Social Security and Me: Ayn Rand, the Four Freedoms, the Road to Serfdom and the Leninist Strategy
What the —! Well it occured to me, and not for the first time, that a lot of people really don’t understand my Social Security project and particularly what even some of my friends and allies think is a narrow focus on the nuts, bolts and numbers of Social Security financial reporting. It seems to them to often miss the point entirely. But there is method to my madness (although all madmen claim the same) although that method is based on an apparent paradox: the battle over Social Security is NOT about numbers and in most respects never has been. So why focus on them? And why set up a so-called game called ‘Total Security on Elsinore’ that seeks to abstract Social Security from all societal and economic context? Well the clues are in the post title and hopefully will be explicated below the fold.
But fair warning. There will be a lot about “Me” here. And for people who find me and my writing some combination of irritating, innumerate, illogical, intemperate, and worst of all interminable this probably isn’t the post for you. For others, friends, allies, and foes —–
If the battle over Social Security is not really over numbers and solvency then what is it about? Well I suggest it is a manifestation of a clash of philosophies between two irreconcilable camps. One camp takes its collective inspiration from a canon that includes Ayn Rand’s Atlas Shrugged and The Virtue of Selfishness, Milton Friedman’s Capitalism and Freedom, and Friedrich Hayek’s The Road to Serfdom. Each work and its respective acolytes subscribe to one or both of the following equations: Capitalism = Freedom and Socialism = Tyranny. In this camp the firm and often fervent belief is that any and all government interventions in the Free Market via central planning, regulation or programs that redistribute gains from productivity are if not Socialism per se, certainly steps along the path. They may admit that such interventions might be well motivated and even for a time have positive net effects by Utilitarian Greatest Good for Greatest Number calculations but still maintain that promoters of them are either dupes or active collaborators with a fundamentally anti-Freedom and anti-Capitalist agenda. Which as Friedman suggests are ultimately the same thing.
On the other side of this divide is a group that takes its inspriration from a quite different canon, one that includes FDR’s Four Freedoms Speech and for the more religious the Sermon on the Mount. If you had to some up the unifying philosophy it is explicitly anti-Rand in holding that not only is Selfishness NOT a Virtue and still less the PRIME virtue, but instead close to The Root of All Evil.
As a result there is little room for compromise in the parallel battles of Chicago vs. Hyde Park, Objectivism v. the New Deal, or Libertarianism vs. Social Democracy, each draws on a different vision of what it means to be fully human. So the fight tends to play out by proxy and programmatically, Glass-Steagal is passed and then later repealed, tax schemes are advanced and fought back, and perhaps most persistently there has been a decade long struggle against the largest interim victory of the New Deal/Social Democratic side. Which is to say Social Security and its expansion via Medicare (the official title of the “Medicare” Act was the Social Security Amendments of 1965)
Historically the major obstacle for the Selfishness as a Virtue camp is that Social Security and later Medicare proved to be extraordinarily popular, to the point that conventional wisdom dubbed the former ‘The Third Rail of American Politics’ because ‘Touch It and You Will Die’. Also relatively few people, whether of faith or not, are willing to simply reject the messaging of the Sermon on the Mount out of hand, or at least openly admit to the same. Because at some point the more extreme versions of Objectivism/Libertarianism devolve into Every Man For Himself/Sociopathy.
Of course many Libertarians and Free Marketeers are not sociopaths and indeed love their kids and their parents and don’t kick puppies. And many of them don’t want other peoples kids and parents to suffer unduly. On the other hand Freedom is not something you just allow yourself to lose. And if you sincerely believe that State Socialism = Slavery and that Social Democracy is just State Socialism-Lite then you have a moral obligation to roll back the Social Welfare State, because the stakes in the game Freedom vs. Slavery could not be higher.
This approach leaves most New Deal/Great Society types baffled. Because they simply don’t accept the premises that underlie the theses presented in Virtue of Selfishness, Capitalism and Freedom and The Road to Serfdom. As a result they don’t see the resistance to Social Welfare programs as a defense of liberty but instead an attack on the Sermon on the Mount. Which leaves the two camps shouting past each other in mutual incomprehension.
But there is another result. The Capitalist Freedom Fighters have over the years come to recognize the danger represented by the Third Rail of American Politics and so as a matter of tactical necessity rarely take Social Security straight on. Instead they have adopted strategies designed to drain the Juice from the Third Rail, which Juice is in the end just the Confidence of succeeding generations that the system is sustainable going forwards. And the core of that was outlined rather straightforwardly in a 1983 paper by Stuart Butler and Peter Germanis included in the Fall 1983 Social Security Reform issue of the Cato Journal. That paper is available online in PDF and had the title listed in the TOC as Social Security Reform: Achieving a ‘Leninist’ Strategy but on the actual title page not including the first three words.
The paper is worth reading in full but the strategy can I think be summarized in three phrases: “Reassure the Old, Scare the Young, and Blame the Boomers” and the weapon of choice is to use a narrative of ‘crisis’ and ‘bankruptcy’ and ‘sooner is better than later’ based on a particular set of numbers. With the twist that the authors are forced to disguise their ideological opposition to Social Security as being a threat to Freedom under the guise of concern about such things as solvency of the system going forwards. Mind you many of them might believe their own numbers and the seeming implications for solvency, but to the degree that all see this fight as a moral obligation to fight for Freedom as they define it, it is not surprising or particularly morally culpable in their eyes if they rest their thumbs on the scales particularly when it comes time to measure the rhetoric and deliberately using terms interchangeably that are not the same thing at all. As an example ‘unfunded liability’ vs. ‘debt’.
As a result I am not inclined to react with indignation but instead with a resolve to use their own weapon of choice back against them. And that weapon is numbers. Which doesn’t make them more important than the underlying ideological clash nor even undermine my own commitment to the values of my camp in this struggle. It is just that in this particular battle, this particular duel they got to choose the weapons.
I put it this way in a 2005 post on my own blog titled Social Security: it it about Solvency or about Ayn Rand?
This site is all about the numbers. You get links to every Social Security Report from 1942 to 2005, you get breakouts to particular tables from all Reports from 1997 to 2005, you get some explications of what those tables mean. The numbers are important, if you are going to participate in the debate over the future of Social Security you need to understand them, you need to understand their implications, you need to be able to measure them against the numbers you read in the paper every day. Because oddly enough this debate is not about numbers and in most respects it never has been.
And I stand by every word of that today. The debate is about Ayn Rand and the Leninist Strategy and the Road to Serfdom and my fundamental belief system is well spelled out in FDR’s Four Freedoms speech. It just happens to come formatted in data tables and budget language.
very good and insightful post.
Oh, and the numbers actually show the program to be sustainable (and if I’m wrong, call me when the Social Security Trust Fund is empty)
I agree with Bruce, but have a slightly different take on it.
In the first place, whatever the ideological beliefs of the “other side,” they are not honest. They lie about everything. Their “ideology” is nothing more than a constructed lie to pretend there is some justice to the fact that they want all the money. They are clever liars so they can usually bury the lie in a twisted tangle of “factually true” statements.
And they know they are trying to hurt people. I have a word for people like this: evil. It’s an old fashioned word and it offends people when I use it. “Can’t we all get along?”
No, we can’t. They are out to kill your grandmother. And that means they are out to kill your little daughter who will someday be a grandmother. Keep that in mind.
I tried to show, in my former innocence, how the numbers being used by the “Social Security is going broke, will be a huge burden on the young…” people turned out to amount to an eighty cents per week raise in the payroll tax. No one seems to care.
I think that’s because in the first place no one can do arithmetic, and in the second place no one even has a sane sense of proportion about the SIZE of eighty cents per week (hint: it’s next to nothing). They are having too much fun fighting about doomsday. The “leninist strategy” people want to kill the grandparents to save the children…. they say. And the “defenders of social security” want to “tax the rich to save the poor.”
They don’t seem to understand that the Leninists have been out there telling the rich that “they are going to impose huge taxes on you to pay for someone else’s retirement.” So they are actually playing into the Leninist hand. No one wants to hear that “the poor” (that’s you and me) could pay for our own Social Security with an extra eighty cents per week from time to time.
It occurred to me that the really big liars might have, in their own minds, a legitimate case. They really believe that we must all work as hard as possible to create the wealth we all will need to stave off starvation and defeat the indians. And they look at someone like me who says, “we have enough, we can take some time off” as some kind of moral slacker. And moral slack is catching and petty soon you won’t be able to get anyone to work.
Well, this might have been true enough on the frontier… even the frontier of ancient Babylonia. But today it is simply a mental disease.
Only those people can’t help themselves. Partly because by hard work (they tell themselves) and being smart (they are in a way) they find themselves in a position where they don’t actually have to do the hard work. the ugly, dirty, dangerous work. They can pay someone else… as little as possible… to do that, while they work at managing their money,,, and, of course, keeping the workers working.
Well, that’s as understanding of the poor dears as I am prepared to get. The fact is that they have become liars and monsters… as they always have. And the only hope ordinary people have… have ever had… is to work together to make it harder for the monsters to eat them.
Trouble with that idea is that ordinary people have never been very good at working together.
All I can say is… if you COULD work together, you could convince Congress that you are willing to pay an extra dollar a week or so (the honest numbers) from time to time in order to keep your Social Security, which you will need.
And which is not broke and will not burden the young. They are going to need it themselves. And the price is a bargain.
Umm, bullshit.
If you have to falisfy the terms of debate and the perspectives and arguments of the debaters, perhaps your own argument and perspective are in junk shape.
What else would explain the dishonest fabrications?
Greg are you calling bullshit on me or Dale?
What can you be more specific about the falsification here either way?
Also I am having problems interpreting “dishonest fabrications”. Which ones and by whom?
Because you are being awfully non-specific here and neither Dale or I are mind readers.
Greg
i am not as nice as Bruce. It’s easy to say bullshit. It’s a little hard to actually say something that means anything. What do you find false in what either of us said?
If you want a true “fact.” here’s one: the 8.6 Trillion dollar unfunded deficit turns out to be a need for an eighty cents per week per year raise in the payroll tax.
Everything else you see on the news is a lie.
(that may possibly be an exaggeration, but you’d have to remind me of something that wasn’t a lie, or at least a distortion amounting to a lie.
i suppose i should have said that “only” the biggest liars are psychologically committed to the idea that we all must work every hour until we die. they still lie about Social Security, but I think their basic motive must be something like that.
the smaller liars, including a few recent presidents are not particularly motivaed by the work until you die ethic. or any ethic at all. they are just whores. in it for the money… mostly from the bigger liars.
and then there are the fools. folks like Sammy and Krasting and Greg here. As far as I can tell what motivates them is that they believe the lies. And they don’t seem to be very nice people either.
I have just reread Bruce’s post and my comment. There is nothing in either of them that is even in the category of statements where it would make sense to call it a lie, or a true for that matter.
I think Greg is just one of those people who calls everything he doesn’t want to hear a lie.
I suppose someone might say the same thing about me. But the fact is I can demonstrate the “deliberate misleading” (which is what i call a lie) in every argument made by the “Social Security is going broke. Social Security will be a huge burden on the young. The old are robbing the young” liars. Sometimes its a little tedious (for both of us), but if you can think at all, there is no doubt once you have … well, thought about it.
Bruce,
Greg is right. Your post is bullshit. You have fabricated some mysterious cabal of Ayn Rand-ers who want to reform social security only out of malice. They don’t exist. No one hates the elderly.
