Plenty of news outlets today reported the newly announced increase in Social Security retirement benefits. Starting in January, the typical benefit check will increase $24, from $1055 per month to $1079. That’s a 2.3% increase.

Somewhat less publicized is the other Social Security announcement of the day: the cap on Social Security taxes will rise next year from $97,500 to $102,000. That’s a 4.6% increase, and it’s one that will affect 12 million taxpayers.

The latter item was included in many stories, but was not prominently featured. Consider this CNN Money article. The benefit increase is in the headline. The tax increase is first mentioned in the fifteenth paragraph.

Democratic Presidential hopeful Barack Obama offered up a suggestion to solve the Social Security crisis: raise taxes.

No, it’s not a hike in the Social Security tax rate that he’s referring to; it’s to do away with the income cap, which is currently at $97,500/year. He refers to this as a “raise” in the cap, although it actually eliminates it altogether.

This change wouldn’t affect me, and it wouldn’t affect most Americans, at least not directly in their pocket. However, for those who it does affect, it represents not only a MASSIVE tax increase, but also a complete abandonment of one of Social Security’s founding principles.

From the start, SS has calculated one’s benefits based on the amount of taxes paid. Benefits are tiered, with higher-income taxpayers receiving larger benefits than lower-income taxpayers (although lower-income taxpayers receive a better return on their money).

What Obama suggested instead is to effectively do away with this principle, and to tax a certain class of people more, without giving them a larger benefit in return. He wants a cap on benefits, but not on taxes.

Or to give Obama the benefit of the doubt, perhaps he means to allow for larger benefits too. But that would mean that the people paying those higher taxes would later be entitled to receive six-figure, or even seven-figure, SS benefits. It hardly resembles a retirement supplement program at that point.

Thankfully, this isn’t a formal proposal yet, so I can save my ire for later. However, Obama does make a formal proposal that’s equally insulting to my generation, and that’s to eliminate federal income taxes for seniors up to $50,000 a year. On his Issues page, he refers to seniors’ expenses for health and energy, and to the 1993 increase in taxes on Social Security benefits.

This is bald-faced pandering and vote-buying, and special-interest politics at its most blatant. Georgia Governor Sonny Perdue made a similar proposal during the 2006 campaign, and I ripped on it then too. Every age group has its own unique expenditures. Young Americans have rising energy bills too, as well as child care costs and the ballooning cost of home purchases. Seniors may have medical bills, true, but they generally aren’t paying for dependents and their homes are more often paid for. Why should seniors, then, be singled out for a special and unique tax advantage?

Obama points to the 1993 tax increase on SS benefits (passed, incidentally, by a Democratic President AND a Democratic Congress), but if that’s his concern, he could simply undo that tax increase. Just stop taxing those SS benefits, if that’s a problem. Don’t create a separate tax exemption to compensate for a tax excess somewhere else. It’s a fairly obvious and simple solution, which only makes me wonder further why Obama doesn’t want to go down that road.

In the same September 20 debate I discussed earlier, Clinton had this to say about the program’s solvency:

“When my husband left office…the projection was that Social Security was solvent until 2055….Now after seven years of President Bush and an irresponsible Republican Congress, the life of the Social Security trust fund has been cut to 2041.”

This is what we in the political business call “a big fat lie.” And it’s one she’s tossed out at more than one debate, so it’s a safe bet we’ll hear it again from her lips.

Bill Clinton left office in January 2001. In March 2001, the Social Security Board of Trustees issued its annual report on the long-term health of the trust fund. It stated that the Social Security trust fund would become insolvent in 2038. Not 2055. The 2000 Trustees’ report only gave it until 2037.

And Clinton is certainly aware of the Trustees’ reports, because it’s the 2007 Trustees’ Report that she’s citing for the current 2041 life expectancy of the trust fund.

So it isn’t a loss of 14 years. It’s a gain of 3. Still not enough to benefit my generation, but it’s a 17-year discrepancy that completely destroys Clinton’s point, and if she keeps repeating this, also her credibility on any matters regarding Social Security.

Where, then, did Clinton pull this 2055 date from? From her husband’s rejected Social Security reform package. He proposed spending nearly 2/3 of the projected federal budget surpluses for the next 15 years on Social Security (which really amounts to little more than a backdoor OASDI tax increase), and investing one-quarter of that money in the stock market. It was projected that those two moves, together, would extend Social Security’s solvency to 2055.

Of course, this proposal never passed, and was condemned as being a masterpiece of creative bookkeeping. Yet it’s this projected date for a reform plan that was never adopted that Clinton has intentionally chosen as her grossly misleading basis of comparison.

Somebody call FactCheck.org.

The leading Democrats in the Presidential race haven’t had much to say about Social Security thus far, but according to the Washington Post campaign blog, the issue was addressed at a debate yesterday.

