Social Security: What do Americans Want
The above is an extract from a 2012 National Academy of Social Insurance publication entitled Social Security: What do Americans Want. There is much to see and read in this publication and I urge people to take a look at this longish PDF of 57 pages and many Tables, of which this is just one. But one that tests the simple question of whether Americans would agree either to pay more for Social Security themselves and/or to have wealthy Americans pay more. And I think rather amazingly there is a broad consensus for one, raising Social Security revenues, and two, an across the board burden sharing. That is Workers are not ALL about “Tax the Rich” and the Wealthy are not AT ALL about “Not MY problem”. Instead Americans from all Generations, Income Levels and even Parties think Social Security is important enough to pay for. Important enough to have EVERYONE pay for it.
Intergenerational Warfare? Where? and By Whom on Whom? Because it doesn’t show in the numbers.
I could (and maybe will) cut and paste extracts from this Report all night and all day. But lest some think that the above Table is a little one sided and doesn’t test support for benefit cuts we can check this out from pg. 15
Individual Policy Options in the Trade-off Analysis
Trade-off analysis can estimate the appeal of specific
policy options within packages. Table 8 shows
the appeal of each of the policy changes examined
in the trade-off analysis. For example, when a
policy option has a “strong positive” impact,
respondents were much more likely to choose a
package when that option was included.
The trade-off analysis shows that the following
specific changes strongly increase the appeal of a
package of policy options:
*Gradually, over 10 years, eliminate the cap on earnings that are taxed for Social Security.
* Gradually, over 20 years, raise the Social Security tax rate that workers and employers each pay from 6.2% of earnings to 7.2%. Increase the tax rate that workers and employers each pay in two steps, from 6.2% to 7.2% in 2022 and to 8.2% in 2052.
*Keep Social Security’s current full retirement age at 67.
*Do not means-test eligibility for Social Security benefits.
In contrast, the trade-off analysis showed that options that strongly decrease a package’s appeal would:
*Not increase revenues for Social Security.
*Raise Social Security’s full retirement age to 70.
*Means-test eligibility for Social Security benefits.
Bruce here. Which explains why most proposals put forth by the PGP types simply don’t include most revenue options and instead insist the only choices are between raising retirement age or means testing or large benefit cuts or some combination of all three. That is it is ALL ‘Children you need to take your medicine now’.
The problem with the 2012 report is that it uses stale data.
A week ago CBO said that the I&P number was 3.5%. Using that number it concluded that Immediately eliminating the cap resolved only 45% of the actuarial gap. Yesterday the CBO said the I&P number is now 4%. Using this number the action to Immediately eliminate the cap will resolve less than the 45%. The option you point to eliminates the cap over a five-year span. This option would cover yet a smaller percentage of the 75 year gap.
Webb’s own efforts a few months ago showed that a .2% increase over 22 years was required to ‘fix’ a 2.6% I&P gap, so surely a 1/20% increase over 20 years does not fill a 4% I&P bucket.
To ‘fix’ SS that faces a 4% I&P gap would require an Immediate elimination of the Cap, AND an additional 2.5% I&P tax increase for all workers/employees. I don’t think that amount of tax increase is ‘sell-able’ in Congress in 2014, it will not be sell-able in 2015 or 2016 either. After the next presidential election (2017) the cost of fixing SS with just tax increases (of any kind) will be much higher than they are today.
The options that may have existed in 2012 are no longer valid today. So polls done on the 2012 options are no longer valid either.
Webb/Coberly believe that the only approach to fixing SS is raising taxes. I think they are wrong – but time will tell.
Shorter Bkrasting: “If you don’t have the data, argue the methodology….”
Krasting is quite wrong, but he understands that if the Big Lie is repeated often enough people will come to think it’s true.
I have my own doubts about NASI’s results. I can’t see the point of raising the cap when a simple tiny raise in the “tax” on the people who will get the benefits will solve the problem entirely.
IT is “of course” people will like raising someone else’s taxes to pay for something they like. So I don’t take the sentiment for raising the cap too seriously until people currently over the cap agree that they would “accept” a cap raise in return for increased benefits…. even rich people might like to secure a retirement income of 30k or so “just in case.”
