Social Security Keeps 132,000 West Virginians Out of Poverty

Social Security continues to play vital role in reducing poverty in West Virginia. According to the latest Census data, in 2014-2015 there were approximately 318,000 West Virginians living in poverty, including 40,000 seniors. Without Social Security, 132,000 more West Virginians would live in poverty.

Most people aged 65 and older receive the majority of their income from Social Security. Without Social Security benefits, 52% of elderly West Virginians would have incomes below the official poverty line, all else being equal; with Social Security benefits, only 12% do. These benefits lift 132,000 elderly West Virginians above the poverty line.

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Nationally, Social Security lifted more than 1 million children out of poverty. About 6.5 million children under age 18 (9 percent of all U.S. children) lived in families that received income from Social Security in 2015, according to Census data. This figure includes children who received their own benefits as dependents of retired, disabled, or deceased workers, as well as those who lived with parents or relatives who received Social Security. In all, Social Security lifts 1.1 million children out of poverty.

For more information, and to see how Social Security reduced poverty in all 50 states, check out this blog post from the Center on Budget and Policy Priorities.

West Virginia is Risking the Future of the U.S. Constitution (Updated)

by Betty Rivard and Ted Boettner

West Virginia has been targeted by a number of conservative groups to adopt a resolution calling on Congress to convene a constitutional convention of the states, with the goal of adopting a balanced budget amendment (BBA). Opponents from across the full political spectrum are alarmed that a convention of the states can create turmoil in the country, jeopardize the U.S. Constitution, and divert the nation and the states from the critical issues that they need to resolve on an ongoing basis. It was reported today that Ohio Governor John Kasich will be in Charleston West Virginia this Thursday ( February 19) to promote a constitutional convention.

The focus on amendments to impose fiscal restraints on the federal government also puts the country and its economy at risk. Our state’s Senate Concurrent Resolution (SCR) 13, introduced today, seeks a constitutional convention to propose a balanced budget amendment under Article V of the U.S. Constitution. And SCR 21, calling for fiscal restraints and term limits, is on tomorrow’s agenda for the Senate Interstate Cooperation Committee. A companion resolution, HCR 47, with 60 sponsors, has been introduced in the House. These resolutions are based on model legislation from the American Legislative Exchange Council and others,  not a constituent-driven action. The House also has a bill,  H.B. 2424,  that  attempts to define the delegate process for the convention.

Blog BBA

To adopt a concurrent only require a simple majority vote in both the House and the Senate. Although pending concurrent resolutions have been referred to committees, neither a referral to committee nor a reading on the three consecutive days is required, so they can move very quickly. Sign-off by the governor is not required for a concurrent resolution to take effect, and the governor’s veto power does not apply.

Both the constitutional convention and the content of the resolutions and bill present serious risks to our government and our economy.  The legislature should prevent any resolution calling for a constitutional convention, or bill laying out a process to do so, from being adopted during the current legislative session.

Why is a constitutional convention a serious risk? What are some of the implications of these limits to federal power and, specifically, fiscal restraints?

Serious risks posed by a constitutional convention

The most critical risk is that the country and our state could be thrown into extreme turmoil due to the lack of legal agreement about what is involved in a convention of the states. While Article V of the U.S. Constitution provides for the option of amendment via a convention, there is no direction on how this option is to be implemented.

Despite reassurances from conservative groups, there is no consensus among legal scholars that either the states or Congress can control what happens once a convention is convened, even if states specify that it is only for a balanced budget amendment or other limited purpose. Convention delegates could consider any changes to the U.S. Constitution that they want to introduce. The only check and balance is the ratification by at least 38 states, via either their legislature or a convention, before an amendment is adopted. Some legal experts believe that even this ratification process could be open to change by the convention.

