Social Security Actuarial Gap: the Time Series
The 2010 Social Security Report is due out any day now and I thought I could lay some groundwork for a number based discussion of its implications. Starting with changes to the 75 year projection over time.
1996-2.19%
1997-2.23%
1998-2.19%
1999-2.07%
2000-1.87%
2001-1.86%
2002-1.87%
2003-1.92%
2004-1.89%
2005-1.92%
2006-2.02%
2007-1.96%
2008-1.70%
2009-2.01%
2010-??
Each Report Year the Trustees give an estimate of how much payroll tax would have to go up immediately to deliver Long Term Actuarial Balance, meaning full payment of scheduled benefits and a Trust Fund with a one-year reserve at the end of the 75th year. In this post I want to explore the reasons why this number can go either up or down over the course of a single year, sometimes in a pretty dramatic manner, how can one Report Year whip the tail by as much as +/- 10%? Geekiness under the fold.
The first thing to understand is that the bias in this number by rights should be upwards for two reasons. Consider 1998, in point of fact we did nothing in the faces of a 2.23% actuarial gap from the previous year, meaning that extra dollars were not collected and so contributed neither principal or interest to the Trust Fund, all things being equal this should have added to the cost of an ultimate fix, because as ‘everyone knows’ the longer we wait the more any fix is going to cost. Well the numbers show that not to be true, in the face of inactivity the total cost can actually go down, why that is to be explored a little later. The second cause for an upward bias is the result of the change in valuation period, in 1998 what had been year 1, that is 1997 dropped off, and what had been year 76 became the new year 75 and so got included. And the Trustees tell us that change alone will add 0.06% to the gap. Meaning that if we were 100% confident in our modeling we would expect to see an uptick in that amount each and every year.
Well a single glance at this time/number series shows that we are not justified in that confidence, when people claim that the Trust Fund ‘will’ run dry in 2037, what they mean knowingly or not is ‘if every bit of our methodology is correct and so too all of our economic and demographic assumptions about the future’. Well obviously we don’t know what is going to be happening in 75 years, or even 10 years. For that matter only a handful of people not named Baker or Schiller were predicting this years economy even 3 years ago.
This uncertainty is fully recognized by the professionals in the SSA Office of the Chief Actuary, a fact that is shown in three ways. First the numbers above are drawn from is known as the Intermediate Cost alternative, the OACT also provides a more optimistic Low Cost alternative, and a more pessimistic High Cost alternative to present a range of possible outcomes. Second the OACT doesn’t pretend to be able to predict future business cycles after the first ten years, instead all of their economic number series under all three alternatives settle out into what are called the Ultimate values, and finally the OACT shows its work in the form of Sensitivity analyses and Stochastic projections that show how those outcomes vary in response to changes to individual variables and in light of past variations, all of which are published in the Annual Report.
Which leads me to my first conclusion here: Infinite Future is Hooey. Given the probabilistic variation revealed even over the medium term and particularly given that an outcome that shows the system fully funded over the 75 year period (which is the result of Low Cost), and given the substantial uncertainties in even year over year projections as revealed above trying to influence policy by an ‘Unfunded Liability’ over the ‘Infinite Future Horizon’ is not just misguided, it is thoroughly dishonest. Particularly given the time series.
In 1997 Social Security could still reasonably be said to be in crisis, the 2.23% projected actuarial gap had been steadily increasing over the few years before just as you would expect from a crisis left unaddressed, the fact that the system had finally reached a Trust Fund ratio of 100 in 1993 and so met the short term test did not mean the whole program was out of the woods, as long as the actuarial gap was ticking upwards there was good reason to ‘Save Social Security First’, after all under then current projections the Trust Fund would go to zero in 2029.
Well a funny thing happened, starting in 1998 the gap, even in the face of inactivity started to drop, in the first year just a little but in 1999 and 2000 by a lot, 10% improvement per year in a 75 year outlook. And it was in response to this that Dean Baker and Mark Weisbrot published Social Security: the Phony Crisis and I developed my own plan for Social Security which I cleverly dubbed “Nothing”. In 2000 Greenspan was happily assuring us that via the miracle of the Great Moderation we had conquered the business cycle and we could enjoy 3% productivity and 4% Real GDP forever. Numbers that if correct were far better than the ones of Low Cost which showed Social Security vastly overfunded going forwards.
