A USER FRIENDLY GLOSS ON THE CBO REPORT "Social Security Policy Options” JULY 2010
by Dale Coberly
“SOCIAL SECURITY POLICY OPTIONS” JULY 2010
A USER FRIENDLY GLOSS ON THE CBO REPORT
The first thing that strikes me about the CBO report is that the language is unnecessarily negative. They tell you that Social Security is running out of money. They tell you this three times in three ways. They don’t tell you that this means a whole lot less than you think it does.
They say “for the first time since…1983…outlays will exceed…annual tax revenues.” They don’t tell you that in 1983 the tax was increased exactly so that revenues would exceed outlays, increasing the size of the “Trust Fund,” in order to create a bigger reserve to carry Social Security through times, like the present recession, when outlays exceed revenues.
It has long been known that through this increased Trust Fund the baby boomers have paid in advance for their own retirement. But CBO just forgets about the Trust Fund and says “starting in 2016…the program’s annual spending will regularly exceed its revenues.” Forget about the two and a half trillion dollars the program has in the bank.
CBO tells you that “the trust funds… will be exhausted in 2039.” But they don’t tell you that Social Security can go right on paying benefits on a “pay as you go” basis, just the way it was designed to do. This could require a reduction in the “replacement value” of benefits, but not a reduction in their “real value” as compared to today’s. The “replacement value” is the amount of the monthly benefit as a percent of the worker’s adjusted average lifetime monthly income. (The “adjusted” income includes an effective interest that is equal to inflation plus the increase in average national per capita real incomes for each the year since the tax was paid on that income.) The reason the reduction would be needed is that the next generation of retirees are expected to live longer than the last. To avoid a reduction in monthly benefits, the same replacement rate could be paid, over the longer life expectancy, with a payroll tax increase at that time of about 1.9% of payroll for each the worker and his boss.
They do manage to tell you in a footnote that to bring Social Security “into actuarial balance over the 75 years, payroll taxes would have to be increased 1.6%.” This is about eight dollars per week for a worker making 50,000 dollars per year. They are not in a hurry to tell you that there is no need to increase the tax that eight dollars per week today. There is no need, and much harm in raising the tax too soon. All it would do would be to increase the Trust Fund… increase the amount of money that Congress “borrows” from Social Security and then blames Social Security when it doesn’t want to pay it back: “you should have taken the bottle away from me. you know I can’t be trusted.”
The eight dollars doesn’t need to be paid today. It can and should be phased in over about forty years. A rate that would never be “felt” as more than 80 cents per week. but would average twenty cents per week per year while incomes were going up an average of ten dollars per week per year. (Again, these amounts are in today’s money.)
I don’t quite know what to do about people who would think that saving an extra eight dollars per week so they can retire “on time” is an intolerable burden. And for those who think the eight dollars the boss would contribute is really “my money,” all i can say is, you aren’t getting it today, so you won’t miss it if the boss puts it in a savings account for you.
If you work for yourself, and pay both shares, and make near or over the top of the SS-taxable income, you would be looking at an extra 32 dollars per week. This is not an insignificant amount of money, but it is a good investment as insurance, especially as you will almost certainly get all of it back, with interest, when you retire. And remember it is 32 dollars out of about 2000 dollars per week….or more, depending how much over the cap you earn. It’s not something you would actually notice unless you obsess about what you “might have gotten” by investing, and risking, it on the market.
My guess is that if you are going to make big money on investments, you can find something other than your Social Security money to invest and risk. Then if the unthinkable happens and your investments fall through, or you become disabled, or your job becomes obsolete, you would still have about 2000 dollars a month (in today’s money) Social Security to live on. Not a lot by your standards, maybe, but a hell of a lot better than living out of a dumpster.
CBO tells you that the “gap” between revenues and scheduled benefits is 0.6% of GDP.
They don’t tell you that this is not a lot of money to pay for feeding and housing and providing modest comforts for about one fourth of the population. Or that the people getting the benefits will have paid for it themselves. That is, the people paying the tax will get their money back with interest. Perhaps they don’t want to have to try to explain “pay as you go” to people who think that money they put in a bank is kept in a locked box for them, growing interest by spontaneous generation.
A lot of people don’t realize that 0.6% is 60 cents out of a hundred dollars.
Surely the workers of America can find a better use for that kind of money than to save it for their own retirement.
THE POLICY OPTIONS
Page xi of the summary gives an overview of the effect on the actuarial gap of various policy options. The chart is poorly labeled. It is not clear that the values given are in “percent of GDP,” so you would have to know, for example, that a value of 0.6 on the chart is actually 100% of the actuarial gap.
Then you would have to be careful about reading the policy options. For example the second option “increase the payroll tax rate by 2 percentage points over 20 years” actually closes the actuarial gap entirely. Why then does the third option, “increase the payroll tax rate by 3% over 60 years, only close the gap by .5%of GDP (which is 83% of the entire gap)?
The answer is that 2% over 20 years is a full tenth of a percent per year, while 3% over 60 years is a tax increase of half a tenth of a percent per year. This means that after 20 years the second option has raised the tax 2%, while the third option would only have raised it by 1%. By year 40, when the third option catches up to 2%, the higher tax phased in earlier by the second option would have had its effect on the 75 year gap enhanced by the interest it has been earning from the excess it collected over what was needed to pay expenses in the earlier years.
On the other hand, by reaching a tax rate of 3% instead of 2%, the third option is much closer to closing the actuarial gap for “the infinite horizon,” which would require a total tax increase of 3.6% over 75 years.
It needs to be noted that this is the “combined” tax, so the workers’ share would be half a tenth of a percent per year in the second option, or half of a half of a tenth of a percent per year in the third option. In today’s terms that amounts to about 40 cents per week per year for the second option, and 20 cents per week per year for the third. These are not staggering burdens.
As it turns out, these increases “only” balance the trust fund for 75 years. To balance SS over the “infinite horizon” would require that the second option be run for about another 17 years, or the third option would need to be extended for another 15 years. A better answer would raise the tax one tenth of a percent whenever the Trustees report “short term actuarial insolvency.” This would average one fourth of one tenth of one percent per year (about twenty cents per week) for each the employer and the employee for 64 years and would leave SS fully paid for, and fully “funded,” able to pay all benefits for the “infinite future,” with no reason to anticipate a need for further tax raises after that time.
So when you look at the other policy options, you need to keep in mind that what you are being asked to do is to substitute another “solution” for part or all of the staggering cost of twenty cents per week per year for the workers to pay for their own benefits.
In this regard, you could:
RAISE THE CAP
Eliminate the taxable maximum (the cap), raising the tax on people making over 106,800 a year by 12.4%. These are people who would not expect to benefit from Social Security. You can see why they might think this is a poor idea compared to raising the tax of the people who will actually get the benefit by one fourth of one tenth of one percent per year.
Or you could raise the cap to cover 90% of earnings. This would raise the tax on some, but not all, income over 106,800 by 12.4%, and would save the workers about one third of that one fourth of one tenth of one percent per year. This is about six cents per week for the workers who get the benefits vs about 24 dollars per week, or 1200 dollars per year, for each ten thousand over the current cap, on a worker who will not see any benefit. Sounds like great politics.
CUT BENEFITS
Or you could cut benefits. CBO offers a variety of options. which save the worker from 3 cents per week to 20 cents per week, at the cost of cutting his retirement benefit (in today’s terms) from about a thousand dollars a month (note: “month”) to about 700 dollars a month, or even to 500 dollars a month. Talk about your penny wise, pound stupid.
RAISE THE RETIREMENT AGE
Or you could raise the retirement age to 70. this will save the worker 10 cents per week per year. If you can’t imagine what having to work an extra 3 years would do to someone with a hateful job, or declining health, declining physical or mental abilities, or a life expectancy somewhat shorter than what we are being told “we”… mostly the rich and well fed and lightly worked… can “expect”, you need to do some serious thinking. That future old person might be you. Or, if you can imagine this, your child:
“Here my child, my darling, I saved you ten cents per week. Only now that you are old, you have to work another three years to pay for it.” “But dad, my arthritis! But dad, I really wanted some time for myself before I have to go to the old folks home.”
But hell, what do you care? So what if the cop that answers your 911 call is seventy years old. No doubt the guy with the gun breaking in downstairs will be seventy too.
AND IN CONCLUSION
The last paragraph on p xii invites another kind of stupid thinking. It is true that gradually phased in tax increases will have a bigger lifetime effect on younger workers than older workers. But younger workers are going to be making a lot more money and living a lot longer. The phased in tax will actually proportion the larger share of the tax increase to those who will get the most benefit from it… by living longer in retirement at a higher standard of living.
The question you should be asking yourself is not, “Will I get a few tenths of a percent better or worse deal than my parents?” but, “Will I be getting a good value for my money?” The answer is that yes you will.
You are paying for insurance… an insurance policy that will pay you if you get disabled, pay your family if you die, pay you enough to retire if you otherwise reach old age without enough to retire on, and pay you back everything you paid in, with interest, if you are among those lucky enough to earn near the top of the income ladder for a whole lifetime.
What pays for this magic insurance is the difference between what the high earner “might have” gotten on his “investment” and the “average increase in wages” over his lifetime. That high earner will have plenty of other money to invest to chase those higher returns at higher risk.
Judge it as an investment and you miss the point that it is insurance. Judge it as welfare and you fail to understand that the workers pay for it themselves. It was deliberately designed NOT to be welfare.
I have only covered the Summary. But this is a good place to stop for now. Looking ahead, what I see is more clever writing that never lies exactly, but is carefully designed to lead you to arrive at false conclusions and hurt yourself, or stand silently by while they hurt your children
The issues with SS fixing itself to fix the US G are bogus, if the fiscal issues of the country are to be borne by SS the country will sink to third world status.
The solution to SS and other entitlements lies in the one-third part of federal spending called “discretionary”, a euphemism for corporate welfare which socializes 13 or 14% of the US economy.
Fix that, fix productivity.