I don’t understand the point of raising the payroll tax half of what it would take to do the job. That would save the average worker about 40 cents per week per year as compared to raising the tax 80 cents per week per year which would solve the problem entirely. And save us from the “arguments” of people like Krasting who don’t understand the problem in the first place.
BUT I am grateful to Bruce for bringing the NASI report to us. It is very encouraging that most people prefer a tax raise, even a cap raise, to cuts in benefits or drastic changes in the way SS works (means testing) that would destroy SS in all but name.
As an indication of Krastings thought process
note how he goes from an increase of one percent “each” over twenty years to “a 1/20% increase. and ignores the next option: increase the tax 2% “each” over 40 years.
Which is essentially the “fix” I have been showing solves the problem entirely.
I, we, can’t keep up with every new “estimate” that CBO can come out with, using dubious assumptions, but at some point honest people will realize that very small increases in the tax “as needed” will solve the “problem” entirely. And the ultimate level of taxes will not be a noticeable burden, and will be the cost that it would take them to pay for their own retirement whether there was any SS or not. What SS does for them is protect that savings (the tax) from inflation and market losses and their own chances of disability or death or inability to make enough money over a lifetime to save enough for even a minimal retirement.
Krasting you are being moronic here.
One you persist in mixing and matching CBO and SSA numbers and explaining variations between them as some sort of recent “change” that would make the previous one “stale”. And two – Oh the Hell with it. Number one says all that needs to be said.
Krasting simply does not understand the numbers and issues involved. He thinks he does and has some rudimentary number skills left over from his previous career as a bond trader as well as some apparent sales skills he probably used to steer people into wrong headed investments (perhaps explaining his early retirement), and this combination of apparent numeracy and salesmanship give his posts and comments some surface plausibility. That is they mostly doesn’t sound crazy until you examine his evidence and chain of argument in detail. Which I have done repeated times over the last four or so years and which just about every time reduce themselves to two words:
Bluster. & Bullshit.
I’ll be putting up more extracts from this Report which will, and quite incidental to my purposes, demonstrate the blustery bullshitedness of BK. Again. For the amusement of AB readers. But life is too short to just fend off incoming BB’s from BK.
I would have to say that the survey behind the report was designed to produce a positive result.
There is no discussion of how benefits grow with AWI.
There is no option that is a mix of tax increases and benefit cuts.
I strongly suspect that if you gave respondents an opportunity to “compromise”, they would take it. People are prone to believe that the answer is in the middle.
The fact that people want to believe that the answer is in the middle does not make it true, but I think a case can be made. I continue to support the NW Plan’s dependence entirely on tax increases because the cuts only side gets all the press, so people seem to think the middle is close to what they hear from Peterson. (and because it does make sense.)
If you had to incorporate benefit cuts, the place to do it would be by reducing the growth of benefits to something less than the current AWI. AWI does not represent the rate at which productivity advances reach workers, so why should it be used to get those advances to retirees? (We are so far beyond outdoor plumbing and iceboxes, so I hope no one brings that up again.) (If the benefits of productivity did reach workers, then we would be closer to Bruce Webb’s desire where the current Intermediate Cost projection would be horribly pessimistic.)
Webb and Krugman have both observed that it is silly to observe that if we do Nothing we will have to cut benefits in the future and that the “cure” is to cut them now. However, it is not silly. Taking gradual cuts now is much better than taking a big cut later. If we are lucky enough to convince people that paying enough to keep scheduled benefits as they are is a good plan, we will need to get started in about 5 years. But if we are forced to accept a compromise, we will actually have to start sooner to avoid a larger cut later.
Arne:
Several things going on here:
– Unemployed Labor (White and Blue collar) slowly creeping back to what it should be (no thanks to Repubs).
– Productivity Gains skewed heavily to Capital stagnating income to most of the US Labor.
– Globalization and the movement of Labor overseas.
– Automation and computerization of jobs (Ford’s Light in the Tunnel).
Solve these in a reasonable fashion and the issues go away. Everything else is a holding action and race to the bottom. If people believe they had issues with Baby-boomers retiring, wait till Millennials hit retirement. Their cohort is larger than Baby-boomers. These are the core issues.