Which leads to a second conclusion. When it came to Social Security the Bush Administration was thoroughly dishonest from the start, they promoted their tax cuts based on a set of economic numbers that if they had actually come about would have saved Social Security along the way. Yet they willfully ignored the number series above and convened a Social Security Commission that still relied heavily on the rhetoric of crisis and ‘we can’t afford to wait’. Well the hell we couldn’t, the ways the projected numbers were moving during Bush’s first term there was positive evidence that a short term policy of “Nothing” was in fact optimal.
As noted at the outset the natural bias in this series in the face of inactivity is upwards due to theoretical taxes not collected in the previous year combined with the built in increase due to change in actuarial balance. Leaving aside the specific reasons for changes in projections from year to year the fact that four years of inactivity from the time Bush was elected in 2000 to his re-election only increased the actuarial gap by 0.02% and even at that was down by 0.03% from the previous year made the whole Social Security Tour of Spring 2005 itself throughly dishonest. These numbers show clearly why “There is No Crisis” was a relatively easy campaign to win, our side had the numbers.
Well except one. In 2003 a new measure of Social Security solvency suddenly appeared in the Reports, instead of measuring the payroll gap over the standard 75 year window, the Trustees would add a new number projecting Intermediate Cost over the Infinite Future Horizon. Now given the existing probability range over even the first 75 years and the rapid changes in outlook seen since 1997 this was more akin to witch magic than anything, but it produced a very useful number on its own. All of a sudden the President’s Men could point away from a number that was under 2% and on balance shrinking and to a number that was almost twice as high at 3.5%. And they needed a number that high and badly because of something I pointed out in an adage coined in 1997:
“If privatization is necessary, it won’t be possible. If privatization is possible, it won’t be necessary.”
For movement Republicans the real Social Security crisis was that it existed in the first place. But due to its general popularity a head-on assault was thought politically impossible, so in order to sell their ideologically preferable system of Private Accounts they were forced to play the solvency crisis card, and to present the better returns on equities as being the key to the solution. Unfortunately for them there were three problems here. One their models assumed traditional returns on stocks, which in turn required growth rates in line with historical trends, which rates if sustained were significantly better than those projected under Intermediate Cost assumptions. Hence the ditty above. A secondary problem is that along side their ideological commitment to Private Accounts was their even stronger commitment to tax cuts which had been sold on claims that such cuts would boost productivity. If tax cuts had actually worked as advertised then Social Security would have been saved from crisis along the way. A third problem was structural, any move from traditional Pay-Go Social Security to self-funded Private Accounts had to somehow handle the transition costs. And there was no way to do that at a cost to the worker that would not exceed the 1.89% payroll gap. Which would reasonably lead an informed worker to ask “Exactly what is in this for me that I should take this extra risk when I could just except the tax increase and guarantee a 100% benefit?”
And there was no answer to that in 2005, even the use of a 3.5% Infinite Future number didn’t rescue the calculations, there was no numerically based challenge to the proven plan of “Nothing”. To see why we have to look a little deeper at the numbers and what I call “The Cost of Inactivity”.
In 2001 the process of actual shrinkage in actuarial gap stalled. There is some reason to believe that this stalling was deliberately engineered so as not to make the sales job for private accounts even harder than it was. People in a position to know on both sides of the issue insist that deliberate manipulation of the numbers in the Report is impossible, but both Prof. Rosser and an originally skeptical Arne took a hard look at the internals of the data tables and numerically if not practically the case is pretty solid. But either way a steady number as seen from 2001-2005 is an irrefutable argument for “Nothing” for two reasons. One the same performance numbers that drove down and then kept steady the actuarial gap also moved the date of Trust Fund exhaustion out in time, between 1997 and 2005 the date of depletion had been pushed out from 2029 to 2042. Not only had that date been moving at more than a year per year, suggesting that the event itself would never happen, it was being pushed out past the point of maximum Boomer demographic impact, a close look at the numbers show that the thirty or so years after mid-century will be relatively easy on Social Security as it handles a cohort of Gen-Xers that is numerically smaller than the Boomers that will have moved off the stage and the still working Millennials behind. In 2005 the case for simply waiting out ‘Crisis’ was excellent. Because every year of inactivity meant the functional equivalent of a tax cut in the amount of the fix not applied.
Well the case for “Nothing” got more problematic with the gyrating numbers from 2006-2009 and what is likely to be a disappointing number for 2010. Which is why I moved off “Nothing” to support the “NW Plan”. But in any event it is important that all decision making on this be driven by the numbers and not by slogans. And that means digging into the data tables and not relying on the MSM to bring you the news. Hopefully this post will help you cut through the spin certain to be coming down the road in the next couple of weeks after Report release.
