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AP-GfK Poll: Most Americans say they don’t believe Medicare has to be cut to balance the federal budget ditto …,


AP-GfK Poll: Medicare doesn’t have to be cut
May 23, 2011, 7:02 a.m. EDT
Associated Press

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WASHINGTON (AP) — They’re not buying it. Most Americans say they don’t believe Medicare has to be cut to balance the federal budget, and ditto for Social Security, a new poll shows.

The Associated Press-GfK poll suggests that arguments for overhauling the massive benefit programs to pare government debt have failed to sway the public. The debate is unlikely to be resolved before next year’s elections for president and Congress.

Americans worry about the future of the retirement safety net, the poll found, and 3 out of 5 say the two programs are vital to their basic financial security as they age. That helps explain why the Republican Medicare privatization plan flopped, and why President Barack Obama’s Medicare cuts to finance his health care law contributed to Democrats losing control of the House in last year’s elections.

Medicare seems to be turning into the new third rail of politics.

“I’m pretty confident Medicare will be there, because there would be a rebellion among voters,” said Nicholas Read, 67, a retired teacher who lives near Buffalo, N.Y. “Republicans only got a hint of that this year. They got burned. They touched the hot stove.”

Combined, Social Security and Medicare account for about a third of government spending, a share that will only grow. Economic experts say the cost of retirement programs for an aging society is the most serious budget problem facing the nation. The trustees who oversee Social Security and Medicare recently warned the programs are “not sustainable” over the long run under current financing.

Nearly every solution for Social Security is politically toxic, because the choices involve cutting benefits or raising taxes. Medicare is even harder to fix because the cost of modern medicine is going up faster than the overall cost of living, outpacing economic growth as well as tax revenues.

“Medicare is an incredibly complex area,” said former Sen. Judd Gregg, R-N.H., who used to chair the Budget Committee. “It’s a matrix that is almost incomprehensible. Unlike Social Security, which has four or five moving parts, Medicare has hundreds of thousands. There is no single approach to Medicare, whereas with Social Security everyone knows where the problem is.”

That’s not what the public sees, however.

“It’s more a matter of bungling, and lack of oversight, and waste and fraud, and padding of the bureaucracy,” said Carolyn Rodgers, who lives near Memphis, Tenn., and is still working as a legal assistant at 74. “There is no reason why even Medicare, if it had been handled right, couldn’t have been solvent.”

In the poll, 54 percent said it’s possible to balance the budget without cutting spending for Medicare, and 59 percent said the same about Social Security.

Taking both programs together, 48 percent said the government could balance the budget without cutting either one. Democrats and political independents were far more likely than Republicans to say that neither program will have to be cut.

The recession cost millions their jobs and sent retirement savings accounts into a nosedive. It may also have underscored the value of government programs. Social Security kept sending monthly benefits to 55 million recipients, like clockwork; Medicare went on paying for everything from wheelchairs to heart operations.

Overall, 70 percent in the poll said Social Security is “extremely” or “very” important to their financial security in retirement, and 72 percent said so for Medicare. Sixty-two percent said that both programs are extremely or very important.

The sentiment was a lot stronger among the elderly. Eighty-four percent of those 65 or older said both programs are central to their financial security. Compare that to adults under 30, just starting out. Just under half, or 46 percent, said they believed both Social Security and Medicare would be extremely or very important to their financial security in retirement.

Old, middle-aged or just entering the workforce, most people are keenly aware of the cost of health care, and that may be helping to focus more attention on Medicare.

“Health insurance these days is very costly, and it’s not something that most people can afford to go out and buy on their own,” said Tim Messner, 38, a technology quality assurance analyst from Barberton, Ohio. “I don’t know that we could possibly plan ahead for medical insurance, but if you had to replace Social Security or investments, you at least have an idea of what you can live on.”

Numbers tell the story. As health care goes up, the value of Medicare benefits is catching up to Social Security’s. A two-earner couple with average wages retiring in 1980 would have expected to receive health care worth $132,000 through Medicare over their remaining lifetimes, and $446,000, or about three times more, in Social Security payments.

