Helping African-Americans Join The Ownership Society

A few days ago I found an AP story that I meant to write about, but didn't:

"President Bush is readying a new budget that would carve savings from Medicaid and other benefit programs, congressional aides and lobbyists say, but it is unclear if he will be able to push the plan through the Republican-run Congress.

White House officials are not saying what Bush's $2.5 trillion 2006 budget will propose saving from such programs, which comprise the biggest and fastest growing part.

But lobbyists and lawmakers' aides, speaking on condition of anonymity, say he will focus on Medicaid, the health-care program for low-income and disabled people. Medicaid costs are split between Washington and the states."

When I read this, I just didn't know what to think. I said to myself: wasn't George W. Bush supposed to be a compassionate conservative? Didn't he just tell us that "we know that in a culture that does not protect the most dependent, the handicapped, the elderly, the unloved, or simply inconvenient become increasingly vulnerable", and that to prevent this he was "working with members of the Congress to pass good, solid legislation that protects the vulnerable"? Is it protecting the vulnerable to cut health care for the poor and disabled? Imagine that you are trying to raise your kids on a minimum wage job. If you are, say, a maid at a motel, you probably don't have access to health insurance that's remotely affordable. If you or your kids get sick, what are you supposed to do? I tried to make sense of it all, but I couldn't; and I was so confused.

Then today I read a post by Josh Marshall, and it pointed me to a story that made everything clear.

"Bush tried to get ministers and other leaders of the black community behind his agenda in an earlier private meeting that lasted more than an hour. Attendees said Bush told them his plan to add private accounts to Social Security would benefit blacks since they tend to die younger than whites and end up paying in more than they take out. Private accounts would be owned by workers and could be inherited by loved ones after death."

So it turns out that there's a good side to African-Americans' shorter life expectancy: their private personal Social Security accounts won't have to last as long. Of course, this won't help if they have already converted their private personal accounts to annuities, but African-Americans are also disproportionately likely to die before they reach retirement age, and so proportionately more of them will be able to pass on their private personal accounts in their entirety to their heirs, without having had the chance to spend a single cent on themselves.

Here's where the cuts to Medicaid come in. Since African-Americans are more likely to be poor than other Americans, they are disproportionately represented among Medicaid enrollees. That means that by cutting Medicaid, President Bush will give even more of the benefits of reduced life expectancy to African-Americans. And unlike many of his proposals, this will give those benefits to the poor and disabled, who need them most. The result? More poor and disabled African-Americans will die before they have a chance to touch their private personal Social Security accounts. This means that their children will inherit the money in those accounts, and will thereby become members of President Bush's ownership society. Of course, they will have to enter that society without their parents, but no one ever said that we could have ownership without sacrifice.

I feel so much better now.

(Note: to anyone who finds this excessively snarky, three points: (1) Yes, of course it is. (2) But I wasn't the one who had the clever idea of trying to sell the President's Social Security plan to African-Americans by citing their reduced life expectancy. This idea is grotesque, and it deserves to be made fun of. (3) You should have seen the earlier drafts. They were a lot funnier, but, I eventually decided, not in an entirely constructive way ;) )

Comments

[Sebastian Holsclaw]

Hmm, the Medicaid thing is one thing, but won't black people get more out of Social Security if they have personal accounts?

[rilkefan]

SS is already a disproportionately good deal for blacks. (And for hispanics, who have a _longer_ life expectancy than whites, and would I guess be more likely to exhaust their forced investment accounts...)

[Sebastian Holsclaw]

Really? How so? Are we talking the retirement aspect or the disability aspect? So far as I know, all reforms being talked about are on the retirement aspect.

[rilkefan]

Umm, for blacks at least I think we're talking summed benefits plus consideration of lower wages. Will reconstruct the info behind the above if I can.

How the non-retirement aspects will survive the diversion of payroll funds unscathed escapes me.

[rilkefan]

Ok, it was a GAO report via these guys via Marshall.

[notyou]

I posted this elsewhere, and I'm lazy:

Wealth accumulation for the poor sounds great, just don't trash Social Security to make it happen. Indeed, rather than substitute SS with private accounts — an exercise in account shuffling that doesn't really improve one's situation — let's add private accounts to the SS baseline and march forward, expanding the opportunities personal wealth provides to even the lowest among us. That's progress. That's SS reform with a purpose.

We'll means test our new Patriot Account program and transfer up to $1000 yearly to eligible citizens, with modestly onerous restrictions on investment options so nobody gets burned.

We'll tax the rich* to pay for it.

-----------
*For the purposes of the program, we'll define the rich as those with income above the SS cap (ie, $90k). One benefit of this approach is educational; those with incomes above the cap who now believe that the existing cap is fair and equitable will, soon after the law is enacted, educate our political leaders on the importance of dramatically boosting the cap to save SS and to preserve the fairness and equity of our tax code.

[Sebastian Holsclaw]

Rilkefan, that editorial relies on the following:

Heritage failed to factor in the progressivity of Social Security benefits; on a taxes-paid to benefits-received ratio, those with lower incomes get more back. Blacks tend to earn less than whites, and thus their Social Security benefits are larger in comparison to taxes they pay.

• Social Security is more than retirement benefits. It also includes survivor and disability benefits. Blacks benefit disproportionately from those programs. While blacks are 11 percent of the workforce, for example, they are 18 percent of those receiving disability benefits. Almost half the blacks receiving Social Security -- 47 percent -- are getting disability benefits or survivor benefits.

Their point one pretty much ignores the large number of blacks who don't live to the retirement age.

Their point two ignores the fact that disability benefits are not being changed.

Which leaves them with nothing on the point they were allegedly addressing.

