Entirely forseeable costs and how to pay is the real debate…not the rhetoric
Robert Samuelson has written an article so nasty and dishonest that decent people might wish to avert their eyes. But the 288 comments on his website suggest that enough people believe him that it’s worth trying to explain what’s wrong with his thinking.
Here is an example of it: ” One of our long-running political stories is the economic assault on the young by the old. We have become a society that invests in its past and disfavors the future. This makes no sense for the nation, but as politics, it makes complete sense. The elderly and near elderly are better organized, focus obsessively on their government benefits, and seem deserving. Grandmas and Grandpas command sympathy.
“Everyone knows that the resulting “entitlements” dominate government spending and squeeze education, research, defense and almost everything else. In fiscal 2008 — the last “normal” year before the economic crisis — Social Security, Medicare and Medicaid (programs wholly or primarily dedicated to the elderly) totaled $1.3 trillion, 43 percent of federal spending and more than twice military spending. Because workers, not retirees, are the primary taxpayers, this spending involves huge transfers to the old.”
“Everyone knows.” You see, the fact that “the elderly” paid their payroll tax (when they were “the young”) imposes no obligation on “us” to see that they get what they paid for.
But the fundamental fallacy here is that apparently none of “the young” will ever become “the old.” So instead of thinking of Social Security and Medicare as money they pay in advance, while they have it, for services they will need in the future, when they won’t, it is politically important to get them to think of it as “the economic assault on the young by the old.”
In order to do this Samuelson has to represent “entitlements” as “43 percent of federal spending.” This is not true. Social Security and Medicare have their own funding, and have nothing to do with “federal spending”. They are just the people paying for their own needs using the government to handle the details. This is no more “government spending” than it is “bank spending” when the bank takes in your deposit and later gives it back to you. Most people would be glad to learn that they will pay more for rent and groceries and health care when they get old than they pay for their share of “defense.” But Samuelson’s friends don’t like that. Where’s the profit in keeping old people alive? With their own money.
Even in the private insurance market, Samuelson entirely fails to understand this basic idea. We buy insurance, paying for it today, so that if some expense arises at a future time, there will be money to pay for it. But in Samuelson’s world, that transaction can only be understood on a month to month basis:
Samuelson says, “All insurance aims to protect against risk — but within groups facing similar risks. Put differently, most insurance is risk-adjusted. Auto insurance premiums vary by age; younger drivers pay higher rates because they have more accidents. Homeowners’ policies for similar houses cost more in high-crime areas. This is not “discrimination”; it’s a reflection of risk and cost differences. Insurers that ignored these differences would soon vanish, because they’d suffer heavy losses and lose customers.”
What Samuelson, and his admirers, cannot understand, is that if you “expect” heavy expenses in the future, it makes no sense to wait until that future to start paying a premium appropriate to the risk of that month. You simply can’t afford it. It makes more sense to prorate the expected expenses of a lifetime over an entire working lifetime. Your “expected costs” when you are young might be less than 20 dollars a month, while your expected costs when you are old might be 1000 dollars a month.
Only to someone with the brain of a Samuelson would it make sense to pay 20 a month when you are young and working, and pay 1000 a month when you are old and not working. Since the young person knows he will get old, and will have much higher “expected” costs, he can prepay those expected costs at an affordable 200 dollars a month. This way that 200 a month adds up over 40 years to about a hundred thousand dollars, enough to pay your expected costs when you are old and out of work, without having to find a 1000 dollars every month.
Of course it is difficult for a private insurance company to run this way. Even the government has to understand what it is doing as “pay as you go,” in which the premiums collected today (from the young) go to pay today’s medical bills (mostly of the old). As long as this pay as you go is understood and continues from generation to generation, the problem of paying for the higher expected costs in old age, coupled with lower expected earning, is solved.
But Samuelson and his ilk don’t want you to understand this..
Worse, it sometimes seems that the non partisan experts advising the President and the Congress don’t understand it. Even the “good guys” always frame the debate in terms of “fairness” to old people, whatever that means. The proper debate is “how do we most rationally pay for the entirely foreseeable high costs of our own medical care when we get old.”
Dale, I’m not sure of your point. Saying this is the question: “The proper debate is “how do we most rationally pay for the entirely foreseeable high costs of our own medical care when we get old.” Are you proposing a change in today’s methods? Are you just venting re: Samuelson?
