Sunday, December 11, 2016

Social Security

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social-security-insolvent

Washington D.C. has been telling America for years that the Social Security system is headed to inexorable demographic doom. Typically, though, the estimates have been far enough into the future for present politicians to safely ignore what has been called “the third rail of American politics.”

That illusion of safety in distance from the event was shattered Wednesday, as trustees of the Social Security disability trust fund reported that the program will be insolvent next year. The retirement fund will make it longer – until 2035, according to the trustees – but calls are already emerging for congress to take action to prevent the bankruptcy of the disability portion of the Social Security programs.

Of course, congress’ actions are limited. They can either raise taxes which is never a winner in an election year, they can borrow money from the retirement fund, they can take on more debt, or they can cut the programs. All of these options are bad for individual politicians who have to answer to voters, and the temptation to simply take on more debt and allow the Federal Reserve to Quanititatively Ease our way out of the immediate emergency is surely powerful.

President Obama advocates a different path of little resistance, that of raiding the retirement fund to prop up the disability fund. “The president has proposed a common-sense solution to improve the solvency of this fund in the short run so that Americans who rely on it will continue to receive the benefits they need,” Treasury Secretary Jacob Lew said.

Meanwhile, the two houses of congress are fighting over proposed highway funding bills that advocate taking that same Social Security money. There is no clear indication of how many programs that are not Social Security the Social Security funds are actually expected to finance.

Currently, 11 million Americans receive Social Security disability benefits to the tune of $1,017 per beneficiary per month. Insolvency triggers an automatic 19% cut in benefits. In a rational world, insolvency would end the program entirely. Regrettably, our politicians left rationality far behind.

Untrammeled entitlement spending is a huge part of the financial meltdown currently ongoing in Greece, and the US would do well to learn some lessons from the Greek situation. The population stopped working, government programs paid them to do so, Greece borrowed money to fund its unsustainable programs, and eventually ran out of other people’s money.

Some parallels are evident in America’s current economic situation. Since Obama’s election in 2008, home ownership has declined across all demographics, childhood poverty has jumped from 18% to 22%, dependence payouts have doubled to $74 billion annually, the national debt has doubled to $18 trillion, the median household income has declined almost $3,000 annually, and 17% of the middle class fell out of the middle class. In short, we’re earning less, owning less, working less, borrowing more, and living more off the government. Too bad we don’t have an oppressive Euro Zone to blame.

Another huge similarity between the US and Greek situations is immigration. In America, illegal immigration across a porous border leads to pockets of mostly Mexican illegals associated with lower employment, higher rates of violent crime, and increased drug use. In Greece, illegal immigration across a porous border leads to pockets of mostly Islamic illegals associated with lower employment, higher rates of violent crime, and increased drug use. In both countries, the influx of illegals also strained the government entitlement systems, leading to more borrowing and, in the case of the USA, more taking from Social Security.

It’s hard to see the Social Security crisis as the tipping point for the American economy entering a Greece-like death spiral. After all, Greece has a debt-to-GDP ratio over 200%, while America’s is only at 104%, about the same as Cyprus when Cyprus… entered a Greece-like death spiral.

Clearly, the country must make some difficult changes in how it approaches Social Security. A great first step would be to stop raiding the funds for whatever harebrained scheme needs a few bucks. Another good idea is to crack down on fraud, which cost the program $14 billion over the last decade according to one study.

Whatever is done, kicking the can down the road and letting the next person deal with the problem is not going to make it easier. It’s just going to make it less painful for the Obama administration and the present congress.

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It is well known that President Barack Obama has little chance of moving any part of his gun control agenda through Congress but that hasn’t stopped him from using his regulatory powers to expand the list of people prohibited from owning guns – even if that means going door to door to confiscate them.

That’s exactly what President Obama intends to do to Social Security recipients who own guns, and here’s how he’s going to do it.

If a Social Security recipient seeks help in running their health, financials or other personal affairs, the Obama administration wants to declare that recipient incompetent to own or use firearms for hunting, shooting or self-defense.

This is according to a report in Los Angeles Times and the Second Amendment Foundation that has jumped on this power grab with both hands.

According to the president’s plan, millions of Americans who receive monthly disability payments or Social Security benefits handled by others will be added to the list of “disqualified persons” in the U.S. Justice Department’s instant criminal background check system run by the Bureau of Alcohol, Tobacco, Firearms and Explosives (BATFE)

The twisted administration’s reasoning is, if someone “can’t” handle their own affairs, how can we trust them with guns. The Obama Administration is relying on language in federal gun laws that say “restricted people” are those who are unable to manage their own affairs due to “marked subnormal intelligence, or mental illness, incompetency, condition, or disease.”

And unelected, unaccountable bureaucrats get to decide. On their own authority, if the Social Security Administration is sending your benefit checks to a financial planner, an estate trustee or a law firm, you’re out – no guns for you.

Moreover, if records show that you already own a firearm after matching up Social Security records with background check and purchasing records, you face a knock on the door by a federal gun ban bureaucrat with a search and seizure warrant for your firearms.