You have focused only on the Social Security actuarials, which are only slightly out of whack, especially assuming the effortless redemption of the IOUs from the General Fund. In actuality, when the General Fund redeems IOUs it has to either raise taxes, or cut spending in another program. You also ignore Medicare, another, equally important, elderly entitlement which is more seriously out of whack.
So your only explanation is this mysterious cabal of evil doers. This is ridiculous.
You are overlooking the obvious facts that 1) Social Security will forever be cash flow negative, 2) that the Federal Government is $14T in debt and 3) the Federal Government is spending 150% of tax revenues.
Forget the conspiracy theories. You are alone there. Focus on these relevant facts.
Sammy
you missed the part where i speculate about the motive of those who are fooled by the big liars.
Social Security does not affect the deficit or debt except by the fact that SS is OWED money by the government. Your answer to that is just to not pay back the money you owe, even if the elderly starve. I guess you don’t have to hate the elderly, just love money more.
I don’t think Bruce said anything about evil. It was me who said that those who tell lies that they know will hurt people are evil.
The government debt was created by cutting taxes and spending borrowed money on unnecessary wars, and by trying to save the economy from the criminal acts of your banker friends.
All those big scary numbers you cite have nothing to do with Social Security. In any case the deficit is coming down by itself as real economists always knew it would. But Social Security pays for itself. That is, the workers pay for their own retirement using Social Security as a place to save their own money, keeping it safe from inflation and bad days on the market.
You are one of those who doesn’t know what they are talking about. In your case it often looks like you don’t even know what the words mean. Why do you do it?
FDR, the leading element of the Progesso movement…
Of course, SS and medicare was embraced, in the early stages as result of the free lunch syndrome and because of it early grand returns, as SS recipient receive a very substantial return on their tax investment something that is declining at a very rapid pace…
This mandated retire program by the federal nannies upon the serf of America was never that popular as folklore or this author wants to make it out…
If it was such a brilliant scheme it would have been voluntary and not fiat by the state with police powers…
Of course, the only guiding light one really needs, is that most governmental unit programs are either failures or extremely inefficient and are only support by the left and the non-productive (leaches – for those that fish)…
Even the original intend of SS has been fully bastardized, through the transformation of a retire program to a redistribution and collectivist program to support the ruling leftwing elite…
The tax takes 1/8 of your pre-tax earnings and willing leave most individuals in retirement poverty…And this, the supporters will describe as a successful social program…God Almighty (I am quoting Micheal Malone – Air America)
And like so many federal nanny programs, they are complex and difficult to understand and digest…The government always take a simply item and turns it into a massive and bewildering forms, wherein the end user either does not comprehend or needs the services of a paid professional or a government helper…
In any case, unless given a handout, the subscriber generally always gets a poorer return than what would have been provided by the market place…
Yes, the real liars and monsters are those that continue to deceive the low information public…
Sammy, you must understand the liberal mind, their entire existence is based on emotion and subjectivity, rather than facts and figures with Coberly being a prime example…
Despite his protest that SS is sound, there is the clear omission of any support facts or figures…
Sammy you erected a strawman. I never said the Economic Right hated the elderly, I said they were committed to a particular Freedom agenda that required them to reject central planning.
And anyone who doesn’t understand the key influence of Ayn Rand on such avowed acolytes as Alan Greenspan and Paul Ryan is just ignorant of history and the rhetoric of the Right.
How often from Rush Limbaugh down (and I do mean down) have we seem Makers threaten one version or another of ‘Going Galt”? Of evoking the language of ‘takers’ and ‘makers’?
And Hans there were no early grand returns. The stories backing that are based on a combination of bad history, poor use of data, and outright lies.
For one thing Social Security payments didn’t start right away, the program wasn’t scheduled to pay monthly benefits until 1941 though subsequent amendments moved that up to 1940. And a lot of the arguments about outsized returns on Title 2 ignore the contributions those workers made to Title 1 in the form of income tax contributions. Which since the AEI folks like Biggs never inform their audiences even about the existence of the Title 1 program or the fact that it supported more beneficiaries at a higher annual cost than Title 2 right up to 1950 means that an honest evaluation of those ‘grand early returns’ would need to be recalculated.
As to Hans. You are suffering from the same historical blindness. There was no transition of Social Security from a retirement system to a redistributive one. That is a purely convenient myth made up by the Social Security haters post facto. But you have to now something about the actual history of Social Security beyond what you get in handouts from Cato and AEI. You are simply mouthing platitudes that are the product of a deliberate misinformation campaign. For example you might want to read the 1983 Butler and Germanis paper and compare the messaging promoted there with all subsequent messaging from the Right on Social Security. Their advice was followed right down the line right through Bush’s CSSS to the various plans advanced by Ryan and others that promise that ‘no one in or approaching retirement will be effected’. A key element of Butler and Germanis and BTW every bit as much a lie as the much ballyhooed Obama promise that ‘no one will lose their insurance’.
And Christ the popularity of Social Security and Medicare isnot just ‘folklore’, it has been backed up by polling data for decades. And those signs at Tea Party rallies reading “Keep government hands off my Social Security and Medicare” and the use by Republicans of Medicare sayings under ACA to demagogue Obamacare as ‘gutting Medicare’.
If fact the lashing out of you three kind of demonstrates my thesis here, the hatred of Social Security evinced simply can’t be supported by resort to actual economic or polling data. It is all literally talking points distributed originally by self-described libertarian organizations like Cato and American Enterprise.
Which makes doubly ironic your final statement..
“Despite his protest that SS is sound, there is the clear omission of any support facts or figures”
As if any of you supplied anything of the sort. Like most of the people in your camp you just assume that the support is there for your position and so don’t have to bother bring it. Whereas I have been bringing ‘support facts’ and ‘figures’ to this forum over many posts for quite a number of years now.
And boy you don’t need to caricaturize the economic Right when you get statements like this:
“Of course, the only guiding light one really needs, is that most governmental unit programs are either failures or extremely inefficient and are only support by the left and the non-productive (leaches – for those that fish)… ”
You manage to combine both the True believer faith-infused “guiding light” with Randian talk about “the non-productive”. And then complain about others making argumetns “based on emotion and subjectivity”. when as here that is all you yourself have delivered. Boy talk about a “low information public”, you might as well be the Poster Boy for all that you have shown here.
Ayn Rand collected SS in her later years….selfish to the end…
And a good morning to you Bruce. I don’t know how you and Dale keep doing the heavy lifting. And Dale, thanks for commenting over at Balloon Juice last week. I’m sorry you were treated so poorly by some of the people commenting there. Bruce, I don’t want to derail the thread, but I’m wondering if you have a position on raising the cap? Or maybe a link to an earlier post. Again, thanks for laying it out so clearly.
Bruce,
You are wasting your time attempting to engage in a discussion with Hans. There is no there, there.
Meanwhile,
I do have a problem with one of your statements that does not have a link supporting it:
“Of course many Libertarians and Free Marketeers are not sociopaths and indeed love their kids and their parents and don’t kick puppies. And many of them don’t want other peoples kids and parents to suffer unduly.”
The only charts or numbers I need are detailed here – http://www.socialsecurity.gov/cgi-bin/netcomp.cgi?year=2012
and, my own experience after 40 years of working in the United Corptocracy of AmeriKa. The only problem is GREED of the upper 10%. I include this additional 9% because they are the functionaries of the 1%, and as such, are the only beneficiaries of the 1% insatiable greed.
Common sense is finally beginning to dawn for the average jane and joe of the working class. The system is the same ol’ system that has been breaking our backs for the last 5000 years. Time to throw off the shackles and burn down the plantation.
*mind that the chart referenced above only includes wages, the rest of the income of the wealthy, i’d bet the majority of their income is of the unreported variety*
I thought Michael Hudson had made it very clear in his book “The Bubble and Beyond” that central planning never went away but now resides in the hands of the financial rentiers, more colloquially known as the Banksters, whose prime sociopathic objective is to impose massive debt servitude on anything that moves in human form.
@Sammy The “mysterious cabal of evil doers” you have characterized as conspiracy theory is called the Mont Perlerin Society, which was started in 1947. It still meets and include in its inner sanctum the full pantheon of economists of what’s termed the neoliberal school of economics. This group, and its members and think tanks and offshoots of variant related thought are well funded by people of similar mind, who incidently profit very nicely from the theories and way of thought you seem to espouse. See “Never-Let A Serious Crisis Go To Waste”, by Philip Mirowski. [It’s not an easy read and the author can sometimes be a little obtuse in reaching his point. However the material presented is fairly clear as is the pattern of something you might call a “cabal of evil doers” if they were goring your ox — and by the way — they are.]
I believe that we both are in agreement about the value and importance of Freedom. Another book that opened my eyes to what was going on — read “Cornered, The New Monopoly Capitalism and the Economics of Destruction”, by Barry Lynn. A very important and basic freedom you would seem to hold dear might be the right to go out and start a small business of your own to join the wealthy you seem to admire. There is govt. red-tape and regulation galore, but the real killer you’ll run into is the cut-throat competition. You’ll be in the game with large monopolistic firms that control both the production of goods you might want to retail or produce and have the deep pockets and control major portions of the market for those goods, and who will to sell at a loss to drive you out of business or compel you to sell your business to them. That’s not my idea of Freedom or market competition or a free market or the right way for Capitalism to work. You don’t have to be a socialist or a Marxist to see neoliberalism as anything but a free market economy. The present system of Corporate Capitalism that helps fund and supports neoliberal economic thought gives Capitalism a bad name.
Nanute while I am not opposed to tinkering with the cap formula to get the rate of covered income back up to the 90% range from the approx 83% range it is today I do not support raising the cap entirely or extending it to capital gains for a few reasons.
One it tends to undermine the worker funded nature of Social Security. With the cap Social Security is a program of wage workers, by wage workers and for wage workers. It doesn’t put demands on upper management or ownership to fund it and so owes nothing to them, particularly in the way of ceding poltical control. Because as the old adage goes “He who pays the Piper Calls the Tune”. Without an excellent reason I would be relucatant to hand over the keys to the Social Security care to the Masters of the Universe.
Two, and related, lifting the cap tends to undermine the insurance nature of the program and shift it towards a welfare model. As the model exists workers can with some justification say “We paid for it”. But really just another way of restating point one.
Three, lifting the cap is an implicit admisstion that the program was badly designed and unsustainable as opposed to needing some adjustment in FICA as has been done many, many times before and fully anticipated in the First Report of the Trustees in 1941. The claim floating around that FDR promised that the rate would never go up is hooey, or at least was by the time the 1939 Amendments which gave Social Security its final shape were passed. A time of course when Roosevelt was still President.
Four. Lifting the cap gives cover to the “My God we can’t have billionaires paying any more taxes folk”. It allows them to make the “We just gave at the Office” dodge by saying “Hey we did our bit to rescue that flea bitten Social Security program, which failed just like we predicted”. Again much like three but with a little more crowding out.
Five. Social Security really doesn’t need their money and thinking that it does is to just buy into Crisis messaging. There are all kind of reasons to boost top rates or even to create dedicated funds from wages over the cap. For example there is an excellent argument for splitting the financing of DI even more away from OAS (that is Disability from Old Age/Survivors) and funding DI as we fund HI (Medicare Part A) which has no cap. Disability may or may not be work related as to cause but if so it rarely is caused by actions of the rest of the workforce and it is a little odd to have them pick up the bill as opposed to society at large. It is also a little odd to have the same type of contributions and work history requirements for DI as for OAS, which is to say 40 quarters of contributions, there being little logical reason to treat a guy with a crushed leg with 9 years three months on the job differently from the guy with 11 years of total covered earnings under SS. Or to just set the permanent base for calculating the lifetime benefit of that 11 year guy at his highest wage at the time of the injury as opposed to his potential wage if he stayed in the workforce.