For a similar couple who retired last year, the Medicare benefit will be worth $343,000, compared to Social Security payments totaling $539,000, less than twice as much. The numbers, from economists at the nonpartisan Urban Institute, are adjusted for inflation to allow direct comparison. For low-income single retirees and some couples, the value of expected Medicare benefits already exceeds that of Social Security.

The poll found a deep current of pessimism about the future of Social Security and Medicare. As much as Americans say the programs are indispensable, only 35 percent say it’s extremely or very likely that Social Security will be there to pay benefits through their entire retirement. For Medicare, it was 36 percent.

Again, there’s a sharp difference between what the public believes and what experts say. Most experts say the programs will be there for generations to come. But they may look very different than they do today, and Americans should take note.

“Do they have a basis for worrying that these programs are going to pay them much less than they’re currently promising?” asked economist Charles Blahous. “Yes, absolutely. Do they have a basis for being concerned that the programs may have to be structurally changed in order to survive? The answer to that is yes, too.” A trustee of Social Security and Medicare, Blahous served as an economic adviser to President George W. Bush.

Republican lawmakers don’t inspire much confidence right now when it comes to dealing with retirement programs, the poll found. Democrats have the advantage as the party more trusted to do a better job handling Social Security by 52 percent to 34 percent, and Medicare by 54 percent to 33 percent. Often, but not always, major revisions have been accomplished through bipartisan compromise.

Sue DeSantis, 61, a store clerk from West Milton, Ohio, worries she won’t be able to rely on either program. Both are important to her well-being, but she thinks changes are inevitable. And she has little confidence in lawmakers.

“I don’t put my faith in politicians, and I don’t put my faith in the government,” said DeSantis. “I’m a Christian. I believe that God will take care of me. That doesn’t mean I should be foolish and not look at anything, but I don’t believe that the politicians are necessarily going to do the best for the common ordinary person like myself.”

The Associated Press-GfK poll was conducted May 5-9, 2011, by GfK Roper Public Affairs & Corporate Communications. It involved landline and cell phone interviews with 1,001 adults nationwide and has a margin of sampling error of plus or minus 4.2 percentage points.

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Associated Press Polling Director Trevor Tompson, Deputy Director Jennifer Agiesta and AP News Survey Specialist Dennis Junius contributed to this report.

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Online:

Poll results: http://www.ap-gfkpoll.com

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Tax cut has little impact on economy in January


Tax cut has little impact on economy in January
Feb. 28, 2011, 4:09 p.m. EST
Associated Press
Posted by Calvin Lee Ledsome Sr.,

WASHINGTON (AP) — A Social Security tax cut that economists say should help the economy this year is off to a slow start. Consumers increased their spending last month at the weakest pace since June, even with the extra money in their paychecks.

Some people may be using the additional money to pay down holiday credit card bills or higher gas prices, analysts said. And harsh weather may have deterred some people from shopping in January.

Personal finance experts say the real test of the tax cuts impact will come this spring, when the Easter holiday sales begin.

Still, consumers increased spending by only 0.2 percent in January, the smallest gain since June, the Commerce Department said Monday. At the same time, their incomes rose 1 percent — the biggest jump in nearly two years and a reflection of the tax cut.

The increased income is part of an additional $110 billion that economists say workers will receive this year from the cut in their Social Security taxes. Most families will see about $1,000 to $2,000 in extra income. Households with two high-income earners could receive up to $4,000 more.

In December, when President Barack Obama signed the tax cut as part of a broader tax package, economists predicted Americans would spend about two-thirds of the extra money and save the remaining one-third. Higher-income taxpayers were expected to save a little more; lower-income households would spend a bit more.

Economists said the extra spending would help boost growth and could lead businesses to hire more. Still, all that was before tensions in the Middle East sent oil prices spiking. And a surge in global commodity prices is now expected to push U.S. food prices up slightly this year, too.