As the Center on Budget and Policy Priorities highlights in a recent report:

A number of prominent legal experts have warned that states cannot control a constitutional convention or that calling one could open up the Constitution to significant and unpredictable changes.  For instance:

“I certainly would not want a constitutional convention.  Whoa!  Who knows what would come out of it?”a
Supreme Court Justice Antonin Scalia

“[T]here is no way to effectively limit or muzzle the actions of a Constitutional Convention. The Convention could make its own rules and set its own agenda. Congress might try to limit the Convention to one amendment or one issue, but there is no way to assure that the Convention would obey.  After a Convention is convened, it will be too late to stop the Convention if we don’t like its agenda.”b 
Former Supreme Court Chief Justice Warren Burger

“There is no enforceable mechanism to prevent a convention from reporting out wholesale changes to our Constitution and Bill of Rights.”c
Former Supreme Court Justice Arthur Goldberg

“First of all, we have developed orderly procedures over the past couple of centuries for resolving [some of the many] ambiguities [in the Constitution], but no comparable procedures for resolving [questions surrounding a convention]. Second, difficult interpretive questions about the Bill of Rights or the scope of the taxing power or the commerce power tend to arise one at a time, while questions surrounding the convention process would more or less need to be resolved all at once.  And third, the stakes in this case in this instance are vastly greater, because what you’re doing is putting the whole Constitution up for grabs.”d
Professor Laurence Tribe, Harvard Law School

“[S]tate legislators do not have the right to dictate the terms of constitutional debate.  On the contrary, they may be eliminated entirely if Congress decides that state conventions would be more appropriate vehicles for ratification.  The states have the last say on amendments, but the Constitution permits them to consider only those proposals that emerge from a national institution free to consider all possible responses to an alleged constitutional deficiency. . . Nobody thinks we are now in the midst of constitutional crisis. Why, then, should we put the work of the first convention in jeopardy?”e 
Professor Bruce Ackerman, Yale Law School

Leaders across the political spectrum have expressed their concerns about a “runaway convention.” Many states have rescinded resolutions that were passed as early as the 1980s, although a number have replaced these with new resolutions in recent years. This earlier move for a convention was stopped just before reaching the required number of 34 states when some states realized the risk of signing on. South Dakota and Utah rejected the new call to action in 2014. 

While SCR 13 stipulates that only a balanced budget amendment would be considered during a proposed constitutional convention, this is not the case.

 Further Resolved, If the convention called by the Congress is not limited to considering a balanced budget amendment, then any delegates, representatives or participants from the State of West Virginia asked to participate in the convention are authorized to debate and vote only on a proposed amendment or amendments to the United States Constitution requiring that, in the absence of a national emergency, the total of all federal appropriations made by the Congress for any fiscal year may not exceed the total of all estimated federal revenues for that fiscal year, together with any related and appropriate fiscal restraints;

As the Center on Budget and Policy Priorities notes, this final clause (bolded above) “opens the door to any constitutional amendments that a convention might decide fit under this broad rubric, including placing a rigid ceiling on federal spending so that all (or virtually all) deficit reduction has to come from cutting federal programs such as Social Security or Medicare, with little or none coming from revenue-raising measures. Such a ceiling would reduce or eliminate any pressure to produce deficit-reduction packages that pair spending reductions with increased revenue from closing unproductive special-interest tax loopholes or from combating tax avoidance by powerful corporations.”

While H.B. 2424 attempts to lay out a detailed process for delegates and their duties and responsibilities for  a constitutional convention of the states, Article V is silent about how delegates are chosen and what these responsibilities may be. According to a recent study by the Congressional Research Service: 

Congress has traditionally laid claim to broad responsibilities in connection with a convention, including (1) receiving, judging, and recording state applications; (2) establishing procedures to summon a convention; (3) setting the amount of time allotted to its deliberations; (4) determining the number and selection process for its delegates; (5) setting internal convention procedures, including formulae for allocation of votes among the states; and (6) arranging for the formal transmission of any proposed amendments to the states.

Risks of amending the U.S. Constitution to establish new limits on federal powers

The fiscal restraints are in and of themselves a serious risk to the stability of the country. The core principle of most BBA proposals is that the federal government could only pay out what it takes in during the course of a year. This principle jeopardizes benefits to individuals, such as Social Security and Medicare, which depend on the use of a trust fund that carries over from one year to the next. We also know that in hard times the federal government may need to borrow in order to compensate for the revenue shortfalls for our states and our citizens.

Both states and families use controlled indebtedness in order to cover planned expenditures that they cannot afford with their yearly earnings. For example, our School Building Authority uses bonds in order to help build and repair schools. Many of our families have mortgages or student loans to pay for housing and higher education. The BBA would prevent the federal government from using these kinds of common sense fiscal tools.