By the way, maybe worthy of a post. On a site I contribute to we discussed the fact that the CIA gathers economic intelligence on many countries and on a number of factors.
It rates the concentration of wealth in third world as well as first world countries.
The US now has concentration of wealth in the top percentile approximately equal to a banana republic.
Maybe a post on worries about the US becoming like the places Gen Smedley Butler kept pacified for Chiquita Banana and their US banking interests in the 1920’s.
Bogus analysis by either CBO, GAO or the other Trust Fund usurpers is not new and is meant to steal from the pooor to concentrate wealth in the rich.
What better reason to buy congress?
Link?
Possibly I am doing my math wrong. You say SS could go up by $8 per week per worker. and the employer kicks in another $8. So $16 per week. Do I have that right?
That happens to come to $133 billion a year. Do you really think that would not make a differerence? I would make a very big difference. It would be a big drain on consumption. It would knock off a few points of GDP, every year.
So help me out, how much do you want to raise SS taxes?
And the cash would be wasted in war profiteering…………………….
Krasting
I wish you could read. I tell you in the main post to raise taxes one fourth of one tenth of a percent each year.
The CBO “eight dollar solution” will not take any money out of circulation. You see, it goes to pay benefits for retired people who have to buy stuff like food.
And you , of course, don’t understand that by “giving” their money to the currently retired, the workers create a claim they get to cash in when they retire. It works a lot like a savings bond.
by the way, the worker would pay that eight dollars. i don’t know of any worker who would pay $133 billion. Stop trying to scare youself with big numbers.
It it wouldn’t knock a damn thing of GDP. How the hell can you be a big bond trader and know so damn little about GDP. The GDP comes when the money is “made”. Of course the money has to be spend to be made. The worker makes the money. He will spend it when he retires. Meanwhile he lends it to someone else who will spend it. This is what I was talking about when I said the CBO might not relish trying to explain “pay as you go” to people who can’t count to ten without losing their place.
I wish you could read. I tell you in the main post to raise taxes one fourth of one tenth of a percent each year. This would ultimately be an increase of about 1.8% for each the worker and his boss. Then I try to explain why that’s not a big deal, especailly since the worker’s pay will go up over a hundred percent over the same time, and the reason for the tax increase is to pay for a longer retirement that he will very much want, even if he doesn’t know that before he is old enough to understand how he will feel when he is sixty five.
The CBO “eight dollar solution” will not take any money out of circulation. You see, it goes to pay benefits for retired people who have to buy stuff like food.
And you , of course, don’t understand that by “giving” their money to the currently retired, the workers create a claim they get to cash in when they retire. It works a lot like a savings bond.
by the way, the worker would pay that eight dollars. i don’t know of any worker who would pay $133 billion. Stop trying to scare youself with big numbers.
It wouldn’t knock a damn thing off GDP. How the hell can you be a big bond trader and know so damn little about GDP? The GDP comes when the money is “made”. Of course the money has to be spent to be made. The worker makes the money. He will spend it when he retires. Meanwhile he lends it to someone else who will spend it. This is what I was talking about when I said the CBO might not relish trying to explain “pay as you go” to people who can’t count.
I guess since I’m already old, that it perhaps doesn’t matter to this Bouy, but I don’t understand 2 things here, #1: why is there a cap on the SS amount paid in, when wages are still being made? #2: Am I being naive, dumb, even out of my tree here, to ask why the hell this is not being made available far & wide to every corner of this country, especially before the mid term elections for the average working & non-working (un-employed) to digest about the situation? It seems to me that just passing it back & forth between blogs, readers, etc. isn’t doing much more than giving lip service to the what ever you want to name the flim-flam men & women both in & out of Government.
What do you suggest Norman??
Norman
you are a man after my own heart. i wish there was a way to get everyone in the country to read this and think about it and talk about it with their friends and neighbors. but the Petersons own the press, and you will not see an honest account of Social Security in any big news source in the country.
as for the cap, i try to answer that question in the post. social security is not welfare. it is insurance. it must not become welfare. that would kill it. there is no need to raise the cap. raising the cap would make people buy insurance they have no need for. it would turn social security into welfare. that would kill social security.
Krasting,
I wish you could read. I tell you in the main post to raise taxes one fourth of one tenth of a percent each year. This would ultimately be an increase of about 1.8% for each the worker and his boss. Then I try to explain why that’s not a big deal, especailly since the worker’s pay will go up over a hundred percent over the same time, and the reason for the tax increase is to pay for a longer retirement that he will very much want, even if he doesn’t know that before he is old enough to understand how he will feel when he is sixty five.
The CBO “eight dollar solution” will not take any money out of circulation. You see, it goes to pay benefits for retired people who have to buy stuff like food.
And you , of course, don’t understand that by “giving” their money to the currently retired, the workers create a claim they get to cash in when they retire. It works a lot like a savings bond.
by the way, the worker would pay that eight dollars. i don’t know of any worker who would pay $133 billion. Stop trying to scare youself with big numbers.
It wouldn’t knock a damn thing off GDP. How the hell can you be a big bond trader and know so damn little about GDP? The GDP comes when the money is “made”. Of course the money has to be spent to be made. The worker makes the money. He will spend it when he retires. Meanwhile he lends it to someone else who will spend it. This is what I was talking about when I said the CBO might not relish trying to explain “pay as you go” to people who can’t count.
coberly,
Nice post. As usual I find two things that just stand out as, well, bat-s$%^ insane.
First, they forget about the “…Forget about the two and a half trillion dollars the program has in the bank. ” How do you just omit the fact that you have 2.5 TRILLION laying around garnering interest (if even a very modest interest, but still..)?????
Goes back to my point, Congress & the President don’t want to ever see those T-Bills cashed. Ever. They saw the excess SS as just another revenue stream to the general fund. Reguardless of your stand on taxes, I want my taxes called taxes and not some accountants slight-of-hand masking theft. (Yes I’ve gotten there).
Secondly, “CBO tells you that “the trust funds… will be exhausted in 2039.” Whopee! Who cares. Really who gives a flying #$%#@ about what is going to happen in 29 years??? Lets look at a little history, shall we? Start at year 1913 add 29 years and you get 1942. In that blink of an eye the world went through the entirity of WW I, the influenza epidemic, the Great depression, the rise of the two most evil philosophies in human history (communism and fascism), and we stand with Germany and Japan at their zeniths during WW II.
So explain to me once again why I care what is projected in 2039?
(Bruce I understand why they do it, doesn’t change my point). The quietest 29 year period I could think of was 1973 – 2002. But even then we went through the Oil shocks, the Volcker inflation problem, GW I, the entering of the infirmation age and subsequent dot-com bubble, 9/11 and Afghanistan. Not quite as tramatic as 1913-1942 obviously, but still makes 29 year projections look silly.
Islam will change
Coberly,
Thanks for your explanation, I now see why you believe it best to protect SS to frame it as insurance and not welfare.
Buff,
So your arguing that SS shouldn’t forecast and we shouldn’t plan as a society for the future becuase things have happened in the past that we didn’t plan for? Do you not want to be taken seriously?
I think the solvency of SS through 2039 is important to announce as is the “pay as you go” reality of SS and that only minor increases are needed to sustain this social insurance program that is essential to a functioning american civilization. It backs off all the people who are crying “the sky is falling” and arguing that SS/medicare aren’t sustainable. Not only are they sustainable, they are so at a very modest price. This needs to be told everywhere to everyone and retold to combat the misinformation by the chicken littles. Thanks Coberly
It’s Monday morning. I am still thick headed. Trying to understand this. You say:
“raise taxes one fourth of one tenth of a percent each year”
A tenth % is = to .001, yes? So a quarter of that is .00025 yes?. So we would raise SS revenues by that percentage amount each year until total payroll taxes have risen from 12.4 % to 14.2% (over time).
That would imply 72 years. I think it has to be faster than that.
SS will collect ~$650b in PR tax this year, Yes? Using 12.4% as the tax rate this implies SS taxable income at $5.25 Trillion, Yes?
If we use your .00025 (.025%) number for the first year of these increases it comes to $1.3 billion for the increase in SS income Yes? I understand that this number will increase over time as payrolls increase. But you are talking about a five year increase of ~$20-22 billion in TOTAL increased receipts. Yes?
You like to think 70 years out on this. I tend to get mired in too short a time span. But I tell you $20b over the next five years does not get it done. Things will be so far out of whack by 2015 that it will be very difficult to fix. It will cause problems for the broad economy. And yes the bond market will turn on you.
But then again, I could have all my math wrong, so straighten me out please.
bk
PAY AS YOU GO
This seems to confuse a lot of people. I think they can’t understand it because they can’t follow an argument with moving parts. Here is a different way to try to understand what is happening.
Freeze a moment in time back before the stone age: A family of humans. Mom and Dad and the kids and Grandmother. Granddad got killed by a lion.
Dad goes out hunting, and Mom takes care of the kids while tending a garden or gathering wild fruits. Grandma helps Mom. Dad and Mom share their food with the kids for reasons known only to Darwin in heaven. But they also share with Grandma. Is that because she is such a help with the kids? Could be, but there’s more to it. Is it because they love her? Because they are grateful that she fed them when they were kids? May have more to do with it. Or is it because they can see that if they take care of her, then maybe their own kids will take care of them when they get too old to really care for themselves? Well, enlightened self interest always plays a role, and does get wrapped up in that love thing sometimes so its hard to tell where one begins and the other ends.
But look at the result. mom and dad “pay” for grannies groceries (as well as their own kids’.) A few years later mom and dad become grandpa and grandma and their kids become the new mom and dad, and the new mom and dad “pay for” the groceries of the new grandma and grandpa. And this goes on for generation after generation.
Maybe half a million years later, when people have devolped a settled agriculture they are still following this tradition of “paying for” their old fathers and mothers. for the same complicated reasons their pre stone age ancestors started the practice. But there are always people who need to be reminded. And the reminders are built into the “law” that the people take so to heart we call it their “religion.” So a Moses tells them “Honor your Father and your Mother.”
