Bashing Reagan on Social Security: Don’t Go There
by Bruce Webb
News that the Republicans are pushing two bills that would establish a ‘Bi-Partisan Commission’ to ‘reform’ Social Security and Medicare are stirring up a debate which mostly had run cold. And one myth is bubbling back to the surface, the one that claims that Reagan simply used the Greenspan Commission to generate “huge surpluses” for Social Security to fund tax cuts for the wealthy. Never happened. There were no huge Social Security surpluses under either Reagan or Bush I, instead the 1983 reform set in place a mechanism that would slowly rebuild the Trust Funds back to their mandated level. And it worked, in 1993 Clinton entered office with Social Security sitting with a Trust Fund ratio of just over 100 meaning that it met the Trustees’ test for actuarial balance. But the overall outlook for Social Security actually deteriorated from 1993 to 1996 and the large surpluses that started in 1997 and accelerated through 2004 were neither planned for or anticipated by the 1981-83 Commission. They happened and on paper largely pre-funded Boomer retirement but this was not the product of any pre-existing plan. Inspect the numbers for yourselves.
http://www.ssa.gov/OACT/TR/2009/VI_cyoper_history.html#159726
This myth is particularly dangerous because it plays into the movement conservative message that you can NEVER trust big government, maybe ESPECIALLY when it is in Republican hands. Every second spent bashing Reagan or Bush II over Social Security is a second devoted to selling the message that ‘Big Government is the Problem’. Yes for those of us who are accused of being infected with BDS or delight in mocking St. Ronnie all of this is good fun. But it is unproductive good fun if your intent is to keep Social Security out of the hands of the vultures. Reagan in 1981 and Bush in 2001 and 2005 DID try to kill Social Security. They failed, every penny is STILL exactly where it is supposed to be. Insisting that they some how succeeded in raiding the pantry just plays into opposition hands. Knock it off. If that is you want that retirement check.
Bruce, why not explain the key reason we had surpluses in the latter part of Clinton’s and nearly all of Bush’s terms. C’mon now…. it was superior employment numbers.
Bruce,
You gotta keep throwing money down the rat to make it work, it can be better. The value of that retirement check does not have the power it should, mainly because there is too little people carrying water for too many.
We need to make it work in a way that is more in line with our values!
The report of the social security trustees starts like this:
The financial condition of the Social Security and Medicare programs remains challenging.
http://www.ssa.gov/OACT/TRSUM/index.html
You don’t see too much of Bruce’s happy talk in the report. And they don’t mention Reagan.
If you would come back and criticize the posts on worker:retiree ratios with some math you might be credible, even if you failed to succeed. This way is just an assertion without the sticker to put on a car.
The summary remained the same for social security as last year and the year before and the year before….
No new criticisms here, nor numbers. Gotta be more thorough and read the summary.
When I see other names in the NASI report, people who are thorough and actually some who knew Reagon, I will be more sanguine.
Rdan,
If you need numbers on social security you know where to find them so why do you bother me to provide them to you. The last couple of times I provided numbers nobody paid any attention to them. Cactus even insulted me when I showed that federal tax receipts averaged each decade has remained faily constant since the 1960s and thus since they are not really varying his claim that high taxes are associated with economic growth is not substantiated. I also provided a numerical anaysis of deadweight loss and showed how raising taxes decreases economic output, reduces surplus to both the consumer and producer, and that raising revenue imposed between a 5-6 percent deadweight loss cost for each dollar raised. I think the effort was probably a waste.
Quiz; Under what president in past 50 years did the most significant legislation pass to perpetuare the fiction of the social security trust fund as a source that could be used to fund social security payouts.
Answer: Reagan.
No wonder Bruce refers to Reagan as St. Reagan.
Cantab
you gotta be careful. the Trustees are political appointees and they all but lie. read the numbers in the Trustees Report and do the arithmetic. Social Security is in fine shape. very fine shape. you are being swindled out of your social security. you won’t miss it until you need it.
CAntab
there are numbers and there are numbers. any fool can cook up numbers to tell any lie he wants to.
but go to the Trustees Report and use their own numbers and do some arithmetic and you will see that there is nothing wrong with social security, however they try to spin it.
jimi
that retirement check is indexed to wages, so it has been adjusted for inflation as well as for the average increase in wages since you paid the payroll tax. effective interest depends on your circumstances but runs from about 2% real to about 10% real “return on investment.” a rich man can get a better deal on the market. a poor man can’t. the rich man just has to hope his luck holds.
the too little people etc is bogus. in the early days social security could charge a low rate on the payroll tax because on a pay as you go basis there were few retirees relative to the number of workers. as the system has matured the ratio of workers to retirees approaches two to one, and this is mostly because the life expectancy of retirees is approaching 85… giving 2 working years (40) for each retirement year (20) for each worker.
half hassed understanding of the issue can give you warm fuzzy soundbites, but you really need to understand the whole thing if you are not going to sound like a fool to those who do.
bruce
check with altman about what the commission thought it was doing. in her book she leaves the impression that they “solved the problem” for the baby boomers. even if you are right that that is not what they intended, it isn’t a crucial issue. it IS what they got, and the issue is not did Reagan steal the money… that is indeed bogus… the issue is will the current proposed commission steal the money.
it is lovely to watch the R’s (especially, but there are some damn dumb democrats doing it too) whine about repaying the trust fund. they are saying they don’t think the United States of America should honor its debts.