But that drifted from the point which is that Social Security just doesn’t need the money of millionaires and billionaires when placed on a scale of actual problems existing today. Social Security’s ‘crisis’, to the extent it exists at all is small and far in the future. While we have all kinds of priority needs today. Why on earth would we send MORE money to a fund that currently has $2.8 trillion in it rather than investing in children or in highway bridges or energy efficiency or any other of the unmet needs right NOW as opposed to 2033. With the additional bonus that many to most of those investments actually serve to send additional funds to Social Security anyway. That is 12.4% of every federal tax dollar spent hiring a bridge worker or a teacher comes right back to Social Security as does a that portion of that dollar which by being spent supports another worker’s wage.
That is if we just took our ‘Scrap the Cap’ proposal and turned it into an infrastructure tax levied on the well to do and the wealthy and plowed it all back into the economy in ways designed to increase productivity overall it funds Social Security as a byproduct.
Social Security doesn’t need a handout from the rich. It needs More Jobs. At Better Wages. Which is in fact a recipe for all kinds of things that ail this country today. Things like Cap Increases and EITC are attacking the problems at the wrong end.
EMichael, is my probation officer and will encourage everyone not to have contact with me…
This is the type of dialogue he brings to the table…
“meanwhile,
I do have a problem with one of your statements that does not have a link supporting it:
“Of course many Libertarians and Free Marketeers are not sociopaths and indeed love their kids and their parents and don’t kick puppies. And many of them don’t want other peoples kids and parents to suffer unduly.”
Another one of his very fine and productive posts, of which there are all to many…
“Ayn Rand collected SS in her later years….selfish to the end…”
An even more telling anecdote is that is that the father of the Koch Brothers induced the other hero of the piece Hayek to retire in the U.S. because he was eligible for Social Security and Medicare.
Charles Koch Told Friedrich Hayek To Use Social Security, Letters Show
http://www.huffingtonpost.com/2011/09/29/charles-koch-friedrich-hayek-social-security_n_987701.html
I don’t blame Hayek for taking it, after all he earned it. But the Kochs Pere et Freres spend a lot of time railing against the ‘Culture of Dependency’ even as few of them actually turn down their Social Security checks when the time comes.
Capitalists virtuously maximize their own self interest by using every applicable provision of the tax code available to them. After all that is just the law as written (even though it was often written by their lobbyists).
Workers and those with barriers to entering the workforce who maximize their own self interest by using every provision of federal law available to them to secure benefits that are often tax exempt (often because their effective marginal rate is zero) are moochers and looters.
Oil Depletion Allowances were virtuous. And similar tax subsidies to the fossil fuel industry are as well, and untouchable. Because Capitalism. And Free (tax subsidized) Enterprise.
Standard and Personal Exemptions that have the effect of making a large part of the lower 47% exempt from income taxes are evidence that THOSE people shouldn’t even have the right to vote. Because Takers.
Note for commenters like Jeremy.
It is common for new comments and commenters to get caught up in moderation. And while the Post author, in this case me, does get e-mail alerts, they might go to an account that is not monitored on a minute to minute basis. For example all comments at AB on my posts go to socsec dot defender at gmail which is a secondary e-mail for me. But once approved subsequent comments SHOULD go through just fine.
But as Dan’s Open Thread’s indicate AB is having some generic problems with Comments this last few days and it is NOT because the moderators are actively putting up barriers. Like all commenting systems ever devised sometimes WordPress Giveth and sometimes It Taketh Away. And neither Rhyme nor Reason seems to fully apply.
But at a minimum it is better than Captcha systems which to my mind (and old eyes) are often Pure Ebbil. And truth be told the Spam filters work pretty well even if some people at the margin get swept into moderation. Apologies and I will try to stay on top of it during the life of my posts.
Greg
pretty standard Libertarian rant. I had forgotten what it was like to be forever fourteen.
But as for “facts and figures,” when you figure out a way to tell honest facts from lies and honest figures from lying figures, we can talk about it.
But here is where you have to start: The 8.6Trillion Dollar Unfunded Deficit you hear about turns out to mean an eighty cents per week increase in the payroll tax in some, not all, years for the people who will get the bigger benefits needed in the future because they are going to be living longer. And they should have the money to pay for it easily. lIf they don’t have the money, they will need their Social Security even more, so the higher price to pay for it is just like having to pay a higher price for bread, which happens sometimes, But no one spends a billion dollars trying to convince people that the way to deal with a higher price for bread is to feed their kids less than it takes to live.
sorry I meant Hans
Do you have any evidence that the people attacking social security are motivated by ideology? Clearly, their willingness to fudge math and deceive their audience points to other motivations. Did Ayn Rand celebrate the virtue of lying?
To the poster above: social security is no more responsible for government debt than any other holder of us treasury obligations. Also, medicare’s problems are entirely different than ss’s; they arise from out of control private health care, and gop hamstringing of the program.
Thanks Bruce. I agree with your assessment 100%. Getting Congress to “Come to Jesus'” on the expansion of the base through fiscal policy and targeted tax increases, is going to be a very difficult, if not impossible task. As Einstein noted: Insanity is doing the same thing over and over again, expecting different results.”
McMike well it depends on what you consider evidence.
Yes I believe large parts of the Economic Right have fully adopted a philsophy compended out of Ayn Rand, Milton Friedman and F. Hayek. You see it every day in the rhetoric they deploy about ‘makers and takers’, the miracles of Free Markets, and socialism = tyranny. I mean you see plenty of examples of that right in this comment thread.
Consider this: lying in a time of war is generally not considered a crime, not when used by one combatant against another. Indeed refusing to tell the truth when one falls in the hands of the enemy, even in the face of torture, gains you medals and not condemnation. In that circumstances the phrase “I cannot tell a lie” has no meaning, and under certain circumstances could be equated to treason.
The question is whether the Economic Right has actually internalized the surface message of Hayek’s Road to Serfdom, that central planning at all times and under all circumstances will lead to tyranny, which in 1940 meant Fascism on the one side or Communism on the other. And I would say that most of those who accepted Hayek and indeed went significantly beyond him in terms of the relation of government regulation of all kinds and Communism were true believers. Deluded in my view, but not insincere.
Now whether what was true for Charles Koch is actually operative with his sons is a different question. They may or may not actually believe and are certainly mindful of the vast profits to be made by adhering to the belief system of their father. And certainly they and others in their positions have shown unlimited willingness to hire paid propagandists who clearly are in it for the buck and maybe have no core beliefs about anything.
On the other hand it really does not make much operational difference whether these folks and their hirlings are willing to let the elderly poor starve out of active malevolence towards ‘moochers’ or with simple indifference to their fate in the face of ‘greed is good’ philosophies. Or for that matter whether they justify lying in terms of ‘greater good’ or as simple cynicism.
My personal belief, which with a quarter will buy you five nickels, is that the Right sees a successful Social Security program as an existential threat to their ‘government is not the solution, government is the problem’ ideology.
It is worth reading the rest of the essays in that Fall 1983 issue of the Cato Journal that included Butler and Germanis’s ‘Leninist Strategy’. The issue was in the way of a collection of Conference papers from a Cato organized meeting in NYC in June 1983 in the immediate aftermath of the passage of the legislation that came out of the Greenspan Social Security Commisison.
Social Security: Continuing Crisis or Real Reform?
http://www.cato.org/cato-journal/fall-1983
The overall tone is one of clear regret and chagrin at an opportunity missed and one that they understood might not be repeated for half a generation, or maybe ever. Because the legislation was scored as having made Social Security solvent ON AVERAGE for the entire 75 year actuarial period. That is for all the public knew and for that matter most informed opinion Social Security was fixed, solvent, bankruptcy avoided not just in the short run but in the long as well. Or at least the long-middle. And yet the reaction of the people around Cato was not to move on to other aspects of their ‘Freedom’ agenda but instead to re-tool and reorganize around a new message, one that explicitly relied on a divide and conquer strategy to separate the new generations coming up from Boomers and to set the stage for the current ‘intergenerational warfare’ messaging we see with the Astro-turf Bowles-Simpson front group of ‘Millenials’ called The Can Kicks Back.
So I still maintain that none of this is about Solvency or even Debt, the very worst nightmare of the folk at Cato and AEI and Heritage is that Social Security will not only become solvent within its current government insurance/worker funded structure but that it is so perceived by the country at large. Because good news for Social Security is bad news for ‘Government is the Problem’.
But like I said take this and a quarter and you can probably find someone to sell you 25 cents of pennies and nickels.
My dear Mr Webb, you are certainly “entitled” to defend the indefensible, however, not to admit that Social Insecurity has serious inherent defects is not acceptable…
Rather than launch a broad attack on your claims, I will offer you a single rose..
“Congress therefore set an initial minimum
monthly benefit of $10 for anyone who had
paid into the system for at least five years.
This meant that early beneficiaries received
payments far in excess of any contributions.
For example, the very first Social Security
recipient, Ida Mae Fuller of Vermont, paid
just $22.54 in Social Security taxes, but the
long-lived Mrs. Fuller collected $22,888.92
in benefits.”
Of course this is the extreme, however, millions of Americans whom had an extended life spam received many, many times the dollars they paid into the system, including my beloved mother…
A system that operates under the PAYGO, can not afford this type of economic draw down, because the only way to replete these funds would be to add more bodies, something that is no longer possible..
I shall await for your parry..
The only honorable defense of SS, is to say, the main object is to achieve and maintain equality…Anything else is the BIG ___…
Hans the first sign of a total unserious person on Social Security is there dragging out poor Ida Mae Fuller as some sort of exemplar.
Ida Mae Fuller happened to be the first person awarded Social Security monthly benefits. By a really, really odd coincidence Ida Mae Fuller lived to be 100 years old.. To use her ROI as some sort of indictment of the finances of the system is beyond silly, particularly when it is regularly deployed by those who claim most people died right at or after Full Retirement Age and that THAT is proof that the whole thing is a sham.
Whic h is it? A scam that has people work all their life and then get ripped off, or a scam that has people work a couple of years and then collect benefits for decades? Or somehow both?
Plus the whole thing is just too silly for words. Because nearly everyone who actually got the benefit of those ‘unearned benefits’ by drawing Social Security while not having been in covered employment are now off the rolls. Being dead.
Buy a calender. Anyone born in 1918 or after spent their entire work liives under Social Security. And so qualified for benefits strictly on the basis of numbers of years in ‘covered employment’ when by definition they were contributing. Anyone older than that hit Full Retirement Age (then 65) by at latest 1983 and was in a demographic cohort in rapid decline after 1994 and still alive in insignificant numbers by 2004. Which is to say were leaving the Social Security rolls right as the system was itself rolling up $100 billion a year cash surpluses (i.e. not including interest).
Now it is true that Biggs and his colleagues at AEI published a series of pieces on ‘Backwards Transfers’ a few years ago that tried to argue that some $17 trillion of future unfunded liability was due to overpayments to early cohorts. I found this odd because by totally ALL Social Security payments from 1935 to 1980 I only came up with a total of $997 billion. And since the Trust Fund at that point in time had a small but positive balance clearly all such payments had actually been funded by then current workers, so exactly how had the rapidly dwindling number of workers who ‘benefited’ by drawing on SS but never actually paying in somehow manage to transfer $17 trillion in obligations FORWARD?