Many analysts say such inflation could siphon off most of the benefit of the tax cut. Several scaled back expectations for growth Monday after seeing January’s disappointing report.

“It doesn’t look like the economy is going to get any strong net boost from the Social Security tax cut,” said Paul Dales, senior economist at Capital Economics. “It will just go to pay higher prices on food and energy.”

Consumer spending was growing at the fastest pace in four years in the final three months of 2010, helping to support the overall economy. The weak showing in January raised questions about how strong consumer spending, which accounts for 70 percent of economic activity, will be this year.

The modest 0.2 percent rise in spending was even weaker when inflation was taken into account. After adjusting for price changes — particularly a steep rise in energy costs — spending actually dipped 0.1 percent in January. That was the poorest showing since September 2009.

One factor that the report doesn’t take into account is how much was spent on reducing debt. Households may have boosted their spending in December — after hearing about the pending tax cut — and spent the extra money in January to pay credit card bills.

Marshal Cohen, chief industry analyst for a N.Y.-based consumer market research firm, cautioned that most people might not have spent a lot because they didn’t see much change in their income after only one month.

“One or two percent in your paycheck is not going to change the way you live,” said Cohen, of the NPD Group Inc. in Port Washington. “It’ll make living easier. What it will do is keep you spending the way you’ve been spending, so it will keep the status quo.”

Over time, however, as consumers have the opportunity to pay down credit card and other debt, they’ll feel more like spending again, Cohen said.

That could bode well for retailers, who are now looking for shoppers to open up for spring.

“I think the next big event we need to watch for is Easter sales,” said Arun Jain, professor of marketing research at the University at Buffalo School of Management. “That will reflect what they want to buy for spring. That to me will tell us how confident they are.”

An early sign of that would be an increase in clothing sales at discount department stores such as Sears, J.C. Penney, and Target, Jain said.

J.C. Penney launched its spring advertising during Sunday night’s Academy Awards show, buying seven 30-second commercials focusing on its “We make it affordable, you make it yours” clothing campaign.

“When people get these types of paycheck boosts from the government, typically the first area people will spend on is essentials for the family,” Jain said.

Job growth would also boost spending.

Sal Guatieri, senior economist at BMO Capital Markets, predicted the government will report Friday that the economy added around 200,000 jobs in February, much better than the 36,000 jobs created in January.

Still, the weak January spending data caused him to trim his forecast for overall economic growth for the current quarter from a rate of 3.5 percent down to 3.2 percent.

He said the January numbers suggest many families are still stretched financially.

“The key going forward will be job growth,” he said. “If we start to see jobs growing in a stronger fashion, that will support the consumer in the face of rising gasoline and food costs.”
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GOP mocks Obama budget, House weighs spending cuts


GOP mocks Obama budget, House weighs spending cuts
Feb. 15, 2011, 2:09 p.m. EST
Published by Associated Press Writers
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WASHINGTON (AP) — Republicans on Tuesday disparaged President Barack Obama’s proposed $3.7 trillion budget for next year for taking a pass on tackling long-term deficits by not calling for structural changes in big-ticket entitlement programs for the elderly.

“In our nation’s most pressing fiscal challenges, the president has abdicated his leadership role,” said House Budget Committee Chairman Paul Ryan, R-Wis. “When his own commission put forward a set of fundamental entitlement and tax reforms … he ignored them.”

Obama told a news conference that the budget he sent Congress will help meet his goal of cutting the deficit in half by the end of his first term. He said he looked forward to negotiations with Republicans in coming months on how to fix Social Security and Medicare.

“This is not a matter of, ‘you go first, I go first,’ ” he said. “It’s a matter of everybody having a serious conversation about where we want to go and then ultimately getting in that boat at the same time so it doesn’t tip over.”

House Republicans, meanwhile were eager to launch a week long debate on their own package of deep cuts in domestic spending for the current fiscal year.