What the hell did they think they were doing when they borrowed the money (FROM Social Security, not FOR it)?
as it happens the cost of repaying the debt is less than what the upper income brackets got in tax cuts from Bush. you’d think that by now they’d have earned enough on their money to easily afford to repay what they borrowed.
Boy somebody forgot to make a withdrawel from the Irony Bank this week.
Well Nancy and I communicate on a regular basis, for example we exhanged e-mails this morning, a letter she and some other vets of the Greenspan Commission are circulating got picked up by Josh Marshall and I gave her a heads up.
I suggest her thinking has evolved on this particularly after reading an advance copy of Bob Ball’s autobiography called “The Greenspan Commission: What Really Happened”. In Ball’s account Greenspan is much less central to the process with the final deal negotiated outside the structure of the Commission itself which had deadlocked and missed it’s deadline.
I would refer you back to my old post about the oral history of Robert Myers, the executive director of the Commission, who asserts that while the Commission thought they had solved long range actuarial balance ON AVERAGE that they did not focus on the 25 year sub-periods.
Though I have to admit with some shame that I have never actually read Nancy’s full book (or Phony Crisis for that matter).
On the other hand Nancy is familiar with the AB SS series and hasn’t told me I am all wet on this issue. So I am maintaining my ground.
Oops I truncated that. That is just the chapter name and not the working title of Ball’s autobiography. Ball was associated with SSA probably longer than anyone but Myers, both of whom devoted fifty years plus to the cause.
CoRev I made a point of saying this was unexpected prior to 1993. And as to Bush “almost all” is kind of generous, in retrospect the economy started going south with the productivity brash in Q3 2005.
We can argue WHY employment and Real Wage improved under Clinton but only an idiot would deny those are the two key variables for Social Security solvency. So I don’t think I see your point here. Workers enjoyed real gains starting in Clinton’s first term, gains which sustained themselves until Bush inattention and dedication to tax cuts on capital took the economy down.
At the time the 2009 Report was released I believe that four Trustee positions were vacant and Tim Geithner was kind of busy with some other issues. Meaning to the degree the summary was infused with political input it would have been from remaining Trustee Commissioner Michael Astrue plus a variety of Bush Admin embeds. That the tone didn’t change from the 2008 Report is not surprising. And given the Rubinistic Centrism of much of Obama’ economic team I won’t be much surprised if the tone is not much different next Spring with the release of the 2010 Report.
As Dale points out the numbers are more important than the rhetoric.
Bruce,
You failed to mention China’s 2001 admission to the WTO and the impact on U.S. employment, wage levels, and trade balance.
What happened? This:
U.S. – China Trade Numbers Bottom Line
2009 Report to Congress
U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION
http://www.uscc.gov/annual_report/2009/09_annual_report.php
Report page 21
U.S.-China Trade in Goods ($ billion), 2000–2008
Year Imports Exports Balance
2000 $100.0 $16.3 -$83.7
2001 $102.3 $19.2 -$83.1
2002 $125.2 $22.1 -$103.1
2003 $152.4 $28.4 -$124.1
2004 $196.7 $34.7 -$162.1
2005 $243.5 $41.8 -$201.6
2006 $287.8 $55.2 -$232.5
2007 $321.5 $65.2 -$256.3
2008 $337.8 $69.7 -$268.0
—–
Report page 76
China’s Growing Share of the Overall U.S. Trade Deficit
2000 to May 2009 (non-oil goods)
Year Share
2000 26%
2001 27%
2002 28%
2003 31%
2004 35%
2005 40%
2006 45%
2007 54%
2008 69%
2009 83% (YTD May 2009)
.
Any serious discussion about U.S. employment and wage levels during the period 2000-2008 should include a review of U.S. trade policy, China’s role in reducing wages in the U.S., and industries offshored to other nations including India.
It is no mystery as to what happened.
The role of China’s admission to the WTO and impact on the U.S. is outlined here:
China’s Soaring Commercial and Financial Power:
How it is Affecting the U.S. and the World
By Charles W. McMillion
MBG Information Services
Washington, DC
June 2009
http://www.uscc.gov/researchpapers/2009/MBG%20Info%20Svs%20US-China%20Trade%20Report%20–%20FINAL%20June%202009.pdf
This is not a difficult read. Plenty of charts as well.
.
Coberly,
there are numbers and there are numbers. any fool can cook up numbers to tell any lie he wants to.
Cactus is not a fool and the way he cooks up numbers requires skill and patience.
When I present data whenever I can I use original sources and never cheat by picking periods that misrepresent the entire history. That’s what an honest researcher does. Also, if I do a numerical example I don’t torture it to get the results I want.
You allude to this famous quote. “There are three kinds of lies: lies, damned lies, and statistics”.
You butcher this quote with the following flawed thinking: You argue against the policy I want using statistics therefore you must be a liar.
It looks like there’s a run over there at the Cliché bank.
Coberly,
there are numbers and there are numbers. any fool can cook up numbers to tell any lie he wants to.
Cactus is not a fool and the way he cooks up numbers requires skill and patience.
When I present data whenever I can I use original sources and never cheat by picking periods that misrepresent the entire history. That’s what an honest researcher does. Also, if I do a numerical example I don’t torture it to get the results I want.
You allude to this famous quote. “There are three kinds of lies: lies, damned lies, and statistics”.
You butcher this quote with the following flawed thinking: You argue against the policy I want using statistics therefore you must be a liar.