And maybe a thousand years later, a new Teacher has to remind them that Moses was, indeed, talking about money.
And this continues to be the way human beings secure the blessings of family… that is survival… for another two thousand years. Until the advent of capitalism and the industrial age and international economics makes it impossible for any one family to “insure” that they will be able to control their own economic fate to take care of their children much less their aging parents.
Several “solutions” to this problem emerged. The best one, in my opinion, was American Social Security as envisioned by Roosevelt. I mention Roosevelt because his own advisors would have created a welfare system. He prevented that and insisted upon a system of insurance for workers paid for by workers.
Social Security works exactly the way “honor your father and your mother” worked, except that it allows for the realities of modern society. The “young” still pay for the “old”, but the old paid in their turn for their own parents. And the yound will be paid in their turn by their own children. Except now “the family” is “all of us” because in a modern economy “the family” does not have the power to insure its ability to pay for its own.
Please try to understand the flow of “money” in this situation. There is no lock box. The individual does not put money in a box and save it for his old age. In fact this is impossible, and the “bond market” is merely another way of arranging for the young to pay for the old. The only difference is that in the bond market, the ownership of the “money” is individual, and subject to the losses that individual ownership is subject to. With Social Security the “money” is still “individual” in the sense that you do have a legal claim […]
cob-
for someone always so ready to jump on other people for being hostile and rude, you certainly seem to do a great deal of it.
bruce asks a reasonable and polite question and you respond with a barrage of insults.
why is it you feel such an irrepressible need to be hostile and rude to viewpoints other than your own?
bruce, i think you are correct and that taking over 2% out of the after tax incomes of a group that are savers and investors and shifting it to elder spenders (at a loss as SS administration is not costless) will indeed suppress growth of the economy, the assumptions for which are quite rosy in the CBO report. if growth is below those projections, the costs go up considerably.
demographically, we are going to have fewer workers paying for more SS recipients. the “trust fund” set up to account for this is not adequate to offset the effects.
it seems to me that means testing and incresing the retirement age are better solutions that raising taxes. when SS was put in place 65 was about the average life expectancy. that meant that only about 50% of people ever collected any. average years of SS were zero. now average years are 20 or so. that’s a very big difference and one that will only widen. that will be a constant source of upward pressure on costs. every year of increased life expectancy is another 5% increase in lifetime outlay.
means testing also makes piles of sense. paying SS to my parents accomplishes nothing but draining the public coffers. it changes their spending not one bit. taxing to pay it is a deadweight loss. reducing the pool of SS recipients by maybe 20% would go a long way toward alleviating the funding problem without the negative effect of increased taxes.
means testing is clearly the best and most effective response to the issue, but it’s generally completely off the table as instituting it means admitting that SS is an entitlement, somehting viewed as politically unpalatable. i find it interesting that the same peiople who claim SS is not an entitlement are also so often hostile to individual SS accounts that would rpovide actual ownership for contributors and a ring fencing of their money.
PAY AS YOU GO
This seems to confuse a lot of people. I think they can’t understand it because they can’t follow an argument with moving parts. Here is a different way to try to understand what is happening.
Freeze a moment in time back before the stone age: A family of humans. Mom and Dad and the kids and Grandmother. Granddad got killed by a lion.
Dad goes out hunting, and Mom takes care of the kids while tending a garden or gathering wild fruits. Grandma helps Mom. Dad and Mom share their food with the kids for reasons known only to Darwin in Heaven. But they also share with Grandma. Is that because she is such a help with the kids? Could be, but there’s more to it. Is it because they love her? Because they are grateful that she fed them when they were kids? May have more to do with it. Or is it because they can see that if they take care of her, then maybe their own kids will take care of them when they get too old to really care for themselves? Well, enlightened self interest always plays a role, and does get wrapped up in that love thing sometimes so its hard to tell where one begins and the other ends.
But look at the result. mom and dad “pay” for granny’s groceries (as well as their own kids’.) A few years later mom and dad become grandpa and grandma, and their kids become the new mom and dad, and the new mom and dad “pay for” the groceries of the new grandma and grandpa. And this goes on for generation after generation.
Maybe half a million years later, when people have devolped a settled agriculture, they are still following this tradition of “paying for” their old fathers and mothers, for the same complicated reasons their pre stone age ancestors started the practice. But there are always people who need to be reminded. And the reminders are built into the “law” that the people take so to heart we call it their “religion.” So a Moses tells them “Honor your Father and your Mother.”
And maybe a thousand years later, a new Teacher has to remind them that Moses was, indeed, talking about money.
And this continues to be the way human beings secure the blessings of family… that is survival… for another two thousand years. Until the advent of capitalism and the industrial age and international economics makes it impossible for any one family to “insure” that they will be able to control their own economic fate sufficiently to take care of their children much less their aging parents.
Several “solutions” to this problem emerged. The best one, in my opinion, was American Social Security as envisioned by Roosevelt. I mention Roosevelt because his own advisors would have created a welfare system. He prevented that and insisted upon a system of insurance for workers paid for by workers.
Social Security works exactly the way “honor your father and your mother” worked, except that it allows for the realities of modern society. The “young” still pay for the “old”, but the old paid in their turn for their own parents. And the young will be paid in their turn, when they become the new old, by their own children. Except now “the family” is “all of us” because in a modern economy the traditional family does not have the power to insure its ability to pay for its own. (By the way, the powerful people in society like it that the poor do not have the power to insure their own survival. It gives the powerful more power.)
Please try to understand the flow of “money” in this situation. There is no lock box. The individual does not put money in a box and save it for his old age. In fact this is impossible, and the “bond market” is merely another way of arranging for the young to […]
morganovich
i used to be the nicest guy you could imagine. but after i realized that you and krasting could not possibly be as stupid as you pretend to be, i knew you must be evil. you comment is bull shit, but i will have to address it later as right now i have work to do.
Bruce
your math is all wrong. your arithmetic may be okay, but you are losing track of all the variables. i have explained this and explained this. and i will try to explain it again, but i have to go to work. i vill be back.
Norman,
Removing the cap or means testing makes SS into welfare for all practical purposes. This undermines its broadbased support. So these ‘reasonable” fixes actually set the stage to turning SS into real welfare and your payroll taxes into just another income stream to the general fund. In turn this would lead to the gutting of FDR’s signature legislation, by another Democrat President with a huge majority of Dems in congress.
Yes, I can’t figure it out either…
Islam will change
buff
thanks. CBO forgets about the trust fund because, as they “explain” later in the “report” the money has to come out of other taxes. that stops their thinking right there. it does not seem to occur to them that the “other taxes” borrowed the money from Social Security in the first place. and that paying your bills is part of running the government. you see, in their mind it’s all “our” money, because you gave it to us. and you don’t have an enforceable legal claim on it, whatever we said when we collected it. whatever the bonds say when we borrowed it.
as for the trust fund running out. the 39 years doesn’t matter, not because its so far away, but because the trust fund is SUPPOSED to run out. it was not created to last forever like your grandfathers “trust” that he established so you’d never have to go to work. it was created to perform a function: take in money when times is goo. pay out money when times is bad. the big bad time has always been the “looming” baby boom retirement. at about the time the trust fund created by the boomers to pay for the boomers runs out, the boomers will mostly be dead.
whenEVER the trust fund runs out, Social Security can simply return to pay as you go (with a modest “trust fund” to bridge the monthly ups and downs fo collections/disbursements, or a big enough trust fund to bridge the occasional recession.) The Trust Fund is NOT IMPORTANT.
the real issue with SS is not really SS.
Rather the real issue is that the SS surplus has been financing a significant share of the government deficit. Thus, other taxes and/or government borrowing were smaller than it otherwise would have been.
But on the immediate horizon the social security system will be redeeming those loans to the government. So the federal deficit that will have to be financed through either greater borrowing or higher taxes will start to increase sharply because of this.
What Reagan did was shift a significant share of government revenues from the income tax to the social security tax — a shift of the tax burden from upper income groups to lower income groups. As the social security trust funds is redeemed this shift in the tax burden will have to be reversed. That is the real issue. It is a part of the reason that from 1967 to 2007 their was a shift in the share of income
of about ten percentages points from the lower four income quintiles to the top quin quintile.
sgetz99,
You point is practically the only one I see for making the projections. the 75 year ones are even more silly.
I bet both of us can find article after article telling us ‘this time is different’ about the economy in 1998 and that the dot-com boom would continue ad infinitum. Now step forward to 2002 and laugh…
Islam will change
sgetz
thanks. but it’s not “framing.” that’s the way it is designed. on purpose.
i don’t think buff is saying we shouldn’t plan. only that we shouldn’t get hysterical about plans before we really know what we are talking about.
well, hell, here i still am.
morganovich. maybe some day you will convince me you are not evil. but here is a quick reply to some of your comment.
the cost of administering social security is less than one percent of its budget. the money comes out of the “premiums” paid by the workers for their insurance. it does not come from the general taxpayer.
social security does not come out of the incomes of the “savers and investors.” those people do not pay a payroll tax. it comes out of the incomes of the workers. and it will go back to those same workers when they will need it more than they do today. and it does not come “out of the economy” it goes directly to retired people who will spend it today.
the “costs” of social security don’t have a hell of a lot to do with the economy. they do have something to do with the “demographics.” but as i hope to have shown, the cost paying for living longer is so small that no one would notice the increase in how much they have to save for it… via pay as you go.
the trust fund is adequate to pay for the boomers. it was never meant to pay for the longer life expectancy of the post boomers. that is what the tiny tax increase is for. if you could read, you would have noticed that i already answered these “arguments.”
your paragraph following “means testing” is such hopeless nonsense i hardly know what to say. social security began paying out for people who were living on average 12 years in retirement. current average is about 15, is expected to go upto 18 or 20. Arne will correct my numbers. try to pay attention to whether the correction makes a materail difference. when you, morganovich start talking about life expectancies you reveal that you don’t know what you are talking about.