A BBA, in particular, seems like a simple solution, and there is a lot of popular support for pursuing it. The best response to concerns about deficit spending is to demonstrate real leadership on fiscal policy at every level of government and to make these decisions in a thoughtful and balanced way instead of focusing on arbitrary ways to cut spending. As Robert C. Byrd said over two decades ago:  “I support a balanced budget, and I want to lower the federal deficits…But the answer must not be to perform a lobotomy on our nation’s most sacred principles of checks and balances and separation of powers . . . simply because we are frustrated.”

The leaders of our new legislative majority now have an opportunity to prove their ideas for improving the state’s economy. The fact is that, just like other states, we depend on federal funds in order to function. This is especially true for our aging population that relies heavily on Social Security, Medicare, and Medicaid. 

Oppose a Constitutional Convention of the States

Whatever your opinions are about a balanced budget amendment, we all agree that the U.S. Constitution is the backbone of our democracy and that any attempt to risk the foundation that it has provided for our country is misguided at best and disastrous at worst.

Whatever your opinions about a balanced budget amendment, perhaps we can at least agree that calling a constitutional convention for the first time in 227 years is misguided. Such a radical process would imperil the foundation of American democracy, our federal Constitution, which continues to serve us well today. – See more at: http://gbpi.org/reckless-budget-proposal-has-unintended-consequences#sthash.BDia57xB.dpuf
Whatever your opinions about a balanced budget amendment, perhaps we can at least agree that calling a constitutional convention for the first time in 227 years is misguided. Such a radical process would imperil the foundation of American democracy, our federal Constitution, which continues to serve us well today. – See more at: http://gbpi.org/reckless-budget-proposal-has-unintended-consequences#sthash.BDia57xB.dpuf

What Does Raising the Social Security Retirement Age Mean for West Virginia?

As part of the “fiscal cliff” and “grand bargain” deficit negotiations, some CEOs, politicians, and pundits are saying that raising the retirement age of Social Security should be on the deficit chopping block despite the fact that it does not contribute to the federal budget deficit. Raising the retirement age is usually premised on the idea that everyone is living longer and that we can afford to raise the age at which we receive Social Security.

The problem with this argument is that some are living much longer than others. As Ezra Klein (and others previously) noted last week in the Washington Post, life expectancy is largely a function of income.

As the above chart shows, male earners in the top half  (top 50%) have seen their life expectancy at 65 rise about 5 years over the last three decades while the bottom half saw their life expectancy at 65 rise barely a year. This is a crucial point for those advocating for an increase in the eligibility age of Social Security because clearly not “everyone” is living longer.

This could be a particularly acute problem in West Virginia, especially since it ranks as one of the poorest states in the country and it benefits more than any other state from Social Security for its income. While we cannot separate life expectancy based on income in the state, we can look at how average life expectancy rates in West Virginia compare to other states.  In 2009, West Virginia had the second lowest life expectancy in the nation at 75.2 years compared to 78.6 nationally. Factors contributing to our state’s low life expectancy is the disproportionally high number of disabled people,  our low per capita and median incomes, and a heavy concentration of workers in physically demanding jobs such as coal mining.  While the average life expectancy for males in the state was 72.3, it was just 78.1 for females, which was the lowest in the nation in 2009.

Looking more closely at individual counties in West Virginia you see even more evidence that females are not living longer. Among the state’s 55 counties, 18 saw a decline in female life expectancy over the last two decades. In McDowell County, which is one of the poorest counties in the state and nation,  female life expectancy declined by 1.7 years, from 75.8 in 1987 to 74.1 in 2009. 

There is also a large racial gap in life expectancy. In 2009, the average life expectancy for black males was nearly three years shorter than white males, 69.6 compared to 72.5. White females are living nearly three in a half years longer than black females in the state (78.1 compared to 74.7) . As the graph below shows, black females have also witnessed a decline in life expectancy over the last two decades, from 75.1 to 74.7.

It also important to keep in mind that the above life expectancy rates are “averages.” This means that a majority of folks in the state are below the average, especially lower-income folks who tend to not live as long. Because of the state’s low life expectancy and income, raising the retirement age of Social Security means that the state – and especially the high number workers in low wage jobs – will benefit far less from Social Security than other states and those with higher incomes. 