I made a small technical error on a previous post comment thread, though not one I think important in context. The claim was made by Andrew Biggs that a 75 year fix still leaves a actuarial gap in year 76. I said this was not true, after all the NW Plan delivers a 87 year fix. Later Coberly pointed out that depending on how you look at it the NW Plan actually is more than a 2.0% fix. Well there is a certain amount of apples and oranges there but a look at the number series shows why this issue is diminimis.
If the Intermediate Cost projection is perfect in every detail, then the calculated actuarial gap would deliver you with a TF with an exact TF ratio of 100 at the end of year 75. At which point the change in valuation period would insert a new gap of 0.06% in year 76. Inflation adjusted this is the equivalent of right on a quarter a week. Given the large uncertainties revealed in the year over year changes it would seem odd to base current policy on a theoretical pocket change gap in the year 2085, not when a change in assumed interest of .1% moves the number twice as far (see 2006 Report).
Rather than worry about changes at the end of the tail we should be more concerned with measures like ultimate productivity in 2035 and after, that is what really moves the tail up and down.
Bruce
I would like to point out that the NW plan amounts to “nothing” if your predictions turn out to be correct.
Yes. Arne’s contribution of “Trigger” between “Coberly: Fix it and forget it” and “Webb: Nothing” added both practicality and rigor to the NW Plan.
Though it is damn hard to explain.
Well
it makes all the difference in the world “how” you look at it.
The Trustees leave the impression without ever saying so that the system is out of balance and getting worse exponentially. The Peterson gang presents astronomical numbers and the press believes them utterly.
The facts are not so alarming. Assuming the Trustees long term predictions mean anything… I don’t think they mean much, but they are what we’ve got… the “payroll gap” could be closed for the next 75 years with an immediate increase in the tax of 2% plus or minus a little. Given the nature of the prediciton the “plus or minus” is meaningless. The 2% of an average wage of 800 dollars per week (about 42,000 per year) would be 16 dollars per week. Not tiny, but not astronomical either, and maybe worth paying to guarantee that you can retire on time with a benefit that will pay the rent and groceries and enough of the little pleasures that make life worth living.
BUT the way the “2% now” works is that it actually collects more taxes than are needed for the next thirty years or so, building up the Trust Fund and earning interest that helps pay the benefits going forward. And it is calculated to run out in exactly 75 years (with the one year reserve).
But in the meanwhile the rising life expetancy will increase the population of retired relative to the population of workers such that without any help from the now depleted Trust Fund. an extra 1 or 2% increase in the tax would be needed to keep up with benefits.. This would add another ten dollars plus or minus to the payroll tax in 2085. This is basically the source of the “infinite future” fix.
But note that applying that infintie future fix to the present… would raise the tax level far above what is needed for the present, therefore adding to the Trust Fund… and to the deficit when the Congress “borrows” the trust fund. So it’s a pretty bad idea, because it raises the taxes far more than needed on people who will never see the benefit, and it raises the national debt for no good reason.
But it is worth pointing out that “this is it.” There is no exponential increase that would “burden the youth” of tomorrow. Unless of course no one pays back the Trust Fund. Then the interest on that should prove somewhat interesting. It should also be noted that 1% of the 3.5% infinite future fix is caused by a hidden tax CUT that no one talks about. So the real “infinite future” fix is more like 2.5%
But all of this is nonsense. And dishonest nonsense at that. As Bruce points out the numbers are calculated… but not explained.. as a way of making the fix for social security look huge. Calculate the cost of your breakfasts for “the infinite future” and you will realize you can’t afford to eat, so you might as well cut off your head today.
The whole point of the “Northwest Plan” is that it shows that IF and ONLY IF the costs of Social Security actually do rise, they can be paid for with tax raises of one tenth of a percent in those years when the cost rise is imminent. What this means is that most living people will never see the ultimate rise. And those who will see some of it can relax as they realize their tax will never rise more than 80 cents per week in any given year… actually average about 20 cents per week per year… while wages will be rising a predicted ten dollars per week every year.
That means that people most of us will never know, who will be much richer than we are, and who will live a lot longer than we do, will pay a little more for their longer retirements. The little more doesn’t look like it will ever be more than 2% of their income (4% if you insist the employers share is “really” the workers money.) It would be an easy […]
99% in agreement. But you me and Arne need to talk about changes in mortality. Because we seem to have somewhat incommensurate takes or at least are not explaining the same data in a consistent way.
Hmm…why does this entire post exude a certain smell of “managing expectations” for particularly lousy numbers to come out of the upcoming SS report…
Bleakness be it SS future or Obamacare results from the pillaging of the US worker.
