Each time the Deficit Commission holds its meetings, Alex Lawson of Social Security Works has been outside with his camera, shooting video of the closed front door as Firedoglake runs a live stream on the front page of their website. As committee members go in and out of the room, Alex asks them questions when he is able to and, on Thursday, he had an extraordinary exchange with Alan Simpson.
Alex Lawson was incredibly respectful and polite as the grouchy Simpson scolded him, interrupted him, and cussed him out. Simpson has been a long-time supporter of rolling back the New Deal, and when asked about cuts he would recommend to the President and Congress on CNBC, Simpson said “We are going to stick to the big three,” meaning Social Security, Medicare, and Medicaid.
In his exchange with Alex, Simpson begins with the premise that the Treasury will default on the bonds issued to the Social Security trust fund.
In spite of Simpson’s assertions, raising the retirement age to 70 is a benefit cut. It would put an estimated 1.5 million senior citizens into poverty.
In addition, the commission is looking into cutting Medicare benefits for the reason that the deal guaranteeing no-bid Medicare contracts to the pharmaceutical industry by both GOPers and Dems can’t be done away with. The committee claims that it’s independent, but it’s not that independent.
With the lack of transparency from the committee in regard to what happens in its secret meetings, Simpson’s comments to Alex are the best insight that we have into what is being discussed there.
So, without further ado, here is the transcript of the exchange between Alex and Alan Simpson:
ALAN SIMPSON: We’re really working on solvency…The key is solvency.
ALEX LAWSON: What about adequacy? Are you focusing on adequacy as well?
SIMPSON: Where do you come up with all the crap you come up with? We’re trying to take care of the lesser people in society and do that in a way without getting into all the flash words you love dig up, like cutting Social Security, which is bullshit. We’re not cutting anything. We’re trying to make it solvent. It’ll go broke in the year 2037.
LAWSON: What do you mean by “broke?” Do you mean the surplus will go out and then it will only be able to pay 75% of its benefits?
SIMPSON: Just listen. Will you listen to me instead of babbling? In the year 2037, instead of getting 100% of your check, you are going to get about 75% of your check. That’s if you touch nothing. If you like that, fine. You’ll be picking with the chickens yourself when you’re 65. So we want to take care. We’re not cutting. We’re not balancing the budget on the backs of senior citizens. That’s bullshit. So you’ve got that one down. So, as long as you’ve got those two things down you can’t play with anymore, that we’re not balancing the budget of the United States on the backs of poor old seniors and we’re not cutting anything, we’re stabilizing the system.
LAWSON: Thanks for being so frank. My question is – raising the retirement age – is actually an across-the-board benefit cut?
SIMPSON: There are 15 different options being discussed in here today, and why nail one of them…[inaudible]…if you would like to get one of them that pisses your people off.
LAWSON: Alice Rivlin was just on CNBC, saying that that was one of the favorite methods.
SIMPSON: There are 15 of them in there. All of them have to do with stabilizing the system, which we are told is insolvent. It’s paying out more than it’s taking in.
LAWSON: Right now?
LAWSON: But what about the $180 billion in surplus that it brings in every year?
SIMPSON: There is no surplus in there. It’s a bunch of IOUs.
LAWSON: That’s what I wanted to actually get at.
SIMPSON: Listen. Listen. It’s 2.5 trillion bucks in IOUs, which have been used to build the interstate highway system and all of the things people have enjoyed since it has been set up.
LAWSON: Two wars, tax cuts for the wealthy.
SIMPSON: Whatever, whatever. You pick your crap and I’ll pick the real stuff. It has to do with the highway system. It was to run America. And those are IOUs in there. And now there is not enough coming in every month. You’re paying in every month for me. I appreciate that. I really do.
LAWSON: Which is how the system was set up, that the current generation funds the retirees.
SIMPSON: When I was your age, there were 16 people paying into the system and 1 taking out and, today, there are 3 people paying into the system and 1 taking out.
LAWSON: But isn’t that the good news?
SIMPSON: And in 15 years, there will be 2 people paying in. What’s good news about that?
LAWSON: Didn’t they plan for that, which is why they’ve been…?
SIMPSON: Of course not, because they thought…the retirement…they that you would die at 57 and that’s why they set the date at 65. If you can’t get through this stuff, then why do you spread this crap? The thing was set up when the life expectancy was 57 years and that’s why they set 65 as the retirement date. Now the life expectancy is 78, whatever it is, and so we have to adjust that and make it work for the future people, like you, in the United States.
