Another reason not to pay for the Washington Post.
“Michael Gerson, the former George W. Bush speechwriter turned Washington Post columnist, has been an admirable voice of dissent against Donald Trump. His latest column, headlined “If Trump Wins, Blame Obamacare,” advances the bold argument that Democrats share the blame for the nomination and potential election of an ignorant racist demagogue because they reformed the health-care system. In a bizarre way, Gerson’s seemingly tenuous connection between the 2010 law and the 2016 election is actually correct, but the causal link runs just the other way. Republican hatred of Obamacare exemplifies the madness that left its elite unable to stop Trump.
Gerson argues that the failure of Obamacare has produced the political atmosphere that gave rise to Trump……
Gerson argues that the law has failed dramatically. “Only 18 percent of Americans believe the Affordable Care Act has helped their families,” he writes. This may have something to do with the fact that Obamacare, by design, left in place the existing system for the majority of Americans who receive insurance through an employer, Medicare, or Medicaid. It created new insurance for the suffering minority of people who didn’t have it.
Gerson argues that Obamacare is failing by citing wisps of data. “Premium costs in the exchanges increased about 12 percent nationwide from 2015 to 2016,” he argues. “Current rates are being finalized, but it looks as if the increase from 2016 to 2017 will be double that.” It is true that premiums are rising. What Gerson does not mention is that they came in dramatically below projected costs. Even after the expected price correction, premiums in the exchanges will be $600 per person less than forecast. As a new Urban Institute paper explains, insurance in the exchanges will be less costly than the average employer-sponsored insurance plan.”
CBO has a new report on Social Security. It compares the CBO results against that of the SS Trustees. There is a big difference between the two. CBO says the 75 year shortfall is 1.55% of GDP, while SSA has the shortfall at 0.95%.
That sounds like a small difference, but it s actually quite large. CBO sees the shortfall as being 50% larger than SSA.
I think a big part of the difference comes from SSA who is projecting very high rates of real GDP growth between now and 2020. (Figure 5) The difference in the first 5 years of the projections makes a big difference over the long term.
I think a big part of the difference comes from SSA who is projecting very high rates of real GDP growth between now and 2020. (Figure 5) The difference in the first 5 years of the projections makes a big difference over the long term.
You don’t have to think, you have to read. CBO explains every component of that difference starting at the bottom of page 1 and continuing on page 2 and illustrate it with Figure 1. Less than Just a fraction over 1/5th of the difference (.13%) is attributed to GDP factors. This is your source, are you surprised when people actually follow behind you and check your claims?
Getting an accurate projection of the economy for 10 years is a reasonable feat. Getting an accurate projection for 75 years is laughable. Stick with 10 year increments.
” The Ricketts – Joe is the founder of Ameritrade – contributed $6 million to an anti-Trump super PAC over the past year but have now pledged $1 million to Trump’s campaign, according to the Wall Street Journal.
” Their public opposition caused Trump to threaten on Twitter that he would reveal the Ricketts’ secrets if they were not careful. ”
********************************
@realDonaldTrump
” I hear the Rickets family, who own the Chicago Cubs, are secretly spending $’s against me. They better be careful, they have a lot to hide!
8:42 AM – 22 Feb 2016 “
“Republican hatred of Obamacare exemplifies the madness that left its elite unable to stop Trump.”
Indeed. The failure and reluctance of the Republican establishment to stop Obamacare resulted in the distrust and dislike the Republican electorate has for the Republican establishment. Thus, they nominated someone who was not a member of the Republican establishment.
The single scare quotes makes a difference, you can’t just take this sentence out of context.
The relation between interest (as normally defined) and solvency is complicated. First initial benefits for a given worker are driven by Real Wage. Which is post interest. But the cost of subsequent benefits are driven by inflation/COLA which generally tracks interest. If the economy is growing fast in both Real GDP and Real Wage terms (that is post inflation) then the nominal rate of inflation is not a big deal for Social Security. In fact to the degree it correlates to higher interest it drives revenues on Trust Fund balances. On the other hand if you have the combination of low or stagnant Real GDP and Real Wage and a high nominal rate of inflation then solvency takes a big hit as costs get driven up via COLA’s while revenues flatten due to sluggish growth and wages. This is exactly what happened in the 70’s, especially the late 70s, when what was thought a theoretically impossible state of affairs, the combination of low growth and high inflation subsequently dubbed ‘Stagflation’ took a Trust Fund that was in actuarial balance in 1971 and sent it right into insolvency by 1982. https://www.ssa.gov/OACT/TR/2016/VI_A_cyoper_hist.html#293711
My Coffee with a Trump Supporter, Robert Reich
Tuesday, September 20, 2016
“You know, in 1976, when Trump was just starting his career, he said he was worth about $200 million,” I said. “Most of that was from his father.”