Raising the retirement will also hurt workers in the state that work in physically demanding jobs that tend to retire before 65, such as coal miners and construction workers. In contrast, people with desk jobs, like me, are likely to work well beyond 65.

Keeping all of this mind when debating whether to raise the Social Security retirement age is not only important to our state’s working families and economy, but it is also important if we want to live longer and keep more of our seniors out of poverty.

 

 

 

Romney/Ryan Budgets: How Would They Impact West Virginia?

While there has been a lot of debate about how President Obama’s environmental policies would hurt West Virginia’s coal industry and economy, there has been very little discussion about the impact of  Governor Romney and Representative Paul Ryan‘s proposed policies on the Mountain State.

Both Romney and Ryan have proposed drastic changes to federal spending and programs that could dramatically impact families in West Virginia. These policies could especially impact elders and low-wage workers in the state.  While both Romney and Ryan have proposed repealing the Affordable Care Act, they have also outlined specific budget proposals that would cut federal programs such as Medicare, Medicaid, Social Security, and non-discretionary federal spending.

West Virginia’s economy is especially vulnerable to cuts in Medicare, Medicaid and Social Security because of its growing elder population and the high number of low-income families in the state. In fact, West Virginia relies more heavily on Medicare, Medicaid and Social Security for its personal income than any other state in the country. 

For example, in 2011 approximately $12.7 billion or 20.5 percent of the state’s $62 billion in personal income came from Medicare, Medicaid, and Social Security. The U.S. average was 12.8 percent.  Among the 50 states and the District of Columbia, West Virginia relies more heavily on these three programs for personal income than any other state in the country (see chart below). As mentioned above, the central reason why West Virginia relies heavily on these three programs is because the state has the second highest share of people over 65 years old in the country. Another reason is our state’s lack of economic diversity and opportunity, the high number of low-wage jobs (Wal-Mart is our #1 employer), and the long history of poverty associated with the booms and busts of the extractive industry. 

For comparison, only 5.5 percent or $3.4 billion of personal income in 2011 was derived from coal mining and natural gas extraction – two of the largest industries in the state. Medicaid comprised 4.4 percent, Medicare 6.6 percent, and Social Security 9.5 percent. Approximately 1 out of 4 state residents (24 percent or 443,911) received Social Security benefits in 2010 and 1 out of 5 (20.5 percent or 373,450) were insured by Medicare and 17.4 percent or 416, 858 were insured through Medicaid in 2009. A total of 113,00 seniors in West Virginia were lifted out of poverty by Social Security.

So how would Romney and Ryan’s proposed federal budget policies would impact the Mountain State? Let first look at the three programs discussed above.

Medicare: Rep. Ryan’s 2012 budget (which passed the House in March of 2012) would raise the eligibility age of Medicare from 65 to 67 and would replace Medicare’s guarantee of health coverage with premium-support payments (sometimes called vouchers) to seniors starting in 2023. The first change would mean many our state residents who are 65 or 66 years-old would lose health coverage because they would not have access to Medicare, employer-based plan (or PEIA if they are state employees or school teachers), or the health care exchanges. They would be forced to buy coverage in the individual market, which many could not afford. Because of the limited growth in premium support payments in the Ryan budget, the Congressional Budget Office projects that by 2022 an average 67-year-old beneficiary would see their out-of-pocket expenses nearly double – from $6,150 to $12,500 – compared to traditional Medicare. The Romney budget to cap total federal government spending at 20 percent  would reduce Medicare by $1 trillion from 2014-2022, according to a recent report by the Center on Budget and Policy Priorities. In 2011, WV received $4.1 billion in Medicare transfers or about 0.75% of total U.S. Medicare transfers. Assuming the same share of US costs, this would amount to $7.5 billion of lost Medicare payments in WV from 2014-2022.