The WaPo blog post focuses primarily on Hillary Clinton, who seems to be increasingly backing herself into a corner on Social Security. Like Barack Obama, she has declared private accounts to be off the table in terms of reform. In addition, she has also expressly excluded the possibility of raising the retirement age or reducing benefits. She has also, with a little less clarity, stated that she won’t raise the cap on income that is subjected to the payroll tax (finally, something I agree with!).

The question this begins to raise is: what exactly does Clinton think should be done to improve Social Security’s future? A pledge to raise taxes is a sure-fire vote killer among all age groups, not merely retirees. Is she planning to borrow Bill’s plan, and again propose that surpluses be invested in the stock market? Aside from the original concerns about the federal government essentially owning a large share of the private market, this angle is rather harshly at odds with the Democrats’ demonization of stock market investment as unacceptably risky within the context of private accounts.

Or maybe she’s just putting all her stock in this notion that a federally-spurred economic boom will be the program’s salvation. Frankly, that’s not such a bad campaign pitch. It’s vague in the terms of its implementation, it avoids committing to any of the more unpopular alternatives, and it’s so non-specific that it would be hard to lay blame on her for failing to do or not do something. This is the federal version of a dad planning to balance the family budget with an as-yet-unpromised raise or Christmas bonus.

Seniors tie knot after 11-year romance

Monetary considerations won out over long-term love when a 98-year-old Illinois man popped the question to his 80-year-old fiancee…

The two “thought there was no point in getting married” Brown said until Stark wondered whether she would receive his Social Security checks after he died. Yes, he was told, if they were married.

So in other words, she married him for his money.

We’ve all seen the stories about the percentage of elderly Americans who depend mostly, or even entirely, upon their monthly Social Security checks. Usually, this statistic is presented as part of an argument that reducing the size of Social Security would hurt the elderly. Personally, I see it as a cautionary example of the relationship between economic incentives and the savings rate.

However you look at it, the number itself doesn’t tell you anything about how those people got into the position of relying so heavily on Social Security. So, in the interests of informing young Americans about the retired persons that their tax dollars are supporting, here is the first in an occasional series of profiles of those persons. And it’s a good one to start on. In an Associated Press article about the housing market in the , we’re told the story of Jose Morales:

Jose Morales, now 78, moved into a modest Victorian house in San Francisco’s working-class Mission District in 1965, shortly after emigrating from Peru. The rent was $80 a month, and he used leftover earnings to travel, buy nice clothes and eat well.

The rent is now $864 - a bargain by local standards but an unmanageable fortune for Morales. A former tennis instructor, he hurt his back last year and now relies entirely on a Social Security payment of $900 per month.

After paying the rent, he has $36 a month for expenses, including food and medications. He eats at city-sponsored senior centers, which charge $1.50 per meal, buys cut-rate produce from local bodegas and takes freebies from friends.

He never travels. He doesn’t own a television or radio. Among his few new clothes are tennis sweat shirts that pro shops sell him at a discount…

Morales knows he might live better in Peru, where relatives could help and the cost of living is a fraction of California’s. But that would end his quest for American citizenship

“I came here because the U.S. was a great country,” Morales said. “But housing has become a big injustice. … The story of my apartment is the story of my block and the story of my city and the story of all of California and the United States. You have to fight for it, and that’s what I will do _ all the way to the end.”

Based on the tenor of the rest of the article, I believe we’re supposed to feel sorry for Mr. Morales. It’s hard not to feel some sympathy for a guy getting by on $36/month for food and drugs. (Strangely, no mention is made of utilities.) His desire for citizenship is also admirable, though one wonders why he hasn’t achieved citizenship during his first 43 years in this country.

And yet the author went to the trouble of telling the reader exactly how Mr. Morales got himself in this position. He immigrated here at age 35, still early in his working life, and he must have done at least moderately well to merit a $900/month SS check. So where did his money go? Travel, nice clothes, and fine food. He lived the good life, apparently saving nothing in the process, and is now living with the consequences of his spendthrift habits.

On top of this, Mr. Morales complains that his $864/month rent for a Victorian house in one of America’s highest-priced cities is “a big injustice.” While not directly SS-related, this attitude is illuminating nonetheless. After frittering away his own money for 40+ years, yet living in a house with rents that many San Franciscans would give a limb for, he still has the chutzpah to complain that he’s getting a bum deal.

So when you get your next paycheck, glance down at the payroll tax deduction, and know that a little bit of that is going to Mr. Morales.

Rep. Rahm Emanuel (D-Ill.) has a guest editorial in today’s Wall Street Journal entitled “Supplementing Social Security.” And as this title hints, the proposals he makes don’t involve any changes to Social Security. Rather, he takes the standard Democratic line that we should “supplement” Social Security with additional federal savings programs. Instead of working toward allowing Americans to keep more of the 10% they lose to Social Security, he proposes a new program that simply allows workers to save money over and above that 10%.

Frankly, it’s difficult to come down hard on this proposal, since I’m all in favor of new, tax-deductible ways for people to save their own money. But Emanuel’s arguments leave a lot to be desired.