Well it took a lot of digging but it turned out that the secret was in figuring out what Social Security meant by ‘Past’ ‘Current’ and ‘Future’ Participants when compiling those tables of future Unfunded Liabiliity. The unwary might think that ‘Current Participants’ only included folks currently drawing benefits while ‘Future Participants’ were those Gen-X and Millenials who were apparantly getting screwed per these tables. But it turns out that the Trustees defined ‘Current Participants’ as anyone who had already reached the age of 15, which in 2008 already included all Gen-X and most Millennials. Moroever on inspection of the data tables almost all the actual gap between income and outlays came after 2040 and before 2060. And take a wild guess at which cohort will actually be retiring during that period. Hmm, 2040 -67 = 1973. Nine years after the last Boomer was born and so the mid-point of Gen-X. That is it turns out that almost all of the ‘Backwards transfer’ to ‘Current Pariticipants’ that so burden our young people today per the tools at The Can Kicks Back is in fact af FUTURE ‘backwards transfer’ from Gen-X and Millennials to GEN-X! And not in fact to your poor departed Ma or God Help us Ida Mae Fuller.
That is your “millions of Americans —–” is based on totally flawed argumentation relying on both bad chronology and worse arithmetic, it just isn’t the case that any part of ‘Unfunded liability’ is really due to those early cohorts, not in a practical dollar flow context, those people’s Pay was already funded on the Go and they themselves are mostly Gone.
Plus your further argument that we cannot afford this kind of (actually non-existent) drawdown because the “only way to replete these funds would be to add more bodies, something that is no longer possible” is profoundly misguided and ignores all of American history.
An important feature of American history has been a persistent labor shortage to exploit the new opportunities as the country expanded both westward and if you will upward (via industrialization and urbanization). And the solution to that problem generation after generation has been immigration. If America needs “more bodies” we can get them where we always have – from overseas. If I could still be astonished at the pretzel logic of the economic right it would be at the insistence by them that the greatest threat to America is simultaneously immigration and a falling worker-retiree ratio. That Social Security is going broke because there just won’t be enough people to take care of Boomers in their old age AND staff the factorries and yet immigrants are simply crowding out employment for Americans. Well which is it? Is America faced with a future labor shortage that would need “more bodies” to “replete those funds” or are we being over-flooded by those same bodies? Because you really can’t have it both ways.
Oh well you can. Because it is telling that most of the folk who appeal to this kind of ‘demography is destiny’ via falling birth rates and so an ‘aging’ society like to cite the cases of Italy and Japan. But the fact of the matter is that Japan has some of the strictest immigration restrictions in the world and a lot of elderly Italians wished they had the same problem. Because they see the problem often in cultural terms, that an influx of foreigners will dilute what it means to be Italian or Japanese. That is if the solution was really a simple matter of age demographics the solution for Italy would be to accept all those migrants currently drowning in leaky boats trying to cross from Africa and for Japan to actively recruit new citizens from such places as the Phillipines and Southeast Asia. I strongly suspect you could fill every empty billet for retirement home night nurses in Japan overnight by putting up a ‘Welcome’ sign at a recruiter’s office in Manila. And the same for Italy at a similar office in Ankara. And get plenty of candidates trained in western medicine. But their Japanese and Italian would certainly suck, at least initially, though chances are pretty good that their English would be okay.
Which is why I can’t take the Right seriously, they just grab at whatever argument is convenient at the time: immigration bad because American workers lose jobs, Social Security broke because there is no one available to fill low wage jobs. Hmm, anyone but me see a perfectly good source for those low wage jobs?
So that is my parry, as you put it. You are repeating talking points that ultimately originate with Kevin Hassett and Andrew Biggs of the American Enterprise Institute. In fact though you didn’t actually supply a link to your quote it has a familiar ring and sounds like something Andrew has said (because Biggs and I have a history going back some years now).
I am afraid the only “BIG____” is your rather laughable attempt to punch above your own weight in this debate by throwing jabs stolen from much better fighters. (And BTW Biggs is the best at this, you might try the archives at his own blog Notes on Social Security Reform, which I believe is still active).
“Ida Mae Fuller of Vermont, paid just $22.54 in Social Security taxes, but the long-lived Mrs. Fuller collected $22,888.92 in benefits.”
Ida Mae retired in 1940 presumedly at the age of 65. Ms Fuller lived to be a 100 which meant she lived until sometime around 1975. During that 35 years she drew down an average pension from Social Security of $653 PER YEAR. ($22k / 35) and in so doing bankrupted Social Security.
And proving that FDR was the Real Monster. Taking bread out of the mouths of future generations to lavish it on Moocher Fuller at $55 a month. Which she no doubt just blew on Cadillac payments and greens fees. Because “HUGE ROI”.
“Congress therefore set an initial minimum monthly benefit of $10 for anyone who had paid into the system for at least five years”
And didn’t establish any formula for increasing that monthly benefit until the Social Security Amendments of 1950. Gosh I hope those Oldsters who were taking that ‘unearned’ $10 a month from 1940 to 1950 didn’t just blow it all by spending it in one place. Because God knows you could rent a palace for $6 a month in 1948. Or at least buy a Coke for 5 cents and a stamp for 3. Gosh $10 must have been plenty. You could mail a letter and buy a refreshing beverage each day and STILL have $7.60 a month for rent, food and heat. (And car payments and Country Club dues).
Hans they sell perfectly serviceable 4 function calculators at your local Dollar Store for (duh) $1. You might want to punch some numbers in before quoting stuf like this.
And not to kick more dirt on the grave of poor Hans.
When Congress passed the Social Security Act of 1935 they delayed payments of monthly benefits under Title 2 (what we know as Social Security today) until 1941. This didnt’ mean contributers who retired before that didn’t get anything. No in fact early contributers got lump sum payments that in many cases vastly exceeded the amounts they paid in. In fact on the same socsec.gov/history page that gives us the story of Ida Mae Fuller we get the heartwarming story of the FIRST recipient of Social Security under Title 2. One Ernest Jay Ackerman. And depending on your standpoint on ‘moocherdom’ this will have you weep:
“The earliest reported applicant for a lump-sum benefit was a retired Cleveland motorman named Ernest Ackerman, who retired one day after the Social Security program began. During his one day of participation in the program, a nickel was withheld from Mr. Ackerman’s pay for Social Security, and, upon retiring, he received a lump-sum payment of 17 cents.”
http://www.ssa.gov/history/briefhistory3.html
Wholly crap!! This guy more than tripled his investment in a single day!!! Jeesh I don’t know if my cheap Dollar Store calculator can figure out that ROI on an annual basis. My God it must be HUGE! And probably explains why so many college students today go to school from the massive earnings of the Ackerman Foundation after that 17 cent endowment in 1936.
Because 17 cent lump sum payments here and $10 minimum monthly payments there and lavish lifetime average $55 a month payouts for Ida Mae fully explain why “We can’t have nice things. Because ‘moochers’ and ‘takers’. Like Ackerman and Fuller”
Thanks Hans! Because without this fresh information we would never have known!!
Bruce,
In Hans’ mind(sic) those facts are overwhelmed by slogans.
hans
social security is insurance not an investment. ida mae was like someone who had bought an insurance policy and paid one month’s premium of say ten dollars and then had a million dollar accident. no one complains when a person collects more from insurance than they paid in. that’s what insurance is for. and anyone with a brain knows the insurance company is designed so they can afford to make the required payouts. social security can afford to make the required payouts.
with SS EVERYONE gets back more than they paid in. this is possible not because of a growing population, but because of growing wages. so your 12% tax is more money than your dad’s 12% tax. enabling you to contribute more to his retirement than he paid in. but you will get the same boost from your son’s generation which will be making more money than yours. or maybe not. it could happen that the country will hit hard times, and then no one will get more than they paid in… but they will not get a lot less… which is what would happen to their money “on the market.” instead they will get enough to eat, and it won’t cost their kids any more than they would have to “save” for their own future retirement anyway. but because of its pay as you go, the kids can “save” for their own retirement at the same time as they pay for yours. sorry if you don’t understand that, but that’s how money works.
the people who made social security understood that the first few years of retirees would get back “more than they paid in.” that was fine with them. the money being paid in by the younger people would pay for the “extra” while the younger people would not lose because their money was counted as “theirs” when it came time for them to collect their own benefits. and this chain can go on forever. has in fact gone on forever, since it is exactly the way the young have paid for the old since people became human. the only difference is that SS is provided with a “guarantee” that a huge state can provide, that families can no longer provide on their own in a world economy they cannot control.
the ss designers also knew that people like ida mae had lost their savings in the depression… which they did not cause. and had cared for their own elders, and paid taxes for welfare as well as for other government needs. so starting SS did not just start a sudden pool of “investment funds.” it granfathered in all the folks who had supported the country and the previous generation (before SS) of old people, and then lost their savings in a national calamity. don’t try to build a fence between “before SS” and “after SS.” we are the same people, the same country, trying to take care of our own, and payng for our own needs.
the big liars always try to talk about SS as if it were an investment plan. it is not. it is insurance. a way to protect yourself, and the country, from hard times when the investment plans don’t work.
and the Big Liars don’t tell you, but they have a transition plan of their own.
the SS transition plan paid people more than they had paid in to SS (but they had paid into the earlier “plan”).
The liars transition plan would have you paying more than you will get from SS… for the pleasure of getting rid of SS so you can particiapate in their plan to get rich on wall street.
boy have i got a stock for you. sure to go up a thousand percent in one year. bu they don’t want just the fools in their casino. they want to force all of us to play their game.
It’s hard to believe or know that the Randites really mean what they say, but they certainly are talking the talk, e.g., Romney’s 47%. (And he wasn’t very nice to his dog either.) Still, framing it as the forces of evil vs. the forces of good is not going to win over many minds, I think. (Not that I didn’t enjoy the post and understand the frustrations which led to it.)
One of the most sensible, conservative, respected engineers I worked with, named John Williams, put it something like this: pure, unregulated capitalism doesn’t work, and pure socialism doesn’t work – you need a mixture.
I would put it in terms of competition and cooperation. You need competition to motivate people and generate diverse solutions, and you need cooperation to accomplish big things, improve the average persons’s welfare, and maintain a civilization rather than degenerating into individual warfare.
Further to Mr. Coberly’s point about SS being a form of insurance, it occurs to me that the way it works might be the optimum way for economic growth. Suppose no one had insurance and had to save for their individual retirements (and a fund to replace their houses if they were destroyed by fire or hurricane, etc.). Some of those savings might be investments, but for safety some would be in U.S. Treasury Bonds (generating debt for future generations), and some would be liquid (cash or cash substitutes). The latter would be money taken out of the economy, which would tend to stultify growth (as occurred during the Great Depression). A pay-as-you-go system eliminates that problem (as well as the problem of people starving because the stock market crashed just as they were about to retire).
Hans likes to sound aggressively sure of himself, and ends up sounding like a fool to those who actually know something about what he is talking about.
Calling Social Security “indefensible” is ludicrous. Social Security has existed for over 75 years and during that time has kept hundreds of millions of people out of the worst poverty… at a cost to them of less money taken out of their paycheck than any sane person even notices. This is hardly “indefensible.” But Hans has a case, you see: ” Ida Mae Fuller got more out of Social Security that she paid in.” This proves, don’t you see, that Social Security is indefensible.
Now there are certainly people who think they are sane who do notice the 12% bite SS takes out of their paycheck. Why, they could really use that money now. Buy a bigger car. Or invest in the stock market and get rich. But what they can’t seem to understand is that whatever else they used the money for, then they wouldn’t have it. That bigger car won’t pay for their groceries when they are too old to work. And that investment on the stock market, while it might make them rich, might also leave them with nothing. And then they don’t have any money for groceries when they are too old to work.