When I first started reading what Bruce Webb had to say about 10 years ago, I thought he had a good case for the IC projection being too pessimistic. The 75 year gap had been revised smaller for 7 years running. Since then the economy has demonstrated that in 2004 we were still in a bubble. (Even with the 2000-2001 recesssion, we never got down to the trend.) From 1991 to 1995 the gap was getting larger. Since 2008 the gap has been getting larger.
The analysts cannot help extrapolating current conditions. A booming economy leads to excess optimism. A depressed economy leads to excess pessimism. Although we can’t really tell until later, it sure looks like a depressed economy to me, to I assert that the increase in gap we see this year is a result of underestimating what the economy will do over the projection period.
Arne
I hate to lose you.
Sure a “compromise” appeals to people…. who don’t know anything or who have no commitment to justice or reality. Cutting benefits that are currently barely at survival level will … reduce them to below survival level. Making SS unable to act as “insurance” to guarantee your ability to retire.
Frankly I can’t see what “compromise” is needed to save you from the horrible prospect of an eighty cents per week tax increase.
Or are you a believer in Lot’s compromise? “Don’t rape my guests; rape my daughters instead.”
If you asked the question “Since retirees will live two years longer 32 years from now, they should pay part of the cost of benefits by working 1 year longer”, I predict you would get general agreement.
If you asked the question “Since poor to median workers are not living longer, the Normal Retirement Age should not be increased”, I predict you would also get agreement.
While I think that the survey could be helpful, I think a close look tells us we need knowledgeable decision makers.
coberly,
Depending on what you are arguing, you either claim you have no trouble living on SS or that it is barely survivable.
As you well know, the buying power of scheduled benefits will increase even if we do not raise taxes. So the definition of “cuts” is also rather subjective.
I would be happy if you can convince everyone that a “eighty cents per week” is good idea, but I would rather save SS as a PAYGO program by workers for workers by just tweaking the growth of scheduled benefits than expose it to Peterson’s “reforms” that will drag it to its death.
I just don’t see sticking with the current use of AWI as any more sacred than sticking with the current payroll tax rates.
Arne, “If you asked the question “Since retirees will live two years longer 32 years from now, they should pay part of the cost of benefits by working 1 year longer”, I predict you would get general agreement.”
Your hypothetical makes a illogical conclusion. Living two years longer does not equal feeling two years younger when one reaches the age of retirement. An increase in average life expectancy is not equivalent to being fit for work for any longer period of time. The possible increase in age may only be an increase in one’s decrepitude.
I am also of the opinion that we should spend more on education. I do think that the “rich” should pay a large chunk of that, since educated workers benefit them and the more they make the more it is true.
But education directly benefits the worker as well. Spending that 80 cents per week on letting more young people get a better education might be a better choice. And it would pay dividends back to SS.
Jack,
You draw the correct conclusion that there is illogic.
The 2 questions I posed are both in the form used by the survey that is the basis for the report. Neither question contains factually incorrect information – they are both factually incomplete.
The fact that it agrees with my views does not keep me from recognizing that it has elements of a push poll.
I believe that Arne actually raises, if indirectly an important point. One that was raised in an earlier thread.
If we weren’t in an idiotic (i.e. more or less self imposed) recession and wages and thus tax revenues had managed to stay along the trend line established prior to 2008, how would benefits (and especially the potential expansion of benefits) look mathematically regarding the actuarial models?
In some sense like Nixon opening relations to China, Obama has managed to make the economics of SS worse. First by failing to moderate the impact of the housing meltdown (the administration could have done more by underwater homeowners and in fact their rhetoric claimed they would) then failing to argue for more meaningful (not bank/bondholder centric) stimulus, then ignoring long term jobless etc. They then compounded it by declaring a SS tax holiday etc. The gap that peterson and BK are selling is a Democratic enabled one at bare minimum.
“You never let a serious crisis go to waste. And what I mean by that it’s an opportunity to do things you think you could not do before.” – Rahm Emanuel
See also Naomi Klein, The Shock Doctrine.