meanwhile you have your numbrs, and CBO has theirs. why don’t you at least read the CBO numbers and stop trying to fool us with yours. you are just making stuff up without the smallest clue what the numbers mean. a 5% increase in costs…. would be a 5% increase over 12% or a need for an increase in the payroll tax of six tenths of a percent. someting my gradual tax raise would accomplish in 12 years. so if your life expectancy increases at a rate slower than one year per 12 years, i’ve got it covered.
your means testing would mean that people who don’t expect to get benefits would have to pay for them. that is welfare as we knew it. and we know what happened to that.
you are too confused to talk to.
i’ll try to work with any honest person who is confused. but you and krasting convinced me you are not honest enough to think straight. you come to an “answer” you like and it doesn’t matter if it makes sense… you’d have know way to know… you just throw it out and announce that youhave the solution.
the rest of us have to come up with something that actually works.
so, more insults. evil? really? are you truly so narrow minded that you must assume those who disagree with you are evil? you sound like the mirror image of some bible basher declaiming against abortion. it’s terribly convenient to brand those who disagree with you as evil as it allows you to dismiss what they say without ever addressing it, as you continually do, but it simply leaves you narrow minded and bigoted and prevents you from ever learning anyhting or sharpening your own ideas as they are tested by other ideas. you are so attached to your image of your own smartness that it makes you stupid and prevents you from learning. the process is called cognitive dissonance. it’s precisely why most terribly bigoted people see so much bigotry in others. it’s easier to reject facts you don’t like and project them onto others to preserve your worldview, but that is not a path to growth nor greater understanding.
sure, we have always helped pay for our old people. what you are ignoring is the fact that they are living longer and thus that fewer people must pay for a greater number of retired folks.
to use your caveman example, what if we add in great grandma and grandpa? surely, you must admit that doing so meand that those who do hunt and gather must bring home more food to cover the society’s need. to argue that that does not have an effect on the society and its growth is just naive. it is an increase in costs and overall social subsistence needs. it will come at the expense of somehitng, paticularly in a society such as our where few extended families live togther.
you are trying to frame this into some sort of argument about whether we ought to help care for our elders because it’s a useful straw man for you, but how does means testing or raising the benefits age constitute somehow violating “honor your mother and father”?
i have never argued against providing for the old, mearely that our current system for doing so needs a great deal of improvement to both make it more effective as it hideously underperforms what could be acheived by private accounts (saving the same money in governement bonds and then buying an annuity yeilds 5-7X the SS payout) and to bring it into line with impending fiscal realities that come from longer life and perhaps lower growth over a decade or so as we work off the debt overhang.
if you think that’s “evil”, then you have a very curious definition fo the word.
perhaps you would benefit from a bit of time spent asking yourself just why you are so ready to see evil and stupidity whenever someone disagrees with you or even (as bruce did) asks questions in a polite and straightforward manner.
what’s the genesis of this “cobberly crusade” that turns reccomendations for the improvement of a system into “evil”?
“means testing would mean admitting that social security is an entitlement… something politically impalatable.”
no. idiot. means testing would mean TURNING social security INTO “an (welfare) entitlement”… something politically unacceptable, something which it iS NOT.
and now i really do have to go.
That is about four of the new Eisenhower class aircraft carriers due 2015 to start of the 15 projected. Maybe bond traders could use them for collateral.
I don’t follow how a couple points is shaved from GDP at all over 12 years…did we just throw the money into the ocean? Who’s consumption is drained? Not mine!
Krasting come on man, THINK!
CBO scores the 75 year gap at 0.6% of GDP. No one is suggesting a revenue increase on the order of the three to five times that which would amount to the “a few points of GDP” year that you suggest.. So your math has to be faulty. That $8/week is a little confusing but seems to represent the amount ON AVERAGE in 2009 dollars over the next 75 years. An initial increase of 0.1% per year on a $50k income works out to $50 a year or a little less than $1 a week, which if split between employer and worker is less than 50 cents a week. Putting your calculations off by a factor of 40.
The English may not be that clear, but the Math just isn’t that hard.
No rush. Its hot outside. Stay calm. This is a discussion about SS options. I, and no one else in this discussion is evil.
I will try to frame a question for you.
Assumptions:
-SS payroll fiscal 2010 = $650b
-SS payroll grows at 2% pa for the next 7 years.
Using those assumption please tell me what the increases in revenues would be if we phased in a 1.8% increase over 72 years.
You can give me all the years if you like. I am only interested in the first 7 years of results. I think we might have a problem in the 8th year if your plan is implemented (and no other changes are made). If that is the road we go down we will not make it to the 75th year. At least not looking like we are expecting to look. There is no valid long term without a valid short term. CU later. bk
PS You think I am evil? You got me wrong. This ran on NPR this am. I am told it will run again this evening.
http://www.wcpn.org/WCPN/news/31415
Ah, the I am so smart I beat the market just when I need to argument. Not for the average person, and a some of us have to have jobs other than as financiers. Guaranteed 5-7 times for which annuities, in the aggregate? 10-14% returns a year average on all your investments? Quite a feat.
The answers to other claims can be investigated at the Webb Social security series. Detailed answers.
Nice spin on the improvement piece however. But that takes real data to establish. Please offer some.
‘Debt overhang’ comes from assumptions that are from projections (CBO?) and assumptions that have several important caveats. But the sources of our debt overhang are not Social Security. Health care costs certainly suck up a lot of consumption by your defintion. And the workers money from payroll are not what we normally consider the movers and shakers of finance who invest, the money is spread over too many people. The investing class at the moment like financial assets and stocks, but are not so interested in investing in business locally, which is more to the benefit of workers than Walmart prices, and might help to avoid long term problems that the industrial scaleability debate suggests.
coberly – right on the money. Also planning for something happening in 75 years can only be discribes as a waste of government funds…
Bruce let me try.
You need to get beyond the verbiage and address the numbers more directly.
Social Security projected in 2009 a 75 year payroll gap totaling 2.01% of payroll. CBO puts it somewhat lower at 1.6% while I expect the 2010 SSA Report will put it around 2.2% of payroll. But the incidence of that gap does not fall evenly, if you break it down to 25 year sub-periods as this table does:
http://www.ssa.gov/OACT/TR/2009/VI_OASDHI_payroll.html#131183
Table VI.F3.—Summarized OASDI and HI Income Rates and Cost Rates for Valuation Periods, Calendar Years 2009-83
you will see that the gap for the first 25 year sub-period is only 0.19% of payroll, while the 50 year gap shows 1.51% en route to a full 75 year gap of 2.00. Meaning that we could stick in a 25 year fix by increasing FICA by .1% in each of the next two years. But in a few years some of those early years of the current 50 year sub-period enter into what will then be a new 25 year sub-period and so forcing us into a new round. The way out of that trap is to propose a continuous set of increases that backfill the entire 75 year gap which means increasing FICA by 0.1% per year until the 75 year gap gets driven negative. Under CBO’s current projection 20 years of 0.1% increases backfills the CURRENT 75 year gap. But in the year 2030 we will be faced with a NEW 75 year gap extending to 2105 and the current projections show an additional smallish gap in those years. Of course in the nature of things the probability band swamps this number, in fact if you refer back to the linked table you will see even the CURRENT 25 year gap is set within a range of +1.18% and -1.81%, for all we know Social Security is at this point over-funded going forward.
Given that a 0.1% increase a year over 20 years is to some degree overkill, after year 2 it is collecting funds in excess of the 25 sub-period gap and in so doing accruing interest which is just a claim on future productivity, but it would be worth it if only to kill the argument. Or we could go with option 3 and increase FICA by 3% over 60 years which does get you to 0.05% per year which split in half does get you to 0.025% for the employee. Since this only backfills 5/6th of the gap you would have to extend that some and ultimately get pretty damn close to 0.025% or “one fourth of one tenth of a percent” per year over the 75 years.
So Coberly and CBO come to the same place over time. Which leaves us this:
“But I tell you $20b over the next five years does not get it done. Things will be so far out of whack by 2015 that it will be very difficult to fix.”
Nobody at CBO or SSA seems to agree with your analysis. We have discussed in the past why this might be but given that this post is an attempt to explain the CBO report your attempt to drag in your own calculations is somewhat beside the point. A problem that the OACT scores as 0.19% of payroll over the next 25 years does not get “so far out of whack by 2015”. Mathematically that is just silly, unless of course you insist on framing everything in terms of CBO’s ‘primary surplus’ instead of ‘surplus’ which is just a backhand way of abrogating the Trust Funds entirely.
cobberly, once more your cognitive dissonance is showing. you write raft of vaguely comprehensible half truths and nonsense while arguing that everyone else is incomprehensible.
you do not even understand the arguments you profess to refute. GDP is a determinant of the income to the SS paygo system, not it’s costs. it afects the solvency of the system from the other side of the ledger. yet it is we who are stupid? perhaps if you spent a bit more time actually reading what others write and considering their wrguments as opposed to calling them stupid and evil and procaliming your own brilliance while essentially arguing with yourself, you might get a bit more out of these exchanges.
i do not beleive that i have ever met anyone who has such profound projections of his own issues onto others.
you truly beleive you are fighting some sort of crusade to the point where you can’t even offer krasting an apology and admit that you were rude and obnoxious for no good reason beacuse to to do would force you to see what a hypocrite you are on that topic.
faith.
Bruce Webb
the 8 dollars a year is based on the CBO report that the actuarial gap could be closed over the 75 year projection period with an immediate 1.6% increase in the combined payroll tax. Assuming an average wage of 50,000 dollars per year, or a thousand dollars per week, that comes to 16 dollars per week, half of which, 8 dollars, is paid by the worker, and half by the boss.
at this point there are people who want to jump in and say, “yes, but” yes but, the bosses share is “really” my money. or yes but, a worker near the cap earns 2000 dollars per week so his tax increase would be 16 dollars per week, or 32 dollars per week if he pays the bosses share too, or if he really really believes that without the tax the boss would be forced to pay HIM the money on accounta his bargaining power is so good.
i tried to cover all this, but as you say, the English may not be that clear.