Yesterday a web column on the Yahoo finance page posed the headline: “Will Obamacare bankrupt America?”.
I was moved to respond: Did tax cuts bankrupt America?
Or better did the militarist state bankrupt America?
I will leave the tax cut thing alone because these were in part covered by SS surpluses and inflating the currency, that is they are a financing effect.
What hit me is how noone ever asks if continual war that diverts resources from productive use has bankrupted the US.
To my observations the war machine, along with a few related wasting policies has made it impossible for the economy to grow enough to pay for (pay back?) social security surpluses when they are redeemed.
That said it is disengenuous for anyone to ask if a program to care for the masses is any less harmful to the US economy than militarism or the non military side of US government transfers for the wealthy.
The underlying issue: to keep the fruits of resources, and technology from the masses.
As a 71 year old male who collects SS, I have taken note of this back & forth for quite some time. I’ve listened to, read about how the ‘boggie man” is going to pop out of the closet, that SS is going broke, etc. The msm is in my mind, a has been, re; CNN on the downward plunge. So, I ask of you gentlemen, with all your combined knowledge, as you seem pretty much in agreement, not with the present group in Government, but show concern for Country, what besides talking among yourselves, do you intend to do besides talk on the lecture circut, write in your blogs as well as books? Any takers here?
Cas
I don’t know. Take your finger out of your nose and give it a sniff to see where else it has been.
Norman
have numbers, will travel.
Norman,
Actually getting people to understand the truth about the numbers, here, and in others forums, is enough. The problem is to get people to listen, to find places where they will listen.
The same problem existed with the war in Iraq, but not enough people had a personal stake. If there were a draft the war would be treated much differently. Every worker has a stake in Social Security.
It was common among my peers 20 years ago to think we would be better off investing for ourselves. Mathematically, since I have not ever been unemployed, it may even be true for me, but I now know that the ‘it won’t be there’ mantra is propaganda, and I have enough more experience than a thirty-year old to understand the value of a safety net for everyone.
Bruce
i ought to let this go, because Social Securty does not depend on my ego. But there is nothing in anything I have ever said that sounds like “fix it and forget it.” Indeed, unless Arne has a different memory, I thought the “trigger” was my way of “fixing it” so that it could be adjusted from time to time at need without need to “fix it forever” the way Biggs and Company claim is the high moral ground.
as good a place as any:
we look at the Report and talk about the Death Date of the Trust Fund because that is what we have been given. But the fact is that the depletion of the Trust Fund DOES NOT MATTER. In fact it was supposed to run out of money years ago, but since it did better than expected they can keep hyping the fact that it will run out of money as an excuse to “do something about Social Security.” “Social Security is going broke.”
NO! The Trust Fund was always going to run out of money. It is not like a Trust Fund that your great grandfather set up so you’d never have to work. It’s more like a Trust Fund that your dad set up so you could go to college. It is supposed to pay your way for a few special years and then run out. Leaving you in a better position to get a job.
The Trust Fund could run out in 2037 or 2043 or 2057 or 2012 and it would make no real difference to anyone. Social Security would (could) then return to full pay as you go and the Boomers would get the retirement they have already paid for. The post-boomers would have to pay a little more than they expected, but not more than they will get back in their own retirements which will last even longer than the boomers and have benefits that will be worth more.
We look at the Trust Fund because the clever magician has directed our attention to the Trust Fund so we can go oooh! and oh!!. But it DOES NOT MATTER.
Only because everyone talks about it, we have to too.
Arne is exactly right.
With a moderate amount of luck the stock market or your own business would be “a better investment” than Social Security. But Social Security is NOT AN INVESTMENT; it’s insurance. It’s there in case your investments don’t work out, or in case you never make enough money to be able to invest in anything… especially invest money you can’t afford to lose.
This is one thing that makes a lot of the ‘analysis’ of the “return on investment” from social security complete nonsense. The “average” beneficiary does not get especially high returns. But not especially low either. But the real deal is that the “less than average” beneficiary gets a far better return than he could have gotten in any market.
OF course the people who like to gamble, and those who think they are smarter than the rest of us just know they will do better than Social Security and they resent paying the “tax.” Experience shows that more than half of these people are wrong about how smart the are, or how lucky they turn out to be by the end of the game.
Experience also showed how hard it is for the smart ones to make any money in an economy where half the people are too poor to pay rent.
And of course, if you are so smart, you can do just as well investing the money you have left after paying your Social Security insurance premium, as you could if you didn’t have to pay it. And if you don’t understand why, you’re not as smart as you think.
