J.C. Moore Online

Current events from a science perspective.

Election season is coming up, and many of our representatives are, or will be, holding town hall meetings. Congressman John Sullivan (R-OK) held  one of his town hall meetings in Sand Springs on November 7, 2011. He told us that things have been crazy lately in Washington, and he illustrated that by talking about the budget.

 Budget: A Supercommittee has been formed with the goal of reducing the deficit by $1.2 trillion. Congressman Sullivan said he did not think that was enough and he supports a balanced budget amendment, with the goal of cutting $4 trillion from the budget. He said that we would have to cut entitlement programs such as Social Security, Medicare, Medicaid, and a list of other programs that mostly help the poor and the middle class.  He said he supports raising the age or cutting the benefits for Social Security, but that those over 55 should not worry, as the proposed changes would only affect those younger than 55.

 A member of the audience commented that he did not think that was fair, as he was just under 55. When the Congressman was asked if he would consider raising revenue rather than making such deep cuts in spending, he said he could not support raising taxes. That is not surprising as he and 276 Legislators have signed Grover Norquist’s anti-tax pledge, making it almost impossible for Congress to raise taxes. Any reasonable effort to balance the budget will require tax increases as well as spending cuts. Congress is trying to fight the budget battle with one hand tied behind its back.

 Congressman Sullivan also criticized the budget submitted by the President, saying that no one would vote for it and even Harry Reid voted against it. A member of the audience pointed out that Harry Reid changed his vote for procedural reasons and asked what the Senate’s vote was. The congressman replied he did not know. The records show that the President’s budget passed the Senate by a vote of 51 to 47, but not enough to overcome a filibuster. Harry Reid changed his vote as a procedural move so that it might be brought up again later.

 Banking reform: Congressman Sullivan said he could not support unneeded regulations and that the Dodd Frank law should be repealed because “it hurts small banks”. That is surprising, as the Dodd Frank bill was applauded by the Independent Community Bankers of America who said it would “level the regulatory and competitive playing field for community banks.”

Energy: The Congressman said he has introduced legislation encouraging the development of natural gas as a fuel. He pointed out that natural gas provides about three times as much energy and costs much less than gasoline. Natural gas is plentiful in Oklahoma and developing the infrastructure to use it as a fuel would help Oklahoma’s economy and reduce our dependence on foreign oil. Using natural gas would also significantly decrease our carbon emissions – but the Congressman did not mention that as he does not accept the scientific research on climate change.

 EPA: Congressman Sullivan was quite critical of the EPA and stated he has introduced legislation that would require the EPA to do a cost-benefit analysis for every rule it makes. His legislation would create a huge amount of paperwork for the EPA and would make its job impossible to do, which seems to be his goal. Perhaps Congressman Sullivan could help by including a value for human life in his bill, as the EPA says slashing toxic emissions would prevent many premature deaths. The American Lung Association  estimates that the EPA’s proposed  guidelines could prevent 38,000 heart attacks and premature deaths, 1.5 million cases of acute bronchitis and aggravated asthma, and 2.7 million days of missed work or school. The public agrees that the EPA should be setting standards to protect our health, not Congress. A recent poll found that more than two-thirds of registered voters supported EPA setting strong air pollution standards.

 Jobs: The Congressman spent considerable time criticizing the job creation efforts and the economic policies of the President, particularly the stimulus program. When he declared that the government could not create jobs, someone the audience asked him about the CCC and the WPA, which created jobs during the Great Depression and provided improvements in the infrastructure, such as creating the REA. The Congressman answered with a long criticism of the stimulus package, which he finished by claiming that the stimulus package had not created one job.

 A school administrator in the audience said that there were a number of jobs saved in education by the stimulus money and that the cuts to the school budget would’ve been much worse without it. Interestingly, the records show that District 1 in Oklahoma, Congressman Sullivan’s district, received $463 million in stimulus money which directly created 280 jobs. That did not include jobs indirectly created or jobs that were saved, such as the teaching jobs.

 Services: When asked about cuts to mental health services, the Congressman rather surprised us all by saying that one fourth of all Oklahomans have some form of mental illness. The Congressman said he supports mental health programs, efforts to help soldiers with PTSD, and programs that help those with substance abuse. However, it is rather difficult to see where money would come from to support those programs if the budget were cut by $4 trillion.

 2012: The 1^st District covers the population centers in the northeast part of Oklahoma, mostly Tulsa and north to Bartlesville. We certainly appreciate Congressman Sullivan taking time to share his comments with us and answer our questions. Some of the things the Congressman said were of concern to the author, as you can discern from his comments. As the 2012 elections near, Oklahoma voters need to weigh carefully what Congressman Sullivan says and how he votes in order to decide if we should return him to Washington.