Meanwhile, you are certainly right that a better way to do it would be to increase the tax one tenth of a percent per year, as CBO describes in option 2. or an even better way would be half a tenth of a percent per year as CBO describes in option 3. or an even better way would be one tenth of a percent whenever the Trustees report short term actuarial insolvency, which would average half a tenth of a percent (combined) per year… or twenty cents per week for the average worker and twenty cents per week for his boss.
Krasting
give me time and i may understand how someone, you and morganovich, can be so wrong, and keep being so wrong without evil having something to do with it.
i am no doubt wrong about the evil. i am not wrong that you and he persistently refuse to understand what has been explained to you again and again.
you will think i am insulting you, but the best explanation i can give myself, other than evil, is that you can only grasp a very small “concept” at a time, and making it fit with all the other relevant varibles, many of which are moving, is beyond your intelligence.
i’ll come back and try again, but i do have work to do. give my best to morganovich. tell him that when he says “what you are ignoring is…” it infuriates me because i have just spent several hours explaining exactly what he says i am ignoring…the fact that people are living longer and fewer people will have to pay for more people… or what is the same thing… all people will have to pay a little more out of what they make while working in order to save enough to have while they are living longer after they retire.
it is hard for me to make this any clearer.
morganovich
see answer to Krasting below. i have exorcised you of all evil.
stupidity is a harder problem.
your recommendations for improvement of the system ignore not only everything i have said, but everything CBO and the Trustees say. you just make stuff up. and then you expect the old teacher to pat you on the head and tell you what a clever boy you are. and yes indeed, why didn’t we think of means testing ourselves.
except we did. and we answered that. time after time.
but you keep coming back. “hey, hu hu, i don’t know anything, but here is the answer to the great big scary problem i had a nightmare about.”
morganovich says
“but how does means testing or raising the benefits age constitute somehow violating “honor your mother and father”? :
means testing: mom, go into the government office and they will examine you to see if you are hiding any assets. then they will cut your dole because, well, because morganovich needs the money for growing the economy… he means for making more money for himself.
raising the benefits age: mom you will need to work until you are ready for the rest home because god says that the purpose of life is to work until you drop. no, we can’t afford to let you save for your own retirement.
now that’s what i call evil.
Spencer the problem with your argument is that prior to 1998 or so the Social Security surplus was not “significant” when compared to overall government spending or GDP. The whole ‘Reagan raided the Trust Fund to pay for tax cuts’ narrative simply does not survive encounter with the data tables.
http://www.ssa.gov/OACT/TR/2009/VI_cyoper_history.html#159726
Table VI.A4.— Operations of the Combined OASI and DI Trust Funds, Calendar Years 1957-2008
First thing to recognize is that the “Tax on Benefits” is for the most part coming from the same people who gained from the Reagan Tax Cuts, to that extent the effect of them is kind of a wash. And “Interest” was never actually financed out of the current economy, although it contributed to the top line deficit/surplus number and so to some extent masked other spending, over the whole 1988 period that effect only totaled $32 billion, and a full fourth of that in the last year meaning that it didn’t even get reported until Bush I. You don’t get a lot of masking of Reagan tax/defence spending policy with $24 billion in interest from 1983 to 1987.
So once you subtract out the wash that is “Tax on Benefits” and whip away the mask (more of a wispy veil) that is “Interest” you see Reagan ‘stealing’ only the excess of “Net Contributions” over “Cost”. Which yields this data series:
1984: -$0.3 bn
1985: +$3.5 bn
1986: +$7.6 bn
1987: +$13.2 bn
1988: +$29.3 bn
When we see that the net effect of all of that was a Trust Fund at year end 1988 that including all that Tax on Benefits and Interest only totaled $109.8 billion and a Trust Fund Ratio of only 41 or less than half of the statutory target the whole income transfer from workers to wealth starts looking pretty damn silly.
Now 2001 was a different story. In that year SS had $516.4 billion in FICA contributions as against $438.9 billion in total cost, using that $87 billion to help finance tax cuts as opposed to using it as Clinton did to pay down Debt Held by the Public starts verging up to and over the border of theft.
I am the farthest thing from a fan of Reagan, and am at best luke-warm on Bush 1, but neither did anything nefarious in regards to Social Security, the idea that the whole 1983 Reform was some Faustian bargain just doesn’t hold up.
Ten years after the passage of the legislation incorporating the Greenspan Commission recommendations the Trust Fund balance (year end 1992) was $331.5 billion as against costs for 1993 that came in at $308.9 billion. And all of it invested in precisely the kind of instruments specified by the 1935 Social Security Act, instruments fully guaranteed by the Federal Government.
Neither Reagan, O’Neil, nor Greenspan were seers. On the other hand ten years after their hard reached compromise the Social Security Trust Funds were almost exactly where the law mandates they should be. There is just no room for some judgement of malfeasance on the part of any of them. (At least in respect to SS, there are plenty of crimes to lay at the feet of at least two of them).
http://www.ssa.gov/OACT/TR/2009/IV_SRest.html#271967
Table IV.A3.—Operations of the Combined OASI and DI Trust Funds, Calendar Years 2004-18
The 2009 Report projected that Trust Fund Balances in 2015 would total $3.56 trillion or up a trillion from the current $2.5 trillion. The current economic crisis might well slice as much as $200 billion off of that when all is said and done. But you have to twist your numbers in amazing ways to justify the following conclusion:
“But I tell you $20b over the next five years does not get it done. Things will be so far out of whack by 2015 that it will be very difficult to fix. It will cause problems for the broad economy. And yes the bond market will turn on you.”
Sorry BK, this is somewhere between special pleading and hysterical invocations of the Invisible Bond Vigilantes. Close to total nonsense either way. Slowing the rate of growth of Trust Fund balances simply does not equate in any meaningful way to “crisis”. And any amount of revenue enhancement, however small only works to the good here.
With respect to the “trust funds,” Congress is humming right now “she’s so fine, there’s no tellin’ where the money went!”
morganovich
no. it is answering the same damn argument over and over that exhausts my patience. you don’t even begin to understand either GDP or Social Security but you make loud confident assertions.
GDP is essentially the sum of all goods and services produced in the economy. for their work producing those goods and services workers are paid a wage or salary. the total of those wages up to 106,800 per year for any given person, adds up to about 38% of GDP. 12.4% of that (4.7% of GDP) is “taxed” in a way that credits the worker so he will be paid it back plus interest after he retires according to a formula that allows for insurance to be paid under circumstances i have outlined in the instant post. That money is mostly, and in theory always, immediately paid out to the people who are already retired…. paying them back, with interest, for the tax they paid in their turn years earlier. Those people mostly spend that money the same month they get it. Nothing is subtracted from the economy.
But note that the Social Security transaction does not depend on the SIZE of the GDP. It GDP were smaller, the taxes and the benefits would be less. It GDP were larger, the taxes and benefits would be more. The solvency of the system does not depend on GDP. From either side of the ledger.
Not proclaiming my own brilliance here. I know my limitations. I would not call you stupid if you merely did not know stuff. But you persist in not knowing after it has been explained, showing no sign that you are even aware that someone has tried to explain this to you. over and over.
But, yes, I am fighting a crusade…. against the evil people who tell the Big Lies about Sociial Security. They depend on people like you to spread them.
you need to look up cognitive dissonance. you don’t know what it means.
morganovich says
“ surely, you must admit that doing so meand that those who do hunt and gather must bring home more food to cover the society’s need. to argue that that does not have an effect on the society and its growth is just naive. it is an increase in costs and overall social subsistence needs. “
yes, of course i admit it. that is what i was trying to say. but you seem to think that it means that we can just stop feeding granny to “free up” more money for investment. yes we could. that’s why i say you are evil.
but maybe you are just stupid. maybe you can’t even see what you are saying.
Okay let me get this. You propose to raise SS by .1% each year for the next twenty. This would mean that the rate would rise to 14.4% in 2030. Is that correct?
If so that is very differnt than the Coberly approach. You are both on the same page that the numbers go up. One says do it it 20 years, The other 72. You could drive a big truck through that difference of opinion.
krasting
your math forgets about the Trust Fund. the one quarter of one tenth of percent was for the worker and another quarter etc for the boss. Yes it does take about 70 years to pay for the 75 year gap and establish a tax rate that “funds” social security fully over the infinite horizon.
nothing will be out of whack by 2015. the difficult fix that you can’t see is to raise the taxes needed to start paying of the national debt, part of which is owed TO Social Security. what part of paying your debts don’t you understand?
more detail on this below.
Krasting
i am afraid i don’t understand your point at 9:28:16
what do any of those numbers have to do with each other?
if payroll grows at 2% real, SS revenues will grow at 2% real, whether there is a tax increase or not.
the tax increase is to cover the increased outlays due to the increased number of retirees relative to the number of workers. this will be mostly due to the baby boom at first, but eventually be due entirely to the fact that people are living longer. The 1.8% increase in the tax RATE for the worker and his boss will take care of that problem handsomely.
You seem to have lost track of what we are talking about.
or you are still trying to weasel out of repaying the Trust Fund. that’s a separate issue, and even the CBO doesn’t give it the time of day.
[in the summary. they sneak a feel later in the report. but they are not being serious, just trying to head off a “but, but…” argument from people who say the sky is not falling.]
Bruce Webb
bravo. bravo.
but i’m afraid krasting still wont’ get it.
I took a look at the Webb plan. .1% increase for 20 years. This would come to about $82b in the next five years. Plus some interest on this amount. Call it $85b. This is 4Xs what Coberly described. I like it. It would go a long way toward addressing the short, medium and long term. There would still have be other steps taken. Age limits, payouts have to be adjusted too. But not a big deal if we start with the Webb plan.