“That just proves my point,” said the Trump supporter. “He turned that $200 million into four and a half billion. Brilliant man.“
“But if he had just put that $200 million into an index fund and reinvested the dividends, he’d be worth twelve billion today,” I said.
******************
Strange thing happened to DOW: in 1968 (I think I’ve got the exact years right) the DOW was a bit below 1,000 (it’s 18,000 today). It stayed there — at 1,000 — for 15 years, through inflation and late ’70s double digit inflation. Only in 1983 did it start to go up — again, it’s 18,000 today.
Donald’s $200 million in 1976 equates to $850 million in today’s money. Multiply that by 18 and reinvest dividends and RR underestimated at “twelve billion.”
the important thing to note here is that whatever happens to the economy, people are still going to need their Social Security. The difference between 0,95% and 1.55% may be “huge” when counted in dollars, or worse, counted as a percent of a percent, but it’s still only about half a percent per person, and that is an unnoticeable amount… until, of course, it represents the difference between having barely enough and having barely not enough… which is what would happen to hudreds of millions of people if SS is “cut.” While, again, raising their SS tax 2% would not be noticed by anyone not neurotically attached to counting his money and mourning over a nickel left on the table.
the moral of this story, for those who haven’t heard it before: start raising the tax one tenth of one percent when the Trustees project that the Trust Fund will fall below 100% of a full year’s benefits within 10 years.
That looks like it will happen in 2018. one tenth of one percent is about a dollar a week for the average worker.
running an economy by screaming the sky is falling when you see a mouse is stupid. screaming the sky is falling when you imagine you see a mouse sometime in the future is beyond stupid.
i will offer the view from my side of the bridge. i am not married to it.
since Obamacare…. only a coincidence probably, or maybe the result of it in some way having more to do with the basic criminality of the insurance industry and medical care providers… i have noticed a huge increase in doctor’s bills for the same … problem, i almost said “services” but the providers have found a way to charge for “services” that have nothing to do with what they actually do or need to do.
i imagine that most people are like me and they can’t parse out what causes what, but they do notice when they can no longer afford to go to the doctor, even when obamacare, or medicare. is paying for most of it.
Warren seems to be confusing the “interest” that SS pays on employees contributions to the interest that the government pays on the Trust Fund bonds.
The Trust Fund interest doesn’t amount to anything significant… it would make a difference of about 1% (of wages) in the FICA “tax” with the government paying about 5% on the money it borrowed from the trust fund, as compared to the “tax” if there were no Trust Fund interest.
The “interest” that makes up the difference between what you pay into Social Security and what you get in benefits is not interest in any sense that Warren could understand it. It arises just from the fact that in a growing economy the pool of money from which the tax is collected from current workers and paid to current retirees is always less than the pool of money from which the tax was collected from then workers (now current retirees) and paid to then retirees.
There are some complications in this, but again, none such as to make a material difference. The essential fact is that workers need a way to save a part of their own money, safe from inflation and market losses, in order to have enough to be able to retire when they need to. SS is the only way to provide the needed safety… plus the insurance against personal losses and failure to “thrive” that are a fact of human existence and always have been and always will be.
yes, but even at that it’s important to not be panicked stupid over what turns out to be not much when you aren’t comparing percents over percents: such as calling a 2% (of payroll) increase in the projected tax a “whopping” 33% increase in the 6% tax.
the cost of social security is a measure of the cost of keeping alive after you can no longer work. as a percent of payroll, it is a measure of how much wages have grown or not grown.
if your grocery bill goes up, or your wages go down you don’t kill yourself or stop eating because food now costs a higher percent of your wages. Especially if it’s 2% of a wage that is significantly more than you need for reasonable comfort and pleasures.
The SS tax will go up about 1% over the next ten years, and something less than that over the following ten years, and then almost nothing (as a percent of wages) for the next fifty years or as far as we can see into the infinnite horizon.
scaring your self stupid over percents of meaningless numbers is… well, stupid. you are going to need money to live on after you can no longer work (for whatever reason). SS provides an almost guaranteed assurance that you will have enough. And for now at least, it does it and still leaves you much more than enough money to have fun with or bet on the market if that’s your pleasure.
and if you are struggling starting a business, you can always find the financing. but if your business fails (and most do) you would be very very sorry you bet your social security on it.
It is a coincidence. the growing numbers of services added to providers bills have increased on a steady basis for decade.
Run and Maggie know a ton more about this than me, but the simple fact is that fee for service medical care is an ongoing problem. It even includes Medicare, which most people think is so efficient.
Webb – The GDP variable is 22% of the difference between CBO and SSA. If you look at the chart you see that CBO/SSA have the same forecast for GDP post 2020. So the entire 75 year imbalance attributable to GDP is a consequence of just 4 years. If this was spread out evenly over the entire period it would not be significant. But it does have policy implications if you look at SS with a Ten-year view.
The difference between CBO and SSA is that CBO says that the TF=0 in 2029. SSA says TF=0 in 2034.