Co-authorship credit: Barbara Moore

(c) 2011 J.C. Moore

Congressman Frank Lucas (R – OK) held a town hall meeting at the Bristow Library on April 18, 2011. As in his town hall meeting in Hominy , he reported that: the war in Iraq is winding down, but that Afghanistan still continues to be a quagmire without a definite ending in sight.  There is concern about our role in Libya, and in spite of the criticism, the President does have power to take limited military action without a formal declaration of war. He reported that the Legislature has become even more divided and partisan over the last year, and it is becoming very difficult to carry out the business of government.

When asked whether Social Security would go broke, Congressman Lucas explained that, over the years, the surplus collected has been put in U.S. Treasury bonds. Though the government has borrowed against the surplus, it must be repaid and will be available to make future payments.  After the trust fund is exhausted, Social Security will pay benefits as money is collected, and benefits may be reduced by 20 to 30% unless the Social Security system is changed to extend the trust fund.

Comment: A little research after the meeting showed that the trust fund is expected to be solvent until about 2034 but that a few tweaks, such as reducing benefits, raising the retirement age, or raising the cap on FICA contributions, will make this trust fund solvent to about 2080. Americans overwhelmingly support raising the cap on FICA contributions over the other options.

One gentleman was upset about the cost of his health insurance and of Medicare. He noted that the creation of the Medicare Advantage Plans had added about 14% to the cost of the program. He described a recent surgery in some detail, the point being that Medicare was charged $3000 for one small piece of tubing because Congress had voted that Medicare could not negotiate prices with pharmaceutical companies. His point was that Congressman Lucas had voted for both the Advantage plan and for the ban on negotiating prices.

One constituent complemented Congressman Lucas on the Tulsa World article where he defended raising the debt limit so that the U.S. would not have its credit rating lowered, which would be disastrous for the country. However, he also pointed out that Congressman Lucas had voted for extending the tax cuts for wealthy citizens, costing $800 billion, and also for the $610 billion in spending cuts spending cuts, which may cost 500,000 American jobs. The congressman commented that the mood in Congress was to cut taxes and reduce spending. There were several questions about  agriculture, such as whether there would be a carbon tax, whether the EPA would limit dust, and about the animal ID program. Congressman Lucas, who will be the chairman of the Farm Committee next year, said those are all things that the committee would likely examine.

Comment: Climate scientists have pointed out that there is increasing evidence that climate change is causing increasing incidences of extreme weather, such as droughts and storms, which may put our farms production and food supply at risk.  Congress has recently turned down a motion that the Agriculture Department examine the risk to our food supply and Congressman Lucas voted with the nays.

The discussion was lively and it was good that we could ask questions and express our concerns to Congressman Lucas. The third district covers a large area, the Western two thirds of the state, and we certainly appreciate Congressman Lucas taking time to visit with us. Some of his answers were of concern to the author, as you can discern from his comments, and further information will be provided about Congressman Lucas’s views as the 2012 elections near.

Election season is coming up, and many of our representatives are, or will be, holding town hall meetings. It is important that voters attend as many of these as possible, not only to express their opinions, but to decide if they wish to return the representative to Washington in the elections in 2012.   

Congressman Frank Lucas (R – OK) held one of his town hall meetings at the Hominy City Hall on April 19, 2011. He reported that the war in Iraq is winding down, but that Afghanistan continues to be a quagmire without a definite ending in sight.  There is concern about our role in Libya, but the President does have power to take limited military action without a formal declaration of war. He reported that the Legislature has become even more divided and partisan over the last year, and it is becoming very difficult to carry out the business of government. This year, Congress is mostly going to be about the budget, and little else is likely to get done.

A scientist in the audience explained that Dr. Patrick Michaels, who testified before Congress that there was no consensus among scientist on climate change, had been exposed for taking large payments from power companies to lobby for them. There is a consensus among scientists.  A recent survey showed that 97% of climate scientists active in research agree that global warming is happening and that greenhouse gas emissions are the cause. Every major scientific organization in the world has adopted a statement in agreement. Research has also shown that global warming is the cause of some of our extreme weather events, and that higher CO2 levels and warmer temperatures may damage crop yields. After that long explanation, the question was whether the Congressman, who will chair the Agriculture Committee next year, would be willing to hold hearings to determine if global warming might put our food supply at risk. The Congressman replied he could not make a commitment as yet.  