There is no hope for the Webb plan. Do you think the Paul Krugmans of this world are going to sign off on this? That is a pretty big tax increase. And it gets bigger and bigger over time. Over twenty years it comes about $2T. You are not going to get thaty by. Not after the November elections.
So Coberly is too slow, Webb can’t sell it. What to do? If Webb moves to Coberly the economics no longer work.
Buff
exactly. on all points.
“That is a pretty big tax increase.”
Firs
Owl this message got hidden by the system, I don’t know why.
_______________________________
Owl check out options two and three on that CBO blog. Under their scoring 0.1% each year for 20 years backfills the entire 0.6% of payroll. Their numbers not mine. 0.1% of $50,000 (somewhat under current household median) is $50 a year, or less than a dollar a week, less than fifty cents if you assume the employer split. Coberly likes to use $40,000 which probably rightly captures median wage as opposed to gains on capital. 0.1% of $40,000 is $40 dollars a week or somewhat under 80 cents a week. Half of that is 40 cents. Twenty years of that gets to to $8 a week in constant 2010 dollars.
So you can get to the same place with $8 a week as a 15% benefit cut. Per the blog you cite.
Y’all–I read this Summary as a purely political document. The data we know are available, even the charts attached to the full CBO report, do not support the view that the SS TF is insolvent and cannot be “fixed” by any other means than wholesale benefit reductions. The other ideas advanced such as means testing the program are clearly based on an inadequate knowledge of program administration.
That is, by the time you define what “means tests” you’re going to use, figure out how to gather the information you need, and pay for the countless hours of labor necessary to keep track of such data, you end up spending at least 7 times as much per benefit dollar paid than you do without means testing. SSA now administers a means tested program called SSI. The Office of the Actuary and OMB have repeatedly found that the 7-to-1 ratio of budgeted dollar to payment dollar holds true since 1974 in the SSI program. It would simply cost more than it would save to apply a means test to SS benefits. Similarly, the idea that raising the cap would magically solve the problem forgets that relatively few high-end wage earners actually have covered wages. Their compensation is paid in stock options, other forms of preferentially taxed dividends, and the like. There just isn’t enough money there to fix SS without cashing in the TF bonds. Which, of course, is what this is all about.
I have written thousands of memos, reports, and studies of program operations in SSA. I know how to do a valid study and also how to lie with statistics. CBO’s Summary is as good an example of assuming what is to be proved and cherry-picking your facts to support your preconceived notions as I have ever seen. I couldn’t have done it better myself. But, if you want to know what CBO’s numbers mean, you’d be a lot better off asking the Chief Actuary of SSA than the Director of CBO. From what I see, the CBO is willing to support the Peterson camp to the detriment of the taxpayers. Nancy Ortiz
Regarding “high-end wages earners–actually have coverend wages”. It should read “very few of the highest earning employees actually have their total compensation paid in covered earnings. Other forms of compensation such as stock options….” Sorry. Fingers got ahead of my thoughts. NO
coberly,
I have been in touch, over my years in the military industrial complex with the arguments, and prejudices of the benficiaries of the US’ discretionary spending. It is “us” versus “them”.
The tax foundation, who sometimes come to Angry Bear to defend themselves and their benefactors, frame the debate between “entitlements” and “discretionary spending” of the US Government.
Their framing making it “us” against “them” entitlements (them) includes: SS, SSI, Medicare and medicaid and the tax foundation screams when the entitlement side goes over 65% of outlays.
The discretionary side includes 21% of US outlays for militarism, and about 14% for other forms of US government spending to corporations through acquiring goods and services. This 35% generates dividends and employs a few million people.
While the “entitlements” is less concentrated and the economic benefit is spread over 100 million families.
The concentration of 35% of US government spending gives all kinds of money for the tax foundation and assorted PACs to make funky arguments and buy congress for the militarists and other corporate welfare.
Someday, when the trust fund needs cash, the taxes not raised for buying Nimitz class aircraft carriers in the 90’s to 00’s will have to be raised pay for SS rather than dividends from building Eisenhower class carriers.
It is intriquing how they can put Ike’s name on a set of floating nuclear powered waste and abuse of the taxpayer built only to pay for the the undue influence Ike warned about.
You could not come up with that irony in literature or fiction.
rdan-
this has nothing to do with beating the market. you can reach such conclusions using bond yeilds.
using a 5% rate of return, you get 3.9 times the payout from a vanguard annuity at the end. using 8% return (long term equity avg) 9X the payments from a similar annuity.
i initially got interested in this topic after reading this piece and verified the numbers using my own SS statement and spreadsheet.
this will walk you through the methodology.
http://www.coyoteblog.com/coyote_blog/2007/01/social_security-2.html
try it yourself and you’ll see what i mean.
SS may be a betetr deal if you have lower income and are not maxing out the contribution, but if you are, it’s a pitifuly bad investment to the point of outright fiduciary malfeasance.
by debt overhang, i meant consumer debt. apologies if that was not clear. the recent boom was driven (or drove) an expansion of consumer debt levels to heights not seen since 1929. we have lived beyond our means for decades and now will have to pay that down. that will create a drag on GDP growth even before we consider the effects of things like federal debt and the unfunded liabilities of the medi system. all in all, it’s not difficult to build scenarios of a decade or more of below trend growth that offsets the decades of above trend we recently enjoyed.
if gdp growth is less than forcast, then intake into SS in terms of taxes will be below the CBO estimates, leaving the system with less money than projected.
It is not different. It just states the problem over a different time frame.
There are two problems here. One CBO and SSA use different assumptions, and while the difference between 0.6% of GDP and 0.7% of GDP seems minor when expressed in either dollar of % of payroll it is not really small at all. Two we have two different base numbers floating around with me using $50k and Coberly seemingly using $40k. When you mix and match those two and then try to compensate for inflation over sub-periods things get into a numerical tangle expecially if like you you like to express those results in dollar form. It really is better to keep this at the level of percentage of payroll and GDP.
cob-
as ever, you prove my point while attempting to refute it.
you are not, in fact, crusading, but projecting. ask yourself, how else could you view “wrong” as “evil”. that’s a sign of pretty severe zealotry. the fact that you cannot see this about yourself is the result of your profound cognitive dissonance, a term whose meaning i understand quite well, but suspect that you do not. your drive to maintain your own self image and ideas leads you to rationalize any who challenge them as stupid or evil. i know your type well.
you simply cannot beleive that anyone could disagree with you and your half baked straw men and “explanations” so you just repeat them with more insults, but continue to miss the issue. you don’t (or cannot) even bother to read and undertand the other side’s arguments, and beleive me, we are as tired of you and your arrogant, wrongheaded halftruths, misdefinitions, and base insults as you appear to be with us.
isn’t curious how many of the rest of us are able to have civil conversations, but that as soon as you crop up, they tend to become nasty and base? must be all of us, right? couldn’t possibly be you. i have never seen you engage in a friendly and substantive discussion with anyone who disagrees with you. you can blame the “evil conspiracy” if you like, but perhaps it would do you some good to consider that it might be you.
it seems we are at an impasse, so i’ll just bid you good day and hope that you find a decent therapist
happy “crusading”.
The US G manages a number of trust funds:
SS is the biggest in terms of accouning entries in the asset column of its “balance sheet”. It has accumulated interest which was never raised from taxes or receipts of the US G to be deposited anywhere. But it is still “there”.
The next largest, if I recall correctly, is the OPM civil service retirement system, which includes employee money and matching agency “money” which like SS its interest was never paid from taxes or receipts.
The number three largest trust funds I can think of is Medicare, like SS employee and employer contributions, and has accumulated interest which was never paid from taxes or receipts of the US G to be deposited anywhere.
The fourth, is military retirement. This one has no money in it which was ever raised from taxes or receipts of the US G to be deposited anywhere.
If I were thinking of whose trust funds might get raided I would worry if I were a retired fed or military………………….
The deficit hawks may look at how many people are hurt and see there are an awful lot more voters depending on SS and Medicare.
What me worry.
The US G manages a number of trust funds:
SS is the biggest in terms of accounting entries in the asset column of its “balance sheet”. It has lots of cash colected from employers and employees, and accumulated interest which was never raised from taxes or receipts of the US G to be deposited anywhere. But it is still “there”.
The next largest, if I recall correctly, is the OPM civil service retirement system, which includes employee money and matching agency “money” which was never paid from taxes or receipts and like SS its interest was never paid from taxes or receipts..
The number three largest trust funds I can think of is Medicare, like SS employee and employer contributions, and has accumulated interest which was never paid from taxes or receipts of the US G to be deposited anywhere.
The fourth, is military retirement. This one has no money in it which was ever raised from taxes or receipts of the US G to be deposited anywhere.
If I were thinking of whose trust funds might get raided I would worry if I were a retired fed or military………………….
The deficit hawks may look at how many people are hurt and see there are an awful lot more voters depending on SS and Medicare.
What me worry.
no cobberly, evil is saying, hey, you guys who really need this money are going to have to make do with less because we promised to give some to a bunch of people who don’t need it so that we can avoind calling social security an etitlement and face political consequences.
THAT is evil.
i’m the one voulenteering to give up my payments so that others who need them more can have them, and i’m evil?
what curious definitions you use.
i didn’t say i’d stop paying the tax, only that i’d stop collecting the benefits. this means that because they don’t have to pay me, the overall tax can be lower and benefit everyone. once more, you don’t read and make up a position for your opponent and ague with yourself. is that a deliberate choice or are you really not understanding?
also:
if it was moral to set the SS age at US life expectancy when it was created, how can it be less moral to set it at say, 70, giving an average of 15 years of benefits vs 0?
work a bit longer or save a bit more, and we can atke better care of the retirees. what’s your evidence that 65 is the correct age to retire? it’s arbitrary. we live a lot longer now. perhaps we can work for longer as well.
Morgan,
A little history here…….
Your gonna get caught up in arguement here that you are not actually argueing, just to forewarn you.
Coberly and Bruce are not incorrect, but neither are you. They want to frame the debate in terms of how to solve the problem with the current outlook, and you are coming at it from the perspective at which I come at it from, and that is, the realities of our economy as we move forward.