If sustainable solvency is a TF =100% of next year’s benefits, then SS will not be “solvent” in 2027.
According to Coberly a ten-year projection where the TF falls below 1 is when things should happen. That would be next year.
So yeah, I think of the consequences of information, not just the raw numbers.
But if you like raw numbers, consider what the Fed said yesterday. Yellen downgraded 2016 GDP to 1.8%. A far cry from the 2.9% SSA projected in July. Consider the data you provided for economic variables, look at where 2016 is for %, GDP, Inflation. We are running at a rate that is at the high cost outcome.
Coberly – CBO’s #s imply a tax increase on workers of 1.55% of GDP. That tax increase would have to be Immediate and Permanent.
That is equal to a $294 Billion increase in payroll taxes! That comes to 4.6% of payrolls. There is no way you can fill that hole with a 0.1% annual increase. As you said, the year where the TF = <100% of benefits is 2028. (I think it is a year earlier). There is not enough time left for the gradual approach you have advocated.
Given the narrowing time frame even you should admit that a combo approach is going to be necessary. That means changing/eliminating the Cap, means testing benefits, new sources of revenue (transaction tax) AND on budget transfers from Treasury will all be part of the solution. And yes, workers and their employers will pay a bunch more as well.
you didn’t read what I said. the only reason to reply to you is just in case someone thinks those technical sounding comments of yours actually mean anything.
the basic point is that whatever happens to the economy, people are going to need Social Security to be able to retire at a reasonable age with at least enough to live on. in fact the worse the economy the more they are going to need it.
your huge projected increases amount to no more than a few dollars a week extra savings via the payroll “tax”– they get the money back, with interest, when they need it most.
meanwhile, all your detailed arithmetic based on guesses about the future are just a form of playing with yourself… something the Cato institute, among others, encourages by publish full color center-folds of misleading “informatioin” about the dire future of Social Security.
and yes, 2018 would be the best year to start the gradual increase in the tax. but the gradual increase will still work, though less elegantly, if started as late as 2021 or later. and it will still work if the ultimate tax increase is 3% instead of 2% for each the worker and the boss. and if the increase in wages doesn’t more than pay for that, people will still need to pay the increase… a shift of a tiny amount from “current” spending in order to have “enough” to live on when they can no longer work.
we have already talked about “immediate and permanent” you don’t seem to be able to understand there is not “have to be” about it. immediate and permanent is just one way to meet those future costs. it is not the best way. the gradual increase will do the job more fairly and with far less consternation, though even the immediate sharp increase would cause only psychic pain, no real effect on standard of living.
the year when TF reaches less than 100% of benefits is not critical. a gradual increase of slightly more than one tenth percent, or running the increase another couple of years will handle an ultimate needed increase of more than 2% each (your “4.6% combined” is three tenths of one percent more than the 2% figure that SSA projects).
I think we need to use the gradual approach because not only is it completely painless, it would keep us from doing something stupid now because people like you panic when they see a number like “294 billion increase in taxes” and can’t hold onto the thought that that is a guess, and that it means a 2.3% increase in the payroll tax… which they get back with interest when they will need it more than they do today…. and which can be reached one tenth of one percent of payroll (about a dollar a week) at a time, while wages are projected to go up at least ten dollars per week each year.
please try to wrap your brain around the whole picture… in terms of what it means to each person… and stop going crazy every time you read a number that scares you.
especially since your friends were perfectly happy with the SSA numbers when they were scarier than CBO’s, but a change in bosses at CBO got CBO numbers to be scarier than SSA’s, so now for you only CBO can be taken seriously.
and i wish you would stop feeding us garbage. it’s dangerous because some people might believe it, and i get tired of having to answer it time after time.
it may be a coincidence, but politically most people won’t know that and that will make them blame Obamacare.
as for me the “coincidence” is just the gradual capture of the medical care industry, and the government, by the predatory business model which seems to have taken over the country.
Run and Maggie were (are) right that Medicare is caught in the same “coincidence”, but they couldn’t convince me that throwing away Medicare and throwing ourselves on the mercy of the kind insurance companies was the answer. and the conversation went to hell after that.
and what does “4% of the people…” have to do with anything I said?
i get my insurance from Medicare. nevertheless doctors bills have gone up by a factor of from four to ten since the last time i went to a doctor a few years ago. Medicare disallows a good part of it, but they (the taxpayer) still end up paying more than twice as much as a reasonable cost for the actual “service” (not counting the padded “services”) and my 20% ends up being more than i used to pay before i had insurance.
without getting “ideolgical” about it, it seems to me that the insurance companies and the “providers” know how to game the system and Medicare doesn’t seem to care too much that they are being robbed.
If we increase the FICA tax while there is a surplus, the additional surplus will increase the holdings in the SSTF, and reduce private holding of US debt. (We will assume that the government does not change it’s spending.)
So, if future taxpayers will have to redeem those bonds with income tax when the SSTF requires a draw-down, why not just wait until there a draw-down is imminent and raise the FICA tax to meet the need?