The Social Security Trustees are full of it. They assume a GDP growth over 75 years of deep recessionary levels (1.8%; it used to be as low as 1.6% until some of the screaming against the Trustees forced them to raise it a bit). If, however, the Trustees are right about the next 75 years, then the whole US economy will more likely have cratered, which is not the fault of SS. Also, and somewhat separately, the Bush II income tax cuts create a deeper deficit or more debt (by a factor of 3) than the shortfall the SS Trustees’ report imagines. So if you want to shore up SS, then repeal those income tax cuts.
And Angry Bear, the reason the Reagan myth is not really a myth is that the SS surpluses started almost immediately after the 1983 changes, and the Reaganites and Congress used the surpluses to argue the deficit each year was smaller than it really was. I recall distinctly having arguments with right wingers who underestimated the deficit during those years by using the SS surpluses, even as they railed against the SS “ponzi” scheme.
And more damning, when you think about it, the increase (almost doubling the SS payroll tax between 1983 and 1989) in SS taxes almost completely negated the Reagan income tax cuts of 1981 for most workers, leaving the real gains for the richest folks, especially those who don’t earn their money in payroll taxed wages. I like that argument less as one can say the 1983 reforms created a system whereby us Baby Boomers largely funded our own SS retirement. Better just to attack the Reagan income tax cuts as a direct giveaway in real numbers to the top 1%, with nothing targeted for those gifts to improve say industrial capacity inside the US, to take one important example of a targeted cut that could have been helpful at some level…
Which brings me back full circle. If we merely assume 2.3% GDP growth over 75 years, which is below the 75 years previously, then SS is not in trouble, and we will have fully funded the SS retirement benefits of every Baby Boomer (1946-1964). And with the Birth Dearth that followed, we should be fine–again unless the whole economy continues to tank, and, again, that ain’t SS’s fault.
I advise everyone in closing to start with Mike Hiltzik’s book on SS (He is a business writer at the LA Times).
coberly,
This is the central point. SS is fine (as you and Bruce repeatedly point out) IF its looked at by itself. What is in BIG trouble is teh general fund. The Obama debts are greater than any president before and will get even wider. Repaying the SS debt just adds to teh general fund problems which will require more taxes, less programs, or more debt. My bet we get even more debt…
Islam will change
MG,
I’ll grant you that it has plenty of charts. Long on pretty charts, scary numbers and emotionally charged language.. Kinda short on actual analysis, and when it did step its toe into analysis it flunked. For example, the paper’s discussion on “value added” accounting is just wrong. And the paper’s weasel wording surrounding the discussion of “value added” suggests that the authors know their view of GDP accounting is out of step with mainstream economics. The paper takes a mercantilist view of the world. Note the language. It always phrases things in terms of economic and military security. Several times it refers to China’s currency reserves as a “war chest.” It assumes without argument that financial independence is a good thing. It assumes without argument that protection of intellectual property is somehow desirable for global economic growth without apparently noticing that “intellectual property rights” is also another term for government sanctioned monopoly. The authors seem to have a fetish over manufacturing, as though only goods manufacturing matters. And they wrongly conclude that fewer jobs in US manufacturing is synonomous with lower US productivity in manufacturing. This is plain old fashioned mercantilism masquerading as economics. Throwing out lots of scary charts and numbers is not analysis.
There are plenty of problems with US/China trade….and most of them originate on the US side. China’s growth is not due to Chinese protectionism. China’s growth is due to extraordinarily high rates of capital deepening (sometimes exceeding increase in total output!), and that capital deepening is due to forced saving. In the US we refer to forced savings as “taxes”. If we had higher tax rates during the Bush years, then our current account deficit wouldn’t be as bad as it is today. That’s the fault of US voters, not the Chinese. The Chinese are to be blamed for not allowing their currency to appreciate relative to the dollar, but it’s easy to oversell this point.
If you look at the national income accounts for the US, one thing that jumps out is how the share of nonwage compensation for labor has grown. This is what hurts SS revenues over the long run because nonwage compensation does not contribute to the FICA tax. Blaming China for SS revenue problems as a result of lost manufacturing jobs is laughable. The US has clearly lost manufacturing jobs. That’s not in dispute. But you cannot conclude that the US should pursue protectionist policies (which is what the report really advocates) and that protectionist policies will fix Social Security.
Cantab,
Social Security and Medicare. Two different programs with two very different problems. Medicare’s problems are more than “challenging.” If we don’t fix Medicare, then not much else matters anyway. The Trustees say that Social Security faces a very long run problem in that eventually benefits will fall about 25% short of promised benefits. As problems go this one is manageable. Whether or not it rises to the level of “challenging” is a matter of opinion.
We would have been much better investing the social security money in the stock market like the Republicans and Bush wanted to do. In the stock market, it would have been safe and would have increased exponentially as the stock market increased in the years after it was invested.
Democrats need to get over themselves.
What’s your point? Can you draw some connections and explain WHY this explains much at all? The major gains in Social Security slowed down after 2001, perhaps as jobs began offshoring. Which would imply that China’s entry into WTO was a net negative.
But since you rarely make an explicit argument and just lay out endless numbers and sources it is hard to tell. Things which seem self-evident to you are pretty opaque to every one else.
buffpilot,
“The Obama debts are greater than any president before and will get even wider.”
What debt are you talking about? Total public debt? Just debt held by the public? Or did you mean to say “deficits”?
The CBO projects that over the medium run deficits will come down as the cyclical deficit vanishes. The FY2011 deficit will fall by one-third according to CBO. The FY2012 deficit will be 61 percent lower than the FY2010 deficit. That will still leave us with the structural deficit, The long run on-budget structural deficit is around $750B. The long run structural unified deficits are almost entirely due to Medicare & Medicaid spending. Go look at the CBO chart that decomposes outyear deficits.