I seem to recall you quantifying the 2% in dollar terms that implicitly suggested a one time fix. Or maybe one that would phase in immediately.
But not a big matter.
Actually not an unfair assessment.
This post shows that the numbers move in both negative and positive ways year over year. Over the last year opponents have tried to spin a totally predictable change in year end balances against projections as some momentous event that demands immediate action and a sign that the old numbers were inherently structurally defective rather than this year’s new numbers just variations around the mean.
I would not be at all surprised to see a move on the order of 0.10%, big but as the number series shows hardly unprecedented, any change less than that will be in the larger context inconsequential.
Speaking for myself I think of myself as opinion-maker to the opinion makers. The big names in the blogosphere don’t necessarily reference me directly but they know who I am and in turn I can see some of my arguments being echoed back. And the same is true of some of the policy folk on both sides, I have enough cred that I am not ignored.
I can’t possibly measure how far my eight or so years of commenting and then blogging on this has moved opinion and informed the overall debate but I know that the amount is north of zero. As a minor example I made some claims three or four years ago that Arne found implausible. So he dug into the numbers and found that the effect I was pointing out was real even as be maybe didn’t agree with me on the cause.
Knowing people who know people who really are the movers may not get you in the history books or even a gig on Rachel, but it doesn’t mean you didn’t contribute to the movement.
Bruce
what? you mean COLLUDE?
nah. i’ll take the incommensurate takes. If I ever figure out what they are.
all i know is that the Trustees have a table showing an increase in life expectancy of about (about, because in the first place my memory is not that accurate,and in the second place neither is their guess) six years over what it was the last time the tax rate was set, when it was about 12 years at age 65 for men. That makes about a 50% increase in life expectancy. Which more or less matches the 50% increase in the tax that will be required. Wait, wait, it’s only a 33% increase from 6% to 8%… true, but the last time the rate was set, the full six percent was not needed… the extra going into the TRust Fund (and death benefits and the like). Putting it all this way is a kind of a joke for me, because the bad guys have been screaming about a 33% increase in the tax to make it sound huge. BUt it is of course 33% of 6% or about 2%.
Anyway, the whole reason the ratio of retireds to workers is going to increase from 1:3 more or less to 1:2 is because the retired are going to be living longer. Which of course is a disaster, if you are an accountant and you think it’s “the government’s money.” But if you are planning to be one of those long lived retired, and you realize it’s your own money, it doesn’t seem like such a disaster.
Golly, gee, here I am looking at the horror of possibly living longer than my grandparents. What to do what to do? Well, I could plan to work until I am eighty, if anyone will give me a job and my knees hold out. Or I could plan to save a little of my money while I am working in order to have enough when I am too old to work, or want to work. But how much?
It turns out that how much depends on how much you will need to live on when you are old compared to how much you need to live on while you are young. A nice, somewhat arbitrary figure is about 30 to 40% of what you make now will see you though a retirement in more or less the style to which you are accustomed. So if you expect to work forty years and live for 20 years in retirement you would need to put away about 15 to 20 percent of your wages. (these are rough numbers).
But wait, what about inflation? what about market losses? Well here’s where the bad old government can help you out. If you can understand pay as you go with wage indexing. The government will take your savings now and use them to pay the bills of the already retired, and when you retire it will take the savings of the following generation and use them to pay for your bills, and when THOSE people retire, the people following them will pay…. etc. This way every generation pays IN in the money of its time, and COLLECTS in the money of THAT time, automatically solving the inflation problem. Better, if the economy has grown in the meanwhile, the wages will have grown, and the same percent of earning paid in will be more in value than what you paid in in your turn. So you get “real” interest as well. Pretty slick.
But the funny thing is that most people can’t understand this. And some very smart people don’t want you to understand it. They want you to think that somehow you are getting cheated because your money goes to pay some greedy granny today. And when you retire you will be a crushing burden on your children.
Well, to tell the truth, I think you can understand it if you will just stop and think about it for a few minutes.
nah, not a big matter. but you misunderstood. easy to do, given the way i talk sometimes.
Norm,
It’s not what the people on these blog sites do to make change happens. It’s what people like you do with the knowledge that the people here provide you with. That’s the process. They enlighten and we communicate their points to our friends, relatives and neighbors. We also have the responsibility of writing to our elected officials. There are three primary politicos that each of us has to talk to and to whom we have to express our intentions. You have two senators and a congress person. Write, call or email, but what ever approach you take be sure to stress that you’re not asking for direction. Be sure to make it clear that you know the score on this issue and that you’re watching their actions and listening to their words. They have to talk the right talk about the sanctity of the Social Security program and then they have to vote the right way. Remind those elected pols that you are a loud mouth and that you will influence all the people in your own circle to vote the same way. Multiply your vote.