And if the structure of future FICA taxes are such that no draw-down will ever be required, why bother with the SSTF at all? Just set FICA taxes to match estimated expenses.
the surplus is being drawn down now. if we wait until it is gone, the increase required will be a sudden 2% (each) increase in the tax. if we start increasing the tax by one tenth of one percent per year, we match the increase needed for sustainable “solvency” over a twenty year period while wages are rising so no one feels any pain at all.
and future taxpayers will never have to “redeem the debt” because by raising the payroll tax as needed the principle on the debt is never touched. only the interest on the existing debt remains, and that is money the “taxpayers” would pay on ANY remaining debt. and paying interest on remaining debt is considered a normal, and beneficial, cost of doing business by ANY business in the capitalist world. including the business of government. a fact of life well understood by everyone except the people who believe “debt” is like something you owe the mafia.
the trust fund is needed to match short and medium and long term mismatch between incoming and outgoing.. again a normal feature of business. the trust fund money is put in the most secure interest bearing place possible: US special treasuries. something a lot of businesses wish they could buy, but are happy to buy normal treasuries to park their “temporary” excess cash.
you see, you try to “reason” without knowing anything at all about how Social Security works, is working, and apparently not much about how money works in the private economy.
your idea about waiting until the surplus is gone suggests to me you never took calculus, or just learned it by rote, without understanding how you meet a moving target.
i really, really hate being personal and sounding like i am insulting you, but the fact is you don’t know what you are talking about, yet you spread the ignorant misunderstandings of people like the Cato Institute and create a danger to the people who believe you and them.
Thing is, though, that Cato knows damn well they are spreading harmful misunderstanding. that makes them damned liars.
The ANNUAL SURPLUS is in cash terms gone. The SSTF balance continues to grow only because interest in excess of that needed to cover the cash deficit still is credited to the Trust Fund.
But as things stand Income Excluding Interest (i.e. cash) has fallen behind Benefits. And even if we take Income Including Interest the calculated surplus will vanish around 2023. If we are going to move on FICA we might as well move now rather than waiting for what is mostly a paper event 7 years from now.
FICA taxes do match outlays as closely as possible. what you are calling for is like putting mouse poop in the carburettor because a man in a suit told you it would save on gas.
the surplus was built up for a reason. it is now being drawn down for that reason.
next year would be the best time to start increasing the tax gradually.
increasing the tax one tenth of one percent will let tax replace a small part of the trust fund drawdown… allowing the trust fund to last a little longer. doing it again the next year will do the same thing only moreso. by the time the tax has been increase by 1%, approximately ten years, the trust fund life (at TFR=100) will have been extended considerably and the rate of increasing the tax can slow a little bit… until, gradually the tax is enough to match the outgo of SS (benefits) without the TFR ever having fallen below 100, and with no one ever feeling the tax increase…. only CATO’s devoted followers will even notice it because of all the screaming (lies).
after that the tax income plus the interest on the TF will match the needed outgo for the foreseeable future with no need for further tax increases. you could eliminate the interest on the TF by paying back the money you borrowed from the TF, but that won’t save you any money because you will have to borrow it from someone else, and the people who pay FICA will have to “invest” the TF in something else. there may be investments as safe as special treasuries, but i doubt it. so i’d remind the voters… as if they understood… that if they go for the higher interest from less secure investments they will have to be prepared for the sudden occasional need to increase the tax to make up for the loss of interesst and principle on their investment. seems like a poor way to run a railroad.
note: saying “ANNUAL SURPLUS” may be more “precise” but it doesn’t change what I said about your model of how finance (of anything) in the real world works. you are trying to make the real world work the way it says in your Ayn Rand comic book. It doesn’t, it won’t, it can’t.
Another reason not to pay for the Washington Post.
“Michael Gerson, the former George W. Bush speechwriter turned Washington Post columnist, has been an admirable voice of dissent against Donald Trump. His latest column, headlined “If Trump Wins, Blame Obamacare,” advances the bold argument that Democrats share the blame for the nomination and potential election of an ignorant racist demagogue because they reformed the health-care system. In a bizarre way, Gerson’s seemingly tenuous connection between the 2010 law and the 2016 election is actually correct, but the causal link runs just the other way. Republican hatred of Obamacare exemplifies the madness that left its elite unable to stop Trump.
Gerson argues that the failure of Obamacare has produced the political atmosphere that gave rise to Trump……
Gerson argues that the law has failed dramatically. “Only 18 percent of Americans believe the Affordable Care Act has helped their families,” he writes. This may have something to do with the fact that Obamacare, by design, left in place the existing system for the majority of Americans who receive insurance through an employer, Medicare, or Medicaid. It created new insurance for the suffering minority of people who didn’t have it.