“Repaying the SS debt just adds to teh general fund problems which will require more taxes, less programs, or more debt.”
That’s true. And the reason is that there is no such thing as a free lunch. Bush told a dull electorate that there would be a free lunch. Bush said that we could use the FICA surplus to cut general income taxes and somehow the general fund wouldn’t have to pay it all back. I can’t help it if Bush voters are dumb as bricks.
Almost all excellent points.
Except the “near doubling” of rates. The rate in 1983 pre-reform was a combined 10.8% for OASDI and only slowly increased to the current 12.4%.
http://ftp.ssa.gov/OACT/ProgData/taxRates.html
And the surplus argument is off as well, which you could see if you followed the link.
http://www.ssa.gov/OACT/TR/2009/VI_cyoper_history.html#159726
Total surplus in 1983 was $100 million, primary surplus/deficit (less interest) was -$8.2 billion
1984 $6.2 billion, but contributions from FICA added up to -$300 million, with the balance being made up with $3 billion in newly imposed tax on upper income recipients.
1985 $11.1 billion, but FICA only $3.5 billion, tax on benefits $3.4 billion
1986 marked by some repayments to HI which skews things
1987 $21.9 billion, FICA $6.5 billion
1988 $41 billion, FICA surplus $29.3 billion
I don’t dispute your memory because people did promulgate the myth then as they do now, it just doesn’t hold up to the actual numbers, the extra dollars extracted in the form of increased FICA just were not that big. I am not saying that some $50 billion of actual FICA surplus after 1985 was chump change, it is just that we didn’t finance the Cold War or the Tax Cuts on an average of $12 billion a year. Plus the large bulk of that came in Reagan’s last year and wasn’t even reported until March 1989.
I am aware of Hiltzik’s work, I suggest you are not fully aware of mine. In this particular limited case the argument against Reagan is rhetorical and not numeric.
Because there is nothing safer than the stock market? Which always goes up and would never be down at a time when we needed to draw on the Trust Fund? How would stock certificates in a file cabinet in Maryland be safer than Treasury Bonds? Couldn’t the government equally claim we couldn’t afford to sell them at any given time because of adverse effects on the market and so need to cut benefits instead?
Did you sneak into the turkey early? Because something made your brain sleepy here.
http://eightiesclub.tripod.com/id329.htm Black Monday. The stock crash of 1987.
“This is going to make ’29 look like a kiddie party,” predicted one trader on the floor of the Pacific Stock Exchange. Indeed, the stock market collapse of October 19, 1987 — a day that would forever after be known as Black Monday — was considerably larger in volume than the one that had occurred in October 1929 and sent the world plunging into a Great Depression lasting a decade. On Black Monday the Dow Jones industrial average plunged 508 points — 22.6 percent of the market (almost double the 12.8 percent drop on October 28, 1929) — and closed the day at 1738.74. What happened on Wall Street happened as well in Tokyo, Hong Kong, London, Paris, and other markets around the globe. It was the worst week in Wall Street history, and in the aftermath many people wondered anxiously if a global economic disaster would follow. A poll taken shortly after the crash revealed that two out of three Americans expected a serious economic downturn
By the end of the week, one marked by wild market fluctuations, the Dow was still down a record 295.98 points; the industrial average stood 28.3 percent below the 2722 peak of August.”
Yeah except for those occasional 508 point /22% dips there is nothing safer than the stock market.
Another withdrawal from Bruce’s irony bank?
Slubs,
The Trustees say that Social Security faces a very long run problem in that eventually benefits will fall about 25% short of promised benefits.
The problem is not a long term problem in the sense that everything is fine until one day the trust fund is gone and agreed upon payouts exceed generated revenue. Rather the problem starts today since every dollar less heisted from social security to the general fund is 1 dollar less in the general fund and the deficit is one dollar more. The milestones of going into the trustfund or the trustfund running out of money in an accounting sense and going to 0 are not big bang type events.
I agree that medicare funding is a mess. This in my opinion is the reason that’s what’s masquerading is really just a scheme to force healthy people to buy 5 grand insurance programs that have expected payouts of 1 grand and use the 4 to pay for other government priorities with medicare being one of them.
Cantab,
“Rather the problem starts today since every dollar less heisted from social security to the general fund is 1 dollar less in the general fund and the deficit is one dollar more.”
Huh? So in your world creditors are “heisting” money from your bank account when they insist that you pay back what you borrowed?
Bruce,
“Reagan in 1981 and Bush in 2001 and 2005 DID try to kill Social Security. They failed, every penny is STILL exactly where it is supposed to be. Insisting that they some how succeeded in raiding the pantry just plays into opposition hands.”
The problem is that today’s strategy on the far right is to try and convince the public that the Trust Fund has some kind of moral obligation to never redeem those IOUs sitting in the lock box because doing so would impose higher income taxes.
Actually the underlying argument is that those IOUs were just phony to begin with and only soft-headed liberals would have trusted the Big Bad Government to start with. And when it is convenient they will cast their own leadership in that role.
One of the most blatant and cynical uses of this tactic was when Bush openly argued that there was no point taxing the truly rich because they would just find some way of getting around it anyway.
Conservatives WANT you to believe that Reagan stole the Trust Fund or at least performed some sort of chicanery and then suggest that us rube victims of the con just need to accept reality and get over it.