As far as the entitlement issue and paying for them, that has been a fundamental political questions since time immemorial. In good times there are fewer arguments, in bad times they become paramount arguments. So what is your point here?
Robert (“Not Paul”) Samuelson is a partisan hack and if he didn’t share the same last name as a famous Nobel Prize winning economist who also happened to write one of the most popular textbooks for the field http://en.wikipedia.org/wiki/Economics_(textbook) would probably never have gotten his gig. For generations of undergrads ‘Samuelson’ = ‘Economics’ and if there were justice Robert (“Not Paul”) would be indicted for identity theft.
How about commenting on the facts in the article and and Samuelson conclusions. I really don’t see the logic in taking from a young person sharing an appartment with a couple roomates and giving their money to some 60 or 70 somethings living in a house with a white pickett fence and with a healthy retirement income. The old and poor are a different story. The point is you don’t really have a legitimate reason not to means test these entitlement programs.
The point is pretty simple. We have an insurance system where current benefits are paid for by past contributions not just in the form of taxes paid, but in the form of cumulative productivity. The average middle class household today has a much greater standard of living, at least when measured by certain material goods, than Boomers did even in the imagined glory days of the fifties and sixties, just as middle class Boomer kids had it much better than their Greatest Generation parents did. Our parents worked and paid for all the improvements we gained in the Space and Electronics Age, and Boomers built on that foundation to build and pay for the improvements that gave us the Communications and Information Age.
Yet we live in a world where PhDs in Economics can solemnly tell us that the biggest problem we face is because we gave too MUCH in the way of retirement security to early generations of Social Security recipients and continue to LAVISH benefits on their Greatest Generation children who not only won a world war that secured democracy and capitalism but built the American middle class throughout the fifties and sixties.
And having handed to Gen-X what is still the wealthiest and most powerful country on the face of the earth the thanks they get is “Sorry grandma, your health care is cutting into my music purchases and ski vacations, you gotta go.”
Call Social Security and Medicare “entitlements” if you want, I called them earned benefits from a lifetime of work, taxes, and contributions to the economic and social superstructure that younger workers obliviously enjoy today. Samuelson is very cynically pushing the message “What have you done for me lately” to kids who have no idea what even middle class life was like forty years ago. Four bedroom houses? Three car families? Little kids with unlimited long distance phones in their pockets? Which play unlimited music and videos streamed live from this Intertube thing? It is not like I trudged through the snow uphill, barefoot both ways to school in the sixties (for one thing I lived in Hawaii and California) but even middle class kids had much lower expectations of what was possible than kids today.
So I think that Dale’s point is that we shouldn’t begrudge some dignity in retirement and a moderate level of health care to those who delivered the lifestyle of today to a bunch of ungrateful kids who can’t imagine any other way.
Keep your hands off my social security.
Why should some poor widow die on the street because some 22 year old needs to buy a case of beer? Stupid argument is stupid.
I hope that you don’t mind, but I posted a lilnk to your entire AngryBear post on Samuelson’s
comments page. he has always been a toady. He gets paid well to swig the swill and spew it out to the masses. Remember what the man said about the masses. They didn’t get that way without help from the likes of Samuelson.
Discretionary war profits versus entitlements to aid US citizens in need.
Divide and conquer.
The aged versus the young.
The owners versus the rent payers.
Discretionary spending (succor the owners 2%) being traded against the entitlements (succor for the 98%).
The entitlement surpluses pay for tax cuts and smaller annual cash deficits, but when there is need to trade those debt instruments for cash the annual deficits are too high. Perpetual war with reduced national invetsment.
The perpetual war crowd fulfills Orwells prophesies of dystopia where war and other senseless discretionary wastes keep the mass from the benefits of advanced societies.
Why Europe has 1% of GDP for their small war profiteers and social nets, and the US has fat war profits at 5% of GDP paid by the insecurity of the US working classes.
Wage slaves to the war profiteers.
Continued by dividing the young from the old, so the rich keep the poor poor.
The problem is not investing in the past (old people) it is wasting on war in the present.
Divide and conquer………………..
Why conquer your own citizens?