Gerson argues that Obamacare is failing by citing wisps of data. “Premium costs in the exchanges increased about 12 percent nationwide from 2015 to 2016,” he argues. “Current rates are being finalized, but it looks as if the increase from 2016 to 2017 will be double that.” It is true that premiums are rising. What Gerson does not mention is that they came in dramatically below projected costs. Even after the expected price correction, premiums in the exchanges will be $600 per person less than forecast. As a new Urban Institute paper explains, insurance in the exchanges will be less costly than the average employer-sponsored insurance plan.”
http://nymag.com/daily/intelligencer/2016/09/how-the-republican-war-on-obamacare-explains-trump.html
The sad part is that many so called liberals have this same view of the ACA. Another example of attacking good because it is not perfect.
CBO has a new report on Social Security. It compares the CBO results against that of the SS Trustees. There is a big difference between the two. CBO says the 75 year shortfall is 1.55% of GDP, while SSA has the shortfall at 0.95%.
That sounds like a small difference, but it s actually quite large. CBO sees the shortfall as being 50% larger than SSA.
I think a big part of the difference comes from SSA who is projecting very high rates of real GDP growth between now and 2020. (Figure 5) The difference in the first 5 years of the projections makes a big difference over the long term.
The report:
https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/reports/51988-SocialSecurityTestimony_0.pdf
You don’t have to think, you have to read. CBO explains every component of that difference starting at the bottom of page 1 and continuing on page 2 and illustrate it with Figure 1.
Less thanJust a fraction over 1/5th of the difference (.13%) is attributed to GDP factors. This is your source, are you surprised when people actually follow behind you and check your claims?Getting an accurate projection of the economy for 10 years is a reasonable feat. Getting an accurate projection for 75 years is laughable. Stick with 10 year increments.
Cubs owners do amazing about-face on Donald Trump
Israel Fehr, Yahoo Sports, Sep 20, 2016, 4:36 PM
http://sports.yahoo.com/news/cubs-owners-do-amazing-about-face-on-donald-trump-213653704.html
” The Ricketts – Joe is the founder of Ameritrade – contributed $6 million to an anti-Trump super PAC over the past year but have now pledged $1 million to Trump’s campaign, according to the Wall Street Journal.
” Their public opposition caused Trump to threaten on Twitter that he would reveal the Ricketts’ secrets if they were not careful. ”
********************************
@realDonaldTrump
” I hear the Rickets family, who own the Chicago Cubs, are secretly spending $’s against me. They better be careful, they have a lot to hide!
8:42 AM – 22 Feb 2016 “
“Republican hatred of Obamacare exemplifies the madness that left its elite unable to stop Trump.”
Indeed. The failure and reluctance of the Republican establishment to stop Obamacare resulted in the distrust and dislike the Republican electorate has for the Republican establishment. Thus, they nominated someone who was not a member of the Republican establishment.
“[A] big part of the difference comes from SSA who is projecting very high rates of real GDP growth between now and 2020.”
How is that possible?
“[The] ‘interest’ is supplied by the general growth in the economy (arguably average wages).”
“[The] interest on investment SSA refers to is interest on the workers money. in America interest on your money counts as your money.”
http://angrybearblog.strategydemo.com/2016/09/harvard-surveyed-their-alumni-and-guess-what-they-found.html#comments
So aren’t the benefits tied to the growth of the economy (or average wages)?
3% real is not “very high”
https://www.ssa.gov/OACT/TR/2016/V_B_econ.html#308187
The single scare quotes makes a difference, you can’t just take this sentence out of context.
The relation between interest (as normally defined) and solvency is complicated. First initial benefits for a given worker are driven by Real Wage. Which is post interest. But the cost of subsequent benefits are driven by inflation/COLA which generally tracks interest. If the economy is growing fast in both Real GDP and Real Wage terms (that is post inflation) then the nominal rate of inflation is not a big deal for Social Security. In fact to the degree it correlates to higher interest it drives revenues on Trust Fund balances. On the other hand if you have the combination of low or stagnant Real GDP and Real Wage and a high nominal rate of inflation then solvency takes a big hit as costs get driven up via COLA’s while revenues flatten due to sluggish growth and wages. This is exactly what happened in the 70’s, especially the late 70s, when what was thought a theoretically impossible state of affairs, the combination of low growth and high inflation subsequently dubbed ‘Stagflation’ took a Trust Fund that was in actuarial balance in 1971 and sent it right into insolvency by 1982. https://www.ssa.gov/OACT/TR/2016/VI_A_cyoper_hist.html#293711
My Coffee with a Trump Supporter, Robert Reich
Tuesday, September 20, 2016
“You know, in 1976, when Trump was just starting his career, he said he was worth about $200 million,” I said. “Most of that was from his father.”
“That just proves my point,” said the Trump supporter. “He turned that $200 million into four and a half billion. Brilliant man.“
“But if he had just put that $200 million into an index fund and reinvested the dividends, he’d be worth twelve billion today,” I said.