He writes, “Every American who works ought to have the chance to save. But today, too many don’t. An estimated 75 million working Americans — nearly half the work force — lack access to an employer-sponsored savings plan that helps put away money for retirement.” Not having an employer-sponsored plan means you don’t have a chance to save? Nonsense. I don’t even have an employer-sponsored savings plan. But I do have a Roth IRA, and anybody with a paycheck has the access to set up a Roth IRA. Or a regular IRA. Or a savings account. Or a mattress. It’s not the lack of universal employer-sponsored plans that are keeping people from saving for themselves.

The goal of making saving more universal is still a good one, and Emanuel states that we should combine the best of the proposals made by Democrats and Republicans. But as he goes on to map out his own proposal, it’s hard to see what he’s taken from the Republican side that wasn’t already embodied in Democratic pitches. It’s a rhetorical claim of bipartisanship, but it’s really just the Democratic plan with a ‘Now More Bipartisan!’ label affixed to the cover.

And as he spells out the details of his plan, it’s hard to see where Emanuel is treading new ground, because all he’s really proposing is making 401(k)s opt-out, instead of opt-in. Emanuel’s “Universal Savings Accounts” are tax-deductible on the front end, there’s a matching employer contribution, and investment options are limited. It’s the same old savings plan, just with an extra layer of federal involvement upfront.

Still, there’s something potentially positive here. In allowing for workers to opt-out of these Universal Savings Accounts if they don’t want to participate, Emanuel is acknowledging a certain level of control that people should have over their own money. Even when, in this case, mandatory participation would still mean that the funds in the accounts remained the personal property of the individual. And even though the individual contribution would only be 1% of their paycheck.

So what, then, are Rep. Emanuel’s feelings about making Social Security itself opt-out? That’s a program that costs every American over six times as much as his Universal Savings Accounts. No matter where you fall on the income spectrum, that’s a significantly higher burden. And that sixfold payout isn’t going into a savings account with your name on it; it’s going towards Old-Age Insurance. Specifically, Old-Age Insurance with benefits that aren’t guaranteed and returns that aren’t legally enforceable.

If it’s a good and right idea for me to be able to opt-out of a program that makes me save money, why shouldn’t I be able to opt-out of a program that makes me spend six times as much for the same purpose?

CNN’s American Morning spoke to a couple of politically-versed college students about the 2008 election. For the Republicans, they had Laura Elizabeth Morales of the University of Texas at San Antonio. Not only did she surprise the hosts with a strong endorsement of Ron Paul, but when asked for her #1 issue in the ‘08 campaign, she revealed herself to be a woman close to my own heart:

“My most important issue is probably going to be Social Security…My generation is pretty much going to be completely robbed of those funds that we’re putting into the government. We really need to get students to really focus on that issue and make that the forefront for the 2008 election.”

Well said, Laura. Young adult and student advocacy is an absolute necessity for reform, in order to counter the extraordinary influence of the AARP. S4, for instance (to which Ms. Morales apparently belongs), does a great job, but given the scope of the changes we need now, successful advocacy will need to evolve beyond small groups, and into something more akin to a full-blown movement.

U.S. News is reporting that the Bush administration won’t be pursuing significant Social Security reform anymore, and will instead focus on efforts that both parties can agree on.

Now from a political standpoint, this makes sense. Democrats control both houses of Congress, so nothing is going to get passed that they don’t consent to. Bush had his opportunity during four years of a Republican-controlled Congress, but all he managed to do was prove that he didn’t have what was necessary to get some real changes made. To an extent, Paulson is right that for Bush to continue pushing for private accounts would be “tilting at windmills.”

On the other hand, it’s a mighty shame to see the one big advocate of reform give up, and it’s a mightier shame to see what they plan to do instead. Helpful reform would be reform that would lessen the burden on young Americans and successive generations.

‘Bipartisan reform,’ on the other hand, means reform that will almost certainly make the program worse for young Americans and successive generations. That’s exactly what the last bipartisan reforms did, back in the early 1980s, when they jacked up the tax rate, set up a gradual increase in the benefits age, and even made benefits taxable. Sure, it prolonged the program’s solvency, but only by making it a worse deal in three separate ways.

Without someone taking a firm stance and being willing to advocate for it, that’s what bipartisan reform will reap us again: a Social Security program that costs us more and gives us less. And that’s the kind of “reform” that young America shouldn’t tolerate.

Democrats.org takes on newly-declared candidate Fred Thompson on Social Security:

Fred Thompson says that Social Security needs to be “fixed,” which sounds a lot like George Bush, and he vigorously supported Bush’s plans to privatize Social Security in the past.

They say that like it’s a bad thing.

However, the blogger goes on to raise an eyebrow to Thompson’s statement that he doesn’t “remember the details of [Bush’s] plan,” despite having supported reform in 2000. Glossed over here is the fact that Bush’s biggest push for reform, and his most publicized and remembered plan, was in 2005, not 2000. Whether there’s any fading memory here depends on which reform plan Thompson was asked about.