Eager to please their conservative tea party supporters, Republicans are championing $61 billion in cuts to hundreds of programs for the remaining seven months of this federal fiscal year, which ends Sept. 30, under a bill the House planned to debate Tuesday. AmeriCorps and the Corporation for Public Broadcasting would be completely erased, while deep cuts would be carved from programs for feeding poor women and children, training people for jobs and cleaning the Great Lakes.

Reductions of that magnitude this late in a fiscal year would have a jarring impact on many programs. The GOP-run House planned to approve the measure Thursday.

The proposed reductions have “showdown” written all over them. Republicans included them in a must-pass bill financing the government, which otherwise runs out of money on March 4. The Democratic-controlled Senate and Obama himself are sure to turn them down.

“We have consistently said it’s not our intention to shut down this government,” House Majority Leader Eric Cantor, R-Va., said Monday of one possibility should there be an impasse. “That’s political talk and we ought to get that off the table and we ought to go about the real business of trying to cut spending.”

White House budget director Jacob Lew kicked off the administration’s defense of its proposed 2012 budget on Capitol Hill with an appearance before the House Budget Committee. Rep. Mike Simpson spoke for most of the Republicans on the panel in saying he doesn’t view the proposal — which mostly ignores the recommendations of Obama’s fiscal commission — as a serious one.

Lew countered that the Obama plan is a “tough budget” filled with cuts to programs the president himself supports.

Lew downplayed the possibility of a government shutdown.

“If we all work together in a bipartisan way to look for the things we can agree on and take some of the things that we can’t agree on off to the side, we can accomplish a great deal,” he said.

Obama unveiled his fiscal blueprint a day earlier, a plan that mixes tax increases on the wealthy and some businesses, a five-year freeze on most domestic programs, and boosts for elementary schools, clean energy and airport security. The outline is a first step in what is likely to be a bitter partisan fight as Congress translates it into a parade of tax and spending bills.

Despite its savings, Obama’s budget projects a record $1.65 trillion deficit this year, falling to $1.1 trillion next year and easing thereafter. Even so, it stands to generate a mammoth $7.2 trillion sea of red ink over the next 10 years, a number that would be even larger had the president not claimed over $1 trillion in 10-year savings by winding down the wars in Iraq and Afghanistan.

Glaringly missing from the president’s budget was a substantial reshaping of Social Security, Medicare and other massive, automatically paid benefit programs that bipartisan members of his deficit-reduction commission had recommended last year. That leaves the nation under a black fiscal cloud as its aging population, prolonged lifespans and ever costlier medical procedures leave the government with enormous I.O.U.’s.

Most Republicans have also shied away from calling for savings from so-called entitlement programs, but that has not stopped them from criticizing Obama’s failure to do so. Ryan, R-Wis., chairman of the House Budget Committee, has called for such reductions, but would not predict whether they would be included in the 2012 spending plan his panel plans to write this spring.

“The president punted on the budget, he punted on the deficit,” Ryan told reporters. “That’s not leadership, that’s an abdication of leadership.”

Overall, Obama’s budget claims $1.1 trillion in deficit reduction from tax increases and spending cuts over the next decade while protecting some — but not all — programs that Democrats cherish.

By 2021, Obama projects that $844 billion out of the $5.7 trillion federal budget would go toward paying interest on the government’s debt. Such interest payments would exceed the size of the entire federal budget in 1983.

Federal budgets often burrow into the minutest details of the bureaucracy, and Obama’s was no exception.

The State Department said it expected to save $5.3 million over the next three years by painting the roofs of its embassies and other offices in a heat-reflecting, energy-saving white color. And the U.S. Agency for International Development projected hundreds of thousands in savings by reducing the font size in its documents to reduce paper usage.

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Associated Press writer Matthew Lee contributed to this report.
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Social Security fund will be drained by 2037


Social Security fund will be drained by 2037

Jan. 27, 2011, 5:50 a.m. EST

Information Published by Associated Press Writers
Information Posted by Public Blog News-Plus Posting Service

WASHINGTON (AP) — Social Security’s finances are getting worse as the economy struggles to recover and millions of baby boomers stand at the brink of retirement.