Talk to your people. Influence the people you know. Don’t expect others to win a point for you or for me. We have to do the winning with the awareness that is provided here.
Bruce,
I don’t see the basis for you to act like you have anything special to offer on social security. If someone wants to become an expert all they have to do is to go to the social security website, download all the information, and make a model such as an excel spreasheet where they could run simulations and do what if scenarios.
I don’t trust your analysis for two reasons. First, I don’t believe that if you found something out with analysis that did not support your extreme position that you would not present it. You mishold relevant information to mislead. Second, I don’t know you as a competent quantitative analyst so I doubt your ability to do anything sophisticated.
Any one that looks at the social security trust fun knows its only value is as an accounting identity and a pre-passed legislation authorizing additional funding without the need to pass any further legislation in congress. What its not is a source of funds. What it did not do was to succeed in its original intent of increasing our capacity to pay social security as a nation, evidence the deficit. Your talk about the full faith and credit of the United States is a red herring since its not even a real debt. We could cancel it at anytime as a nation and this would probably raise our credit rating rather than diminish it.
Bruce,
I don’t see the basis for you to act like you have anything special to offer on social security. If someone wants to become an expert all they have to do is to go to the social security website, download all the information, and make a model such as an excel spreasheet where they could run simulations and do what if scenarios.
I don’t trust your analysis for two reasons. First, I don’t believe that if you found something out with analysis that did not support your extreme position that you would not present it. Your withhold relevant information to mislead. Second, I don’t know you as a competent quantitative analyst so I doubt your ability to do anything sophisticated.
Any one that looks at the social security trust fun knows its only value is as an accounting identity and a pre-passed legislation authorizing additional funding without the need to pass any further legislation in congress. What its not is a source of funds. What it did not do was to succeed in its original intent of increasing our capacity to pay social security as a nation, evidence the national debt. Your talk about the full faith and credit of the United States is a red herring since its not even a real debt. We could cancel it at anytime as a nation and this would probably raise our credit rating rather than diminish it.
Jack,
A lot of people talked about Scott Brown in Massachusetts. I voted for him. Do you want people to just be involved or do you just want them to be involved if they would vote the way you do. The latter is selfish although understandable.
Cantab
you are a fool. you don’t even understand a word of what you are talking about, but because someone else has come to conclusions you don’t want to believe you pretend to have something to say.
every goddam piece of “money” in the world is “only…an accounting identity.” our capacity to pay social security is the goddam payroll tax. since the Trust Fund is money borrowed from the payroll tax, paying it back out of general taxes is a simple matter of legal common sense.
it is true that congress can reneg on that debt in subtle ways that might get past a supreme court not known for it’s ability to tell justice from convenience, but that is the risk you take in any country, democracy or not. we are not goint to get to your libertarian utopia, or if we did, it would last about five minutes until your friends found a better way to get the results they want, but in the meanwhile we have to work with the congress we have, and the laws we have, and the numbers we have.
it happens that I have run the numbers. and Bruce is essentially correct although i put emphasis on different aspects than he does. I see no evidence that YOU have run the numbers, excel spread sheet or not, but the fact that you don’t understand a goddam thing about what you are talking about suggests that it wouldn’t mean much if you did. Your analyses doesn’t pass the sniff test. Ask Cas.
Coberly,
I have more credible on social security than you and Bruce because I say things that are truthful and logical. I say the social security trust fund is a total failure because it was supposed to increase our capacity to pay benefit to the baby boomers. Obviously since we are at around 12 trillion in national debt the objective to increase our capacity is pay benefits never materialized. Acknowledge this or accept your role as a spinner and a fool.
The fact is that we can cancel the entire social security trust fund and not pay any price in the international bond market. This is because the trust fund is a commitment to run an internal government program and has nothing at all to do with the nation’s credit worthiness from the point of view of holders of our nation’s marketable securities, both foreign and domestic.
There is no such thing as the congress reneging on its debt because individuals don’t have a right to receive social security. Things would have been different had we had private accounts but since you fools lobbied against it and won we have no right to “our” social security.
I don’t have any faith at all in you or Bruce running the numbers. This is because you’re so once sided and can never present the negatives of the system that none of your analysis can be trusted. I don’t do the spreadsheet because I don’t have the time to do it.