Medicaid: Rep. Ryan’s budget would repeal the Affordable Care Act, thereby repealing the ACA Medicaid expansion, and turn Medicaid into a block grant program. According to a recent Kaiser Family Foundation report, this would reduce federal Medicaid spending by $1.7 trillion between 2013 and 2022. All together, this would reduce Medicaid spending in West Virginia by 38% or $15.9 billion over this time period. The report also points out that this would reduce enrollment in Medicaid between 216,000 and 259,000. If WV wants to avoid the cuts due to the block grant it will have to spend an additional $1.2 to $2 billion from 2013 to 2022.  An analysis of Romney’s budget shows that federal Medicaid spending would be reduced between 44 percent and 61 percent or $1.5 and $1.9 trillion from 2014 to 2022. 

Social Security: While Ryan is on record of supporting the privatization of Social Security and his Road Map for American’s Future  includes plans to partially privatize the program, his budget proposal did not include any drastic changes to Social Security. Romney has been on record advocating for raising the retirement age, indexing benefits, and not increasing the payroll tax to shore up the solvency of the program. A recent report from the Center for Economic and Policy Research shows that this would hit low-income families the hardest and would increase income inequality.

Romney and Ryan’s budget would also dramatically reduce spending on a whole host of other federal programs. For example, under Romney’s budget would require deep cuts in SNAP (food stamps), Children’s Health Insurance Program (SCHIP), and  non-discretionary programs such as aid to elementary and secondary education, veterans’ health care, law enforcement, highways and mass transit, national parks, environmental protection, biomedical and scientific research, housing assistance, the weather service, and air traffic controllers. A recent analysis of Ryan’s budget shows that it would make deep cuts in SNAP that would impact WV. Of the proposed $134 billion in SNAP cuts in Ryan’s budget from 2013-2022, it would cost WV approximately $840 million over this ten year period. Under Ryan’s budget  plan, West Virginia would also lose an estimated 22 percent or $195 million in federal funding for education, clean water, law enforcement, and other state and local services in 2014 alone. Ryan’s plan also would shift other very large costs to West Virginia  by reducing sharply federal funding for highway construction and other transportation projects.

While it is unclear how these policies would unfold if Romney and Ryan are elected in November, it is very clear that they would have a dramatic impact on West Virginia’s economy and especially the state’s  elderly and working families.  While Obama’s proposed regulations on air-pollution and green house gases will impact  the state’s coal economy, it is abundantly clear that Romney/Ryan plans to repeal the Affordable Care Act, drastically reduce federal spending over the coming decades, turn Medicaid into a block grant, and replace Medicare with a voucher plan will have a far greater and pervasive impact on working families in the Mountain State.

Raising the Social Security Tax Cap

Last year, legislation was introduced in Congress to apply the Social Security payroll tax to earnings above $250,000, to help alleviate Social Security’s long term budget shortfall.

Currently, wages over a certain yearly total ($110,100 this year) are exempted from Social Security payroll taxes. Raising or eliminating this cap could help strengthen Social Security’s finances, but for how long and who would it affect?
 
In 2010, the Congressional Research Service looked into the question, and analyzed four different scenarios, shown below.
 
Under current law, the Social Security Trust Fund is projected to be exhausted in 2041 (now revised to 2038), and then run a long term deficit of 1.92%.
 
Option 1 would make 90% of all earnings subject to the tax (which would have been an effective cap of $171,600 in 2006), and also increase benefits to those paying higher taxes. This would have only made the trust fund solvent until 2044, and then run a long term deficit of 1.09%. Over the long term, only 43% of the shortfall would be met.
 
Option 2 would eliminate the cap, but also increase benefits accordingly. This would keep the trust fund solvent beyond the 75 year projection, but Social Security would continue to run a small deficit of 0.1%.
 
Option 3 eliminates the cap, but does not increase benefits. This too keeps the trust fund solvent, and Social Security would actually run a long term surplus.
 
The current legislation in Congress, eliminates the cap for incomes above $250,000, creating a “donut hole” in the payroll tax from $110,000 to $250,000, but wouldn’t increase taxes for anyone making under $250,000.
 
According to Chief Actuary of the Social Security Administration, this proposal would also keep the trust fund solvent for at least 75 years, and the program would run a long term surplus.
 
How many people would be paying higher taxes under this proposal? According to CEPR’s estimates using the 2010 ACS, about 1.96 million workers earned incomes over $250,000, or about 1.4 percent of all workers. The effect in the Mountain State would be even smaller. Only 328 workers earned more than $250,000 in West Virginia, effectively 0.0 percent of all workers.
 