On the other hand if you maintain that the Special Treasuries do bear Full Faith and Credit of the U.S. then neither Reagan or Bush I did any harm to the Trust Fund, to the contrary they over an ten year period from 1983 to 1993 put the Trust Funds back in actuarial balance. At which point Clinton picked up the ball and proceeded to lower Public Debt as a share of GDP even as Intragovernmental Holdings soared. Only Bush II did overt harm to the Trust Fund by reversing that trend and building Public Debt back up, leaving us with that much less borrowing room for any subsequent turn down and/or redeeming the TF.
“In the stock market, it would have been safe and would have increased exponentially as the stock market increased in the years after it was invested.”
Best. Parody. Troll. Ever.
Thanks for the Thanksgiving day chuckle, Sal!
Cantab
you appear to have a thought disorder.
bruce
fair enough.
i don’t see that the point matters very much. i thought i had been careful not to say that Reagan stole the money. in fact, i am always pointing out to people that the money hasn’t been stolen…yet.
fwiw, it seems to me the way the commission worked, it would be hard to claim just “what” they intended. i suspect they all intended something a little different. but i am willing to accept the result that they ended up paying in advance for the baby boomers, and now all we have to do is make sure we don’t let the bastards use the “looming bankruptcy” of the trust fund as a reason to kill or maim social security.
buff
i can’t argue with that. obama does not have my confidence.
Mitchell Freedman
glad to meet you. i am not sure we should be fighting about nuances when the bad guys are lying through their teeth and out to cut granny’s throat. Bruce is probably right that it’s not useful to say “Reagan stole the money.” On the other hand, your analysis seems to me to be fairly accurate: up to now, the Trust Fund has amounted to an extra tax on the poor in order to pay for a tax cut for the rich.
And the rich are now in court crying that repaying the money they borrowed will cause the economy to collapse. Kind of like it did after eight years of Bush tax cuts.
Cantab
with respect to your numbers. the term “deadweight loss” gives you away. if taxes were a deadweight loss why would we bother with them? to keep the king and his courtezans in luxury? no. for some reason in a democracy we, the people, have decided that we further our general welfare by having the government buy some things that are difficult to buy on the private markets. we pay for them with taxes.
practically the first page in economics 101 makes the point that economics is about trade-offs. obviously, you, or your business, would be better off if you didn’t have to pay taxes… as long as everyone else paid their taxes and you got the benefit.
i hope i have not called you a liar. i try to reserve that term for people who know what they are talking about.
My point is that Reagan committed his own sins, but it is not fair to cast the sins of Bush II back on him.
Conservatives declared War on Social Security in 1936 but after an initial skirmish it mostly settled back into its own version of WWIIs Phony War. (http://www.worldwar2database.com/html/phonywar.htm). There were other incidents between 1936 and 2000 and a war plan written in 1983 (Butler and Germanis) but open warfare was not engaged in until the Bush tax cuts put redemption of the Trust Funds at risk, something which to that point had seemed inconceivable. And in November 2004 Bush made it clear that this strategy was deliberate, that he was prepared to baldly state that Full Faith and Credit did not apply to Special Treasuries.
Supporters of Social Security need to understand that this route of attack is not just a by-product of Big Government is the Problem but instead was a direct assault on the New Deal on behalf of Bush’s base which he openly (if jokingly) identified as the “Haves and Have Mores”. Having driven Bush from the field we can’t leave behind the idea that the Special Treasuries were ALWAYS simply considered Phony IOUs. That was NOT part of the 1980s narrative, at least in my recollection, back then Social Security ‘Crisis’ was always identified with Trust Fund Depletion and not with initial payment of interest and principle. It is important, to me anyway, to keep the pre-Bush and Bush phases of the War separate in our minds.
Bruce
I have not been making it clear that I agree with you entirely..
except possibly about whether the greenspan commission “intended” to pay the full cost of the boomer retirement. i don’t know what they intended, if they know. i don’t think it’s important. it is what they achieved at the end of the day, and from time to time it is the most efficient way for me to make the case that the Trust Fund has NOT been stolen… just as you say… yet.
Joel, I hope you know Sal and can vouch for him actually being a parodists. Because AB has some commenters who would make Sal’s contribution actually seem sensible. Indeed we had a not at all lamented regular past commenter who came from so deep in Hyper-Glibertaria that he could have been the posterchild for Sociopathy. After awhile your Troll-Dar gets out of calibration.
Join the Liberal Democratic Party of the United States at http://www.democratz.org If that link temporarily does not work then go to http://bit.ly/democratz
Send email to your copngresspeople that you demand a strong public option at http://bit.ly/public_option
Send email to your congresspeople that you demand they fix the Medicare part D prescription drug benefit at http://bit.ly/drug_benefit. Tel 2 of your friends.
Thanks, Bruce, for setting me straight. I was confusing, in the argument over the deficit, the SS surplus and the Reagan tax cuts, the overall amount of SS taxes coming in with the much smaller amount of the increase. And man, if I didn’t always think there was a doubling of the SS tax between 1983 and 1989…
Oh well, I love the Internet. Live and learn.