******************
Strange thing happened to DOW: in 1968 (I think I’ve got the exact years right) the DOW was a bit below 1,000 (it’s 18,000 today). It stayed there — at 1,000 — for 15 years, through inflation and late ’70s double digit inflation. Only in 1983 did it start to go up — again, it’s 18,000 today.
Donald’s $200 million in 1976 equates to $850 million in today’s money. Multiply that by 18 and reinvest dividends and RR underestimated at “twelve billion.”
I think Bob Reich calculated in the hookers, blow and gold plated toilet seats on the jet. All that drags down ROI.
http://robertreich.org/post/150669464055
left out above
the important thing to note here is that whatever happens to the economy, people are still going to need their Social Security. The difference between 0,95% and 1.55% may be “huge” when counted in dollars, or worse, counted as a percent of a percent, but it’s still only about half a percent per person, and that is an unnoticeable amount… until, of course, it represents the difference between having barely enough and having barely not enough… which is what would happen to hudreds of millions of people if SS is “cut.” While, again, raising their SS tax 2% would not be noticed by anyone not neurotically attached to counting his money and mourning over a nickel left on the table.
the moral of this story, for those who haven’t heard it before: start raising the tax one tenth of one percent when the Trustees project that the Trust Fund will fall below 100% of a full year’s benefits within 10 years.
That looks like it will happen in 2018. one tenth of one percent is about a dollar a week for the average worker.
running an economy by screaming the sky is falling when you see a mouse is stupid. screaming the sky is falling when you imagine you see a mouse sometime in the future is beyond stupid.
EMichael
i will offer the view from my side of the bridge. i am not married to it.
since Obamacare…. only a coincidence probably, or maybe the result of it in some way having more to do with the basic criminality of the insurance industry and medical care providers… i have noticed a huge increase in doctor’s bills for the same … problem, i almost said “services” but the providers have found a way to charge for “services” that have nothing to do with what they actually do or need to do.
i imagine that most people are like me and they can’t parse out what causes what, but they do notice when they can no longer afford to go to the doctor, even when obamacare, or medicare. is paying for most of it.
Warren seems to be confusing the “interest” that SS pays on employees contributions to the interest that the government pays on the Trust Fund bonds.
The Trust Fund interest doesn’t amount to anything significant… it would make a difference of about 1% (of wages) in the FICA “tax” with the government paying about 5% on the money it borrowed from the trust fund, as compared to the “tax” if there were no Trust Fund interest.
The “interest” that makes up the difference between what you pay into Social Security and what you get in benefits is not interest in any sense that Warren could understand it. It arises just from the fact that in a growing economy the pool of money from which the tax is collected from current workers and paid to current retirees is always less than the pool of money from which the tax was collected from then workers (now current retirees) and paid to then retirees.
There are some complications in this, but again, none such as to make a material difference. The essential fact is that workers need a way to save a part of their own money, safe from inflation and market losses, in order to have enough to be able to retire when they need to. SS is the only way to provide the needed safety… plus the insurance against personal losses and failure to “thrive” that are a fact of human existence and always have been and always will be.
Ron
re 10 year projections vs 75 year projections..
yes, but even at that it’s important to not be panicked stupid over what turns out to be not much when you aren’t comparing percents over percents: such as calling a 2% (of payroll) increase in the projected tax a “whopping” 33% increase in the 6% tax.
the cost of social security is a measure of the cost of keeping alive after you can no longer work. as a percent of payroll, it is a measure of how much wages have grown or not grown.
if your grocery bill goes up, or your wages go down you don’t kill yourself or stop eating because food now costs a higher percent of your wages. Especially if it’s 2% of a wage that is significantly more than you need for reasonable comfort and pleasures.
The SS tax will go up about 1% over the next ten years, and something less than that over the following ten years, and then almost nothing (as a percent of wages) for the next fifty years or as far as we can see into the infinnite horizon.
scaring your self stupid over percents of meaningless numbers is… well, stupid. you are going to need money to live on after you can no longer work (for whatever reason). SS provides an almost guaranteed assurance that you will have enough. And for now at least, it does it and still leaves you much more than enough money to have fun with or bet on the market if that’s your pleasure.
and if you are struggling starting a business, you can always find the financing. but if your business fails (and most do) you would be very very sorry you bet your social security on it.
Cob,
It is a coincidence. the growing numbers of services added to providers bills have increased on a steady basis for decade.
Run and Maggie know a ton more about this than me, but the simple fact is that fee for service medical care is an ongoing problem. It even includes Medicare, which most people think is so efficient.
Webb – The GDP variable is 22% of the difference between CBO and SSA. If you look at the chart you see that CBO/SSA have the same forecast for GDP post 2020. So the entire 75 year imbalance attributable to GDP is a consequence of just 4 years. If this was spread out evenly over the entire period it would not be significant. But it does have policy implications if you look at SS with a Ten-year view.