I’m having difficulty getting into comments and having mine “stick”, so I’ll be brief. Samuelson’s argument is based on the premise that there is no connection between individuals in society. People have no claim on each other. In his world, the only thing of value is money and any requirement to spend or save for anyone but one’s self is a unauthorized taking or outright theft. If so, then his ideas are right, and society exists only to promote the accumulation of wealth for some individuals. Presumably, the rich qualify for income redistribution to them but no one else does.
I doubt you find yourself in a world consisting only of you and your money. So, people, remember that the concept of needs testing indicates a need to ration charity. You know, some meritless but needy person can only hope to claim so much. Otherwise, nothing is what he deserves and will get. And, if we complain, we should remember that he is perfectly free to die on the street. Of course, people in this country already die on the streets in adequate numbers. So, I would argue that Samuelson’s concerns are unwarranted. We’re already doing more than enough to insure that our charity is sparingly distributed. So, I think he can give his constant miserly carping on his tired old idea a good, long rest. I’d be grateful, sure enough.
The poor old woman gets money but a rich old widow sitting with a paid for home and a trust fund should not get money from the 22 year old or anyone else for that matter.
And why should that 22 year old finance the rice old widow’s cruses in the caribbean or trips to the casino.
According to the Supreme court findings its not your social security. Bush tried to make it yours but his efforts failed.
So now you and coberly are not even trying to pretend to get past your Ad hominem attacks.
here is my point simply restated:
Samuelson wants you to understand “entitlements” as a war between “the young” and “the old.” He sees old people as some kind of parasite feasting off the blood of the young.
But any young person with brains enough to realize that one day he will be an old person, will also realize thay he may, when he is old, have expenses that he will not be able to pay for out of his then current earnings.
The solution for this young person is to buy insurance. In order for this insurance to work it cannot be understood as “one month’s premiums equals that same month’s risk.” It has to be understood as “a lifetime of premiums equals a lifetimes’s risk.”
It happens that life is arranged in such a way that our period of greatest strenght and highest productivity occurs when we are young, and our period of highest risk for being sick and unable to work occurs when we are old.
Human beings have solved this problem by an informal “pay as you go” system, which the ancient Israelites called “Honor your Father and your Mother.” They did this either out of gratitude for what their parents had done for them when they were children, or what they could still do for them… helping to raise the grandchildren, or because they could see that they in their turn would become old and so it was a good idea to encourage the young to care for the old. And the best way to do this would be to set a good example by caring for their own parents.
After the industrial age rendered families unable to reliably support the elderly, the idea of formal “old age insurance” was invented. But it’s still the same idea. We pay when young for the care we will need when we are old. It takes someone with an evil heart to see that as “the old waging economic war on the young.”
let me head off an objection
with the industrial age another method of providing for expenses in old age was invented: “accumulate wealth” that will legally be “yours” when you get old. i mention legally because it is in fact the case that even this “private enterprise” solution requires an honest government to work.
but more than that, experience has shown that “accumulate wealth” never works “reliably,” so ordinary prudence suggests buying some sort of insurance that will continue in force after you have lost the ability to pay the premiums. as far as i know only an honest government can credibly be expected to manage that kind of a policy.
Because she and/or her husband worked and paid premiums for that benefit?
What are you some kind of commie, under your logic we should be means testing her trust Fund! What would the difference be?
The starving young worker vs the wealthy Boomer lounging by the pool is the stalest and most pathetic talking point out there. Give it a rest, that one was dumb when it was first put forth a couple of decades ago. Under current projections that 22 year old worker will get a 20% better benefit in real terms than a similarly situated 66 year old retiring this year. If benefits are slashed after 2037. If not that benefit is scheduled to be 60% better. Quit listening to the “intergenerational inequity” lies coming out of Concord, AEI, and the PGP Foundation, or at least quit promulgating them. They are pure, utter, malicious crap. Peddle it to the room temperature IQ people are Red State, you know you are not going to sell it here. Why are you insisting on looking like a dupe/dope on this issue?
Cantab you ass, that is not what that ruling meant. Another lying talking point. And if you looked at the actual annuitization requirements of Bush’s preferred model 2 of his CSSS (Commission to Strengthen Social Security) the whole concept of ‘ownership society’ was a pure joke for all but top earning workers.