And that’s what SS does for you. It takes enough of your money “now” to save for your groceries when you are too old to work. It protects your money from inflation, and bad days on the market, and even provides “interest” at a rate above inflation according to how much the whole economy is growing. And… it provides you with insurance against the fairly high possibility that you will never make enough money in your life to save enough to be able to retire. It does that by paying those who make more than enough… they don’t know who they will be until they actually reach the age where they collect their savings plus interest… by paying them a little less interest, so it can pay those who ended up poor a little more interest.
The thing is not very complicated, but it has enough moving parts so it’s hard to explain them all in a short comment or post. So, for example, when I said in comment above, that the “interest” depends on growth in wages, i left out that it also benefits from growth in population. This is true, but not as fundamental as the “growth in wages” factor. There are other factors… such as increase in life expectancy… all of which will affect just how much “more than you paid in” that you will get back from Social Security.
But the main point about Social Security is that in ANY circumstances we can reasonably forsee (short of nuclear winter) you will get back “enough” from Social Security so you won’t starve in old age. And this will cost you no more than you would have had to save anyway. A lot less actually since it automatically takes care of inflation and prevents “market losses.”
Now you “might” do better on the market, or you might not. But again, if you can’t do better on the market with the money you have left over after paying your Social Security, you don’t have enough money to afford to gamble on the market. And if you can do better on the market with the money you have left over after paying Social Security… what are you complaining about? You don’t need no steenking insurance? Well, lots of people have thought that, and been really, really grateful to find they still had that Social Security check when “all else fails.”
Moreover its a lot harder to make money on the market when the rest of the country is starving, or afraid of starving.
SS has been part of the New Deal that saved capitalism from destroying itself, and made Americans the richest people in the world, and made the rich richer by protecting the poor from the worst miseries of poverty. But Hans calls this “indefensible” because Ida Mae got more back than she paid in.
Bruce,
What a great post.
The elevation of selfishness and greed over the last few decades should be shocking, but now too many of us have grown accustomed to it.
And as a result, over the last few decades we have concentrated wealth into the hands of a few, and created a deeply divided, and angry society.
And lately, the Supreme Court has granted the beneficiaries of that concentrated wealth an overriding influence on elections and thus the elected. This concentration of political influence will create an even more divided and angry society.
I don’t see how anyone can believe that our current course is desirable?
I do not doubt the opposition’s sanity, I question their shortsightedness. They have created a race to the bottom, don’t they ever question the long term consequences of their actions? Whether intended or not, their actions have had negative consequences and will in the future.
Attention dear readers, EMichael, is currently under treatment for ADD, and as such should be disregard…
We are hopeful, that future treatment will bring him some relief but frankly the prospects are rather dim…
Coberly, I can not debate your very sound position…I am waving the white flag in surrender…
Now that I am your captive, I have only one request from you – can I withdraw from your Social Insecurity system?
Jim V
as i said earlier, lots of people don’t like to hear me call the big liars “evil.” well if they are not evil, why do they have to lie all the time? about something that they know will hurt people.
maybe they are just living in a fairy tale. Peter Orszag wrote a book about Saving Social Security “a balanced approach” in which he claimed that by paying Ida Mae Fuller “more than she had paid in,” Social Security robbed future generations of the money they paid in that went, pay as you go, to Ida Mae. That money could have been invested, the say, in the Orszag Magic Present Value Bank and made the the young people “more than they paid in” so they could collect Social Security benefits while paying a lower payroll tax.
He seems to have had no idea how stupid this is. And famous “defenders of Social Security” make themselves look stupid by nodding wisely at Orszag’s “legacy debt” (that’s the money paid to Ida Mae) and then saying “it’s too hard to explain [to a dummy like you].” It never occurs to them that they can’t explain it because it doesn’t make sense.
SS was created as insurance, not an investment club. It grandfathered Ida Mae in because the people then knew that Ida had paid her dues… in a system that stopped working and had to be replaced by something that did work: Social Security. Those people paid “as we go” for Ida Mae, but their payments were at the same time exactly what they needed to pay for their own benefits in the future. There are people who can’t understand “pay as we go,” thinking that we must be paying for someone else’s granny… and then “burdening” the young with having to pay for us. I have to wonder what these people think the interest from the Magic Present Value Bank is doing: you pay in now for what you expect to get back later. but your payment does not sit in the bank propagating like bunnies in a drawer waiting for you to come along and take “your money” out. Your payment goes right out the door the day you put it in to pay for someone else’s “needs.” And when your time comes to withdraw your money, that money comes into the bank door that day from “the young” who are doing exactly what you did: putting their money “aside” for later. Just like Social Security.
And it’s not a question of that money “earning” interest by creating new value. When you come to collect your interest exactly as much money goes out of the “investment pool” as goes out the day you cash your SS retirement check. If there were any shortage of money for “productive investment” the “SS is not savings” people might have a case. But there is no such shortage. In fact there is a surplus of “savings” so that money gets “invested” in gambling schemes that turn into bubbles where everyone loses money… the money is “destroyed” as they say in the financial press. Except of course for the savvy players who know when the music is going to stop.
I’m beginning ramble. But the point is that most (all) of the people talking about Social Security are either lying to you or they are lying to themselves. They set up a “model” of what Social Security is, that is not a model of Social Security but a model of an investment plan (if that is what they think they understand) or a model of a welfare plan (if that is what they think they understand). But no one bothers to deal with the actual facts of what Social Security actually is (does). And they tell lies, or fairly tales, about why it “can’t work” even though it has worked for seventy five years. And try to scare you with huge numbers that don’t mean anything. Or twist “pay as you go” into “the poor young paying for the greedy old.”
So please forgive me if i call the people who tell the lies evil. I have less excuse for calling the people who believe the lies “fools.” Maybe “fooled” is enough.
Hans
sorry you can’t withdraw. you would come crawling back when you are old and can’t work begging for a handout. with SS at least you pay for most of your future needs.
also sorry that you find yourself in the United States of America, where we are forced to look after each other in a way that would never do in Galt’s Gulch.
But if you ever find Galt’s Gulch, maybe they will let you in. If you can pay.
It isn’t hard to see the logic of ‘legacy debt’, where it falls short is when you look at it in the light of actual year over year cash flow.
The logic is something like this:
We have a SS program paying out benefits per formula
That formula shows a future ‘liability’ for benefits payable to all current and future retirees
Therefore payments to current beneficiaries have created a future liability.
But this is to confuse the program with the participants, the current formula with the current payouts. Now it is true that if we didn’t have a PROGRAM paying out benefits to Ida Mae and Forest Ackerman, then there wouldn’t be PROGRAMMATIC ‘debt’. But the fault, if fault there be, doesn’t rest on the beneficiaries of the program but on its designers. And that fault doesn’t depend in any particular way on the AMOUNT paid out in early years to then current beneficiaries.
But is there any fault to begin with? Many critics of Social Security trot out quotes from FDR from various points in time that seem to say that the cost of Social Security as a percentage of wages would never go up or assert that the designers of the program had no idea that we would experience improvements in mortality. But the program that actually emerged from the 1935 Act and the 1939 Amendments was conscoiusly designed to adjust and grow over time, the FACT of an increasing tax and the PROJECTION of improved mortality was fully recognized in the First Report of the Trustees of Social Security in 1941. Maybe FDR in some moments of exuberance overstated some things back in 1934 or 1936 (fixed), I don’t know, I suspect much of that is quotes taken out of context. But the first Trustees of Social Security certainly knew the score and after they sent their first Report to Congress the elected representatives of the people knew or should have known. And all of this within 12 months of the first monthly check going out. Because it is worth repeating that regular benefits under Titlle 2 did not start for a full five years after passage of the 1935 Act. And this was expressly to build up a reserve fund to buffer variations between revenues and outlays. But that reserve fund. by the 1939 Amendments formally transformed into the Trust Funds was NEVER designed to be an investment fund. Now its assets were held in interest earning securities but that was mostly a matter of pure equity (in the sense of ‘fairness’), the Government taxed the money for a future benefit and it was only responsible to pay some interest on it in the meantime. But there was never a time when that accrued interest was projected to pay out more than a tiny fraction of benefits, as Dale said the Trust Funds are not and never were an investment fund. And as such an calculations that rely on ROI just miss the point. As a reading of the First Report will help drive home:
http://www.ssa.gov/history/reports/trust/tf1941.html
My take on it from 2011
http://angrybearblog.strategydemo.com/2011/01/first-report-of-trustees-of-social.html
But returning to ‘legacy debt’. There may be two ultimate sources of the confusion. One is that people talking about it have simply overlooked the defintions of ‘current participant’ vs. ‘future participant’ and gotten themselves in a conceptual mess that way. But another source is just built into the report methodology:
The formula that establishes ‘scheduled benefits’ implicitly assumes that tax rates will in fact go up in the future at a percentage of the increase in Real Wage. On the other hand under our Constitutional system no Congress can bind any future Congress when it comes to tax rates.
So we have a formula that ASSUMES changes in current law.
But a scoring system that REQUIRES holding current law steady.
And that in a nutshell is the difference between Scheduled Benefits and Paybable Benefits and so the source of Unfunded Liability which can and by opponents is measured in current dollars over periods as long as ‘the Infinite Future’ and so produce huge amounts of ‘debt’. But that ‘debt’ is not really debt at all. Because this Congress or any Congress can simply refuse to adjust the tax rate that produces the Payable Benefits score. And has done so. The result is predictable, the built in increases in spending in the Scheduled Benefit formula will, other things being equal, continue to open a gap between it and the amount of revenues projected under the tax rate that generates Payable Benefits. But this gap is untenable, at some point Congress will be forced to take an action or actions that close it in part or in full, the question is which action it will take. So called ‘Reformers’ would like this action to take place on the Scheduled Benefit side, and as a pure consequence of the arithmetic a single act of Congress could eliminate all those trillions of dollars of ‘unfunded liability’. They could simply adjust the formula that sets initial benefits or the formula that adjusts those benefits over time and BOOM trillions of dollars of ‘debt’ wiped away with the literal stroke of a pen. Equally Congress could raise the current payroll tax in an amount that would eliminate that gap arithmetically, again with the stroke of a pen. Which makes this ‘legacy debt’ kind of an odd ‘debt’ to start with, because it is simply the product of a current formula that has gotten cross ways with current law due to the structure of our Constitution.
But none of this is new, all of it was foreshadowed in the First Report and indeed was much of the function of that Report and all others that followed: to put a dollar figure and a percentage on the cost of whatever fix Congress would decide on. The process wasn’t perfect of course. For example the absense of any mechanism to adjust benefits for inflation meant that payments under Title 2 were never adjusted between first payment in 1940 and the Amendments of 1950. And as I suggested in passing this meant that the $10 minimum monthly payment established under the initial law probably seemed a mockery by 1949. And while there was a big adjustment in 1950 there was no automatic COLA until the 70s, before that the annual adjustments was a political football in Congress reminiscent of the current jousting over the debt limit. In the end Congress wasn’t going to touch the Third Rail and until the last year or so it was thought inconceivable that Congress would ever default on the National Debt, but wrangling over SS increases and debt ceilings made for good poltiical theater and opportunities for deal making and so there we are.