Note:  Later, on June 16^th, Rep. Lucas voted to prevent the Department of Agriculture from planning for future extreme weather and crop loss that scientists say will be the result of climate change.  Apparently Congressman Lucas does not believe the scientific evidence and does not want the Department of Agriculture examining the issue, though it poses a danger to our food supply.

When asked about Social Security, Congressman Lucas explained that, over the years, the surplus collected has been put in a trust fund in U.S. Treasury bonds. Though the government has borrowed against the surplus, it must be repaid and will be available to make future payments.  After the trust fund is exhausted, Social Security will pay benefits as money is collected, and benefits may be reduced by about 30% unless the system is tweaked by reducing benefits or raising the retirement age. A little research after the meeting showed that the trust fund is expected to be solvent until about 2034 but that the most popular tweak, raising the cap on FICA contributions, will make this trust fund solvent to about 2080.

One lady explained that we had just spent billions of dollars developing Head Start centers and now the money needed to operate them may be cut from the budget. Head Start allows many low income people with children to work as it reduces some of the expense of child care. What sense does it make to extend the tax cuts for wealthy citizens and then cut programs that benefit disadvantaged citizens and may even cost jobs? The Congressman commented that the mood in Congress was to cut taxes and reduce spending.

Another lady asked about the wild horses on ranches west of town. Congressman Lucas explained it was a program, apparently one he questions, that moved the horses to save them from being euthanized. The horses are a non-native species that damage range-land and the program costs $5 billion dollars. The lady from Head Start asked why we could spend $5 billion on horses, but not $5 billion on the Head Start program benefiting children.  

One constituent complemented Congressman Lucas on the Tulsa World article where he defended raising the debt limit so that the U.S. would not have its credit rating lowered, which would be disastrous for the country. He asked about the monetary policy which benefited the stock market, but hurt many retired people by keeping interest rates low. The Congressman pointed out that the policy was set by the Federal Reserve and it benefits those who borrow and hurts those who save. He suggested the policy might change, and suggested it might be wise to be sure any loans you have were at a fixed rate.

When asked about a flat tax, the Congressman explained he favored a “fair tax”, a national sales tax on all purchases. The states would collect the tax and it would end income tax. Putting the IRS out of business sounds good except that a little research shows that the “fair tax” would have to be about 30% on all goods and services. It would shift more of the tax burden to middle and lower income citizens and would hurt seniors, who have paid income tax all their lives and would now be taxed more on their purchases. 

When asked about the wisdom of subsidizing ethanol from corn, the Congressman replied that the subsidy program benefits corn producing states but hurts everyone else. It costs tax money and it raises the cost of animal feed and food. He commented that the corn producing states have a lot of political clout, and the policy might be hard to change. 

The discussion was lively and it was good that voters could ask questions and express our concerns to Congressman Lucas. The third district covers a large area, the Western two thirds of the state, and it should be appreciated that he conducted town hall meetings at many towns in his district. Elections are coming up and Oklahoma voters need to weigh carefully what he says, and how he votes, in order to decide if we should return Congressman Lucas to Washington.

Privatization. It is usually assumed that private enterprise will find efficient ways to do things and lower costs to the benefit of consumers and taxpayers.  That assumption is probably true when it comes to providing innovation and developing resources. The recent failure of some of our largest private companies have caused an  economic downturn which, along with tax cuts, have left the federal, state, and local governments with financial problems. Privatizing public services and resources is being considered as a way to reduce costs and raise money.

City Services: As a way to save money, many small towns and cities are considering turning their basic services such as water, trash and sewer over to private companies. This has not always worked out well.  As an example, Coatesville, Penn decided to sell off its drinking water and wastewater infrastructure in 2001 and invest the money in a trust fund to be used for city services. But privatization hasn’t been the economic boon the city hoped.  The residents have seen their water and sewer rates jump 85 percent since American Water, the largest water corporation in the country, took the helm. Last year the company proposed a 229 % rate hike for sewer services, forcing the city to cobble together money for legal fees to fight back. (1) Privatization doesn’t always promote efficiency. The trash in Wichita, Kansas is collected by several private trash companies, and customers in any part of town can contract with any of the companies. The result is that several large trash trucks navigate most streets of Wichita each week, resulting in increased noise, wasted energy, more exhaust fumes, and damage to the streets, which of course, the city repairs.  Even though residents of Wichita pay 30 to 50% more than residents of comparable cities with public trash services, a measure to franchise the trash system was defeated amid criticisms of “government control” and “loss of freedom to choose”.