The full report: http://govinfo.library.unt.edu/csss/reports/Final_report.pdf
For lower income workers the only way to pass on ‘your’ account to your heirs is to die before you start taking benefits. Otherwise you are forced to buy an annuity that terminates on your death (like most annuities). Details starting on page 55 of the Final Report.
And retirees would not even have voting rights over the securities in their accounts (see page 62) instead those would be held by the fund managers. Some ownership there.
The Bush Plan was pure bait and switch. I would accuse you of not knowing what you are talking about but I am afraid that you actually do know many of these details and are simply choosing to lie about them.
Cantab it is only Ad hominem is it is untrue. Unlike England truth is generally a defense to slander in this country. Samuelson is a dishonest hack, a trait he shares with you.
the legitimate reason not to means test Social Security and Medicare is that the recipients PAID FOR THEIR BENEFITS.
It’s NOT welfare. YOU are paying for your OWN benefits. Sorry that “pay as you go” confuses you.
i disagree with Bruce: i dont think you are smart enough to know you are lying.
I agree with you about the need for charity. Even about the need for “welfare.” But in the case of Social Security charity and welfare are not at issue. People pay for their own Social Security. Without it, there would be a need for charity or welfare… which the rich would have to pay. with SS the rich do not have to pay.
I think you are right about money, too. Money is a means to facilitate exchanges of goods and services. Unfortunately too many primitive minds turn money into a “real” good itself. then they worship it.
I am enough of a “conservative” to prefer real accounting and real legal ownership, but not such a fool as to worship money. All of the transactions we think of as “charity” almost certainly make the giver richer, but in this fallen world, we can’t count on such charity. So we invent insurance.
Nancy Ortiz has the right idea, and Bruce’s first post is along the same lines.
Adam Smith explained how in certain circumstances (perfect competition) a group of individuals acting solely out of self interest can actually increase the common good. This was a brilliant insight because it’s an exception to the common rule that cooperation yields the best results. But, too many Americans seem to have taken it as the only rule of human behavior.
Where is rdan when you need him. On another thread he accuses me of making ad hominem attacks and now look what’s going on here. This is something.
You never know with you, when the wind is blowing one way you call it social insurance. Insurance against the prospect of becoming old and not having enough funds to live on or get the healthcare you need. But then on the other hand even if you point out that someone that became old with no need for insurance against not having money suddently for you its now a savings plan again.
Growl all you want, you still don’t present a coherent consistent argument.
Your rhetoric is misleading and tiresome. Yes, social security is not the same as personal funds and assets. Thank goodness for the safety of the investment. The investment in this case is the shared support of all of our futures. Each generation pays the primary costs while they work. And each is supported in their senior years because they participated in the sharing of cost while working. It’s a program the strength of which is demonstrated by the vagaries of the stock market and the stability of a genuinely non-profit income assurance program.
What’s your beef with an income assurance program that we all take a share in supporting? What’s the problem with assuring that the working classes are not subject to impoverishment in their retirement?
“So now you and coberly are not even trying to pretend to get past your Ad hominem attacks”
A description is not an ad hominem attack if it fits the taqrget well and true. Samuelson has a long and indistinguished career in inventing and/or modifying the truth of economic and political issues.
The young in the US need to stop worrying about what is “spent” on the old folks.
That money is put back into the society buying hospital capacity and so forth which the young get to use should they get to be old, sick or otherwise need help.
What the younger members of US society need to concern themselves with is the trillion or so bucks a year in investable money which goes down the war profiteers’ hole.
That is lost future productivity (opportunity) which will be missed and someday it will not be easy to cover cash needs because the US killed Saddam rather than investing in hospital beds, energy, education or other futures.
Samuelson is covering for the misspending on discretionary waste by inducing generational ire.
it is very difficult for me to explain what insurance means to someone with a sixth grade education.
If I wanted to insure that I would be able to buy a ham sandwhich forty years from now, i could save the current price of a ham sandwich at interest and hope that in the day, my money would have grown to the then price of a ham sandwich and that a ham sandwich would be available at any price.
or i could arrange with a very reliable insurance company that I would pay a premium… high enough for the company to assume all risks… and the company would guarantee that ham sandwich delivered hot and fresh on the date certain. Whether or not i could pay for it at that time.