I do this type of work every day on the job. Rather than devote a weekend plus maybe more to take over the issue I would rather lear0n a new skill that I can use at work. You and Bruce are the ones that decided to jump into this issue. Too bad we can’t trust the veracity of what you present to us.
Dale don’t bother.
Cantab is a dead man walking. He is not welcome here and a heads up to Dan or me makes him go away. I am away from home and can’t make him disappear. Don’t argue with ghosts. Because tomorrow morning or maybe when I get home tonight you will wonder who you were talking to and why this message, which you may think you read, vanished.
Cantab has been assigned to the Ministry of Truth and frankly we at Angry Bear don’t care much about irony. Trotsky who?
seems to have run down
but i see a point that needs to be made
the interest on the Trust Fund, and the principle itself, on either the current Trust Fund, or the projected trust fund under the Trustees “2% now” solution would indeed have to be paid back by general taxpayers… who are not for the most part the same people paying the “excess” payroll tax.
but this is money the Congress borrows from the Trust Fund that it would otherwise have to borrow from somewhere else. the money would have to be found to pay it back in any case. It is not a question of Social Security imposing new burdens on the taxpayer. It is a question of Social Security helping the taxpayer (Congress, really) shift the burdens it takes on itself from one time to another when it will be arguably easier to pay. In other words ordinary borrowing.
Of course the borrower needs to be prudent enough to manage its affaris so that when the time comes to pay back the loan, it can.
The “insurance, not investment” point is very clear, if one allows it to be, for recent and near-term retirees. The 3-legged stool notion was that private pension, personal savings and investment and a government check would combine to provide and adequate and secure retirement income. Adequate is in the eye of the beholder. For some people, all three legs are shorter than for others. But we had reason to think that the government check would be of a predictable size, which allowed us to work out the details of the other two legs with greater certainty.
Well for most people for whom Social Security checks make up a substantial portion of retirement income, home values made up a big part of personal savings and investment. Many of those people have seen their investments lose value in retirement or on the way in. For those better-off individuals who also had sustantial financial investment, losses on private investment hit the paper part of the portfolio, too. Social Security has become a larger part of their likely retirement income. Privatization implies volatilization. Oh, and notive I didn’t mention pensions. That part of retirement income has gone down, for the US as a nation, regardless of the performance of assets. We just don’t do private pensions very much any more. Even in the best times, it was mostly the luckiest private workers had pensions. The Great Recession seems to mean that public employees will be likely to enjoy pension beneifts, too.
One thing that might just help is for the Norms of the world to reflect what they learn from the Bruces of the world in their own discussions and writings – writings to newspapers and lawmakers, in particular.
Not to be too sneaky about it, but one of the common tricks used by those willing to lie about Social Security (or any other policy issue) is to speak about some claim as if it is accepted fact. “It’s generally accepted…” or “Everybody knows…” or just “Since…” When Norm writes to his congresscritter, one of the things the congresscritter will do with the letter is try go mimic its language. If some evil-doer starts spouting about the unwelcome direction of the actuarial gap in response to the Trustees’ soon-to-be-released data, a reasonable thing to write to one’s congresscritter (really soon, so that they don’t get their foot in their mouth before you can stop them) is to write about “even bigger swings in the actuarial gap which have healed themselves without any policy action in the past, as happened starting around 1998…”
Both the 2% fix and the 4% fix have the mortality numbers built in. To me it boils down to “pay me now or pay me later”.
Norm,
Bruce, coberly, arne, et al are fighting the wrong battle. They continue to prove that the SS Trust fund is in close to balance, but the real problem is with the unified budget, where SS is just another spending line. That is how the politicians and the people are looking at it, with some justification.
Pretty ironic that Bruce is for the Stimulus and National Health Care spending, and is now upset that Social Security, his true love, is in danger of being “crowded out.”
kharris
i suspect a missing word in your last sentence.
the fact seems to be there is a worldwide assault on retirement security, public, private, and social security (which isn’t quite either). i can’t think of a good reason for this unless the Powers have looked ahead and decided that in the future “high mass consumption” will no longer be in their interest so they are preparing a world of minimum or sub-subsistence wages, with no possiblity of ordinary savings buying your way out of work while you have enough juice left in you to be worth sucking out by the bosses.
Sammy
I wish you had read and understood my comment (7:25 today) just above yours. The Congress has borrowed the money from SS. It would have borrowed the money from someone else if it couldn’t get it from the SS “surplus.” It would need to pay it back.
The Stimulus and National Health Care spending may or may not be good ideas. Using their deficit increasing effects as an excuse to cut Social Security is just dishonest.