But I strayed. In the real world there is no such thing as ‘Unfunded Liability’ for Social Security. Because if Congress does nothing to change the Schedule on the one hand or Payable on the other there comes a time under current projections when the two come into fatal oppostion. And that time is Trust Fund Depletion. Under most interpretations of current law the effect of running the Reserve Fund aka as the Social Security Trust Funds to zero in 2033 will be an automatic reset of the Schedule to Payable. And at that point in time every penny of ‘Unfunded Liability’ vanishes. Tens of trillions of dollars of ‘debt’ simply wiped from the books, without even that stroke of the pen.
Now in the world we live in it is unlikely that this simplest of scenarios will actually play out that way, the disruption both financial and political of an overnight reset in benefits will be such that ‘something’ will have to be done in 2033. But this is key: whatever is done will have outsized impact on those trillions of dollars of ‘legacy debt’. Small tweaks in the Scheduled formula would wipe out trillions, small tweaks in the Revenue formula would wipe out trillions, but all at a cost in the current year that would be measured in billions. The tail would be wagging the dog here.
‘Unfunded liability’ and ‘legacy debt’ are useful enough concepts in the right hands. Unfortunately there are very few ‘right hands’ out there. Mostly they serve as a clumsy way of quantifying the THEORETICAL gap between Scheduled and Payable if there was in some magical way a way of maintaining the Scheduled without changing the Payable. For example if Social Security had the legal authority to borrow on the pubic markets to maintain the Schedule. But it doesn’t.. And because of that legacy ‘debt’ and unfunded ‘liability’ are really netiher debt or liability, neither establishes any obligation on Congress beyond the political.
Congress will do something to address ‘legacy debt’. It has to and in fact even inaction meets the definition of ‘something’. Because under current law most people see the Schedule automatically resetting to Payable. And so on paper problem solved. But this also makes the change in metrics for ‘legacy debt’ from 75 years to Infinite Future a totally useless calculation, there is literally no way to actually maintain the gap between Scheduled and Payable in a way that returns those actual debt dollars over even the 75 year window. Because it isn’t ‘debt’, at worst it is an implied political committment to the Schedule. Which given current openness to various versions of a Grand Bargain is not much committment at all. As such ‘legacy debt’ as quantified is just a joke on the rubes. Something the people in the know (who Coberly would call ‘the big liars’) know full well.
Because if we had to quantify it it would make much more sense to pose it in terms of percentage of payroll or of GDP needed in any future year to actually close the gap between Scheduled and current law Payable. But it is hard to scare people with numbers like 0.9% of GDP over 75 years so here we are. TENS of TRILLIONS of dollars in DEBT.
Hmm, not so fast.
SS is a little bit complex. not very. you could understand it easily if you took the time. but the liars are counting on your not taking the time. so they give you simple, misleading “stories” about it.
i have tried to answer some of the “stories.” but here’s one i haven’t done much with yet.
You get more out of SS than you put in. Everyone does. Just the way you get more out of a bank account than you put in. Or more out of a “bond” or a “stock” (if you are lucky).
what determines how much more you get is the “effective interest” earned by your money from the growth in the economy.
basically, if everything else were equal (it isn’t), the money your generation puts into Social Security is about 12% of your generation’s wages. The money your generation takes out of Social Security is about 12% of the following generations’ wages. If wages have grown over that time (and they always have), your generation will take out more than it put in. but the kids aren’t being robbed; their generation will also take out more than it put in… as long as the economy keeps growing.
that, incidentally, is where the money comes from that enables the bank to pay interest, or the stock to pay dividends (and be worth more when you sell it than when you bought it): the growth in the economy. pretty much the “general growth” in the case of the bank, the “growth of the company” in the case of the stock. but the growth in the company also depends, in general, on the growth in the economy.
so, when the “Social Security is ripping off the young” people say that granny’s generation got more than they paid in, and the young people’s generation will get back less than they paid in, they are saying in effect, that granny’s generation did things that made the economy grow faster than the kids’ generation is going to do.
they are also lying. the kids are going to get out more than they paid in. they MIGHT not get out as MUCH more than they paid in as granny’s generation did. This will be a matter of how well they do with the economy.
How well they do is going to be determined by many things. But among those things would be supporting laws that help the workers not get paid less than their productivity warrants, and not get robbed by criminal banks.
And other things they may not be able to control. But however well they do… in fact, the worse they do… they are going to need their Social Security. They would need it even if it did pay less than they paid in. Because it is still going to pay them more than they would be able to save on their own without the SS protection against inflation and market losses. And the SS insurance against personal bad luck … including the bad luck of earning over a lifetime “less than average” or less than enough to save enough to be able to retire.
And this why stories about “average returns on investment” are misleading. SS has always paid a decent to good return to “average” and “above average” earners, considering its insurance value. But SS IS insurance, and it’s “return on investment” to low earners is far above what they could earn on any “investment” in the market. Because they pay in relatively little, even a big “effective interest” will not make them rich, or even give them more than higher earners get in absolute dollars (not percent). But SS is insurance. You really do not know whether you will be one of those who “could have done better” in hindsight, or will really, really need their SS. Odds are that about half of you will “really, really” need it. And the other half will get back enough to buy your groceries, leaving you free to spend the rest of your “returns” any way you like. Not such a bad deal.
“Legacy debt” or “backwards transfer” actually derives from a mathematical curiosity like a mobius strip or Zeno’s paradox. It came from Diamond-Orzag, not Biggs, but in trying to find a new way to describe something, they just created another way to confuse more people.
Since SS is essentially PAYGO, at any point in time the funds paid out equal the funds paid in. Any commitments made must come from future funds. Now simply assert that the commitments are past and the funding future and you have a paradox to twist. You can even calculate a number. You can also assert that the number is related to “transition cost” if you want to convert from PAYGO to “fully funded”.
Since the number is large you can use it to scare some people.
But another oddity about the backwards transfer is that if you just keep going with PAYGO, it will keep growing forever, and it will never matter.
Does the right need to know how much the existing worker generation will be owed when the rapture comes? No, it has simply found another way to attack SS by sowing confusion.
Maybe we should call this ‘The Northwest Seminar’. Because there is a lot of ‘edicating’ in these last few comments. Though possibly a little overwhelming.
Remember that while I said that the fundamental debate over Social Security wasn’t about the numbers and in most respects never was, I also said the following:
“The numbers are important, if you are going to participate in the debate over the future of Social Security you need to understand them, you need to understand their implications, you need to be able to measure them against the numbers you read in the paper every day.”
And at no point suggested that ‘understanding’ came easy. The material would be confusing enough even without the purveyors of bluster and bullshit who are paid to sell a set of narratives to achieve a particular ideological end. And who have openly committed themselves to a self-styled “Leninist Strategy” where ends justify the means.
But I’ll keep plugging away and probably Dale and Arne and some others to. Because to be crude it turns out that as it relates to Social Security: “Numbers are bitches. But they are OUR bitches.”
Which also explains why Dale and I sometimes wear out our welcome in the more polite precincts of this debate. We tend to flunk ‘gentility’.
I think people like Biggs actually believe that if people were forced to save for themselves their retirement savings would be invested and the economy would be bigger and that would be better for everyone. Pure suppply side economic thinking.
I admit I don’t know what to think. A persistent labor shortage should imply there are always good ways to invest, but it is also obvious that there is a lot of gambling. Clearly growth requires both supply and demand, but while conventional wisdom says that business is about finding unmet demand and filling it, invention is about creating demand by supplying something new. I am sure Biggs is not completely right, but I am not sure he is completely wrong.
I think you guys should work on your gentility. You don’t need to convert anyone. You only need to shift things a small amount. Polls show that SS is popular.
We know it is not well understood. We even know that different people understand it differently. Getting the person who wants to remove the cap to change his mind to getting it back to covering 90 percent is a succcess, even if leaving it alone is better.
Over at Ballon Juice Dale’s first half dozen comments let people know there is another way to think. They did not demand agreement; they just provided information. Later on Dale went to far. instead of getting people to think “this guy has a point” he made them think “another cranky old guy”.
You don’t have to move the guy on the right all the way to the left if you can just get most of the people to take half a step. It is that close. Give the facts and let them choose or they will dig in.
Arne,
The reason Bruce Webb and coberly are uncivil is that, like battlefield tacticians, they seek to provoke battles on favorable ground: social security actuarials.
Then, any dissenting positions are called “liars” (coberly), or “Ayn Rand Disciples” (Bruce Webb), or challenged to “bring numbers” (Bruce Webb).
This is not the real battlefield. That is why the views of coberly and Bruce Webb do not resonate far beyond the firewalls of Angry Bear. The real battlefield is the overall Federal debt and deficit, something these guys refuse to acknowledge.
They are much more comfortable hurling insults behind their playground fort.
coberly’s motive is obvious: he is a relatively wealthy social security recipient, with other state retirement benefits, and a large inheritance, that only seek to maximize his social security check. He just needs to obfuscate a little while longer to live comfortably and pass on his estate.
Therefore he spends his retirement hours blogging, advocating for no change to his check while other, more needy, federal programs await the chopping block. Yes, coberly, you are a great guy.
Hans,
A man is best judged by the enemies he has.
I am honored beyond belief that I am one of yours.
Sammy it wasn’t a week since you were attacking all food stamp recipients as worthless layabouts. And in everyway possible have revealed yourself as a fellow traveller with the ‘makers’ vs ‘taker’ ideology.
Plus the real battlefield is not “overall Federal debt and deficit”. Because the truth was revealed by Dick Cheney: “Reagan proved that deficits don’t matter”. Paul Ryan doesn’t give a crap about debts and deficits, his numbers don’t add up and CBO has told him as much. Ryan and much of the economic Right has convinced themselves that capital should never be taxed and the Republican Party has openly committed themselves to a position that insists that net revenue can NEVER be even a partial solution to debts and deficits. Moreover they always insist that Social Security be part of the debt and deficit discussion even after being shown that it doesn’t belong there.
Because ‘social security actuarials’. And the historical record of debt.
Here is a fact for you. Debt as a percentage of GDP declined under every post-war President except for Reagan and the two Bushes. Until Obama’s first term. And debt as a percentage of GDP is declining rapidly in Obama’s second term. And yet this reduction in debt as a percentage of GDP and nominal debt has not even changed the Republican agenda. Despite reductions in deficits that went far beyond even Ryan Roadmap targets, the economic Right is still demanding cuts in entitlements. And restoration of defense cuts. And not budging a bit on taxes. It is not uncivil to suggest that the real Republican agenda is exactly what Stockman and Norquist have always insisted that it was: reducing the non-defense and police powers of government down to the absolute minimum. Because as their language reveals time and again they don’t believe there is any other proper role for government except defense of the borders, protection of private property and the enforcement of contracts. In all respects other than those three their view of government was outlined by their avowed hero: “Government is not the solution, government is the problem”. And not that the words ‘debt’ and ‘deficit’ never appear anywhere in that.
Yes I suppose it was a little uncivil when the Little Boy started laughing and pointing out that The Emperor Has No Clothes. Also a little embarassing for the Emperor’s lackeys. Like you. And of course that stings.
Public Debt as a share of GDP went down under every post-war President not named Reagan or Bush. Until Obama’s first term. And now is going down again. And yet you still insist that the “real battlefield” is “debt and deficit”. Sorry my friend, it seems like you are sharing a tailor with the Emperor.
“coberly’s motive is obvious: he is a relatively wealthy social security recipient, with other state retirement benefits, and a large inheritance, that only seek to maximize his social security check. He just needs to obfuscate a little while longer to live comfortably and pass on his estate”
Sammy I have it on equally good evidence that you are the illegitmate son of the late Sultan of Brunei and Phyllis Shafley.
Which is to say no evidence at all. I call bullshit here, you are just lying through your teeth. With malice aforethought.