Average life expectancy increases the most when younger people stop dying from childhood diseases, wars, etc, so that is probably a large part of gains. People who die two years later then they would have under previous statistics but still die before retirement will have paid more FICA taxes without drawing any SS retirement funds. So it is not clear to me that increases in life expectancy hurt SS funding significantly – it depends on the overall distribution, not on the average.
Speaking for myself, I estimate I have lost 10-20 points of IQ between age 30 and 65, and have less than half the energy. In my 50’s working as an engineer, I stayed late to try to write and run a computer model for a big field problem one night, as I had done many times before, working all night if necessary. That time I hit a wall at 9 PM – my brain just refused to keep thinking. I retired at 60. If I had to get work as an engineer now, I would probably need to go back to school first to learn modern techniques. In short, even for white-collar workers, being able to work effectively past 67 is not guaranteed.
Arne
i think anyone who thinks eighty cents per week per person is better spent on schools than on making sure you can pay for your own groceries when you are old hasn’t been near a school lately, and doesn’t have much imagination. and also doesn’t understand that Social Security is NOT A TAX and doesn’t have a damn thing with the school budget.
stand outside a grocery store some day and ask everyone who goes in or comes out to donate eighty cents to the school fund… and of course do without eighty cents worth of groceries.
i think you’ll get what you deserve.
Arne
i don’t know if it was a push poll or not. I would have asked people if htey would be willing to pay an extra eighty cents per week each year for their social security to avoid cuts and pay for their longer life expectancy.
i think i would have gotten the answer i wanted.
but as you say… we need real decision makers, not “polls.” the value of this poll is that however the questions were asked it does show a willingness for people to pay for their own Social Security.
with a little goddamn honest leadership in this country we could offer them the eighty cent solution and they would say okay fine. sure glad all that argy bargy is over.
but if you want to keep them and yourself confused by pretending it has something to do with the school budget, or that working an extra year is anything but a form of torture for most of them… you are not helping them.
and where are they going to find a ….. job?
haven’t you noticed that corporations are finding ways to lay people off when they reach 60?
i think you are living on a well padded cloud and your understanding of reality for those who aren’t has fallen asleep.
Jim V
same thing happened to me.
i suspect some of the increased life expectancy is because of more better ways to keep people going hooked up to a tube.
but the point is not that we are going to live longer, but do we want to spend the rest of our life working for the boss” or, SINCE WE PAID FOR IT OURSELVES…. or could have paid for it with an extra eighty cents per week… do we want to take some time to live a few years before we are ready for the rest home.
i know that some people expect to have enough saved to retire early and live a little. some people very close to this blog, this thread. but when asked to spend an extra eighty cents per week THAT THEY WILL GET BACK so that other people don’t have to work an extra two years… if they can get a job… he says.. uhhhhh…. well, i could give you forty cents and they could work ONE extra year. You see, out of a hundred thousand dollars a year he can’t find an extra 40 cents except by holding it back from Social Security.
Sorry, it makes me screaming mad.
One of the reasons I have brought up compromise several times this year is that in addition to the fact that my understanding of reality makes me sure that just as it happened 1983 SS will again be “fixed” with compromise. That is how Congress works. The problem is that what is being offerered as compormise is stupid. Changing the COLA calculation is stupid. Means testing is stupid.
The problem is that benefits are growing while revenue is not. If we must accept a change to scheduled benefits, it should be one that makes some sense and works for the life of the SS program. (There will always be adjustments needed – the NW Plan has triggers to manage the revenue side for the life of the program – but unless someone needs to suggests a workable methodology for benefit adjustments, we are going to keep doing Nothing, and Nothing is starting to look like a really bad plan.)
“haven’t you noticed that corporations are finding ways to lay people off when they reach 60?”
I am now unemployed. I have noticed.
Arne:
Doubtful it is age or performance for that matter. It is what I mentioned above.
Arne
i am sorry to hear that. very sorry.
i hope it doesn’t come to your finding out why i am running around screaming with my hair on fire.
i would have thought by now that we would have learned from Obama about the dangers of compromise.
permit me to state again the essential fact:
social security is not welfare. it is the workers money set aside for his own retirement, protected from inflation and market losses. he will get it back when he needs it most, plus interest. he will need it.
there is nothing in there to compromise about.
if we ever reach the point where benefits are too generous, or wages too low to pay for the benefits, AND the people who are paying the tax for those benefits are fully and responsibly informed… instead of lied to every hour for decades… then the people, the workers themselves, the people who pay the tax and need the benefits… can “compromise” with themselves about how much they are willing to give up “today” in order to have “enough” when they can’t work any more.
we are nowhere near that point.
nor are we anywhere near a point where we have to decide between 80 cents per week for our own future groceries or 80 cents per week “for the schools.”