New congressional projections show Social Security running deficits every year until its trust funds are eventually drained in about 2037.

This year alone, Social Security is projected to collect $45 billion less in payroll taxes than it pays out in retirement, disability and survivor benefits, the nonpartisan Congressional Budget Office said Wednesday.

That figure swells to $130 billion when a new one-year cut in payroll taxes is included, though Congress has promised to repay any lost revenue from the tax cut.

The massive retirement program has been feeling the effects of a struggling economy for several years. The program first went into deficit last year, but the CBO said at the time that Social Security would post surpluses for a few more years before permanently slipping into deficits in 2016.

The outlook, however, has grown bleaker as the nation struggles to recover from the worst economic crisis since Social Security was enacted during the Great Depression.

In the short term, Social Security is suffering from a weak economy that has payroll taxes lagging and applications for benefits rising.

In the long term, Social Security will be strained by the growing number of baby boomers retiring and applying for benefits.

The deficits add a sense of urgency to efforts to improve Social Security’s finances. For much of the past 30 years, Social Security has run big surpluses, which the government has borrowed to spend on other programs.

Now that Social Security is running deficits, the federal government will have to find money elsewhere to help pay for retirement, disability and survivor benefits.

“It means that Social Security is increasingly adding to our long-term fiscal problem, and it’s happening now,” said Eugene Steuerle, a former Treasury official who is now a fellow at the Urban Institute think tank.

It’s a bad time for the nation to be hit with more financial problems. The federal budget deficit will surge to a record $1.5 trillion flood of red ink this year, congressional budget experts estimated Wednesday, blaming the slow economic recovery and a tax cut law enacted in December.

A debt commission appointed by President Barack Obama has recommended a series of changes to improve Social Security’s finances, including a gradual increase in the full retirement age, lower cost-of-living increases and a gradual increase in the threshold on the amount of income subject to the Social Security payroll tax.

Obama, however, has not embraced any of the panel’s recommendations. Instead, in his State of the Union speech this week, he called for unspecified bipartisan solutions to strengthen the program while protecting current retirees, future retirees and people with disabilities.

Senate Republican leader Mitch McConnell of Kentucky said he is ready to work with Obama on Social Security and other tough issues.

“I take the president at his word when he says he’s eager to cooperate with us on doing all of it,” McConnell said.

Social Security experts say news of permanent deficits should be a wake-up call for action.

“So long as Social Security was running surpluses, policymakers could put off the need to fix the program,” said Andrew Biggs, a former deputy commissioner at the Social Security Administration who is now a resident scholar at the American Enterprise Institute.

“Now that the system is running deficits, it simply becomes clear that we need to act on Social Security reform.”

More than 54 million people receive retirement, disability or survivor benefits from Social Security. Monthly payments average $1,076.

The program has been supported by a 6.2 percent payroll tax paid by both workers and employers.

In December, Congress passed a one-year tax cut for workers, to 4.2 percent. The lost revenue is to be repaid to Social Security from general revenue funds, meaning it will add to the growing national debt.

Social Security has built up a $2.5 trillion surplus since the retirement program was last overhauled in the 1980s.

Benefits will be safe until that money runs out. That is projected to happen in 2037 — unless Congress acts in the meantime. At that point, Social Security would collect enough in payroll taxes to pay out about 78 percent of benefits, according to the Social Security Administration.

The $2.5 trillion surplus, however, has been borrowed over the years by the federal government and spent on other programs. In return, the Treasury Department has issued bonds to Social Security, guaranteeing repayment with interest.

Social Security supporters are adamant that the program will be repaid, just as the U.S. government repays others who invest in U.S. Treasury bonds.

“It’s an IOU that is backed by Treasury bonds and the faith and credit of the United States government,” said Sen. Bernie Sanders, I-Vt. “It is the same faith and credit that enables us to borrow from rich people and from China and from other countries. As you well know, in the history of this country, the United States has never defaulted on one penny owed to a creditor.”

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