LAWSON: But here’s one question on that, and thanks again for being so frank. Life expectancy is not equally distributed across the income spectrum.
SIMPSON: That’s true. We know that.
LAWSON: The life expectancy gains is actually this 5.5 years difference between the wealthiest…[inaudible]…and the…
SIMPSON: We know that. We talk about that. We talk about everything you know. But if you just want to use flash words…
LAWSON: No flash words. I just wanted to zero in on a few things and you’ve hit most of them – the worthless IOUs.
SIMPSON: Use honesty.
LAWSON: I am. I’m being honest.
SIMPSON: No, no you’re not.
LAWSON: The worthless IOUs that actually goes back to 1936.
SIMPSON: They’re not worthless. There are IOUs in there.
LAWSON: Backed by the full faith and government, full faith and…
SIMPSON: You’ve got it. Full faith and credit.
LAWSON: Full faith and credit.
SIMPSON: That’s absolutely true.
LAWSON: There we go. They’re bonds, just like any other bonds, that the government has to pay back.
SIMPSON: That’s right. But there are not people involved. It is the government and the government.
LAWSON: Well, it’s actually the government and the citizens, right? The government doesn’t actually own the bonds. It’s the government owing…
SIMPSON: Let me say things in a way so your fans will understand this, so you can go and be a hero. There is not enough in the system by the month to pay in, to pay out what comes in. In other words, there is more going out than coming in. That happened 3 or 4 weeks ago. So, what do they do? They go to that trust fund and say “We need the IOUs out of it.” And they say “You can have them, but you have to pay for them.” So you’re taking a double hit on your own government. Makes no sense. The government goes and says “Hey, here’s that 2.5 trillion IOUs. Now we need some money out of that system because we haven’t got enough to pay this month.” And they say “Great.” So the government gets a double hit.
LAWSON: Thanks so much, Senator. We obviously have a very different understanding of the system.
SIMPSON: Yes we do. But we are all involved in one thing, not secrecy.
LAWSON: No, I understand that. But in my understanding from actually looking at the 1983 commission, they actually started prefunding the retirement of the baby boom by building up that huge surplus.
SIMPSON: They never knew there was a baby boom in ’83.
LAWSON: But, actually, they knew there was going to be demographic issues when they set up Social Security. So they actually predicted…
SIMPSON: They never dreamed that the life expectancy from 57 years of age to 78 or 75 or whatever. Who would dream that? No one. They just died. People worked. Social Security was never a retirement. It was set up to take care of poor guys in the Depression, who lost their butts, who were digging ditches, and it was to give them 43% of their wages…when they got out…And that’s what it was. It was never a retirement. It was an income supplement.
LAWSON: Well, it’s actually an income insurance, right? It’s a wage insurance program to replace lost wages due to death, disability, and old age. But it’s definitely an insurance program, meaning that the people own the insurance, right? They’re giving money in, in expectation that it’s their money to come out.
SIMPSON: That’s right. And they’re going to get their money. But right now, to get their money, which has all been used and consists of Treasury Bills, the government has to go and get it out of there and pay it and say “Here’s some money for you,” so you don’t diminish the 2.5 trillion bucks. So it’s got your government putting up money, which increases the deficit to get this money out to go to the beneficiary.
LAWSON: But that’s not Social Security. That’s increasing the deficit because it’s still bringing in more money than goes out.
SIMPSON: The government of the United States has to take separate money out of some stack to get the IOUs out of Social Security. That’s a double hit and that increases the deficit.
LAWSON: But what I’m telling you is Social Security is separate though, from the general budget, right? It’s totally in the green.
SIMPSON: But it wasn’t. Just four weeks ago, there wasn’t as much coming in as going out.
LAWSON: Except you’re not calculating the interest paid on the bonds because, if you do include that, it’s still in the green this year.
SIMPSON: Well, you can go through all the sophistry of babbling that you want to.
LAWSON: It’s not sophistry. It’s just what the SSA says. So I’m just going on the numbers.
SIMPSON: You need to read the report of the Social Security Administration, the one that was given to us. Have you got a copy?
LAWSON: I’d love a copy.
SIMPSON: I’ll get you that. In fact, I’ll have a guy give that to you. You need to have that. And it’s good for you.
LAWSON: That would be fantastic. Thanks so much, Senator.
Above is the video version of this written exchange.