The small number of those affected by the proposed elimination of the cap is unlikely to increase. According to the above CRS report, 83% of workers never earn over the current cap in their lifetime, and only 5% earn over the current cap for more than 6 years. Eliminating the cap on income over $250,000 would affect very few workers, even as they move through income levels.
 
Seeing that Social Security makes up 9% of the state’s personal income, and is likely to grow, it is important for West Virginia’s economic future that the financial state of Social Security is strengthened and protected.

Government plays key role in keeping people out of poverty

Approximately one in seven West Virginians found themselves in poverty during the recession years of 2008 and 2009. This number would have been even higher without crucial assistance from government programs (Figure 1).

Figure 1. West Virginians in poverty with and without government programs

Source. Current Population Survey, Annual Social and Economic Supplement, 2010. Microdata analysis by author.

If West Virginia families had relied solely on their own resources and on assistance from their employer, relatives and friends, or non-governmental agencies, twice as many people – an additional 272,000 people – would have been in poverty. Without governmental aid, three in ten West Virginians would have found themselves below the poverty line.

Two programs in particular proved to be the greatest anti-poverty tools. Social Security had the largest effect, keeping nearly 217,000 people out of poverty. This roughly equals the combined population of Charleston, Huntington, Morgantown (including students), Wheeling, and Parkersburg! The effectiveness of this program might be dampened in 2010 and 2011, because benefits will not increase by a cost of living allowance.

Unemployment insurance also played a key role in keeping many West Virginians out of poverty. As joblessness rose in the state, more unemployed workers qualified for assistance. In addition, provisions in the Recovery Act that increased weekly benefits and weeks of benefit coverage made unemployment insurance an even more effective anti-poverty program. Without these jobless benefits, an additional 15,000 people in West Virginia would have been in poverty.

Hoppy, just say you want to privatize Social Security

Hoppy Kercheval’s commentary today about how politicians are “raiding Social Security” illustrates his long confusion with the program and his desire to privatize or gut the program. Hoppy seems to be getting his inspiration from this Wall Street Journal article.

As we’ve illustrated here and here, Social Security is a basic means of survival for many of our elderly. Not to mention that those near retirement who have very little in wealth will be depending more on the program.

 
According to the Social Security Trustees Report, and much to Hoppy’s chagrin, the trust fund will be able to keep paying full benefits through 2036 without any changes in the program. At this time, Social Security could still pay 75 percent of the scheduled benefits for many decades after this date. Modest changes in taxes and benefits to the wealthy could put the program on sound footing indefinitely. 
 
Hoppy notes correctly that 2010 is the first year since 1983 in which the program’s total expenses exceed its tax income. The reason for this imbalance is the current recession. The actuaries predict that this imbalance will shrink dramatically in 2011 and pretty much disappear in 2012 (although it will return in 2015). The good news is that during this period the trust fund will grow because of the interest income the trust funds will receive from the Treasury bonds they hold. 
 
As for “raiding” Social Security money, let me paraphrase economist Dean Baker. It makes about as much sense to say the Daily Mail raided my bank account as to say the government has been “raiding” Social Security. As Baker notes

There was absolutely nothing improperly done with Social Security money. It was used to buy government bonds. Readers of a business paper like the WSJ Daily Mail may have thought that its reporters  commentators understood how U.S. government bonds work.

The Social Security trust fund will redeem the bonds when they are needed to pay benefits, just as private citizens and corporations often buy bonds and then sell them off when they need the money for some other purpose. In the meantime, the government used the money it borrowed for other purposes. That is the way government bonds and other bonds work. It is also exactly how the law was been written, and it has been followed.


Social Security Prevents Poverty for 120,000 of West Virginia Elderly

According to the national Center on Budget and Policy Priorities , many of West Virginia’s elderly would be living in poverty, if not for Social Security. According our recent report, about 30 percent of West Virginia seniors rely solely on Social Security in retirement.

 
 
What’s particularly surprising is the significant number of children who receive social security benefits in West Virginia. 
 
 
CBPP estimates that Social Security lifts more than one million children out of poverty nationwide, along with 13.2 million elderly Americans.