JimV,
I very purposely said “retirees will live two years longer 32 years from now,” to avoid the whole issue of younger people. The life expectancy of 65 year olds will increase by 2 years from 2014 to 2046 (according to SSA).
The astute reader will note that my posing a question for a survey does not mean that I agree with the question I have posed.
“there is nothing in there to compromise about.”
Like it or not, this is not true.
“nor are we anywhere near a point where we have to decide between 80 cents per week for our own future groceries or 80 cents per week “for the schools.”
Again, this is just wrong. We have to make decisions all the time. Many students are racking up too much debt when they go to college. We used to subsidize tuition a lot more than we do now. It is probabaly possible to decide to do both, but we aren’t.
Frankly, I get tired of you being so screaming mad that you shoot the messenger. I had a really good job and expect to replace it with a different really good job and I am willing to pay more for SS even though I know that my good fortune will mean that I am subsidizing poeple with less good fortune. But the fact that I think Congress will not do what you want it to does not make me unimaginative, a pimp, evil, or even unable to understand what you are saying.
Well Arne I will have to look at it in more detail but I am just not seeing the push poll aspect at first glance. That is they took 12 or so policy options and scored them individually and from what I saw then combined the ones that got the most positive results in two policy alternatives A and B and then posed them against each other.
I guess I woud want to see which question was actually presented in a way that leaned against the actual data as opposed to leaning against the preferred framing of the PGP/Concord/CRFB types. Looks to me that people really didn’t like means testing or raising the retirement age which are pretty much the primary proposals ever advanced by ‘reformers’.
And for what it is worth I too get tired of our mutual friend Dale’s insistance on “My way or the highway”. For me the strength of the Northwest Plan is in its adaptabiilty to outside proposals that would move the trigger points or reduce the schedule of increases. And even Dale is open to ones like “More Jobs. At Better Wages.” But anything that would even touch the earnings cap or smack of “tax the rich” just sets him off. I mean I revere FDR and Frances Perkins to rival any other New Dealer but sheesh even they endorsed fundamental changes to the original design. For example the Amendments of 1939 put in place a substantially different vision for Social Security than the original scheme put in place by the 1935 Act. And the addition of the DI program in 1955-56 even more so. That is it is kind of a stretch to say that DI recipients “paid for it” in quite the same way that retired workers did. And double ditto for the grafting of SSI and its separate funding onto the larger structure that was OASDI. There are welfare aspects to the programs run by the Social Security Administration and to make the claim that it is all workers paying for their own individual retirement at a minimum masks the collective self-help built into the benefit formulas (DI based on projected earnings, Bend Points increasing replacement ratios for lower income workers).
Arne
well, I guess we’ll have to put off that beer.
as for “my way or the highway…” sorry, Bruce, I worked in a field were there was such a thing as the right answer. and the opinions of those who didn’t understand the problem were listened to politely and then set aside.
i WAS the kind of boss, though, who really listened and was pleased beyond belief when the help had better ideas than i did. but when they didn’t, i had to ask them to go along with my approach to get the job done and save their opinions for Miller time.
Arne would do well to take his own advice about listeniing carefully and not getting his feelings hurt because I say that Social Security is not… so far… a welfare program subject to political compromise. IT is the workers money held for them in trust by the United States of America on the promise that it will return it to them with interest, and certain insurance adjustments, in time of need.
As long as everyone wants to keep forgetting this and talk as those Peterson and the idiots who follow him are just honest brokers for a legitimate political position…. the need to use the money for the poor school chidren, for example… you will have the blunt objections of this voice in the wilderness.
i am sorry but your idea of “polite” is something i learned to have contempt for by watching too many “safety meetings,” graduate seminars, and lying politicians figure the whole point was to talk talk talk to either do nothing or do something evil in the end.
i haven’t called Arne evil or a pimp. I guess I have suggested that Krasting is something like a pimp for Peterson who is evil. But that, while not polite, is the overwhelming Truth of the situation.