The difference between CBO and SSA is that CBO says that the TF=0 in 2029. SSA says TF=0 in 2034.
If sustainable solvency is a TF =100% of next year’s benefits, then SS will not be “solvent” in 2027.
According to Coberly a ten-year projection where the TF falls below 1 is when things should happen. That would be next year.
So yeah, I think of the consequences of information, not just the raw numbers.
But if you like raw numbers, consider what the Fed said yesterday. Yellen downgraded 2016 GDP to 1.8%. A far cry from the 2.9% SSA projected in July. Consider the data you provided for economic variables, look at where 2016 is for %, GDP, Inflation. We are running at a rate that is at the high cost outcome.
Coberly – CBO’s #s imply a tax increase on workers of 1.55% of GDP. That tax increase would have to be Immediate and Permanent.
That is equal to a $294 Billion increase in payroll taxes! That comes to 4.6% of payrolls. There is no way you can fill that hole with a 0.1% annual increase. As you said, the year where the TF = <100% of benefits is 2028. (I think it is a year earlier). There is not enough time left for the gradual approach you have advocated.
Given the narrowing time frame even you should admit that a combo approach is going to be necessary. That means changing/eliminating the Cap, means testing benefits, new sources of revenue (transaction tax) AND on budget transfers from Treasury will all be part of the solution. And yes, workers and their employers will pay a bunch more as well.
Krasting
you didn’t read what I said. the only reason to reply to you is just in case someone thinks those technical sounding comments of yours actually mean anything.
the basic point is that whatever happens to the economy, people are going to need Social Security to be able to retire at a reasonable age with at least enough to live on. in fact the worse the economy the more they are going to need it.
your huge projected increases amount to no more than a few dollars a week extra savings via the payroll “tax”– they get the money back, with interest, when they need it most.
meanwhile, all your detailed arithmetic based on guesses about the future are just a form of playing with yourself… something the Cato institute, among others, encourages by publish full color center-folds of misleading “informatioin” about the dire future of Social Security.
and yes, 2018 would be the best year to start the gradual increase in the tax. but the gradual increase will still work, though less elegantly, if started as late as 2021 or later. and it will still work if the ultimate tax increase is 3% instead of 2% for each the worker and the boss. and if the increase in wages doesn’t more than pay for that, people will still need to pay the increase… a shift of a tiny amount from “current” spending in order to have “enough” to live on when they can no longer work.
we have already talked about “immediate and permanent” you don’t seem to be able to understand there is not “have to be” about it. immediate and permanent is just one way to meet those future costs. it is not the best way. the gradual increase will do the job more fairly and with far less consternation, though even the immediate sharp increase would cause only psychic pain, no real effect on standard of living.
the year when TF reaches less than 100% of benefits is not critical. a gradual increase of slightly more than one tenth percent, or running the increase another couple of years will handle an ultimate needed increase of more than 2% each (your “4.6% combined” is three tenths of one percent more than the 2% figure that SSA projects).
I think we need to use the gradual approach because not only is it completely painless, it would keep us from doing something stupid now because people like you panic when they see a number like “294 billion increase in taxes” and can’t hold onto the thought that that is a guess, and that it means a 2.3% increase in the payroll tax… which they get back with interest when they will need it more than they do today…. and which can be reached one tenth of one percent of payroll (about a dollar a week) at a time, while wages are projected to go up at least ten dollars per week each year.
please try to wrap your brain around the whole picture… in terms of what it means to each person… and stop going crazy every time you read a number that scares you.
especially since your friends were perfectly happy with the SSA numbers when they were scarier than CBO’s, but a change in bosses at CBO got CBO numbers to be scarier than SSA’s, so now for you only CBO can be taken seriously.
and i wish you would stop feeding us garbage. it’s dangerous because some people might believe it, and i get tired of having to answer it time after time.
EMichael
it may be a coincidence, but politically most people won’t know that and that will make them blame Obamacare.
as for me the “coincidence” is just the gradual capture of the medical care industry, and the government, by the predatory business model which seems to have taken over the country.
Run and Maggie were (are) right that Medicare is caught in the same “coincidence”, but they couldn’t convince me that throwing away Medicare and throwing ourselves on the mercy of the kind insurance companies was the answer. and the conversation went to hell after that.
4% of the american public get their health insurance through the exchanges.
Anyone that makes these kinds of claims regarding the impact of the ACA has a big problem with their ideology or their math skills.
I know you can add……
You are going to force me to look.
EMichale
i can add, but maybe i can’t read
what “these kind of claims”?
and what does “4% of the people…” have to do with anything I said?
i get my insurance from Medicare. nevertheless doctors bills have gone up by a factor of from four to ten since the last time i went to a doctor a few years ago. Medicare disallows a good part of it, but they (the taxpayer) still end up paying more than twice as much as a reasonable cost for the actual “service” (not counting the padded “services”) and my 20% ends up being more than i used to pay before i had insurance.
without getting “ideolgical” about it, it seems to me that the insurance companies and the “providers” know how to game the system and Medicare doesn’t seem to care too much that they are being robbed.