Do you see the difference? No. I didn’t think you could.
Cantab is here to remind us.
i think i would modify slightly what you and Bruce say about ad hominem.
If I said the Prime Minister has improper relations with a sheep, that would be ad hominem whether it was true or not, unless the issue was his program to provide luxury homes for sheep in the south of France. In that case it would be a pertinent argument. The dishonesty of Samuelson is relevant to the fact that he is making a dishonest case for generational war.
it is very difficult for me to explain what insurance means to someone with a sixth grade education.
You confuse insurance with a futures contract. Maybe its because you’re getting old and your senior moments are fusing into a permanent condition.
Christ i don’t know why its so hard to understand. If they was no Social Security there would still be a wealth transfer from the working to the nonworking just like there has been since humans got old enough that they can no longer work. All social security does is diversifies away idiosyncratic risk, you know what every single finance text says one should do. No longer will grandma need to move in after Bernie Madoff takes away her life savings or no longer will a person die in poverty because here ne’er do well kids disown her.
trying to help cantab still further
no one knows when they start out how they’ll end up. they pay insurance so that they will have at least enough, whatever happens. in the case of Social Security if your lifetime income was too low for you to save enough (through SS) you still get “enough”, and the “enough” is paid for by paying those who managed to save “more than enough” a little less. It turns out that this “transfer” can be paid for entirely out of the “interest” earned by SS, so the “rich” person can still collect a benefit that equals the amount he paid, adjusted for inflation, but he won’t get quite as much “interest” as the person whose luck was bad. that’s part of why it’s insurance.
the other part is the ham sandwich effect: even if I paid twice as much SS as I would ever get back, it still might be a prudent purchase against the risk that my other investments would return even less. It’s a question of risks vs costs. Something every real investor understands. That leaves out Cantab who only understands what he is told to understand by his thought leaders.
compare this to fire insurance: we pay a premium we hope never to get back at all. only those lucky enough to have a fire make money on their fire insurance. this confuses Cantab. he thinks that all insurance is on the fire insurance model: you get nothing unless you have the accident. the idea that an insurace policy could be written so that you get back at least as much as you put in is beyond his imagination. but i think (no expert here) it is also the case with “whole life” insurance policies. someone smarter than me needs to correct me here. the difference betwee SS insurance and private life insurance that pays even when you don’t die is that the federal governmen can afford to guarantee against inflation and has a better chance of still being in business when you need to collect.
as for health insurance, again we had Cantab a few posts back informing us with great superiority that no insurance company could afford to pay benefits to high risk people, but also that people with no risk should not be “forced” to buy insurance. this would seem to eliminate the possibility of insurance at all. fortunately most people are smart enough to realize that they pay for “unknown” risks, and insurance companies are forced to pay for “unexpected” events. unfortunately for private insurance this system only works on a month to month basis. only the federal govrenment can afford to accept your premium when you are twenty and guarantee to pay your bills when you are seventy. it relies on something called “pay as you go” to finesse the risks of inflation… even high medical cost inflation.
this is all to complicated for Cantab, and i haven’t written it very well, but there should be enough here for anyone to think out on their own if they are so disposed, and have not already done so.
As Bruce and Coberly say, a rational way to allow all members of society to provide for their future well-being is to have a form of guaranteed income derived from past work. This is the principle of Social Security. It does not matter that one person contributing to the Trust Fund is poor and another is rich. They both benefit in proportion to their earnings. This is perfectly fair and has nothing to do with anything but SS benefits. And, because SS is self-supporting it has nothing to do with the budget, the deficit, or anything else commonly conflated with it.
Young people are equally eligible for SS in the form of disability benefits, contrary to popular relief. So, in as little as 18 months a young worker can be insured for disability and can insure his wife and kids of a secure income should he die. Don’t forget that the price of admission includes benefits for wives, children, ex-wives, parents and even step-children or adopted children. This here is one hell of a good damn insurance policy. Which of course leads some to conclude that it is way too good for the likes of ordinary Americans.