Up until now, Social Security has never taken part in the background check system. The same is true for the Department of Veterans Affairs system, which “floated the idea”. If regulations with the force of law are approved, then millions of beneficiaries could be affected.

The administration’s plan is to depict people who have help managing their affairs even for reasons of ease and choice, will be depicted as tottering old fools struggling with Alzheimer’s who can’t find their way home.

That’s the administration’s argument!

The administration would deny the most vulnerable people in the country – the old and infirm – from having the ability to defend themselves against criminal attack and critics like the Second Amendment Foundation (SAF) are having none of it.

In a press statement released by SAF, the organizations said:

“The Second Amendment Foundation today responded to published reports that the Obama administration is pushing to prevent citizens collecting Social Security benefits from owning guns if they have problems managing their own affairs as proof the president wants to strip as many people as possible of their Second Amendment rights while he remains in office.”

“This could possibly disqualify millions of people from owning firearms and might prevent many others from seeking help,” said SAF founder and Executive Vice President Alan M. Gottlieb, himself a U.S. Army veteran.

“It’s unconscionable that someone who might have problems balancing a checkbook or managing their finances would suddenly find himself or herself stripped of their right to keep and bear arms.”

According to the Los Angeles Times, the plan “could potentially affect millions whose monthly disability payments are handled by others.”

Even more outrageous is the reports assertion that senior who receive benefits from the Social Security Administration will be grouped in with felons, drug addicts, immigrants in the United States illegally, and others. Gottlieb said:

“The Obama administration wants to equate some Social Security recipients who own guns with felons, drug addicts and illegal immigrants. That’s not simply insulting, it’s insidious, because who knows where this could lead?”

“What’s next?” “Will they take away someone’s right to vote, claiming they’re not competent?”

Published research estimates about 4.2 million adults are now receiving monthly Social Security benefits that are managed by someone else, designated as “representative payees.”

“What may seem reasonable to people who reflexively support any and all gun control is really just one more effort by the Obama White House to erode Second Amendment rights any way they can,” Gottlieb stated.

“Taking away someone’s Second Amendment rights because they can’t manage their finances is wrongheaded and repugnant.”

The Second Amendment Foundation (www.saf.org) is the nation’s oldest and largest tax-exempt education, research, publishing and legal action group focusing on the Constitutional right and heritage to privately own and possess firearms.

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At a time when the federal government is running hundreds of billions of dollars in annual budget deficits… is carrying a national debt of well over $18 trillion dollars… and with unfunded entitlement programs trillions of dollars in the red… the Social Security Administration (SSA) overpaid nearly $17 billion in fraudulent SSA disability payments over the last decade.

According to an audit of the SSA’s books by the Office of Inspector General (OIG), some beneficiaries were paid disability benefits for 10 years even though they were ineligible including 216,070 payments to fugitives and prisoners.

The OIG based its estimate of $16.8 billion overpayments on a sample of more than 1,500 Americans who received disability benefits since 2003 that found nearly half were overpaid.

“Our review of 1,532 beneficiaries in current pay status as of October 2003 found that over a 10-year period (from October 2003 through February 2014), SSA assessed overpayments for 44.5 percent of sampled beneficiaries,” the audit said.

“SSA assessed overpayments totaling about $16.8 billion between October 2003 and February 2014 for approximately 4 million beneficiaries who were in current payment status in October 2003…” according to the audit document.

Of that, the agency was able to recover approximately $8.1 billion, though it is still trying to retrieve $6.3 billion in benefits.

The average beneficiary in the OIG’s sample received improper payments for 14 months. Most earned too much or were able to work, making them ineligible for disability. The findings also included 209,643 payments to dead people.

Frank Cristaudo, counselor to SSA Commissioner Carolyn Colvin, said federal law requires the agency to continue paying beneficiaries who may be medically ineligible until after they appeal, a process that can take years.

“We appreciate OIG’s follow-up work from the previous review”…“While the report does not contain any recommendations, we suggest some further clarification of the text of the report,” Cristaudo said.

“During our review of the preliminary findings, we suggested that the OIG clarify the characterization of payments made during the appeal of a medical continuing disability review (CDR) determination to cease benefits,” he said.

“We are required to continue payments for the duration of an appeal, and these payments are later deemed overpayments if we uphold the CDR cessation on appeal. These payments are clearly not ‘improper’ as that statute requires that we make the payment.”

The SSA began conducting annual audits of the SSA disability program at the request of Senator Charles Grassley (R-IA) back in 2006. The audit also revealed that:

The SSA “prevented about $8 billion in overpayments between October 2003 and February 2014 to approximately 1 million beneficiaries in current pay status in October 2003 by suspending monthly payments.”

When asked for his response to the audit results, Senator Grassley said:

“Every dollar that goes to overpayments doesn’t help someone in need. Given the present financial situation of the Social Security Disability Insurance (SSDI) Trust Fund, the program cannot sustain billions of dollars lost to waste.

