Brave Sir Alan vs Sir Sniveling NewDeal: Orszag Frames Social Security
by Bruce Webb
And by ‘framing’ I mean as in Film Noir gangster movies rather than Lakoffian terms. (Apropos of nothing, Prof. Lakoff gave me the worst grade I ever got in college, but felt so bad about it I wanted to tell HIM to ‘buck up’. Long time ago.)
Peter Orszag has made quite a stir with a couple of Op-Eds this last weekend of which the most recent was Safer Social Security in which he cleverly indicts and then sentences Social Security with the following:
Nevertheless, Social Security does face an actuarial deficit. Current projections suggest that, after 2037, benefits would need to be reduced by more than 20 percent to match revenue. Measured over the next 75 years, the deficit in Social Security is expected to amount to 0.7 percent of the economy — not a huge amount, but a deficit nonetheless.
So it would be desirable to put the system on sounder financial footing. And that is precisely what the co-chairmen of President Obama’s bipartisan commission on reducing the national debt have bravely proposed to do. It’s too bad their proposal has been greeted with so much criticism, especially from progressives — who really should look at it as an opportunity to fix Social Security without privatizing it. Although the plan leans too much on future benefit reductions and not enough on revenue increases, it still offers a good starting point for reform.
Well this is going to take a whole lot of unpacking, and the only question is where to start. And a prosaic answer is ‘Under the fold’.
Orszag’s first move is to point out that Social Security faces an actuarial defict and defines the effect of that in terms of a ‘more than 20 percent’ cut after 2037, and then proceeds to quantify that cut as an actuarial gap of 0.7% of the economy. Already he is having things two ways. Lets say we adopted a plan of ‘Nothing’ in the face of ‘Crisis’, what would be the result on that actuarial gap? Well one answer is that the accumulated Social Security Trust Funds would be drawn down to depletion, which if nothing was done in response would require a 22% cut from the scheduled benefit. Now whether this cut actually even represents a ‘Crisis’ depends on your reaction to what I call ‘Rosser’s Equation’. Under the current schedule real benefits as measured in terms of a basket of good are set to grow by 100% over the seventy five year projection and account for a full 45% of program growth over that period, which can be seen in graphic form via this 2003 CBO Report The Future Growth of Social Security: It’s Not Just Society’s Aging. This growth in real benefits is such that even a 22% cut on Trust Fund depletion in 2037 would still result in a better real result for the retiree of 2038 with Rosser’s Equation yielding something close to ‘78% of 160% =125%’, in this context ‘Crisis’ means ‘25% better real check than my Mom gets today’. Which should pose two questions: one to the hardline deficit guy of ‘Well then Who Cares?’ and another to the New Dealer ‘How do we close the gap?’.
Taking the hardliner first. In his world Social Security ‘crisis’ takes two forms. The one cited most often is the actuarial gap between scheduled and payable benefits over the 75 year and Infinite Future Horizon, that is what it would cost to appease that New Dealer and deliver 100% of the schedule. And those numbers are expressed in three ways in the following Table from the 2010 Report: Table IV.B6.—Unfunded OASDI Obligations for 1935 (Program Inception) Through the Infinite Horizon, If we take as SS critics like to do the Infinite Future numbers we see a gap of $16.1 trillion which equates to 3.3% of payroll and 1.2% of GDP, or if we use the more traditional 75 year window we get corresponding numbers of $5.4 trillion, 1.8% of payroll (2.01% if you add in the requirement for a 100% reserve), and 0.6% of GDP. But what critics, and including Orszag here, glide over is that a policy of ‘Nothing’, if strictly adhered to resets all those numbers to zero at Trust Fund Depletion, the benefit cut itself wiping out that ‘unfunded liability’. Because the so-called ‘Unfunded Liability’ is not in a legal sense a liability at all, Congress can and has changed both tax and benefit levels to raise or lower that ‘liability’ and can effectively eliminate it altogether by simply doing ‘Nothing’. Meaning that critics can present either the 22% percent cut or that 0.6% GDP gap as being the definition of crisis but putting them both forward at the same time is just dishonest. Because the cut in and of itself eliminates the gap.