I have suggested that Arne… who should know better… is wrong. And putting up “ideas for discussion” to disown them later when they are bitterly criticized is dishonest. What is at stake here is too damn important to play games with and show the injured paw when someone suggests… strongly… that you are confusing the issue to the harm of real people and aid and comfort to the enemy.
Dear Bruce
It is certainly true that changes were made in SS. One of the first changes was FDR quietly changing the “plan” of his commission from “government pays” to “worker pays.”
As for the DI not “paying for their insurance, last I looked all of the DI money comes out of worker insurance contributions. Or is it your opinion that the people who have to actually collect on their insurance did not pay for it.
I am sorry, but the words that come into my mind to describe this opinion are not polite.
I don’t have serious objection to changes in SS that keep the essential “worker pays” nature of the program. That is the KEY to the whole thing. When changes are proposed that would turn it into welfare.. those are proposals to destroy Social Security. If you want or need money for welfare, ask for it as a separate legislation, don’t try to ride on the back of Social Security “because it is successful.” That is a bit like Bush calling for mandatory stock market “personal” retirement plans and calling it “reforming Social Security.”
I don’t even have objections to raising the cap, as long as it is done honestly and not as some “soak the rich” solution to “the Social Security crisis”… to save the workers eighty goddam cents per week to pay for their own future groceries.
Their own, in spite of the insurance adjustment, because contrary to what you seem to thing, insurance is not socialism.
Arne
in case we are still having a conversation. up there aways you said you didn’t see why sticking to the current AWI was any more important than sticking to the current tax rate (? my memory of what you said)
thing is the AWI is, i understand, the actual ratio of average wages from one year to the next. it is not a policy.
as for my having no trouble living on barely survivable SS benefits… sorry to say they are both true. it’s than thin line between “enough” and “not enough.”
but the point for most people…who would not choose to live as i live… is that THEY CAN PAY FOR THEIR OWN LEVEL OF BENEFITS and since they would be desperately unhappy with your “more in real benefits,” but 20% less than todays as a percent of “the going wage”, they would be stupid to be conned into taking the cut because someone is telling them “we can’t afford it” or “it’s a choice between Social Security and “the children.”
It’s not a choice… not like that sounds. We will have twice as much real money by the time the tax raise is needed. So it’s a “cut” of a thousand dollars a year out of a 40 thousand dollar a year raise.
Or in the case of the actual present… its a cut of 80 cents per week out of an 800 dollar a week income. It is simply dishonest to claim we can’t afford to pay for our own future groceries “because of the children.” I did spend an entire post trying to point out that your grandparents “paid for the children” out of an income that in real terms was half of what you get today.
typo:
should have said “its’ THAT thin line between enough and not enough”
and just in case anyone has noticed, those “typos” have become unbearably frequent in my old age. it would make it hard for me to earn a living as a typist. even though i am going to live longer than my mother, who did.
Dale why is Disability a collective responsibility of WORKERS? Why is it ONLY funded out of covered earnings?
Or you could ask the same question about the Suvivors piece.
Almost all societies recognize some collective responsibility for widows, orphans and ‘cripples’. Yet under U.S. Social Insurance this collective responsibility has been shifted to workers. Now I get why the OA piece was delegated to workers, why they as a group should self insure their membership of a dignified retirement. But that logic doesn’t run so strong for those who died or were crippled on the job, often because of the callous behavior of bosses. Why shouldn’t the S (of OAS) and D (of DI) fall on all income cohorts and types?
The S and the DI and later the HI were folded into the OA model because it was a convenient vehicle. And not because those Amendments were Revealed Knowledge from the Ghost of FDR. The funding could have been organized differently than OA, that it wasn’t isn’t by that token self justifying in the way your argument would have it.
Dear Bruce
let me invite you to contemplate the difference between my saying that DI is paid for by the workers and DI should be paid for by the workers.
And you might further contemplate that i said that in response to your assertion that it is quite a stretch to assert that workers paid for DI. Again, not that they “should” pay for it.