What Does "Means Testing" Mean to You?

An ABC News poll dated July 17th asks "adults" (not voters) what they think about the debt talks in Washington.  Question 20 asks: "In order to reduce the national debt, would you support or oppose [ITEM]?"  Items include raising taxes on hedge fund managers (64% approve); raising taxes on those earning over $250,000 a year (72%); cutting spending on Medicaid (26%); and raising Medicare premiums for wealthier retirees (61%).  This last item is referred to as "means-testing."

As the debt arguments have progressed, I have noticed a rise in the use of the phrase "means testing" (especially in relation to Social Security and Medicare.)  What I haven't heard or read is a clear explanation of how this "test" would be applied in "real life"?

For example, given how most IRA accounts and home values have been decimated by the economic recession, and how dicey the markets will be going forward, it seems unreasonable to assume that the average retiree could necessarily count on income other than Social Security from year-to-year.  So one assumption is that benefits would get paid to everyone and the "means test" would be part of the income tax returns process.  But I don't know if this is correct. 

Or does it mean we have to create a new reporting system -- that considers medical benefits as "income" -- even though other insurance pay-outs are tax-exempt?  Since most insurance pay-outs are the result of unforeseen circumstances (whether damage to one's home or car or body) why would Medicare (as health insurance) be taxed differently from other insurance?  And why is civilian insurance (Medicare) "means tested" while VA benefits are off limits?  Especially since all workers pay into the Medicare system, while members of the armed services don't.

Or one could change the funding of Social Security to include all taxable income (not just the current $109 K "wage base") so those in the upper 2-3% contribute more equitably to a system from which they derive basic income "security" should their situation change after retirement.  (See my earlier blog entry for more details.)   In the poll, 66% of those interviewed approve this option.

You can see that one can travel down a very circuitous road when dealing with the realities of what seems to be a simple and reasonable limitation to "entitlements."

So I ask for clarification:

What is meant by the term "means testing" and how would it be applied in "real life"?

I look forward to your thoughts on this topic.

Image information:
March 13, 2008, Blairsville, Georgia; AARP Tax-Aide program offers free one-on-one counseling.

Credit: Janice Boling, Writer/Photographer for the North Georgia News

The GOP Assault On Jobs

During the past few weeks much of the focus in the media has been on the GOP's union-busting activities.

These assaults on middle class workers have taken a wide range of forms:

– Stripping public employees of their right to negotiate effective contracts (Wisconsin);

– Downsizing the unions by converting employees to "at will" status when the union contract comes due for renegotiation (New Hampshire);

– Creation of state-appointed "emergency financial managers" who can dissolve legal agreements including (surprise) union contracts and take over cities and school districts (Michigan);

– An attempt by Maine's Republican governor to dismantle a union-history mural installed in the state's Department of Labor;

– Even an attempt to intimidate a university history professor (Wisconsin).

In all this, the party that rolled to victory in 2010 by saying its agenda was to create jobs has not made an effective case that explains how union-busting and worker intimidation create even one real job.

The Republicans focus on budget cuts instead of infrastructure investment (which contributes to our country's long-term growth.)  They act as if helping people get jobs with decent pay and benefits is fiscal madness – even though such actions would help these workers buy things and pay taxes again (as opposed to drawing unemployment benefits or depleting their remaining retirement savings.)

Of course, if people went back to work and bought things and paid taxes then the economy itself would pick up, more jobs would be created and more revenue would flow into government coffers – federal, state and local. Then there would be a budget problem – but not a budget crisis.  And the GOP needs everyone to believe there's a crisis so the voters will be afraid and Republicans will win big in the upcoming 2012 elections.

At least, that's how they're acting.  And their "jobs program" backs up this skepticism.

Robert Reich, Clinton's former Labor secretary, focuses on the "big lies" Republicans put out there as their jobs "program":  Tax Cuts for truly wealthy individuals ($1 million +); Corporate Income Tax Cuts; Cuts in Wages and Benefits; and Elimination of Regulations.  They claim these four actions will create jobs – when history proves they actually increase the deficit, undermine middle class earning power, and deplete our ability to maintain our nation's infrastructure. 

These "ideas" are not new; they are a reintroduction of Reagan era trickle-down voodoo economics. They didn't create jobs in the 1980s and they were a downright failure in the 2000s.  The tax cuts (exaggerated by two unfunded wars) have led to a "budget crisis" which the GOP claims only more tax cuts, regulatory cuts, and lowered wages will "solve."  Wage and benefit cuts have led to a major loss of real income for the middle class and working poor.  De-regulation led to the worst economic recession since the 1930s and the Gulf oil spill disaster.

Rachel Maddow says clearly "It's not about the budget."

This is about a lot of things. This is not about a budget. This is using or fabricating crisis to push for an agenda you'd never be able to sell under normal circumstances. And so you have to convince everyone that these are not normal circumstances. These are desperate circumstances and your desperate measures are therefore somehow required.

Given this situation, it's time for President Obama to call the Republican bluff.  He needs to say clearly that the budget "crisis" continues into the future primarily because revenue is down.  There are two primary reasons for the reduced inflow of cash:

– Unemployed people don't pay taxes; and people who earn less (due to frozen or cut salaries) pay less tax.

– The tax rate on those industries which gained during the past decade (such as banking, finance and energy) is too low; they aren't covering the cost of government services that benefit them (energy subsidies, bank bail-outs, lax regulations and enforcement.)

Obama needs to change the conversation back to real Job Creation.  As long as he goes along with the budget "crisis" argument, he is missing the larger issue: the corporate assault on working Americans. 

The American people understand this as two March 2011 polls show:

– The CBS News poll identified the Economy/Jobs as the number one national priority (51%); Budget deficit/national debt came in a distant second (7%)

– Bloomberg: Unemployment and jobs were number one with 43%, Federal deficit and spending gets 29%, more votes, but still second place.

Candidate Obama knew this too:

…Real change isn't another four years of defending lobbyists who don't represent real Americans - it's standing with working Americans who have seen their jobs disappear and their wages decline and their hope for the future slip further and further away.  

– Spartanburg, SC | November 03, 2007

I look forward to hearing President Obama reaffirm this commitment to the country's top priority: meaningful jobs for all those who want and need to work.

Photo credit

Sally Fields, Norma Rae, released by 20th Century Fox, 1979.