Sammy says
“The real battlefield is the overall Federal debt and deficit, something these guys refuse to acknowledge.”
Sammy, if the real battlefield is the overall Federal debt and deficit, why don’t you pay your taxes to pay back the money the Federals borrowed (the Federal debt).
Instead you think the obvious solution is to just steal the money the old people lent the government expecting to get it back when they needed it for retirement.
But you go further: you want to take away people’s right to save their own money protected by the government from inflation and market losses… not to mention theft by con artists. Thus pretty much guaranteeing 50 million people in every generation will live lives of miserable poverty.
The $2.8 trillion in assets in the Social Security Trust Funds are scored as a large portion of Public Debt. In fact more than double the amount of such debt owned by the Chinese.
If the real battlefiled is “overall Federal debt” then the solution is paying down the Trust Fund. Which could be done a couple of ways, we could actually increase benefit payments or reduce FICA, Each would dramtically reduce the $16.9 trillion in Debt Subject to the Limit. Or we could impose benefit cuts in the form of Chained-CPI or Means Testing or increases in Retirement Age. Which would serve on balance to increase Public Debt.
So hmm, the efforts of Social Security Reformers is not actually to reduce Public Debt.
Which leaves deficits. Well this is a little trickier. Under current methods of scoring ‘deficits’ Social Security is still running surpluses. But is set to run deficits (as scored) sometime near the end of the decade. And we could prevent that and KEEP Social Security running surpluses by cutting benefits. At the cost of increasing Public Debt. And risking people wondering why a hyper-focus on deficits was targetting a program that had been in official surpluses since 1983 and due to ‘reforms’ would continue to do so. Why that fact might make people take a look at the idea that current levels of deficits were actually driven by Social Security rather than the actual truth, that Social Security, though legally ‘off budget’ has for 30 years been reducing the top line number for ‘deficits’ as reported in the major media.
Cutting Social Security benefits via Chained-CPI or anything else INCREASES its contribution to Public Debt and INCREASES its contribution to surpluses. At the SAME TIME. So much for the hyperfocus on ‘debts and deficits’. Currently Social Security ‘contributes’ to deficits. By REDUCING them. So not exactly a culprit. Imposing Social Security cuts INCREASES Public Debt, at least as a first order effect. So claims that Social Security has been a net negative for annual deficits is a lie. Or at best a fatal misunderstanding. And claims that cutting Social Security will reduce Public Debt are a lie. Or a fatal misunderstanding.
Which isn’t to say that cutting Social Security wouldn’t have positve effects on deficit scoring. Because it would. But the relation between debt and deficit is not nearly as straightforward as the Sammy’s of our world would have it. Or even as many of my allies in the overall fight to defend Social Security would have it. But to have Sammy accuse ME of ignoring the effects of Social Security on debts and deficits is laughable. Because those effects don’t hit in the places and the directions that the naive ‘cut Social Security to save us from debt and deficits’ view would have it. None of that actually works out in the way simple logic would have you believe.
Nothing is simpler than the equation of Deficits x Years of Deficit = Debt. Yet that equation is all wrong. In Fiscal Year 1999 the General Fund ran a small surplus. In FY 1999 Social Security ran a larger surplus. In FY 1999 the government reported an overall Federal Surplus, Woo hoo!! In FY 1999 total Public Debt went UP. The answer to why Public Debt can go up when both the contributers to the overall Federal Budget Surplus/Deficit were in Surplus is not that hard. It just makes mince meat of the knee jerk programmatic ‘solutions’ to ‘debts and deficits’ advance by the economic Right.
A little knowledge is a dangerous thing. Especially when that ‘little’ knowledge actually adds up to negative understanding.
Sammy says: ““coberly’s motive is obvious: he is a relatively wealthy social security recipient, with other state retirement benefits, and a large inheritance, that only seek to maximize his social security check. He just needs to obfuscate a little while longer to live comfortably and pass on his estate” – See more at: http://angrybearblog.strategydemo.com/2013/11/social-security-and-me-ayn-rand-the-four-freedoms-the-road-to-serfdom-and-the-leninist-strategy.html#comments”
No, Sammy, my everlasting lover (meet me at Day’s Inn tonite), you have coberly mixed up with me. Don’t be envious, I have no children so, given an estate in limbo, I will adopt coberly’s ten children, 2 dogs and a cat and leave my vast untapped estate to them. Meanwhile I will travel the world and eat my tartar with my Social Security riches that I stole from richer self in future life.
My Dear Mr Webb, I am very sorry to say this, however, you like all other defenders of SS, are intellectually dishonest…
Rather than admitting the fact that you are a collectivist and that equality is more important than having an efficient and productive retirement program you propagate a misleading narrative …
My first question to you is if this is such a “splendid retirement program” then why would it have to be enforced by fiat and police power ??
In fact, that if this program was indeed voluntary it would collapse in short order, because most tax slaves understand that this is a lousy offer..
It is a well know fact, that as SS ages so have the returns to retirees…From a ratio of 30 to 1 worker bees to less than 3 to 1, today..
You do not need to be an academic to understand the results…This program has been labeled as a pyramid scheme and rightfully so…
Furthermore, it took less than thirty some years, that in the 60’s chances
has to be made to allow the program not to go broke…
http://lubbockonline.com/business/2012-08-12/social-security-not-deal-it-once-was-workers
http://www.heritage.org/research/reports/1998/12/social-securitys-rate-of-return-a-reply-to-our-critics
http://www.heritage.org/research/reports/1998/01/social-securitys-rate-of-return
http://www.econlib.org/library/Enc1/SocialSecurity.html
http://www.emarotta.com/social-security-is-hopelessly-broken/
Dear readers, please enjoy the links and make up your own mines…
Those of yous, that will retire twenty years from now, will receive less than you paid in!! Now that makes sense does it not…Just another great Socshevik program, enforce by the barrel of a gun…
SS, officially bring poverty directly to your household, by your caring and loving Central Governmental unit…
I await your parry…I have dropped my weapon and are defenseless…
Ah well Hans,
This statement does not deserve a reply.
Hans
I can see why Dan says your letter isn’t worth answering. But I must be in a kind mood, because I am going to try to answer it… even though I know you won’t learn anything.
First you need to understand that not everything you read is true. I would think you’d know that since you don’t think what I write is true. But how do YOU decide what is true and what isn’t?
Most important: YOU will get back from SS MORE than you paid in. Those who tell you you won’t are lying to you. They can get away with lying because they cross their fingers behind their back and say to the judge, “When we say he will get “less than he paid in” we mean he will get less “in present value” than he paid in.” That means they don’t think you will get back as much MORE than you paid in as you would if you put your money in their Magic Present Value Bank, which always, they say, pays a rate of interest that in fact you can’t get, better than inflation, and with no risks… I guess it must be guaranteed by the government. And of course their Magic Present Value Bank won’t pay you if you become disabled, won’t pay your kids if you die before they are grown up, won’t pay you lots and lots more than you paid in if you have bad luck and never earn much money in your whole life.
SS has to be enforced by “fiat and police power” because far too many people would never pay in until it was too late. That is not because they are smart and know it’s a bad deal. It’s because they are dumb and don’t understand how much they are going to need it when they get old.
The 30 to 1 workers to retirees was what you expect when you start an insurance program. At first everyone is paying in and no one has had an “accident” yet, so at first you have many more “workers” than “beneficiaries.” As time goes on more and more people have “accidents” until eventually you reach a ratio of workers to beneficiaries that stabilizes according to the accident rate for that particular population. SS is just reaching that point, where the number of people collecting benefits will stabilize and the payroll tax you pay for your own benefits is just enough to cover current retirees on a “pay as you go” basis. But there is no chance you will understand that. Essentially the 30 to 1 then, 3 to 1 today is just another lie they can tell you because you don’t, won’t, or can’t understand what is really going on.
This is not a pyramid scheme. The new workers coming into the system will always be enough to pay for the old workers retiring. Forever. The cost of paying for those workers is essentially the same as the cost of paying for your own retirement directly… except pay as you go takes the risk of inflation out of the equation.
Try to add up the cost of being retired for twenty years. Then add up how much you pay in SS taxes over a working life time. You will see they are about the same. Only you actually pay less than you get because the growing economy is able to pay more into the system when you retire than you were able to pay into it while you were working. The kids paying in today will get the same good deal… they will retire and collect more in benefits than they paid in.
I understand that you don’t like government. I don’t like it much myself, especially as the government is being taken over by your friends. But the fact is that you are safer with the government than you are with the banks. You are safest of all in a country where the government is limited by the people, and the banks are limited by the government. But that does take a reasonably intelligent population… or at least a Congress that is afraid the people are reasonably intelligent.
I think they are no longer afraid that we are reasonably intelligent.
Bruce,
your statement, “there were no early grand returns. The stories backing that are based on a combination of bad history, poor use of data, and outright lies.”
is inconsistent with reports from Social Security’s Office of the Chief Actuary, http://www.ssa.gov/OACT/NOTES/ran5/index.html , which shows that expected IRRs have consistently declined with birth year ranging from 1920-2004.
To be fair, a person born in 1920 retired in 1985, which was roughly the peak in bond yields. That said, for practically all income tranches/family earning profiles, except “Very Low”/”One Earner Couples”, IRRs are fairly consistently below long-term treasury yields (even at today’s Fed manipulated low levels) – and Coberly, this is not an invitation for you to remind me that OASDI is an insurance vehicle and not investment device, I’m well aware; but I will point out that insurance is the only financial asset a purchaser acquires with the expectation of a negative real return.
As for the larger point of the original post, I will admit that my objection to SS rests on broadly-defined “freedom” in Bruce’s crude Randian description, and also on the horrible life cycle planning for the investment component it represents, where it has those with the longest time horizons and smallest disposable incomes investing in the safest assets, when it should be the exact opposite.
M Jed and Sammy excellent posts!
Mr Crawford, I am deeply disappointed by you non-approval..Run silence, run deep…
Please, examine the excellent returns that Chilean retirees receive from their privatized retirement system..
It averages, yes averages, nearly 100% of the yearly income of workers.
Now I ax all, what is the return for American workers for Social Insecurity?
Do you want Americans to retire with a livable income or in poverty just so you can fulfill your social justice program.?
Fairness, Forward, Equality, Power to the Progressos!
Remember folks, the more you vote for us, the more you get!
Hans the Chilean Plan does nothing of the sort. Got an actual cite? Dated maybe sometime this decade?
Your econ.lib.org piece is a 2000 reprint of a 1992 article. To call it ‘dated’ does it too much justice.
Your cite to Marotta is worthless, he doesn’t bother sourcing any of his claims at all and most of them all somewhere between fallacious and tendentious, it is a piece of crap from top to bottom.
Then you give us some links from Heritage that on their very face date back to 1998, so not exactly timely, in fact 1998 is the time that Social Security’s financial outlook started improving in almost miraculous ways leaving the doomsayers with mouth’s open as the dates of Trust Fund Depletion pushed back at a rate of more than a year per year right through 2004. Any study that doesn’t take that decade of massive Social Security surpluses into account is just worthless.
The Lubbock piece is just more of Biggs. But let me just put it this way. BIggs claims that the ‘average’ couple retiring in 2011 paid a total of $598000 in Social Security taxes during their lifetimes. This as stated is impossible. At least when using current dollars.
