Pandemic shows contrasts between US, European safety nets

Source: PBS

May 10 2020

The coronavirus pandemic is straining social safety nets across the globe — and underlining sharp differences in approach between wealthy societies such as the United States and Europe.

In Europe, the collapse in business activity is triggering wage support programs that are keeping millions on the job, for now. In contrast, in the United States more than 33.5 million people have applied for jobless benefits and the unemployment rate has soared to 14.7%. Congress has passed $2 trillion in emergency support, boosting jobless benefits and writing stimulus checks of up to $1,200 per taxpayer.

That is a pattern seen in earlier economic downturns, particularly the global financial crisis and the Great Recession. Europe depends on existing programs kicking in that pump money into people’s pockets. The U.S., on the other hand, relies on Congress taking action by passing emergency stimulus programs, as it did in 2009 under President Barack Obama, and the recent rescue package under President Donald Trump.

Economist Andre Sapir, a senior fellow at the Bruegel research institute in Brussels, said budget policy in the U.S. plays partly the role that Europe’s welfare system plays because the American welfare system is less generous and a recession can be much harsher on workers.

In downturns, U.S. employees can lose their health insurance if they lose their job and there’s also a greater risk of losing one’s home through foreclosure. On the other hand, Europeans typically pay higher taxes, meaning they earn less in the good times.

“In the U.S. you need to keep pumping money into the economy so that people continue to be employed, because it is through being employed that they are protected,” said Sapir. “Which is the better system? I’m not going into that discussion because that is really a huge issue.”

The U.S. tends to rank below average on measures of social support among the 37 countries of the Organization for Economic Development and Cooperation, whose members are mostly developed democracies. The U.S. came last in people living in relative poverty, meaning living on half the median income or less, with 17.8%. Countries like Iceland, Denmark, the Czech Republic and Finland have less than 6%.

Here’s a look at how the social safety nets of the U.S. and Europe compare:

UNEMPLOYMENT BENEFITS

Americans on unemployment were collecting an average of about $372 weekly before the coronavirus struck. But that average could range from $215 in Mississippi to $543 in Hawaii. The rescue package gave jobless workers an additional $600 a week through July. It also extended benefits to those who lost work as a result of the coronavirus outbreak, which could include parents who needed to leave their jobs because schools were closed. Most states offer six months of unemployment but the emergency legislation adds 13 weeks.

By comparison, Germany’s jobless benefit pays 60% of previous salary for a year. France provides up to 75% of the previous average daily wage for up to two years. Unemployment benefits in France are on average 1,200 euros ($1,320) per month.

The famous shopping street “Zeil” is seen during a partial lockdown in Frankfurt, Germany, March 21, 2020, as the spread of the coronavirus disease (COVID-19) continues. Photo by Kai Pfaffenbach/Reuters.

And there’s Europe’s short-hours programs, which pay most of worker salaries if companies put them on shorter hours through a temporary disruption. More than 10 million workers are being paid that way in Germany and about 12 million in France, helping hold eurozone unemployment to only a 0.1 percentage point increase in March over February, to 7.4%.

The U.S. emergency package included money for cheap loans to businesses that can be forgiven if the money is used mostly for payroll.

HEALTH INSURANCE

Nearly half of Americans receive health insurance through their employers, while another 34% get benefits through the government programs Medicare and Medicaid. Separately, 6% are insured individually and 9% in 2018 had no insurance at all.

In Europe, universal health coverage is the rule, generally funded by payroll or other taxes. One example is Britain’s National Health Service, which is funded by taxes and offers free care that costs the government 7% of GDP per year.

MATERNITY BENEFITS

U.S. workers are entitled to unpaid family leave, but no federal law requires private employers to provide paid family leave. In the private sector, 16% of workers had access to paid family leave as of March 2018. Some states offer paid family leave insurance for 4 to 10 weeks. The United States is the only country in the OECD to not offer paid leave to new mothers.

In France, by contrast, mothers are entitled to at least 16 weeks of leave for their first child and must take at least 8 weeks. From the third child onward, they are allowed 26 weeks. Workers get a daily maternity leave allowance of up to 89 euros ($94.50). But some professions have their own more favorable deals, up to the complete payment of salaries.

Denmark gives 52 weeks of parental leave after a birth or adoption, to be shared by the parents; whether at full salary or not depends on workplace agreements.

DISABILITY

Roughly 8.3 million Americans collect disability benefits earned through Social Security contributions. The payments average $15,100 annually — just above the poverty level for a one-person household of $12,760. Standards are strict and most applications are denied; people who don’t qualify may wind up on food stamps, a basic subsistence program. The U.S. ranks 30th among 36 OECD countries in spending on all forms of disability related to work or illness.

In France, the totally disabled are eligible for public health insurance payments of at least 292.80 euros ($311) a month and no more than 1,714 euros ($1,825). Those who are totally unable to work and also depend on help for daily tasks are eligible for 1,418 to 2,839 euros ($1,510 to $3,027) a month. The payments can be combined with other forms of income and be subjected to tax and social security contributions.