Good Luck!
coberly,
See I get it. Two things. First point Krasting at the SS tab at the top. Might shorten the back and forth and stop the repitition.
Second, I am getting people on the Dem sife in places like Kevin Drum’s site, Mish’s site, and my favorite illiterate blogger Matt Yglesious site who keep saying things to the effect: “we obviously have to either increase the eligibility age or lift the wage cap or both.” Its rather depressing that the Dems keep sayign that, especially after the Dems reaction to Bush Jrs tepid run at SS. For SS to get gutted the reps don’t need to lift a finger.
Also, there seems to be a undercurrent theme that lefting the wage cap is a good way to soak the rich (without lifting the benefits).
Islam will change
We forget that the tax on social security benefits is already a form of means testing, 85% of benefits are taxed if your income is above a limit. Likewise Medicare part B is means tested if you make 350k or more a year you pay 3x what someone making 50k pays. This point does need to be made when others talk about ss. Also the bend points in the formula make SS a form of welfare in that the first 700 of average earnings over the 35 years gets 90% then then next 3800 or so goes at 32% and everything else goes at 15%.
I think the trust fund is important becuase it masks the debt and allows you the option of ‘doing nothing’ for a few years until it runs out. (Figure what about 10-15 years worst case for depletion?).
The problem with a modest adjustment is that it doesn’t make headlines and provides little room for graft.
Islam will change
Coberly,
I am surprised that you let this slip “the difficult fix that you can’t see is to raise the taxes needed to start paying of the national debt, part of which is owed TO Social Security.”
That’s not like you to open a door to real debate. We get to the Meat & Potatoes…..you keep wanting to tell all of us how evil we are about your little tax increase, when this is the topic we really want to talk about.
So let’s get started AGAIN! When, where, and how much is that tax increase gonna play out to get back the money that is owed, especially in an environment we have to look forward to come the next ten years?
Buff, Dan this got blocked. Second comment this happened to on this thread. I don’t see the commonality.
Nancy,
The issue is how to raise taxes, cut spending, or inflate our way back to the revenues needed to pay back the Trust Fund.
Who is argueing that the SS is insolvent……no one!
Making the accounting work is one thing, actually coming up with the money to give to people is entirely different monster.
morganovich
no. if gdp growth is less than forecast, the long term financial balance will be essentially unchanged because benefits are based on wages.
over a short term… the average depression… there would be a problem, but the Trust Fund is held to a one full year’s reserve to take care of that. YOu would have to run 10% short on revenues every year for ten years to use up a one year’s reserve.
All that stuff about Bond markets may be very interesting to you, but it has nothing to do with Social SEcurity, which was created exactly to save people from the ups and downs of bond and stock markets.
SS is a good enough deal even for those “maxing out the contribution.” It gives a real return of about 2%. Then add in the insurance value, and you can’t touch it on any private market.
so you can say “outfight fiduciary malfeasance” but you are just making a meaningless, rude noise.
the arithmetic you propose, like all such exercises fails to account for all of the factors. it’s easy enough to take an adding machine and dazzle yourself with compound interest. but it never works that way in the real world.
talk about your projection.
thanks ilsm,
but even if the military was a good way to spend money it would have nothing to do with social security. social security is just people paying into an insurance policy that will pay them back every dime they paid in, not out of “tax” money, but out of the next generation of people paying into the same insurance policy for the same benefit… and this can go on forever.
The Trust Fund is created out of that paid-in money to create a reserve. The money does not come from the general taxes, and has no effect on military spending.
EXCEPT that when the congress is faced with paying back the money it borrowed from Social Security, it suddenly realizes it really really can’t afford to pay BACK the money it BORROWED, so of course social security has to be cut.
i will grant the the congress spent the money it borrwed FROM social security on wars and military toys, but it would have spent its money on that anyway and borrowed it from someone else if it couldn’t borrow from Social Security.
IF I was Social Security I wouldn’t lend to the Congress because they are dishonest and stupid. But it’s too late. Social SEcurity could just write the Trust Fund off as a bad loan and go onwith its life. IT really wouldn’t make a lot of difference to anyone. Except thsoe people who look at two and a half trillion dollars and feel every nickle of it like their big sister snatched their baby bottle.
if by “saving people from vond markets” you mean “by taking their money and getting no return on it”, then again, you have a very curious definition.
citizens would do better just holding cash. SS actually has negative nominal returns.
and how does rolling over US treasury bonds in a tax free account not work to compound interest? if the governement stops making bond payments, you can bet that SS will be defunct as well.
Actually Dale, i think he has you nailed.
Lyle
you have to be a little careful with words. the bend points don’t make SS welfare. and taxing benefits is not means testing.
What the bend points are is a way of defining the “insurance” function of SS. folks with average incomes under 600 a month for a life time, really need a big boost in their SS payment if they are going to have enough to eat when they retire. The folks between the bend points are “the average” and they get more or less what they paid for. and the folks above the top bend point are doing well enough that taking a cut of what they would have gotten otherwise and using it to pay the folks below the botton bend point is just the way the insurance is managed. it’s not welfare. there is no means test. you can live in a mansion and if you made 600 dollars a month in “covered wages” on average over 35 years, you will get a check for about 550 dollars. On the other hand if you live in a dumpster and your covered wages averaged 8000 dollars a month over 35 years (and you paid the tax) you will get a check of about 2000 dollars every month. No governmetn agent will call to see if you are hiding assets.
the tax on benefits is a function of IRS, not Social Security. your congressmen just figured that if your income is over 20,000 a year or so you can afford to pay income taxes (at the rate for your bracket) on half of your SS income. No government agent checks your assets. It’s all based on the numbers in the record. what you paid in on the one hand determines your benefit. what you report to IRS as income today determines whether or not the government will tax part of your SS.
Lyles numbers for the bend points are probably more accurate than mine.
morganovich
you keep repeating arguments that have been refuted.
that is either stupid or you are trying to fool beople who haven’t read the refutation. that would be evil.
Krasting.
read the damn post. we talked about the different options that CBO scores. We also offered our own modest suggestions which happens to solve the whole problem and not just a part of it.
what gets me so mad is you just keep makig the same dumb points without having read the post you are arguing againt. or else you are just hoping that you can fool other people who haven’t read it.
Jimi
what part of paying back money that you borrowed don’t you understand?
buff
yes. i have to conclude that the Dems are sold out or stupid. sold out makes more sense, because no one is that stupid.
and you have to remind people that while their tax rate is going up by a quarter of a tenth of a percent per year, their income is going up by a full one percent or more per year.
Bruce,
“If you can’t secure real wage increases in excess of 1 penny per hour per year something is seriously wrong with you and/or the economy. “
If that is true we have a LOT more to worry about than social security…..
Islam will change
Nancy
what is sad here, is that the trade offs between benefit cuts and cap raises are in the CBO report, and in my essay. the Krastings and Jimis and Owls and Morganovichs just can’t read. Why should they read when they already know the answer?
Proposing to raise the S.S. tax is racist. Black people have a shorter-life expectancies than caucasians. Which means they get the actuarial shaft when it comes to S.S. and you want to tax black people more for benefits many of them will never receive?
coberly and Jimi,
Your both right. The problem is NOT SS but it IS the general fund. And the general fund is an overwelming mess of debt, more debt as far as the eye can see. And we will need spending cuts, tax increases, and some healthy growth to cover that debt.
And coberly, that’s exactly why your congress critters don’t want to cash those T-bills in. That would either increase the debt or force the need to increase taxes…Jimi’s point.
Islam will change
jimi
who is arguing that SS insolvent: well Pete Peterson, CBO (slyly) and some Senators.
how to come up with themoney to pay social security: collect it from them while they are still working. has worked for 75 years now. no reason for it toever stop.
how to collect the money to pay Congress’ debt? well, raise the taxes on the people who got the tax cut that created the debt springs to mind. or cut some spending (Social Security is not government spending), or borrow it from other willing lenders.
Bruce, Just promise me a note when I get banned is all I ask!! Otherwise I don’t blame you guys, life happens!!
Jay,
This is over the top stupid. How about deleting it?
Islam will change
Jay,
Funny, but I think a better arguement against it would be “Generational Theft”
If this country would get back to focusing on what originally made us such a powerful empire….the long term money problems get solved.
It seems Americans have lost that spirit…maybe we can get it back with new leadership…but I’m quite skeptical.
If everyone made the same amount of money and lived the same number of years SS might be easier to administer. While we are trying to make is simpler we may as well assume that all investments had the same risk and return.
In the real world it is true that life expectancy is correlated with income. Even so, Social Security benefits are progressive, so raising the taxes of poor workers will increase their benefits by more than they put in. The racist argument will cause even me to call its originators liars.
New CEOs? Maybe. It would be nice to have real capitalists.
Buff and Arne…yes.
The value of the 75 year projection is that it gives us some confidence that there will not be another bulge like the one caused by the Baby Boomers. We are simply in a regime where if people expect to spend a longer portion of their life in retirement, they are going to have to ‘save’ more while they are working. The Echo Boomers are large enough to notice, but not large enough to put a blip in that trend.
Because the trend is always the same direction (even if you support benefit decreases), there is no reason to overshoot. The trustees report includes a section which gives a significant probablility that the gap is only half of their best guess. Anything other than phased in adjustments based on actual results is criminally stupid.
As long as the BB bulge is present it may make people more comfortable to make 15 to 25 year adjustments, but after that the simple solution of looking 10 years ahead, as coberly proposed, works just fine.
morganovich
and what did any of that mean? unconnected noises that sound like they might mean something don’t count as actual argument. not that you could tell the difference.
Social Security “returns” about 10% real rate of “interest” to a low end married worker who doesn’t have the leveragre to get his boss’s contribution without SS. SS returns about 2% real rate of “interest” to a high end “unmarried” worker who is his own boss and so contributes both shares of the tax.