So, what’s an entitlement? It is the legal right given by law to a citizen or other person to a defined and expected benefit or other priviledge based on earnings, military service, civil service, election to a constitutionally defined position (e. g., member of Congress, VP or President, federal employee, veteran, and federal law enforcement officer.) This right is not a property right per se. It is not a sum of money set aside in an individually identifiable account, but a plenary right to recieve all the benefits and priviledges following from meeting certain requirements. This property right is subject to due process under the Fourth, Fifth, and Fourteenth amendments and if you want you eyes to really glaze over, I can go on like this FOR HOURS. A case in point supporting this idea is the Supremes’ decision in Goldberg v. Kelly (1974) which specifically finds that entitlements are not gratuities but rights.
No other society in the West has any difficulty understanding this concept. Yet another wonderful way in which the US is exceptional. /snark/ NO
I’d go just one step further and point out that Samuelson has made a career of being a media flack. While his head is generally up his own ass, his nose is firmly planted in the back sides of corporate America. The working man/woman doesn’t fit well in his view of industry. He’s a publicist parading around as a journalist. Unfortunately he has many clones in his line of work.
it’s also true that private insurance cannot make a profit insuring people with “prior conditions” unless the premium is so high that the insuree might as well pay his bills himself.
the governmen can afford to insure people with prior conditions on the understanding that we all have prior conditions… we just don’t know what they are yet… so by everybody being in the same pool the risk can be shared at a cost we can all afford.
some of us… not cantab… understand that even very sick people can be valuable to society, so we do not “lose money” by helping pay for their care. this is again something that no private company could afford to do.
it seems to me very strange that … cantab… would argue that the government has a legitimate role in providing an army to protect us all from foreign enemies… but no role at all in providing insurance to protect us all from catastrophic health care costs. what exactly is the difference?
well, you need to explain to this old man the difference.
you have volunteered to be our straw man. and that is a valuable service. i always start out meaning to be kind to you, but you always manage to make me forget my good intentions. i’ll try to see if i can see exactly what it is that does the trick.
thank you so much. we need your expertise. could you explain this to a congressman? or chairman of the Federal Reserve?
“You confuse insurance with a futures contract. Maybe its because you’re getting old and your senior moments are fusing into a permanent condition.” Cantab in reply to coberly.
You’re way off the mark with that analogy. A futures contract identifies an asset and sets a future value on same. An individual or business entity that is likely to own such an asset at that future date, by mining it or growing it or even manufacturing it, may need to sell the rights to the asset now in order to meet some current financial need. The result is a contract to deliver the asset at a set price at that future time. The contract is a currently sellable item at some lesser price than the thought to be foture value of the asset.
That has no resemblance to the social security program which is a sharing of financial support of those in the present who have shared a similar cost in the past, by those who will require a similar support in the future. In other words, social security is just what its name implies. It is the securing of a minimum standard of financial support by means of providing that same security to others. It’s only a matter of time. We’re paying now for what we will require iin the future. It works by shared trust within the group.
thanks. i would love to see you and Nancy (below) explain this to Congress. MIght need to tie them down and prop their eyes open with toothpicks.
It is simple. They paid in. They should get paid. Today the Federal Government borrows from social security to supplement income tax. In the future the Federal Government will have to pay back what they borrowed. Income taxes rates will have to go up. The rich do not want this to happen so they paid people to sell the idea that social security is unfair. They are trying to get rid of it so their income tax rate won’t go up. The fact that millions of senior citizen will end up homeless and starving after putting money into social security for decades doesn’t bother them. They are sociopaths.
To compare what the seniors put in and take out you have to take into account inflation, rates of return, compounding, and the fact that a smaller percent of seniors will collect than put in for a far shorter period of time. Once this calculation is done I seriously doubt that our senior owe us a red cent, We probably owe them money in addition to everything else we owe them like our life.
>Only to someone with the brain of a Samuelson would it make sense to pay 20 a month when you are young and working, and pay 1000 a month when you are old and not working.
No. Here is the rub. I have a friend who had a nervious break down. Lost everything and has been living hand to mouth for years. My thought about him is one of his problems is he’s been poor so long, he’s forgotten what real money is. Samuelson has the opposite problem, he’s been a wealthy man for so long he has no idea that $1000/mo is ruinous for a person that earned a real living.
First do you trade futures contracts? If not I don’t think you are in a position to offer a serious opinion. Coberly babled as is he custom something about locking in the price of a ham sandwich. Locking in a price is what you do with futures and forward contracts. See his problem is that he won’t settle on if social security is an insurance policy against the prospect of ending up old with no resources of if its a forced savisngs plan where you are getting a return on your investment. His positions change back and forth depending on what argument he is trying to make.