THE COSTS

Europe’s more generous social safety nets come at a cost, largely paid through taxes levied on workers and employers.

In the United States, Social Security contributions amounted to 6% of GDP in 2018, according to the OECD. In France it was almost three times higher, at 16% of annual GDP, while in Germany it was just over 14%.

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Sylvie Corbet and John Leicester in Paris, Josh Boak in Washington and Jan M. Olsen in Copenhagen contributed to this report.

Privatized Social Security System Cited By GOP Candidates Works For The Rich, But Is ‘Very Bad’ For Everyone Else

Πηγή: ThinkProgress
By Pat Garofalo 

Sep 14, 2011

During Monday night’s GOP presidential primary debate, several the candidates called for privatizing Social Security, with former corporate CEO Herman Cain pointing to a system of privatized accounts for government employees that was implemented by Galveston, Texas. “In 1981, the Galveston County employees, they opted out because that was a very short window of opportunity. They took it. Today, when people retire in Galveston County, Texas, they retire making at least 50 percent more than they would ever get out of Social Security,” Cain claimed.

Texas Gov. Rick Perry has also praised the Galveston system, saying in his 2010 book Fed Up!that “employees in those private plans, having exercised their liberty at Washington’s sufferance, are reaping the benefits,” and adding in Monday’s debate “the issue is, are there ways to move the states into Social Security for state employees or for retirees? We did in the state of Texas back in the 1980s.”

As it turns out, this system did work well for some people: the wealthy. Everyone else would have been better off sticking with Social Security:

For the highest-earning workers in the Gulf Coast county, the personal accounts have yielded nearly double what they might have collected under Social Security. But according to independent studies, the results have been less favorable to those on the lower end of the income spectrum.

In 1999, the Social Security Administration and the General Accounting Office (now the Government Accountability Office) separately examined the program adopted by Galveston and surrounding counties and found that its benefits depended on income and longevity: The lower one’s income and the longer one lived after retirement, the less advantage there was to participating in the program compared with Social Security. Also, Social Security payments increased with inflation, while payments under the Galveston plan did not.

“If you’re single, if you’re well off and you die within 10 years [of retirement], maybe you’ve done better,” said Eric Kingson, a professor of social work at Syracuse University and a vocal critic of the Galveston alternative. “For most people, it’s somewhere between ‘very bad’ and ‘not very good.’ ”

“Low-income working persons do not receive anything approaching the kind of protection they receive under Social Security” under the Galveston plan, said Syracuse University professor Eric Kingson. Keith Brainard, the research director for the National Association of State Retirement Administrators, added that the problem “lies in Cain’s implication that Social Security should be a wealth-producing vehicle, when that’s not what it’s supposed to be. Social Security is supposed to be old-age insurance. That should be the emphasis of the program, not ‘retiring with a lot more money.’”

But for the GOP, it seems, Social Security (which kept 14 million seniors out of poverty last year) should no longer be a guarantee, but a program subjected to the whims of the stock market. And that would mean real trouble for retirees.

Real Threat to Social Security Benefits is Government Spending

Πηγή: A View from the Nest
by The Resident Raptor in Life

July 25, 2011

In his Friday night prime time media event, the President Obama spread the notion that he might be forced to delay the August Social Security payments.

Jessica Yellin was one of the pre-selected White House reporters to set the President up with a friendly question .

Standing here tonight, Mr. President, can you assure the American people they will get their Social Security checks on August 3rd? And if not, who’s to blame?

With that question, Obama launched into a long discourse inferring that Social Security and more were in fact at risk and the Republican House of Representatives was to blame. You can read the entire transcript courtesy of the Wall Street Journal here

This is an oft-repeated strategy used by government to intimidate opposition to budget cuts. The same mantra is used over and over again. If you cut the federal budget at all senior citizens. the sick and infirm, education of our children, and the middle class will suffer. How many times must we hear ‘the sky is falling’ before we realize all these threats are lies. Yes there is a real threat to future social security benefits and it is simply federal spending. The failure to raise the debt limit should not affect social security in any way since President Reagan signed into law the 1983 social security reform act .