What you seem to be saying is that “raising taxes to pay for what we enact” is the last possible choice. Even stealing money from widows and orphans is a better option than paying our own bills.
You can tell yourself that you don’t like the Stimulus OR Health Care OR Social Security, so there is nothing wrong with stealing from one to pay for the others, or cutting the others entirely. But as long as I have to pay taxes for things I don’t like, I feel like the basic concept of “democracy” requires that we both pay our taxes anyway, try to change the laws we don’t like, but don’t steal directly from the people who trusted us to look after their retirement savings.
And you have a hard time holding in mind the fact that it IS their money. social security is not like a tax in that the people put their money in trust so that it will be protected for them until they retire. when you pay a tax you are hoping of course that your share of the new submarine will protect you from dangerous terrorists, but you don’t expect a direct return of your cash.
Sammy said, “…..but the real problem is with the unified budget, where SS is just another spending line. That is how the politicians and the people are looking at it, with some justification.”
You really need to stop misrepresenting the facts. Social Security is not just another line item of a “unified budget.” The so-called unified budget is itself an artifact of decptive accounting. It is the very mechanism that was invented for the purpose of making the general budget look better than it was all the while that the Trust Fund was building the legally required and legislatively planned surpluses that would maintain Social Security’s ability to meet its obligation to its qualified citizens. The government is legally required to make legitimate payments to those qualified citizens. That’s why the liars are out there trying to convince the fools and rubes to let them change the law. The Trust Fund must be maintained under current law. The qualified recipients must be paid their benefits under the current law. The country as a whole has to pay taxes to meet the obligations of the many government programs that require funding. Social Security is one of those obilgations, but it has a seperate and defined revenue stream.
What are total anticipated payments over the next 20 years for SS?
Is there a projected year by year payment schedule?
Boomer demographics are well known and quantifiable so it should be fairly to easy to discern what SS may be expected to pay in say 2019.
I have a hard time following many of the arguments here as SS is merely a promise to tax workers and pay beneficieries in the future so all talk of surpluses, interest on surpluses and the like seem very abstract.
AndyC’
In that case it would be of great value to you to learn more aboout the Social Security program and the legislation that sets out the structure of that program. Knowing as little as your comment makes clear leads to your inabililty to understand the issues in regards to the Social Security program. One good example is the relationship between SS receipts from FICA contributions and the general employment situation as well as the strength of the economy during any given period of time. The more people that are able to find work and the more they are paid, the more contributions that will flow into the SS program. That’s not so easily predicted ten years out or, for that matter, even only five years out.
You see AndyC, that’s what all the fuss is about.
AndyC
jack is essentially correct. the predictions you ask for have been made to three decimal places. They are not especially reliable, but they aren’t obviously bad either. The problem has been that the implications of the predictions have been hyped beyond anything resembling common sense.
the bad guys talk about trillions and trillions of dollars. the fact is the predictions amount to a need for a tax raise that averages 20 cents per week each year over the next 75 years and declining after that… while wages are going up an average of 10 dollars per week each year.
but even more than that, we are invited every year to run around cutting our heads off because “the trust fund is going broke.” the fact is it was always intended to “go broke.” it was created to tide the system through “the lean years.” when it has done its job Social Security returns to “pay as you go” which is the way it works best. possibly needing that tiny “tax” (really “insurance premium”) increase so that the people can pay in advance for their own expected longer retirement.
so instead of raising your premium a few cents per week every year, the bad guys want to destroy social security altogether, and the “good guys” seem to want to destroy it by the slow death of turning it into welfare as we knew it…. paid for by “the rich” with “means testing” visits to the government proctologist every quarter to prove you are not rich.
“jack is essentially correct. the predictions you ask for have been made to three decimal places. They are not especially reliable, but they aren’t obviously bad either.”
Can you provide a link for projections over the next 10 years?
Andy,
see if you can pull up the Social Security Trustees Report for 2009. google it. be sure you don’t get the “Trustees Summary.”
If you have trouble, I’ll find the link, or ask dan to email me and i’ll send you my pdf which includes the Trustees estimates and what happens to them when my one tenth percent trigger is applied.
actually, there isn’t much difference between the Trustees and my numbrs for the first ten years, becasue as of 2009 there was no need for any action at all until 2026… except a total of three tenths of a percent tax hike (combined) in this year and next to be applied to the Disability Insurance,
three tenths of a percent, would be about $2.40 per week, but you’d only pay half of it unless you are your own boss. i think this would also solve the “cash flow” problem that some people are worried about: that is it would save the Congress from having to repay the money it borrowed for another few years.