CompSource. The state of Oklahoma gave its wealthiest citizen a nice tax cut in 2004, which, with the economic downturn,  has left the state government strapped for cash. One proposal to raise money was to sell CompSource Oklahoma, which has been providing workman’s comp to state workers for 76 years – apparently successfully. State Rep. Dan Sullivan pushed for privatization of CompSource because: “It’s a fundamental issue of what is the proper function of government . Is it to compete with private enterprise? We think not.”  He also claimed the increased competition would lower rates. That sounds good, except an expert in comp insurance pointed out it would cost more to insure state employees and 40% -70% more to insure workers in high risk categories, such as volunteer firefighters, oil field workers, and farm workers. The plan fell through, for the time being, when it was discovered that the state might not get the proceeds from the sale and that the politicians pushing the matter had ties to the insurance companies who would profit from the sale. (2)

Medicare and Social Security. Privatization of Government services for ideological reasons often fails as a practical way to lower costs. While privatizing Medicare was ostensibly done to reduce costs, the Medicare Advantage Plans created have increased the cost to the government by 14% and decreased the long term stability of the program. Also, to reduce costs, the plans created the infamous “donut hole“ that costs seniors an additional $25 billion annually. (3) The cost created by privatizing is not a mystery, as the VA and Medicare  have a 3-5% overhead while private insurance companies have an overhead of 15% or more. That is something that should be considered when thinking of health care reform.

Social Security is one of the most effective and popular government programs. It provides a safety net so that no matter how fortunate or unfortunate people are in their choices and investments, they will not be destitute when they retire.  The recent attempts to privatize SS would have been a boon to the financial services industry and money poured in for promotion and campaign donations. After the recent economic downturn, we should all be grateful that the plans to privatize Social Security failed. Some private pension accounts lost as much as 40%, while Social Security paid reliably. The idea that SS is going broke, part of the PR created to try to justify privatizing SS, still lingers on. (4)

Public Service: Our public servants, teachers, firefighters, police, military personnel, and the myriad employees that run our country, actually serve us well. Their pay is usually determined by their responsibilities, experience, and education, as in the GS ratings of federal employees that determine their compensation. Public servants seldom receive bonuses and sometimes little appreciation for doing their job well. The government does not make a profit so their services can be provided at lower cost. And, while we have little say about what goes on in the boardroom, our elected representatives are in charge of public employees.  While it may not be the role of government to compete with private industry, it is certainly not the role of government to make policies that favor private companies over the needs of our citizens. Certainly, privatization for purely ideological reasons is a bad idea that should not override practical considerations.

(1) http://www.alternet.org/story/149725/vision:_how_small,_mostly_conservative_towns_have_found_the_trick_to_defeating_corporations

(2) http://jcmooreonline.com/2009/10/01/will-privatizing-compsource-lower-costs/

(3) http://www.cbpp.org/cms/index.cfm?fa=view&id=2917

(4) http://jcmooreonline.com/2010/08/04/is-social-security-going-broke/

(C) 2011  J.C. Moore

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Is Social Security Going Broke? No. According to the actuaries at the Social Security Administration, Social Security (SS) is financially as sound as the U.S. government. The surplus in the SS trust fund today stands at $2.4 trillion and is entirely invested in U.S. Treasury Bonds, which earn interest. The Treasury bonds are backed by the full faith of the US government and SS would only go broke if the U.S. government went bankrupt.

There was a hike in the Social Security payroll tax (FICA)in the 1980s so that baby boomers would pay a bigger share of their own retirement. That hike created a surplus which went into the SS trust fund. The trust fund is projected to grow and reach its peak in 2027 at nearly $6 trillion. From that and collections, there will be sufficient money in SS to pay 100 percent of benefits until 2041.

A few small changes now could extend the trust fund far into the future. A poll conducted for USA Today by Gallup shows that 67% of Americans would support lifting the cap on FICA contributions. That change alone would extend the SS trust fund until 2083.   More, and references  Here.

Is Social Security Going Broke? No. According to the actuaries at the Social Security Administration, the bottom line is that Social Security (SS) is financially as sound as the U.S. government. (1) The surplus in the SS trust fund today stands at  $2.4 trillion and is entirely invested in Treasury bonds which earn interest. The trust fund will peak in 2027 at nearly $6 trillion and there will be sufficient money in SS to pay 100 percent of benefits until 2041. A few small changes now could extend the trust fund until 2083. The Treasury bonds are backed by the full faith of the US government and SS would only go broke if the U.S. government went bankrupt.