The inside story of the Greenspan Commission at least from Ball’s perspective is facinatimg. I read the whole thing some months ago and only checked some names this time but whole thing was factionalized between groups of stakeholders. On the R side you had 3 Reps of Business and three more or less Paleo Cons plus Dole and Heinz. On the D side you had a 5 member Liberal group maybe some technocrats. Ball’s job ended up being selling this to the labor rep Kirkland and the Seniors Claude Pepper. Pepper went in wanting no chane in benefits, the Paleos were never going to go along, the business people didn’t want to get stuck with bill and mostly no one except the Paleos wanted millions and millions of pissed off seniors going into the 1984 elections having their benefits cut or delayed. A careful study of each of the members could get you pretty close to initial intentions but the way the negotiations played out limited the ways those initial intentions were allowed to play out. In any event both Ball and Exec Dir give pretty consistent descriptions of the process even though Ball suggests there were decades of tension between them (Myers was with SSA’s predecessor, Ball was there I think from the early 40s, Myers ended up spending a couple decades as Chief Actuary while Ball ended up as Commissioner which knowing human nature probably explains much)
Mitchell my reply came across more testy than I intended going in.
You and Hitlitz (sp? I am on an iPhone) do have most of this exactly right. I don’t see any difference if that is we start our analysis starting Nov 2000. And Reagan’s intent in 1980 was malign, we could sum it up as “Didn’t get his way in the end”. My dissent is mostly tactical.
Sorry for being right on or over the border of rudeness.
oh, well, no one will mind then if i point out that even if a Trust Fund ratio of 100 is not a “huge surplus,”
it is still about a half a trillion dollars in the bank. being borrowed by the general fund. allowing general taxes to be that much lower than they would otherwise be, or “public borrowing” that much lower.
Coberly,
if taxes were a deadweight loss why would we bother with them?
You tax to raise revenue to pay for government spending. The point of the deadweight loss is that tax is no a zero sum game. In the example that I did it was a cost equal to between 5-6 percent of the revenue raised.
Economics is about tradeoffs and since taxes take money out of the pockets of the public, private business, reduces demand and thus jobs, and cause a deadweight loss then public projects have a high hurdle to prove they’re worth doing.
“Cactus is not a fool and the way he cooks up numbers requires skill and patience. “
1. This post was by Bruce Webb, last I checked. If you don’t like my approach, don’t argue against it in the comments to Bruce’s post.
2. You act as if I am pulling sleight of hand. Yet I use the same approach for every series I look at: I graph the data. I also pull it straight from the government source that collects it, I tell you the source, I provide links, and I put it in a *&%)ing spreadsheet.
You just don’t like the results of a simple graph. You prefer what comes out of some Heritage Foundation black box model which has been far more often wrong than right in the past.
What’s with the Huh? Social security overcharges in the sense that they collect more in taxes then they provide in benefits and normal operating charges to run the system. They send the overcharge to the general fund where it’s not saved but rather used to finance government consumption — sort of what Bernie Madoff did with the exception that they need not be criminals since they can re-write the law. If Madoff had that power he would be a free man today. He could just tell those that contributed to work harder and give him more money to pay back what he spent on all those houses, rolexes, boats, planes, and prostitutes.
Cantab
so what is your point? that high hurdle is called “elections.”
i would hazard that nothing in economics is “zero sum.” even in ordinary transactions you have two people each deciding that what he is getting is worth more than he is giving up.
Cactus,
You just don’t like the results of a simple graph.
Your graphs are not simple and you only present them after going though data rejecting graphs that contradict your points. This is like the unethical conduct of a money management firm that presents composite returns to hype performance using only the results of existing funds and does not show the ones that failed and had to be closed down. It’s dishonest and considered unethical in that industry because it misrepresents actual performance. Your graphs are so one sided and that is obvous to anyone that works with data and numbers that they’re the product of data mining.
Coberly,
i would hazard that nothing in economics is “zero sum.” even in ordinary transactions you have two people each deciding that what he is getting is worth more than he is giving up.
For the consumer this sense of serendipty is called comsumer surplus. Getting something worth more than your giving up gives you the sense of not being squeezed all the time. I would say this tax free exchange should serve as a baseline to measure the benefit of new social programs requiring funding from taxes which we know reduces consumer surplus and determine if we think there worth doing.
Actually its called “consumer surplus” and only referred as “comsumer surplus” by people who can’t type.
1. 2slugbaits – “Long on pretty charts, scary numbers and emotionally charged language..”
Can you offer proof that any of the numbers are false? Most of the numbers from U.S. Government agencies.
2. 2slugbaits – “For example, the paper’s discussion on “value added” accounting is just wrong. And the paper’s weasel wording surrounding the discussion of “value added” suggests that the authors know their view of GDP accounting is out of step with mainstream economics.”
Prove it. Cite the specific statements you are referencing. I find no such discussion of value-added other than one sentence in the paper’s introduction.
3. 2slugbaits – “The paper takes a mercantilist view of the world. Note the language. It always phrases things in terms of economic and military security. Several times it refers to China’s currency reserves as a “war chest.””
I cited two references in two comment posts in the order for a specific reason. One report was prepared in support of the other.
Dr. Charles W. McMillion prepared his paper for the U.S.-China Economic and Security Review Commission which was created on October 30, 2000. The Commission’s mission is to “monitor, investigate, and submit to congress an annual report on the national security implications of the bilateral trade and economic relationship between the United States and the People’s Republic of China, and to provide recommendations, where appropriate, to Congress for legislative and administrative action. Public Law 109-108 directs the Commission to focus its work and study on the following eight areas: proliferation practices, economic transfers, energy, U.S. capital markets, regional economic and security impacts, U.S.-China bilateral programs, WTO compliance, and the implications of restrictions on speech and access to information in the People’s Republic of China.”
4. 2slugbaits – “It assumes without argument that financial independence is a good thing.”