While the complete elimination of overpayments for either the SSDI or Supplemental Security Income (SSI) programs may not be feasible, the agency is failing beneficiaries and needs to improve its work to rein in the problem.

Congress also may need to look at what additional tools could be provided to further track down and prevent overpayments.”

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social-security

In an incredible application of “one size fits all” bureaucratic rulemaking and doublespeak, the Social Security Administration (SSA) has signed off on disability benefits for hundreds of Puerto Ricans because they do not speak English despite the fact that they live in the predominantly Spanish-speaking territory.

This finding comes from a new audit by the Office of Inspector General (OIG) that says the SSA is misapplying rules intended to provide financial assistance to individuals who are illiterate or cannot speak English in the United States. Apparently, under the rules, Puerto Ricans may receive disability benefits because they are unable speak English well in Puerto Rico.

According to the OIG:

“We found the Agency did not make exceptions regarding the English-language grid rules for claimants who reside in Puerto Rico, even though Spanish is the predominant language spoken in the local economy…”

The audit concluded that someone applying for disability in Puerto Rico who cannot speak English “may increase his/her likelihood of receiving disability benefits.”

The exact number of Puerto Rico residents who receive disability for language reasons in the U.S. territory is not known because there is no system in place to track them.

That is not the only reason why Americans living in Puerto Rico have it easier than their brethren on the mainland. According to tax and litigation expert Robert W. Wood writing in Forbes Magazine:

“Puerto Rico is a U.S. Commonwealth. It is part of the U.S. but in some ways still independent. Its tax system is a hybrid, part of the U.S. and well, not.

If you can really move yourself and/or your business, you may be able to cut your income taxes down to almost nothing. You have to be careful, though. The interaction between the IRS and taxman in Puerto Rico is nuanced, requiring some Puerto Ricans to file with the IRS, some with the Puerto Rico Department of Finance, and some with both.”

And the incentives to move are incredible. Once you qualify, the maximum income tax rate in Puerto Rico is just 4%. In addition, after you become a resident, taxes on interest, dividends and long-term capital gains on appreciated properties are zero.

Compared to California, where the maximum federal income tax rate is 39.9% and state income tax rate is 13.3%, a move to Puerto Rico could double your disposable income by 100% or more.

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social-security

The Social Security Administration (SSA) Inspector General released an audit earlier this month concerning enrollment numbers in the Social Security system to get a handle on waste fraud and abuse that contained some shocking numbers.

The audit revealed that there are 6.5 million people with active Social Security Numbers (SSN’s) on the agency’s database of beneficiaries over the age of 112. If these numbers sound impossible, that’s because they are.

The SSA says the problem has to do with bookkeeping. It seems that the overwhelmingly high number of eligible beneficiaries are phantoms – electronic records called a “Numident” that have not been updated with a “death date”. The March audit concluded that the:

“SSA did not have controls in place to annotate death information on the Numident records of number holders who exceeded maximum reasonable life expectancies and were likely deceased.”

This begs the question: How many of these phantoms are dead and of those who are, have third parties used their SSN’s to collect benefits fraudulently? The SSA has an answer – sort of.

According to the audit summary for tax years 2006 through 2011 the, 66,920 SSNs reported approximately $3.1 billion in wages, tips, and self-employment income but the names on income reporting documents did not match the names for the SSA’s on file. In addition, employers made 4,024 E-Verify inquiries (eligible to work in the U.S.) using 3,873 SSNs belonging to holders born before June 16, 1901 between 2008 through 2011.

It is widely believed that SSN belonging to dead people are used to fraudulently to open bank accounts, allow illegal immigrants to apply for work, file false tax returns for refunds and to file disability claims – with some individuals and even gangs using one or more SSN numbers at a time.

Sen. Ron Johnson (R-Wis.), Chairman of the Homeland Security and Governmental Affairs Committee said:

“It is incredible that the Social Security Administration in 2015 does not have the technical sophistication to ensure that people they know to be deceased are actually noted as dead”…

“Tens of thousands of these numbers are currently being used to report wages to the Social Security Administration and to the IRS. People are fraudulently, but successfully, applying for jobs and benefits with these numbers. Making sure Social Security cleans up its death master file to prevent future errors and fraud is a good government reform we can all agree on”.

The committee’s ranking member Sen. Tom Carper (D-Del.) said the findings are “major problem” that wastes taxpayers’ money, exposes citizens to identity theft and undermines confidence in government. To quote Sen. Carper:

“It is simply unacceptable that our nation’s database of Social Security numbers of supposedly living people includes more than six and a half million people who are older than 112 years of age, with a few thousand having birth dates from before the Civil War. Preventing agency errors by keeping track of who has died is a relatively simple problem that the government should pursue as a high priority.”

The use of SSN’s belonging to those who have died and have not been added to the SSA’s “Death Master File” also represents a national security threat. A terrorist could use an SSN to get a driver’s license, secure a birth certificate and obtain other identifying documents that can then be used by a terrorist – particularly the homegrown kind – to blend into a community before striking.

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