"How the non-retirement aspects will survive the diversion of payroll funds unscathed escapes me."

It escapes because we aren't talking about diverting 20 or 30 or 40% of the funds. We are talking about less than 10%.

[SomeCallMeTim]

So Republicans note that African-Americans die at a fairly young age and see an opportunity to shill the dismantling of SS? Rather than wondering if there might be something we could/should do to stop African-Americans from dying young? Classic. There's your compassionate conservatism at work. If Republicans didn't exist, we'd have to invent them for the sheer comedy value.

[Stan LS]

Some.

So Republicans note that African-Americans die at a fairly young age and see an opportunity to shill the dismantling of SS? Rather than wondering if there might be something we could/should do to stop African-Americans from dying young?

So, it's either one *or* the other?

[bender]

a word to those who gripe about the "SS cap" isnt static. I forgot that it wasnt this year - which was a suprise to me, because I got much less time to profit from the misery of others. (sorry - I had to take that shot...)

[lily]

When George Bush talks about the "unloved" and "vulnerable", isn't he referring to fertilized eggs and embryos? I don't think there is much evidence thhat his compassion extends to the post-born.
I have a friend (Native American, not African American) who has worked since high school. Over the last twenty five years her standard of living has steadily dropped. Her union job became non-union. her non-union jobs have fewer benefits and lower pay with every job change. By the way, she has never been fired. She has been laid off or had her job disappear several times.
She is supporting three childern and she cannot save money. The suggestion that the "ownership society" and private accounts wouuld give her a stake in the economy is an example of the imposition of an ideology on reality. She had a stake in the economy: a good paying job. Policies of conservatives are partly responisble for the slow removal of that stake. She doesn't have the time or energy to manage a private account. Also a private accouunt would leave her vulnerable to the quirks of the market, a vulnerability which she cannot afford. She will need Social Security in her old age.
I realize the "reform" is a matter of choice-Linda can choose a private account or stand pat. She has already decided to stand pat. I'm only telling her story because it illustrates how sedutive lovely esthtically pleasing ideologies can sometimes obscure the reality of human experience.
And anyway there is no plan to pay for the private accounts. Either taxes will go up to cover the money removed from SS. or my generation and Linda's will be screwed, or the government will go into debt to cover the removed money. people.

[hilzoy]

As I understand it, rilkefan's points are accurate. Moreover, most people who have a private account and made it to retirement age would be well advised to convert to an annuity, which is not heritable in any case, and so the talk about passing your nest egg on to your children really only applies to those who either die before they retire or both (a) don't convert and (b) die before they run out of money.

It is true that if blacks converted to annuities, they would be likely to get higher annuities than whites, given identical personal accounts, since whites tend to live longer. But I would have thought that if you're talking about whether the SS proposal benefits blacks, the crucial question would be not, do you do better than whites if it's passed?, which there are rilkefan's reasons to be skeptical of, but: do you do better under this new proposal than you do under the old one? And all of this doesn't speak to that crucial question at all.

Do we have to choose between the SS proposal and increasing life expectancy? In principle, no. In practice, probably yes, since the SS proposal imposes such huge transition costs that it's likely to squeeze out a lot of discretionary spending. In the actual world, whether we have to choose or not, we have both the Social Security proposal and the cuts to Medicaid, and whether this is the result of a forced choice or not, we are in fact not just failing to take steps to increase black life expectancy, we are taking steps that seem likely to worsen it.

Recall also that the reason we're in such bad fiscal shape that even Bush thinks he has to make cuts is that we passed three huge tax cuts that overwhelmingly favored the rich. Choosing to cut Medicaid as opposed to repealing some of them is a choice.

[rilkefan]

SH: "We are talking about less than 10%."

I thought the admin wanted to divert 4% points or 1/3 of individual contributions (so I guess 1/6 overall). And that might be just the camel's nose in the tent. Of course since the admin hasn't presented a plan and is already telling their folks on Capital Hill that when they do it should be passed immediately, who knows what would happen. My feeling is that they're flailing around and will get nothing, but then my feeling was that President-elect Kerry would be preparing his emergency medical coverage bill now.

[votermom]

Something ate my comment.
I have a question: Where do the funds from Medicare, and for SS, come from? Strictly from personal wage taxes? Do any other taxes go into it?

[hilzoy]

rilkefan: It's worse than that. As I understand it, the total contribution to SS is 12.4% of payroll. Of this, 6.2% is the employee contribution, and the other 6.2% comes from the employer. So when we read the following (via TPM): "Mr. Cheney is said by associates to favor creating investment accounts into which workers could deposit 4 percent to 6 percent of their earnings that are subject to the Social Security payroll tax.", what that means is that he's proposing that workers be able to donate anywhere between about 2/3 to over 96% of the employee contribution into private accounts.

As you recognize, the difference between diverting x percent of income and diverting x percent of the taxes one pays is crucial. If you don't pay attention to it, diverting 6% sounds so tiny and innocuous.

[Jay Sundahl]

Hilzoy
"It is true that if blacks converted to annuities, they would be likely to get higher annuities than whites, given identical personal accounts, since whites tend to live longer."
I believe race based pricing of insurance products (including annuities) is prohibited by law in many if not all states and possibly at the federal level. I haven't found specific cites for annuities, but there are several stories from the life insurance side with large settlements against offenders.

[hilzoy]

Jay S: oh, thanks. I didn't know that. One more possible advantage to African-Americans gone glimmering.

[dutchmarbel]

I read in one of these discussions on the net that average live-expectancy is almost the same after retirement: mortality rates amongst children and young adults (who do not yet *pay* for SS) force the average down.