The “claims” that the ACA is responsible for the increase in doctor’s charges for the same services, as you have stated.
Medical inflation has declined since the ACA. I will not say the ACA caused that decline as there are too many other factors involved.
But somehow it is “ok” to blame increased charges on the ACA?
EMichael:
As you probably already know, the PPACA controlled insurance and had little to do with commercial healthcare.
If we increase the FICA tax while there is a surplus, the additional surplus will increase the holdings in the SSTF, and reduce private holding of US debt. (We will assume that the government does not change it’s spending.)
So, if future taxpayers will have to redeem those bonds with income tax when the SSTF requires a draw-down, why not just wait until there a draw-down is imminent and raise the FICA tax to meet the need?
And if the structure of future FICA taxes are such that no draw-down will ever be required, why bother with the SSTF at all? Just set FICA taxes to match estimated expenses.
EMichael
go back and read what i actually said.
Warren
the surplus is being drawn down now. if we wait until it is gone, the increase required will be a sudden 2% (each) increase in the tax. if we start increasing the tax by one tenth of one percent per year, we match the increase needed for sustainable “solvency” over a twenty year period while wages are rising so no one feels any pain at all.
and future taxpayers will never have to “redeem the debt” because by raising the payroll tax as needed the principle on the debt is never touched. only the interest on the existing debt remains, and that is money the “taxpayers” would pay on ANY remaining debt. and paying interest on remaining debt is considered a normal, and beneficial, cost of doing business by ANY business in the capitalist world. including the business of government. a fact of life well understood by everyone except the people who believe “debt” is like something you owe the mafia.
the trust fund is needed to match short and medium and long term mismatch between incoming and outgoing.. again a normal feature of business. the trust fund money is put in the most secure interest bearing place possible: US special treasuries. something a lot of businesses wish they could buy, but are happy to buy normal treasuries to park their “temporary” excess cash.
you see, you try to “reason” without knowing anything at all about how Social Security works, is working, and apparently not much about how money works in the private economy.
your idea about waiting until the surplus is gone suggests to me you never took calculus, or just learned it by rote, without understanding how you meet a moving target.
i really, really hate being personal and sounding like i am insulting you, but the fact is you don’t know what you are talking about, yet you spread the ignorant misunderstandings of people like the Cato Institute and create a danger to the people who believe you and them.
Thing is, though, that Cato knows damn well they are spreading harmful misunderstanding. that makes them damned liars.
“[The] surplus is being drawn down now.”
Then we should increase the FICA tax accordingly.
“[Your] idea about waiting until the surplus is gone….”
Perhaps I was not precise. I should have said ANNUAL SURPLUS.
The ANNUAL SURPLUS is in cash terms gone. The SSTF balance continues to grow only because interest in excess of that needed to cover the cash deficit still is credited to the Trust Fund.
But as things stand Income Excluding Interest (i.e. cash) has fallen behind Benefits. And even if we take Income Including Interest the calculated surplus will vanish around 2023. If we are going to move on FICA we might as well move now rather than waiting for what is mostly a paper event 7 years from now.
Agreed, Bruce. FICA taxes should match, as closely as possible, the outlays of the system.
Warren
FICA taxes do match outlays as closely as possible. what you are calling for is like putting mouse poop in the carburettor because a man in a suit told you it would save on gas.
the surplus was built up for a reason. it is now being drawn down for that reason.
next year would be the best time to start increasing the tax gradually.
increasing the tax one tenth of one percent will let tax replace a small part of the trust fund drawdown… allowing the trust fund to last a little longer. doing it again the next year will do the same thing only moreso. by the time the tax has been increase by 1%, approximately ten years, the trust fund life (at TFR=100) will have been extended considerably and the rate of increasing the tax can slow a little bit… until, gradually the tax is enough to match the outgo of SS (benefits) without the TFR ever having fallen below 100, and with no one ever feeling the tax increase…. only CATO’s devoted followers will even notice it because of all the screaming (lies).
after that the tax income plus the interest on the TF will match the needed outgo for the foreseeable future with no need for further tax increases. you could eliminate the interest on the TF by paying back the money you borrowed from the TF, but that won’t save you any money because you will have to borrow it from someone else, and the people who pay FICA will have to “invest” the TF in something else. there may be investments as safe as special treasuries, but i doubt it. so i’d remind the voters… as if they understood… that if they go for the higher interest from less secure investments they will have to be prepared for the sudden occasional need to increase the tax to make up for the loss of interesst and principle on their investment. seems like a poor way to run a railroad.
note: saying “ANNUAL SURPLUS” may be more “precise” but it doesn’t change what I said about your model of how finance (of anything) in the real world works. you are trying to make the real world work the way it says in your Ayn Rand comic book. It doesn’t, it won’t, it can’t.