I have calculated these returns using SSA’s numbers for average wages since 1960, assume the low end worker at half the average wage, assume the high end worker at twice the average wage. the tax calculation is 6.2% or 12.4% depending on your assumption about who pays the bosses share. the benefit calculation is based on the bend points in the 2009 Trustees report. All you have to do is adjust the imputed percent on each years tax that gets you to a total after 35 years that would pay an annuity equal to SS’s benefits over the life expectancy after retirement. I think I assumed an annuity at a nominal 8%. no doubt you can do these calculations yourself. try not to forget all the pieces.
i don’t think i ever said anything about rolling over bonds not compounding interest. i did say you are not going to get the results in the real world that you get on your calculator, for some strange reason.
TLB
thank you for your insightful comment. I wll take it to heart.
thanks arne
it is also true that black people collect more disability and death benefits. i don’t know how it all balances out in the end, but i can tell you that the black people i talk to understand social security better than the bond traders. and they want it left alone.
arne is exactly right.
this is not a case of agreeing with someone who agrees with me.
arne and i have had, may still have, a very serious disagreement about one aspect of this, and he has been the victim of my bad manners, but he very handsomely here cuts to the core point.
make the changes as they are needed, or as they can be reasonably predicted, and the long range “problem” will take care of itself.
i’d disagree with arne that the 75 year projection gives us some confidence that there will not be another bulge. no one predicted the baby boom in 1940. and in fact the 75 year projections of SS just take the 25 year projection and assume “everything stays the same” for another 50 years…
although here what is staying the same is the “rate of change.” not a concept that some people find easy to understand.
Jay I didn’t know you were a bleeding heart lib all concerned about Black folk. Good to know.
Just kidding, I know you are just repeating Heritage and AEI talking points. Determining whether blacks are disadvantaged under SS requires calculating whether that increased mortality also entails a greater average reliance on DI prior to age 65, plus a calculation of whether that earlier mortality is offset by benefits to survivors, particularly as a widow has I believe a choice of which spouse’s benefit to collect, plus the offset that shifts some benefit dollars from higher income wage workers to lower.
Experts who have done those calcs show that blacks are not on net disadvantaged. The argument from racism, generally advanced by people awfully comfortable with racism in other contexts, is mostly a bullshit attempt to play on liberal guilt.
btw
i don’t object to the 75 year projection. i use it myself to get my numbers. what i object to is using the big numbers from a 75 year projection to create hysteria among people who can’t understand that numbers over 75 years will naturally look different from numbers over one year. these are the same people who can’t understand the that numbers for 300 million people,taken all at once, tend to be large.
For example every Trillion Dollars! you hear about turns out to be 130 dollars per taxpayer per year.
So when you hear about 5 Trillion Dollar Unfunded Deficit… you can be sure that 700 dollars a year would cover it. The question is whether you are getting your 700 dollars worth. and the answer is that you are. It’s going to be the money you will need if you want to retire at a reasonable age.
Of course that 700 dollars is about 13 dollars per week, but even that is misleading, because the 700 dollars per year won’t be needed for thirty years, so it can be phased in at a rate of 40 cents per week each year, while your wages are going up ten dollars per week. and your boss pays half of that 40 cents.
morganovich,
I tried it myself and my numbers do not agree with your blog post. The excel sheet you link is not there, so it is hard to check.
I got a much smaller monthly payment from my Vanguard quote than you. The number I got better fits with the ratios that I have seen people use for annuities.
I also wonder if you are accounting for the fact that a portion of payroll tax is for disability insurance and should not be included.
Further, whatever number you use for rate of growth of private accounts should be after tax. Have you done that? And if you want to argue they should be tax-free, you should use a historical value for tax-free real return.
Another problem is that the total of SS benefits is 3 or 4 percent of the total market cap. Private accounts would have to make up more than half of the market. That much more money seeking returns would drastically alter the market.
Yet another problem is the insurance cost. On your web page you assume you will keep contributing until you retire. If instead, you lose your job and have to spend down your nest egg you won’t have the money to buy your Vanguard annuity. I’m sure it could not possiblity happen to you, but it could happen to someone almost exactly like you, and so a legitmate analysis needs to consider that – either statistically or through insurance cost.
When you get done with your revised analysis you will find that SS is a good deal for most people.
No, you just avoided answering my questions
You guys need to look around you. Do you not see the daily evidence that our economy is slowing down, again? Every signle economic indicator is pointing down.
We already have pushed the limit on fiscal and monetary policy. We already have zero interest rates. They can’t get lower. We can’t run more trillion dollar deficits. That is over. You must see the hand writing on the wall. If you can’t see what is in front of us then I will let you live your pollyanna life.
The CBO and the TF have projections of real economic growth of not less than 2.8% for far into the future. We will be lucky to average 1%. The odds are now turning into a double dip.
Don’t rely on those rosy projections. They will not be realized. What happened to the TF in 08/09 will continue. They are not going to recover by magic when we have 10% unemployed. Those numbers do not add up any longer.
See comment above. We will not know if the current footings will result in a crisis. The rules will be changed in the next year to push that date into the future. But if they don’t there will be a problem with SS and it will happen around 2015.
well, i looked at coyote website.
it favors the kind of free association hand waving the morganovich is so fond of. the guy comes up with a roi which is 100% less than Andrew Biggs, a non partisan expert no friend of SS. he doesn’t give me enough to go on to see where he went wrong, but he says enough that is just not true to make me believe it wouldn’t be worth my time.
krasting
no pollyanna here. i just understand how SS works. actually the worse the economy gets the more people are going to need SS. the money for it will come from “taxing” the wages of those working. since these taxes are going to be paid back to those workers when they retire, they are going to be glad to have the money kept in a safe place.
you keep saying that but you never make a coherent argument that connects the ankle bone to the shin bone. and you never even notice that arguments have answered your claims.
lyle
i am sorry that medicare is not capped. it spoils the “insurance” that it should be and does turn it into welfare. my commetnts here should be considerd only to apply to OASDI
no, krasting
i have answered your questions. you show no sign of hearing the answers or caring about them.
If anybody gets this far, I’d appreciate letting me know if you got through the slime attack well enough to understand what the CBO numbers were saying.
That was the point of my post. But the slimers were so interested in attacking me as a cover for selling their favorite scare stories about Social Security that they failed to even notice that much of the time they were attacking CBO’s numbers.
Very brief summary: CBO offers a number of options for solving the Social Security projected deficit.
The second option solves the entire deficit by raising the payroll tax one tenth of one percent per year (combined. thats a half a tenth of a percent for the worker.) for twenty years. This is about 40 cents per week per year in today’s terms.
The other options include raising the retirement age, cutting benefits, or raising the “cap” (taxing the rich.) You have to decide if these other options are worth it to you to save 40 cents per week, or, usually, less than half that.
An option CBO does not discuss, would raise the tax half of half or a tenth of a percent per year for the next 70 years. This would be about 20 cents per week per year for the average worker, in today’s terms. And it would at the same time “fund” Social Security “over the infinite horizon.”
These are the facts I was hoping people would understand.
If anybody gets this far, I’d appreciate letting me know if you got through the slime attack well enough to understand what the CBO numbers were saying.
That was the point of my post. But the slimers were so interested in attacking me as a cover for selling their favorite scare stories about Social Security that they failed to even notice that much of the time they were attacking CBO’s numbers.
Very brief summary: CBO offers a number of options for solving the Social Security projected deficit.
The second option solves the entire deficit by raising the payroll tax one tenth of one percent per year (combined. thats a half a tenth of a percent for the worker.) for twenty years. This is about 40 cents per week per year in today’s terms.
The other options include raising the retirement age, cutting benefits, or raising the “cap” (taxing the rich.) You have to decide if these other options are worth it to you to save 40 cents per week, or, usually, less than half that.
An option CBO does not discuss, would raise the tax half of half of a tenth of a percent per year for the next 70 years. This would be about 20 cents per week per year for the average worker, in today’s terms. And it would at the same time “fund” Social Security “over the infinite horizon.”
These are the facts I was hoping people would understand.
Coberly,
Yep…..got it, but next year it will be revised and that tax increase will be a little larger, and then the year after that it will be revised even larger and so-on and so-on.
Once again it comes down to the politics of cashing in those T-Bills. I agree with you, that we need to get it done, but politically it is toxic, and the people who want to get rid of Social Security are going to have a Hay-Day.
Just to warn you, any tax increase is going to get blamed on Social Security, and they are going to attempt to sell the public on the idea that we are being tax twice-or overtaxed just to make Social Security work, and the Trust Fund was stolen. There is going to be huge support for ending the program, but I think if that happends it will just be replaced with something else.
Jimi and Coberly–Something from real life to amuse you from remote, wild SWGA. But, I was talking to my pharmacist today and I said I spent a lot of time on blogs. I told him about the bond industry guys and how they wanted to privatize SS–Peterson, Krastig, etc. He turned red in the face and spluttered. Several outraged remarks later, he left no doubt in my mind what his opinion was of that idea. This guy is not a Southerner, but is quite conservative based on previous conversations. He is no fan of the President, Democrats and so on. But he’d just as soon the Wall Street guys left his Social Security alone. Nancy Ortiz
Jimi
you are probably right.
let me make clear, though, the tax increases talked about by CBO as well as me DO increase every year. The point is that they increase such a tiny amount that no one will ever feel them. This is not a case of boiling the frog. The amount of money needed to pay for your social security is not large, but the sanest way to get it is a gradual raise in the tax, so the system is not overfunded some times and prey to “borrowing” by Congress, and not underfunded (that is, paid for, but not at a rate that will work forever) so that people like Peterson can make a career out of shouting fire in a crowded theater.
Based on what happened here, I am sure “they” can sell the people on any damn fool thing that doesn’t ask them to think. Just attach an easy to remember sound bite to their fear of being robbed. Then you can rob them and they will thank you.
Thanks Nance.
we got about another 300 million people like that to talk to. You take that side of the street, and i’ll take this’n.