Are you attempting to say that financial independence is a bad thing? Moreover, identify the citations that support your claim.
5. 2slugbaits – “It assumes without argument that protection of intellectual property is somehow desirable for global economic growth without apparently noticing that “intellectual property rights” is also another term for government sanctioned monopoly.”
Another absurd claim. Cite the actual wording.
6. 2slugbaits – “The authors seem to have a fetish over manufacturing, as though only goods manufacturing matters.”
The purpose of the paper is explained above. Moreover, the author cited U.S. job losses in all categories of employment.
7. 2slugbaits – “And they wrongly conclude that fewer jobs in US manufacturing is synonomous with lower US productivity in manufacturing.”
Prove it. Cite the wording in the paper that supports your claim.
8. 2slugbaits – “Throwing out lots of scary charts and numbers is not analysis.”
Identifying facts is what this report accomplished. Where are your facts?
9. 2slugbaits – “China’s growth is not due to Chinese protectionism.”
Prove it.
10. 2slugbaits – “China’s growth is due to extraordinarily high rates of capital deepening (sometimes exceeding increase in total output!), and that capital deepening is due to forced saving.”
Where is your data and supporting information for this claim? Do you have a link?
11. 2slugbaits – “If we had higher tax rates during the Bush years, then our current account deficit wouldn’t be as bad as it is today. That’s the fault of US voters, not the Chinese.”
How would you prove this claim? It looks easy on the surface, but there is no proof that Congress wouldn’t have funded more programs and spent more money as a result of higher tax revenues.
12. 2slugbaits – “The Chinese are to be blamed for not allowing their currency to appreciate relative to the dollar, but it’s easy to oversell this point.”
There is no need to oversell this issue. It is what it is. It has been, in fact, undersold by successive U.S. Administrations. There is has never been a finding of China’s currency manipulation provided to the U.S. Congress.
13. 2slugbaits – “If you look at the national income accounts for the US, one thing that jumps out is how the share of nonwage compensation for labor has grown. This is what hurts SS revenues over the long run because nonwage compensation does not contribute to the FICA tax.”
How would you prove this claim? The numbers alone are not proof of your claim.
14. 2slugbaits – “Blaming China for SS revenue problems as a result of lost manufacturing jobs is laughable.”
What is laughable is your lack of knowledge in discussing China’s impact on the USA.
15. 2slugbaits – “The US has clearly lost manufacturing jobs. That’s not in dispute. But you cannot conclude that the US should pursue protectionist policies (which is what the report really advocates) and that protectionist policies will fix Social Security.”
The issue is addressing what has impacted the continued overall decline in U.S. real wages and displaced employment which has resulted in further wage decreases for a segment of the U.S. worker population. China’s WTO admission and significant role in U.S. offshoring is one of the causes. Working population wage decreases and worker dislocations have direct impacts on Social Security revenues.
Bruce,
You stated: “Workers enjoyed real gains starting in Clinton’s first term, gains which sustained themselves until Bush inattention and dedication to tax cuts on capital took the economy down.”
Instead of arguing about your statement with which I partially agree, I cited the importance of reviewing trade policy, China’s entry into WTO, and industries offshored in relation to wages and entitlement source funding. It’s not a minor consideration.
The loss of direct jobs on the order of 1 million plus the loss of further employment and companies’ revenue in support of plants and facilities displaced by offshoring since 2000 have a direct impact on wage levels and entitlement revenues. Moreover, the resulting wage level declines and flattening in some communities due to the offshoring losses had some additional impact on entitlement and other tax revenues at local, state, and national levels.
I made it very clear that any serious discussion about U.S. employment and wage levels during the period 2000-2008 should include a review of U.S. trade policy, China’s role in reducing wages in the U.S., and industries offshored to other nations including India.
For whatever reasons, perhaps political or not, you’re overlooking the significant impact of China’s entry into WTO and the U.S. workforce from factory to retail and points in between. The reality did not match the expectations and we have seen the evidence of that during this decade. Hence, the few numbers I cited and reference to only two reports in my original comment posts.
Here’s a third reference that speaks for itself. Things didn’t work out as President Clinton and Members of Congress anticipated. Job losses and reduced wages did occur as a result.
U.S. Trade with China: Expectations vs. Reality
November 16, 2004
http://www.pbs.org/wgbh/pages/frontline/shows/walmart/china/trade.html
“In the late 1990s, Washington was a sharply divided political city, but there was a growing consensus on one big issue. Most Republicans and Democrats agreed that trade with China would be a boon for America. President Clinton summed up the mainstream consensus in Washington with a message to Congress in the spring of 2000. In a letter circulated to House members, he wrote, “China with more than a billion people is home to the largest potential market in the world… If Congress makes the right decision, our companies will be able to sell and distribute products in China made by American workers on American soil, without being forced to relocate manufacturing to China. …We will be able to export products without exporting jobs.” Clinton was pushing Congress to permanently normalize trade relations with Beijing, helping to ease China’s entry into the World Trade Organization (WTO).”
Cantab
this is just dumb. the “overcharge” is the extra money that will be needed to pay the boomer retirement. the boomers are paying in advance for their own retirement. the trouble with the people who hate social security is that they will offer any bogus reason to bad mouth it, even if they have to contradict themselves at every turn.
CAntab
you can’t seem to get the point that measuring the benefit of programs/taxes is what we do every time we have a vote. here is a hint for you: i don’t always like the way the vote comes out myself.