For me social security is a forced savings plan. It could have been done as most other savings programs with accumulating assets in private accounts or the way it is with no savings but rather a pay as you go scheme where the younger generation fund the retirement of the old. My description of the system never changes.
Guest–SS is not a forced savings plan for all the reasons I explained above in my comment. Savings plans do not create lifetime benefits in excess of the dollar value of the savings plus interest for oneself and one’s eligible family members. Just doesn’t work that way. For example, savings you put away do not magically match themselves in the bank accounts of your eligible dependents (wife, minor kids, adult disabled kids, parents, and former spouses) both while you live and when you die. But, Social Security contributions create a right for all of the above to lifetime benefits, no matter how much they are as long as they live. No cash value you limit on total lifetime benefits to you and all who receive benefits on your earnings record. Your savings don’t do that. As I said, it’s one of those insurance policies that is way too good for ordinary people. But, if you don’t want to participate in the benefits, don’t apply.
no, my explanatioin does not change. you simply can’t understand it. the trouble with private accounts is that they have a way of not being there when you need them.
thanks. I don’t know if Samuelson has an idea or not. My guess is he mollifies his conscience with some vague idea of “welfare” for those who “really need it.” Since he can’t or won’t take the trouble to think this through he has no idea that it won’t work. Certainly not as well.
I forgot to add… and this is part of what confuses Cantab: I can’t say everything at once… that the other aspect of Social Security insurance is that you are insured against failing to make enough to save enough to be able to retire. I have said that so many times I can’t remember when I said it last time.
The return on Social Security is not so high that it would be worth anyone’s time or risk to game the system by earning too little in order to qualify for proportionately higher benefits. But we are getting into subtleties here.
Sure! No problem. Used to do that for a living. But, you know, now I’d need an Armani suit and a major encounter with Botox. But, of course. NO
Got it right, Rob. NO
Jack, you got it! NO
Different Guest–Money is not the issue, nor is its value. How we provide for those who cannot provide for themselves is the issue. And, in that regard, we return to the question of the means and cost of how to do what’s right. That’s all there is to it. Simple. Are we human with respect for other human beings or not? How say we? Samuelson has his answer. Coberly, Jack, Bruce, Peter John, and all those of like mind have ours. This is a simple, not an easy thing. Think about it. NO
i am easy enough to admit that my ham sandwich parable may describe a futures contract, but if so the fault is mine and not the fault of the Old Age, Survivors, and Disability Insurance program.
The point is not to get hung up on words. The program does what it does. And what is a futures contract if not an insurance policy?
I got into the ham sandwich by trying to answer another of your “reasons” why SS is “not insurance.” I think in this case it was because some people collect who are not poor. Other people, or maybe it was you, say it can’t be insurance because with insurance you pay a small premium for an unlikely event. But all of these objections amount to too narrow a view of what insurance is. Insurance is just a plan for paying in advance for an uncertain eventuality. The size of the premium, the degree of risk, and the exact nature of the payout are all details designed to fit the needs of the customer as well as the insurer.
I think either you have a “fundamentalist” cognitive style.. meaning a tendency to get stuck on a very narrow “meaning” of words, or are a victim of a “dishonest” cognitive style, in which the deceiver uses words in a way intended to be misleading. Of course it’s easier for him if his victim is willing to accept his interpretation as the “only possible” meaning of the words.
What you say is nonesense. I’ve paid into they system my entire working career. I had no choice, and when I turn 65 i’ll get benefits as if I had put the money into a mutual fund. That’s a forced saving plan, Same with my brother. Same with my parents. Same with everyone I know. You just don’t know what you’re talking on this one. And the death benefits are trivial compared the total money put into the system. As a matter of fact the only thing for me that makes it not as good as a private forced savings plan is that there are no savings, my social security set aways are not my property, and the government can increase or decrease my return on investment without my input since I have not rights on the money I set away. Otherwise I’ll be getting a check, the size of which will be decided by politics of the time.