Right now the maximum contribution any single worker can make is 12.4% of $113,700. Or $14098. And that only if they are self-employed, The actual maximum for a wage worker is half of that or $7049. But that amount goes down as you move backwards in time. For example in 1971 the rate was 4.6% for a wage employee and 6.9% for the self-employed. Moreover the cap was much lower at $7800. Meaning the maximum a single self-employed individual could have paid would have been $538 no matter what their income was. Even if you take the extreme case of a couple who were both self-employed and both making over the cap in covered employment you would have a hard time coming up with that $600,000 figure and certainly that wouldn’t have been average. Right away you can see that Biggs is playing some sort of Present Value game there.
So you have Carolyn Weaver from 1992 (not an unbiased source), Heritage from 1998 (they don’t even pretend to be unbiased here), some financial advisor dude who is just spouting second hand talking points in the same way you are and then the closest thing to actual currrency and expertise you have a 2011 article summarizing an AP story in turn drawing on the work of Andrew Biggs. Who is only identified as a Former Deputy Commissioner of Social Security and AEI Scholar while not mentioning that he was a top Bush Social Security guy during his first term and before that the no 2 guy at Cato’s Project for Social Security Privatization (since renamed Project for Social Security Choice).
That is every source you give is either by an avowed enemy of Social Security or is horribly dated or both. Except for the clue free one from MR. Marotta.
But I have to admit I followed part of your advice:
“Dear readers, please enjoy the links and make up your own mines…”
Because I did enjoy the links, at least they were good for a hearty laugh of recognition. And while I didn’t actually fabricate any mines, I did come across a few that blew right up in the face of your attempt at an argument.
Oh and don’t tell me you just came up with that original unsourced quote and now these very dated cites all on your own, there is no way some random Google search would turn up those 2000 and 1998 links. You obviously are lazily reading off some crib-sheet of talking points that you don’t even pretend to understand. Because pointing isn’t arguing and you have yet to bring anything original to this at all.
m.jed. your comment and source are not directly responsive to my ‘grand returns’ which at no point denied that there might have been some variable rate to such returns but in response to the claims that current levels of unfunded liability were due in large part to large returns to people who didn’t actually contribute.
It is the whole Free Lunch narrative that is the bad history. Because it silently relies on the assumption that beneficiaries from the 1930s were drawing from the same program that we consider Social Securiyt today and that as such there had to be some lag between benefits and contributions. Well an examination of the 1941 Report shows that to be largely untrue. Unless you lump in the General Fund paid state run welfare programs set up under Title 1 (which did start paying benefits right away) with the Pay-Go insurance plan set up under Title 2 (which didn’t start paying monthly benefits until contributions had built up).
In 1941 Social Security had reserves equaling 18x of the amount of 1942 cost (TF ratio of 1782). In 1944 it was over 20x (2025) and didn’t drop under 5x of next years cost until 1955. That is Title 2 was Pay-Go from the Git-Go. This doesn’t mean there wasn’t any backwards transfer, but neither was there any outside subsidy. Not under Title 2. You could look it up.
http://www.ssa.gov/oact/tr/2013/VI_A_cyoper_hist.html#207122
The Old Age Insurance Plan did not start in a hole. It did not start out by paying out more benefits than it took in in contributions. It just didn’t.
The belief that is must have done so seems to me a simple by-product of people not understanding that more people were getting more dollars in benefits under Title 1 welfare than Title 2 insurance right until the Social Security Amendments of 1950.
A better way to see dropping worker retiree ratios is that over time workers took the burden of supporting retirees off the hands of the Income Tax payers who were funding Title 1 and into their own hands via payroll deducations on capped levels of wages under Title 2
You would think the capitalists would be thanking us for relieving them of this burdensome claim on their taxes but NOOOOO.
And BTW the Northwest Plan represents this same kind of massive burden lift from the wealthy onto workers. To the extent that there even is a multi-trillion dollar ‘unfunded liability’ under NW it is assumed by workers out of their own pockets. And as a bonus they give capital a free gift of all the principal they borrowed over the years. Because under NW that principal never gets paid back. And even the interest gets discounted.
Billionaires should be raising toasts in the name of Dale Coberly. Even though tax relief for future billionaires wasn’t a conscious part of the design of Northwest that is how the numbers actually come out.
PS it is a funny kind of Soschevik-ism that offers to take $20 trillion in debt off the hands of the Makers and have it assumed by the Takers. You would think that is the kind of Taking the Makers would get behind.
Dale is offering to make Social Security solvent over the Infinite Future Horizon at a cost of exactly nothing to capital. And gets called a Commie for his trouble by morons like Hans. Go figure. No I mean it ‘go figure’ as in ‘do sums and long division’. Maybe we could get somewhere.
Dear Readers!
Note now that the distinguished writer has resorted to name calling – the hallmark of a leftie…
Also note, that Mr Webb never answered my question why SS is not voluntary…
Note how the author only refutes the sources based on his political bias..
Note how the writer even disclaims stats from SSA itself from poster Jed.
Note how, Mr Webb, provides no concrete sources in his own defense…
“Dale is offering to make Social Security solvent over the Infinite Future Horizon at a cost of exactly nothing to capital.”
Webb’s quote for a fix to SS; He is Chairperson of the Free Lunch for Social Insecurity Committee…
Oh yes, a retire program which features benefits such as – payment to widows, payments to orphans, disability insurance scammed into the billions of dollars..
It is just another failed Socshevik program – like BarrockOcare, which I am sure Mr Webb has also trumped…
The House of Cards is coming down, with the truncate of SSDI, a transit place for friends of Webb whom claim their minds where paralyzed and damage because societal insistence to work…
The Webbers of the world will give you only a single option – their option because they are tyrants of the worse sort…THEY know better and through fiat and police power will make sure you comply – forget fairness and the democratic way…
The power of the mob..Poach the producers…Morality, a pox on the left…
Hear is your Chilean retirement model, Herr Webb..
http://news.investors.com/ibd-editorials/092613-672776-score-another-one-for-the-chilean-model-of-private-pensions.htm
The supporters of this lame retirement program, are sending millions into poverty, just like Lenin did with the collectivist farms…
Never mind, that the large groups of Texas governmental unit employees opted out of the program – UNTIL THAT WAS ALSO BAN!
You know what they say, misery loves company!
Bruce,
I had written a post for AB in several years ago titled something like Defense of SS Privatization, where if memory serves, I noted that the reason SS IRRs were lower than treasuries was the initial wealth transfer to the early recipients of benefits. It may not be Ms Fuller, but I believe estimates put the drag on future returns at about 1/4-1/3 of comparable “market” returns.
jed
your analysis of SS completely fails to understand the situation faced by real people, ordinary workers, in this country. the “insurance” value of SS is critical. and applying general rules of thumb taken from ordinary insurance, or advice to people of means, simply does not address the needs of the great majority of the population in the matter of retirement, or, to a lesser extent, disability and death with dependents.
as to the question of “freedom,” you solution would leave the people free to be robbed, or simply to be ruined by their own lack of “prudence,” something that poor people can’t afford. It doesn’t do them much good to save ten dollars a week out of a hundred dollar paycheck, leaving them with not enough to buy groceries, and not enough in the bank to cover any emergency, or add up to the ability to retire when they get too old to work.
i think you mean well, but you need to to some much more serious thinking about reality… and learn to discount, a little, all the “truths” you learned in financial planner school.
i am sorry i can’t keep up with this conversation. AB wipes me out after about a minute or less. even this is written “off site” and pasted in in the few seconds AB allows me.
Mr Webb, has withdrawn from the discussions, because facts have been reveled which are not favorable to his positions…
He attacks my sources because of their Conservative leanings but presents no counter leftwing arguments or facts…The same with Coberly..There are by at least 5 to 1 ratio, more liberal think tanks than conservatives, but no provide no links or articles from them..Why?
http://www.econlib.org/cgi-bin/printarticle.pl
If one even bothers to simply scan this article, just a minute or two of your time, it clearly supports all of my positions..
Another point that SS lovers will not tell you, that since LBJ (no that is not Lebron James) all social security taxes have gone into and spent by the general fund…There is no Al Gore lock box, just stinkin IOUs from the US Debt Department..
Mr Webb, has “left” the field because he has exhausted all of this counter points (pea shooter) and will not return…
I will try to find a link, which will show all the adjustments made in the past fifty years to save Social Insecurity – a crime worse than Bernie Madoff..
The truth cleans and heals..
I would like to add, that this retirement system is racist, as Black-Americans general receive less in aggregate payments..Now that is another cause for liberals to invoke, right?
Let’s look at other forms of return, which makes Social Insecurity a poverty program…
“In return for a lifetime of contributions to Old-Age and Survivors Insurance, the 50-year-old single mother can expect to receive, on average, $155,903 in Social Security benefits while a 21-year-old can expect to receive $190,767. In each case, private strategies yield much higher returns than Social Security. An ultra-conservative investment program in which all of their savings are invested in long-term government bonds would yield post-tax lifetime amounts of $213,220 and $284,098 for the 50-year-old and 21-year-old, respectively-a net gain over Social Security of $57,317 and $93,330.19
The gains from a prudently mixed portfolio of bonds and equities are even greater. Had their taxes been invested in a mixed portfolio of 50 percent bonds and 50 percent equities, the 50-year-old would receive at least $280,016 in lifetime post-tax income and the 21-year-old would receive $382,840 (in 1997 dollars). This represents, respectively, $124,113 and $192,073 more than they could expect to receive from Social Security.
SOCIAL SECURITY AND UPPER-MIDDLE-INCOME AMERICANS
Even for affluent groups, with their ability to supplement Social Security, the lifetime cost of the current Social Security system is by no means trivial in terms of economic well-being. Chart 8 shows the effects on the lifetime wealth and savings of an upper-middle-income, white married couple in New York who have two children and who, in 1996, each earned $77,166 (for a combined income of $154,332).
In return for a lifetime of contributions to Old-Age and Survivors Insurance, the 50-year-old single mother can expect to receive, on average, $155,903 in Social Security benefits while a 21-year-old can expect to receive $190,767. In each case, private strategies yield much higher returns than Social Security. An ultra-conservative investment program in which all of their savings are invested in long-term government bonds would yield post-tax lifetime amounts of $213,220 and $284,098 for the 50-year-old and 21-year-old, respectively-a net gain over Social Security of $57,317 and $93,330.19
The gains from a prudently mixed portfolio of bonds and equities are even greater. Had their taxes been invested in a mixed portfolio of 50 percent bonds and 50 percent equities, the 50-year-old would receive at least $280,016 in lifetime post-tax income and the 21-year-old would receive $382,840 (in 1997 dollars). This represents, respectively, $124,113 and $192,073 more than they could expect to receive from Social Security.”
Several of my friends have died before collecting SS, with all of their taxes going down a deep black hole…
With ones own retirement account, one could spend only the interest returns or the entire principal…You could leave a large pot of money for your survivors (the most generous $255 SS provides as a death benefit) rather than leave them with nothing under SS.
Save for yourself, as much or little as you want, with no governmental unit regulations, fines and penalties..Simple and easy, rather than the fiat of hundreds of rules from the SSA…
But as we all know, people MUST be manged by a third party provider because they do not know any better…
If you are that LAME, then by all means join the system of your choice, but leave me to my own devices: I can stand on my own two feet without your unwanted assistance…
Another point, there have been countless increases in SS taxes, until they stolen 1 out of every 8 dollars…
The taxable level on income now exceeds of $100,ooo and grows each and every year…
I remember in the earlier 70’s, when in the 4th quarter of the year, I reached the maximum level of payroll taxes and had extra monies on my pay check…Not anymore…
SS, is a scam, which cheats Black-Americans and other minorities and forces hard working Americans into Poverty Retirement, so we can have redistribution and social engineering…
Want a moral disgraces!