COLUMN: After payroll tax, 4 more issues to rally Democrats

Fri Dec 23, 2011 3:11pm EST

Dec 23 (Reuters) - The payroll tax cut fight has reminded Democrats that they still have muscles, and that they can win a fight once in a while against Republicans.

But everything about this fight was upside down - Republicans fought a tax cut and posed as defenders of Social Security; Democrats fought for tax cuts and appeared ready to harm Social Security by tapping its dedicated revenue stream, the Federal Income Contributions Act (FICA) tax.

Democrats spent much of 2011 playing footsie with proposals that would weaken the social safety net for older Americans. The President has proposed raising Medicare's eligibility age to 67 and perhaps means-testing the program. More recently, Sen. Ron Wyden (D-Oregon) co-sponsored a Medicare voucherization with Rep. Paul Ryan.

Here's a better plan for Obama and the Democrats in 2012: Embrace your historic identity as the defenders of Social Security and Medicare, and run with it.

The timing couldn't be better. Americans' confidence in their ability to retire comfortably is at an all-time low, according to the Employee Benefit Research Institute. The U.S. Government Accountability Office (GAO) says the median level of financial assets for people near retirement age (55 to 64) is just $72,000 - enough to replace just 5 percent of pre-retirement income for the typical household. And that figure dates to 2007 - before the market crash.

The lowest-income Americans over 65 depend on Social Security benefits for 83 percent of total income, GAO found; middle income seniors depend on Social Security for 64 percent of total income.

Nearly a quarter of respondents to a recent AARP survey of Americans over age 50 said that that they or someone in their family had exhausted all of their savings during the recession. Among that group, nearly half reported that they delayed getting medical or dental care, or delayed or ceased taking medication.

If those numbers don't add up to a we-are-the-99-percent moment, I don't know what does. So Democrats should line up four-square against the following bad ideas in the year ahead:

1. RAISE SOCIAL SECURITY'S RETIREMENT AGE

The idea that we're all living longer and should therefore work longer is specious. The gains in life expectancy have been concentrated mainly among high-income, educated Americans, and labor force participation rates are as high as they've been since World War II. At any rate, we're already raising the full retirement age gradually to 67 under the reforms of 1983.

2: CUT SOCIAL SECURITY COLAs

Deficit hawks want to adjust Social Security's cost-of-living adjustment formula to use the "chained CPI." With compounding, that would cut benefits by 8.4 percent for a retiree at age 92 (calculated from age 62, the first year of eligibility), according to the National Academy of Social Insurance.

3: PRIVATIZE MEDICARE

Ryan-Widen is the latest of four or five proposals to voucherize traditional Medicare. This one is a variety of "premium support," which would let seniors choose traditional fee-for-service Medicare or receiving a defined amount of money that they could use to shop for a private plan in a federally-sponsored Medicare exchange marketplace.

All these ideas all have one thing in common: They would transform Medicare from a program of defined benefits to one of defined contribution. Yet there's no evidence that privatization reduces the cost of delivering health care - its an ideological belief in search of data. Vouchers or premium support would reduce federal Medicare spending by capping outlays, but the costs would simply shift to seniors.

Traditional Medicare has a stronger record of controlling costs than the private insurance market. As the largest U.S. purchaser and regulator of healthcare, Medicare has purchasing clout far beyond what any single private insurance plan could exert.

And an analysis of federal data by the Center on Budget and Policy Priorities (CBPP) found that between 1970 and 2009, Medicare spending per enrollee grew by an average of 1 percentage point less than private health insurance premiums, or one-third less during that period.

4: PUSH MEDICARE ELIGIBILITY TO 67

This is another flavor of privatization, since it would send seniors in this age bracket to buy health insurance in the new public insurance exchanges to be launched under the Affordable Care Act (ACA). But all it really does is shift costs around. Research by the Kaiser Family Foundation (KFF) suggests that a higher Medicare age would lead to increases in state and private-sector spending costs twice as large as any net federal savings.

Voters back the idea of keeping Social Security and Medicare strong by wide margins. President Obama, in particular, has an opportunity to do better this time around with seniors, the only age demographic that went for John McCain in 2008.

Maybe it's time to occupy senior centers, Mr. President.

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The author is a Reuters columnist. The opinions expressed are his own.

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