Since the inception of Social Security, the government had administrated it as a pay-as-you-go program, paying benefits out of current receipts rather than building up a capital fund for each contributor. However, in the mid-1970s, expenditures for Social Security benefits began to exceed tax payments coming into the trust funds. This occurred because a serious recession reduced employment and trust-fund revenues while inflation simultaneously created a need to increase benefits. Public concern developed over the possibility that the Social Security system might become bankrupt over time. Since the funds had been accumulating for over 35 years, they had a reserve of more than $40 billion in 1976, so the system was in no immediate danger. Nevertheless, experts warned that in the long-term the reserve would eventually become depleted. In an effort to restore the financial integrity of Social Security , the government began to reform the system of contributions and benefits. source

This was part of a much larger package of program changes designed to address the financial solvency of the program. One might fairly say that cutting benefits and raising revenues was the purpose of the 1983 Amendments, and the adoption of Social Security benefit taxation was simply one provision among many to facilitate these aims. It is also important to note that funds raised under this provision does not go into the General Fund of the Treasury but into the Social Security Trust Funds. This emphasizes again that the purpose of introducing this provision was to raise revenue to help restore Social Security’s financial solvency. (The Committees estimated the six-year savings from this provision at $26.6 billion, and estimated that this provision would supply almost 30% of the total additional long-range funding provided by the Amendments.)source

The reality however is less rosy. Since the federal government sees all revenues coming into the treasury as "government money" the funds that should have been held in reserve in the social security trust fund have long since been raided to spend on other government programs, and as kick-backs to political cronies to garner votes and to gain constituent support. In other words the federal government is the enemy of Social Security. The federal government has long ago spent any ‘social security surplus’ and replaced it with worthless paper IOU’s.
Had the government actually invested the funds it collected from the separate FICA payroll deductions into tradable treasury notes, then the value of the ‘trust fund’ would have gained value, instead they spent all the money and ‘promised’ to repay it with other funds taken from the general fund. These funds of course need to be raised from the private sector through taxation and regulation or out right theft.

In simple terms, the federal government stole the money they forced you to pay into a retirement fund. These funds that should have been held in secure treasury bonds were spent on other government programs and wasted in federal largess. The Social Security trust fund now only contains worthless IOU’s. As the number of retirees continues to grow and the number of workers to support these retirees continues to decline the deficit created by this funding disparity continues to grow year after year.

But since the Supreme Court has declared that Social Security is not a contractual entitlement and that the congress can do with the fund as they see fit, there is no incentive to secure your Social Security by this or any other congress.

Section 1104 of the 1935 Act, entitled "RESERVATION OF POWER," specifically said: "The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress." Even so, some have thought that this reservation was in some way unconstitutional. This is the issue finally settled by Flemming v. Nestor .

Therefore it is reasonable to assume that unless you personally take control of your own retirement, congress has no obligation to honor Social Security payments to future generations. There is no law requiring this or any other congress to secure these FICA payments, in fact the law says this or any future congress can change the rules of Social Security or eliminate it altogether without any court remedy.

How secure do you feel now? So regardless of whether Social Security checks get issued on August 3 or not is not the question that should be asked. What should be asked is can we opt out of this gamble and select to use our own money to fund our own retirement accounts which congress can not eliminate with the stroke of a pen, and the funds are not made available to the federal government general fund.money flowing into the trust funds is invested in U. S. Government securities. Because the government spends this borrowed cash, some people see the trust fund assets as an accumulation of securities that the government will be unable to make good on in the future. Without legislation to restore long-range solvency of the trust funds, redemption of long-term securities prior to maturity would be necessary.source

Private-sector trust funds invest in real assets ranging from stocks and bonds to mortgages and other financial instruments. However, the Social Security trust funds are only "invested" in a special type of Treasury bond that can only be issued to and redeemed by the Social Security Administration. As the Congressional Research Service noted in a report on May 5, 1998:

When the government issues a bond to one of its own accounts, it hasn’t purchased anything or established a claim against another entity or person. It is simply creating a form of IOU from one of its accounts to another.

According to the Office of Management and Budget under the Clinton Administration in 1999:

These [trust fund] balances are available to finance future benefit payments and other trust fund expenditures–but only in a bookkeeping sense. These funds are not set up to be pension funds, like the funds of private pension plans. They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury, that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures. [Emphasis added.]

In short, the Social Security trust fund is really only an accounting mechanism. The trust fund shows how much the government has borrowed from Social Security, but it does not provide any way to finance future benefits. The money to repay the IOUs will have to come from taxes that are being used today to pay for other government programs. For that reason, the most important date for Social Security is 2018, when taxpayers must begin to repay the IOUs, not 2042, when the trust fund is exhausted. Source

The Social Security System is now, forever has been, and forever will be a system where money is taken from people who work and given to people who do not work. It is also one of the most incredible cons ever perpetrated on a citizenry. So the only solutions to the so-called Social Security crisis are these:

Raise Taxes

Raise the Federal Debt

Reduce Benefits

Some combination of these three things will happen. There absolutely is no avoiding it. As it is very unfortunate for a person with a brain tumor to be told he has a headache, and to treat it with aspirin, so, to, would the Social Security situation benefit from an honest appraisal of what it is and what it is not. It is not a retirement program.

How secure do you feel now? So regardless of whether Social Security checks get issued on August 3 or not the question that should be asked is can we opt out of this gamble and select to use our own money to fund our own retirement accounts which congress can not eliminate with the stroke of a pen, and the funds are not made available to the federal government general fund. Only when you take control of your own future can your future be guarenteed. No government run program has your best interest at heart. They simply can not be trusted.