Why Do Many Believe Social Security Is Going Broke? It is because many politicians and financial advisers are telling them so. The claim that SS was going broke was part of the PR created to try to justify privatizing SS. Privatization would have been a boon to the financial services industry and money poured in for promotion and campaign donations. Privatization eventually failed, but the idea that SS was going broke has lived on. The theme that “SS is going broke” has now become a talking point used by unscrupulous politicians to blame political opponents, inspire fear, convince voters that the government isn’t working, or to justify changes to the system to benefit friends and donors. The theme is also a useful marketing tool for retirement funds who wish to convince potential customers that no matter how much money they have saved, they will eventually run out – unless they invest with them. Of course, a solvent SS ruins that argument.

Won’t the Baby Boomers Use SS Up? No. There was a hike in the Social Security payroll tax in the 1980s so that baby boomers would pay a bigger share of their own retirement. That hike created a surplus to handle the crunch of baby-boomer retirements and the surplus went into the SS trust fund. The trust fund is projected to grow steadily until 2027 and after that, it is estimated that SS funds will be sufficient to pay 100 percent of benefits until 2041. After that, payroll tax revenue alone will be sufficient to meet 78 percent of the program’s obligations – even if no changes are made.

Should Changes Be Made? The SS trust fund could be extended by either increasing the retirement age, reducing  benefits, increasing the payroll tax, or raising the cap on earnings.(2) The latter might be the fairest and most popular. Earnings above $106,000 a year are now exempt from SS taxes. As the inequality in earnings between top and average wage earners has grown over the years, the cap has exempted a larger share of top wages from taxes – and thereby reduced SS collections. An analysis by the Congressional Budget Office shows that if the cap were lifted, the Social Security trust fund could be extended through 2083. A poll conducted for USA Today by Gallup shows that 67% of Americans would support lifting the cap. (3)

Social Security was created by the Social Security Act of 1935 in the midst of the Great Depression to provide for retired workers who had lost their life savings. It did that, and since has become one of the most relied on government programs. Many economists think future retirees may be even more dependent on Social Security because of the disappearance of traditional pensions. Social Security provides a safety net so that no matter how fortunate or unfortunate Americans are in their lives and choices, they will not be destitute when they retire. A few thoughtful changes now will insure that SS will be around when those who are now babies reach retirement age.

1) http://www.ohio.com/news/american_dream/27325314.html

2) http://www.cbo.gov/ftpdocs/115xx/doc11580/07-01-SSOptions_forWeb.pdf

3) http://www.dailykos.com/storyonly/2010/8/2/889034/-Proof-that-the-Social-Security-problem-is-easy-to-fix

The author once attended a retirement seminar sponsored by AG Edwards. The speaker tried to convince the participants that no matter how much money they had saved, they would eventually run out if they lived long enough. That is unless, of course, they let AG Edwards invest their savings. The speaker did not mention Social Security, and fortunately for those who put their money in stocks, Social Security was there as a safety net.

Social Security was created by the Social Security Act of 1935 in the midst of the Great Depression to provide for retired workers who had lost their life savings. Congresses right to create Social Security was established on the general welfare provisions of the Constitution and by  Article 1, Section 8 which establishes Congresses power to collect taxes and provide for the general welfare of the United States.  It says, “The Congress shall have power to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defense and General Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States.”

Several challenges to the Social Security Act of 1935 were decided in its favor by the Supreme Court. The most notable of these was U.S. v. Butler (1936) that held that the Spending Power Clause of the Constitution gave Congress broad power to tax and spend for what it determined to be the general welfare of the country. Because Congress has discretion to determine what is the general welfare, no court since Butler has ever invalidated a federal spending program on the ground that the general welfare of the country was not being promoted.¹ Also, in Helvering v. Davis ( 1937), the Supreme Court defended the constitutionality of the Social Security Act of 1935 requiring only that the welfare spending be for the common benefit as distinguished from some mere local purpose. It affirmed a District Court decree that held that the tax upon employees was constitutional. ²

Social Security is certainly a government manage retirement program but it has not put private retirement funds such as AG Edwards out of business. Social Security provides a safety net so that no matter how fortunate or unfortunate you are in your choices and investments, you will never be destitute. Congress has the authority to create a government managed health care safety net for Americans. It would likely not put private insurers out of business but it would certainly provide a safety net for health care.

We are now in the midst of an economic downturn that has cost millions of Americans their jobs and their health insurance. What better time to enact health care reform.

(1) http://qanda.encyclopedia.com/question/butler-decision-428463.html

(2) http://en.wikipedia.org/wiki/Helvering_v._Davis