Boomers have all retired. 

Senate Finance, Not Forgotten: Protecting Americans from Abuse and Neglect in Nursing Homes, March 6, 2019

We will omit the restatement of our usual four-part tax reform proposal, but will mention that we propose that all Medicare, Medicaid, Affordable Care Act and Health Insurance Exclusion funding will be through our proposed Net Business Receipts/Subtraction Value Added Tax (NBRT or SVAT).

Our income and inheritance surtax (which taxes cash disbursements from estates and sale of estate assets as normal income), will fund withdrawals from the Medicare Trust Fund, which should be phased out when Baby Boomers have all retired.

Care for the sick and elderly was provided by families prior to the establishment of Social Security. Extended families provided shelter, income and health care because they had to. Allowing seniors to live independently freed the nuclear family to move without taking everyone with them. This led to a crisis in health coverage for those seniors left behind.

The logic of social insurance led to both Social Security, Medicare and Medicaid. This provided care for everyone regardless of accidents of birth or death. Without it, families with no surviving parents or grandparents would pay nothing, where only children might have to pay for both parents and their in-laws. This inequality still happens with housing and it strains many marriages.

Nursing home care is currently provided outside of Medicaid for the wealthy who can self-finance (although this does not necessarily guarantee quality if children or conservators get greedy), by spending down assets or through Medicaid once the assets are gone. Catastrophic insurance can be used as an alternative to spending down assets, although this is usually on available to wealthier individuals.

For most of us, nursing home care can be provided by state facilities, for profit facilities and religious (mainly Catholic) health systems.

Public facilities are being overcome by privatization efforts and often are dependent on local budgets. They are a big ticket item that seems easier to cut, although this is often penny wise and pound foolish, resulting in bad care and spurring privatization.

Private facilities can be good or bad, depending upon rates charged and the quality of the staff. Sometimes one does not imply the other and Medicaid limits may lead to cutting corners, especially in staffing. Often, it takes a great deal of oversight by families to provide decent care, although they may just be witnesses to profit driven care which abuses their loved ones rather than being able to correct it.

Religious care is better because it usually lacks a profit motive and can, along with Medicaid funding, provide better care, although this may also lead to using members of the order who are not as well trained as professional staff. This meets the needs of many seniors, especially in rural states. Indeed, religious care holds a monopoly in some areas are for profit facilities close. Sadly, some systems in urban areas have the same bias to highly paid CEOs and lower paid staff.

In all systems, the need to save can lead to attempts to bust unions or to negotiate for substandard nursing wages or use of lower-skilled staff. Governmental oversight helps matters, but budget cuts can  leave such units understaffed with unreasonable caseloads. The choice between care for patients and oversight is a continual balancing act for CMMS and states.

Medicare for All would provide an ever growing pool of beneficiaries with Medicare benefits at Medicaid prices, with the difference being paid by either a payroll tax (employee and/or employer) or with an NBRT/SVAT, which would tax both labor and profit, as above. This is a change in funding, not a guarantee of quality. Cooperative health care, however, can provide better care for less money.

In the long run, employers, especially ESOPs and cooperatives could replace health care services for both employees, the indigent and retirees and opt out of Medicare for All and receive an offset for NBRT/SVAT levies. This would allow them to hire their own doctors and arrange for hospital and specialist care with an incentive to cut cost and the ability to do so.

Expanding the number of employee-owned companies and cooperatives could be established with personal retirement accounts. Accounts holding index funds for Wall Street to play with will not help. Accounts should instead hold voting and preferred stock in the employer and an insurance fund holding the stocks of all such firms.

NBRT/SVAT collections, which tax both labor and profit, will be set high enough to fund employee-ownership and payment of current beneficiaries.. All employees would be credited with the same monthly contribution, regardless of wage.  The employer contribution would be ended for health care at all levels.

ESOP loans and distribution of a portion of the Social Security Trust Fund could also speed the adoption of such accounts. Our Income and Inheritance Surtax (where cash from estates and the sale of estate assets are normal income) would fund reimbursements of the Trust Fund.