but you entirely forgot about the insurance part. you will get benefits even if you fall on your head and don’t make another dime. yes, you could buy death and disability insurance from a private company but there would be issues about inflation and the company going bankrupt and more things than either of us can think of at the moment. but mostly, there is no insurance company besides uncle sam who can insure you for simply not making enough money over a lifetime to be able to afford to retire.
you are like a person searching a vast library with only a very small flashlight.
sadly, you are right about the politics of the time. that’s why i keep yelling at people they need to yell at their congressmen. and bring a rope. but YOU are the politics of the time, and it is only because people like you are so easy to fool that there is any danger to Social Security at all.
as for the death benefits being trivial compared to the total money in the system. this is kissing cousin to the stupid argument of Samuelson that “entitlements” make up half of the budget. the death benefits are trivial because most people do not die before they collect retirement checks for quite a while.
oh, not only is Samuelson stupid to compare the size of “entitlements” with the defense budget and be sad because we pay more to live for twenty years than we pay for new submarines, but the entitlements he is talking about are not even part of the budget, much less half of it.
Whoa. Let’s at least frame the discussion correctly. The greatest generation paid less than they recieve from the entitlement system. Way less. At the same time, they control over 70 % of the wealth in this country. Children are four times more likely to be living below the poverty line, with no health insurance, than the currently retired. The highest income group is the retired. Truly a geriatric aristocracy.
That being said, how do we rectify the disparity. Means testing, marginal tax rates, and the unearned income transfer tax upon death.
Hey this is a guy who can’t tell who hires who. You expect him to get intergenerational conflict straight when he can’t get class conflict straight.
Thanks. You’ve just proved that a little knowledge is a dangerous thing. You’ve got your statistics a bit screwed up. While a small group does certainly control 70%, and more than that, of the wealth of the country, you’re confusing the senior population with the extraordinarily wealthy sector of the population. Think of it this way, if most extraordinarily people are over 60 years of age does that mean that all people over 60 are extraordinarily wealthy. Or, if great wealth is held by some senior citizens do all senior citizens share in that great wealth.
Is the confusion beginning to clear for you? Try this. Great wealth is confined to circle A. Circle A is populated by a very minute portion of the senior citizen population. Circle B is populated with more than 95% of the senior citizen population, but circle B also contains a very small portion of wealth. So, a very small percentage of seniors control most of the wealth and a very large percentage of seniors control very lilttle wealth. Is there a relationship between wealth and age? Ask the seniors in circle B.
Cantab, when you have 20 or 30 years to spare, get yourself a copy of the Social Security Act (all 20 plus titles) and every other section of federal law relating to the administration of the program, and learn something. Then, prepare yourself to argue these issues. Otherwise, the law will protect you anyhow. The sections regarding the computation of benefits would be of particular interest to you. In any event, you would see that politics is not a factor in the determining the amount of benefits. You could do that if you need a rational basis to argue your case. Otherwise, keep on talkin’ same as ever.
jack corrects part of your logic. let me attempt the rest.
Social Security is an insurance program. The people who get benefits paid for them. Your suggestion that the “right frame” is to steal their benefits and give them to someone else who “needs it more” is simply a rationalization for robbery. There are plenty of other places you could steal the money from.
Maybe you could stand ouside the grocery store and everyone you see who looks like they can afford it you knock down and steal their groceries and their purse and run to give the money and food to some poor children you know.
Or maybe we are smart enough in this country to run one program to meet one set of needs, and run another program to meet another set.
The problem with this article is that both sides are wrong.
In theory, the social security that was paid by the old was an investment. In theory, it was like giving your money to a bank.
The bank might have made a loan to someone who did something productive with the money. The person who borrowed the money gradually paid i back with interest.
Unfortunately, the old invested their money with a collection of deadbeats known as the US congress. It was not invested. It was spent on every wet dream a congressman could come up with. The supposed “trust fund” is simply a box filled with IOUs.
While we had an economy, this might have worked out. A prosperous younger generation would pay off the bad debt under the impression that they were investing for their own old age. It’s a con game, but like any Ponzi scheme it could run for a very long time before anybody noticed.
There aren’t enough young, and there is no longer an economy that allows the young to earn enough money to pay off their own student loans – let alone repay an “investment” that was imposed upon them.
If the younger generation wakes up and realizes just what has been done to them, they are not going to fight a battle on behalf of the older generation.