2slug
the shift in compensation is accounted for in the Trustees Projections through 2085, it actually accounts for 1% of the 2% “increase” in taxes needed to restore the system to balance. so the real increase in taxes needed is only 1% (of payroll).
2slugbaits,
Ok, it was discussed further down in the paper. I had forgotten that. All the same, you conveniently ignore what the author also stated: “A serious study of the value added in China’s exports is not now possible with the very poor quality and unverifiable nature of detailed input/output data for China’s industries. What is clear is that, along with its soaring growth of domestic demand growth and record global trade surpluses, China’s simple ratios of exports-to-imports soared for virtually all modern manufacturing industries. It’s export/import ratio for all manufactured goods rose from 1.15 in 2001 to 1.66 in 2008.”
This author has previously addressed the problem with how China cites its value-added output. It appeared to me that he was using their method in this paper, and subsequently explained that the method is wrong. That was take after reading all of it.
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That’s not a bad paper on China’s capital growth. I don’t have a problem with that information as it follows what has been stated by other sources. I just wanted to know your source. The problem I have is with your previous statement: “China’s growth is not due to Chinese protectionism.” You appear to have no clue as what measures China has undertaken to protect its export machine. Your statement has no basis in fact. I don’t believe that you’re very well read in this area.
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I am familiar with the historical U.S. compensation statistics. I disagree with your conclusion that growth in other than wage/salary compensation has put a huge strain on Social Security revenues. One doesn’t necessarily impact the other. You would understand that if you worked in commercial industry. As an example, if healthcare insurance costs didn’t rise, there is no guarantee that wages would have increased above existing levels. I have listened to this argument previously. No sale on this end.
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You failed to cite the author’s statements on financial independence. Moreover, I disagree with your apparent conclusion that levels of debt to other nations and parties do not matter. And I am not alone in that stance.
—-
As far as I’m concerned, you fail to get it on matters related to China. It’s interesting that you work for the Department of Defense, yet you have demonstrated no concerns that I recall about China’s growing role in world affairs. Your supposed knowledge of China’s impact on the U.S. is highly questionable in my judgment.
MG,
Most people interpret financial independence to mean that a country doesn’t run a deficit with any other country. In other words, you’re saying the goal of trade ought to be to accumulate surpluses. That’s mercantilism. When most people hear the phrase “financial independence” they have something like that in mind, just as when they hear “energy independence” they mean no oil imports. This is mercantilism gone mad. A country does not run balanced trade with all of its trading partners. You run surpluses with some countries and deficits with others. That means you cannot have both financial independence and international trade. One or the other.
“…if healthcare insurance costs didn’t rise, there is no guarantee that wages would have increased above existing levels.”
Total compensation has increased, which tells us that wages would have gone up if the nonwage component of total compensation had not gone up. This is pretty basic economics. Over the long run labor earns its marginal product.
“The problem I have is with your previous statement: ‘China’s growth is not due to Chinese protectionism.’ You appear to have no clue as what measures China has undertaken to protect its export machine.”
Protectionism isn’t about developing export markets; it’s about developing a domestic industry for domestic consumption. Prohibiting Chinese workers from buying US products does not directly enhance China’s export market. There is an indirect effect in that protectionist policies are effectively taxes (forced saving) and that forced saving is used to build capital; but that forced saving could be done any number of ways.
“It’s interesting that you work for the Department of Defense, yet you have demonstrated no concerns that I recall about China’s growing role in world affairs.”
Completely different issue. Now you’re talking about national security issues and China’s growing power as an independent political actor. Those are not economic issues. If you really want an extreme example of that kind of thinking, go back and read some of the AEI papers from the mid-70s or the stuff from SECDEF Schlesinger. A lot of those types used to argue that the purpose of a robust national economy is so that a nation’s productive resources can be mobilized to fight wars and combat threats around the world. That kind of thinking has a lot in common with comrades inside the old Kremlin. What you’re seeing in the paper you linked to was a milder version of the same kind of thinking.
Guest,
Yes, but the growing gap still resulted in lower FICA revenues to date, and those lower revenues also translate into a larger current account deficit. They translate dollar for dollar.
MG,
Somewhat frivolous, but when I said:
That kind of thinking has a lot in common with comrades inside the old Kremlin. What you’re seeing in the paper you linked to was a milder version of the same kind of thinking.
There are actually a lot of comparisons between Kremlin thinking and the view of national security types in this country during the Cold War. If you spend any time around Army bases built during the Cold War, one of the things you can’t help but notice is the strking resemblance in architecture with the old Soviet style…particularly with headquarters buildings. Massive, heavy structures that let you know what’s inside the building is powerful and important, while you outside looking up are puny and insignificant. A lot of heavy concrete structures. It’s a style that seems to appeal to certain mindset that you’d often find in the national security community.
Also a style that might hold up in case of a reasonably far away strike by a tactical nuke or even of a targeted strike by air borne conventional bombing.
Not everything is about messaging, some people read and understood the lesson of the Three Little Pigs and the Big Bad Wolf and not building fortifications out of straw.
Social security outlook continued to improve after 2000. Your attempt to link SS numbers to Chinese trade needed elucidation you did not provide. The admission of China to WTO does not clearly correlate to the improvement starting in 1997 or the degradation in 2005. Your assertion that I just ignored the effect itself ignores that your initial post neither makes a claim about the direction of change in outlook or explains the lag. You might as well asked “What about the Loch Ness Monster?”
I add this image (still has yet to make the frontpage of AB BTW) to my point of the coming Obama deficits that are WAY over the top of ANY President before….