So a policy of ‘Nothing’ projects the following result: 100% of the scheduled benefit payable until 2037 with retirees in that year getting a roughly 60% better check than today, and then if the economic projections are correct (a big if) then a cut to a Pay-Go status in 2038 that would have initial benefits only 25% better than today and then a continued (if slower) growth in real terms from then on. How does this result remotely add up to crisis for the hardliners? Well it is a mostly unstated political calculation, they believe that when push comes to shove that then current retirees will demand that the full schedule be paid ANYWAY, no matter what the consequences. So what is the ‘brave’ answer to this future political showdown? Convince workers that ‘crisis’ doesn’t mean ‘25% better real check’ but instead ‘no check for me’ and so accept a phased in benefit cut that STILL ends up with most workers getting a worse deal than plain ‘Nothing’. And especially those workers who will have spent most of their projected retirement already by 2037. The SSA Office of the Chief Actuary scored the ultimate effects of Simpson-Bowles as a percentage of scheduled and payable (i.e. after cut) benefits at various income levels, which scores were mostly extracted in the following post here: More From SSA on Simpson-Bowles. And the results show that everyone in the top 60-70% of lifetime wage earnings comes out a loser, first taking initially small cuts from the schedule starting in 2010 that by 2037 have the ‘High’ and ‘Maximum’ earners taking the same cut by 2040 as ‘Nothing’ would enroute to a 35% or 41% cut compared to the schedule respectively by 2080.
Now why does Orszag insist that progressives should accept this cut for the majority of beneficiaries as the starting point for compromise? Because it isn’t privatization. Oh boy, oh joy we get to trade slow bleeding for amputation! Instead of say going for a complete cure.
Now that we know what result ‘Nothing’ would deliver for the typical beneficiary, that is a 25% better basket of real goods even after the reset, what would be the cost of a ‘Something’ that would actually deliver 100% of the schedule or a 60% better basket? Orszag and friends won’t even allow you to go there, by methods fair and foul they have prevented open discussion of what in real terms a revenue based solution would mean, and in particular any revenue based solution starting from across the board payroll tax increases. The unstated implication is that such solutions would be too costly for the average worker for the benefits accrued, but despite a lot of talk about ‘all options being on the table’ this one is not offered even in expectation of it being rejected. Because odds are it wouldn’t be, in comparison to the drastic cuts presented as an alternative the needed tax increases would be a flea bite.
CBO recently scored 30 different policy options to address the projected 0.6% of GDP gap between scheduled and payable benefits in a Report linked from and with key graphic reproduced in this AB post CBO Scores Social Security Policy Options. Now a lot of progressives insist the answer is easy: “Lift the cap” and depending on how you lift the cap and whether you allow that increase to come with a commensurate better benefit you can fix or even more than fix the gap via that route, see Options 4 and 6. On the other hand the Option closest to the Obama campaign proposal of taxing wages over $250k at 2-6% which is no 9 only closes 1/6th of the gap. But some of the traditional SS defenders at AB think this is largely the wrong way to go, in large part because the cap has serious political and philosophical advantages in keeping Social Security a worker funded retirement system rather than a welfare system. Now Dale, Arne and me are currently on record with the NorthWest Plan which is close to Option 2 which CBO does score as backfilling the entire gap, but I would be perfectly happy with a combination of Options 3 (raise FICA 0.05% a year for 60 years) and 5 (gradually restore taxable maximum to the traditional 90% of wage income level) which disregarding possible interaction add up to a 0.7% of GDP fix to the 0.6% projected problem (CBO) or 0.7% one (SSA) and allows for adjustments in the out years.
But for Orszag embracing a fix in perfectly alignment with most past adjustments and maintaining the traditional balance and structure of Social Security is just us sailing up some river in Egypt, in our stubbornness unwilling to admit the ‘bravery’ of Simpson and Bowles where that bravery involves bleeding away retirement security for the middle class while giving the truly wealthy of free pass. Well sorry, until ‘compromise’ is defined as putting the FULL RANGE of possible solutions on the Table and engaging in a numerically honest discussion of the tradeoffs, I am inclined to ignore Peter Orszag and instead listen to the long-time champion of Social Security, Dean Baker of CEPR:
Action on Social Security: the Urgent Need for Delay whose advice starts:
There is enormous public confusion (much of it deliberately cultivated) about the extent of Social Security’s projected shortfall. Many policymakers and analysts point out that projections from the Congressional Budget Office and the Social Security Trustees show the program to be out of balance in the long-term, therefore we would be best advised to make changes as soon as possible. This paper argues that supporters of the existing Social Security system should try to ensure that no major changes to the core program are implemented in the immediate future. It points out that:
1) There is good reason for believing that the public will be better informed about the financial state of Social Security in the future, in part because of the weakening of some of the main sources of misinformation;
2) Many more people will be directly dependent on Social Security in the near future. These people and their families will likely be strong defenders of the program;
3) The group of near-retirees, who may be the victims of early action, will desperately need their Social Security since they have seen much of their wealth eliminated with the collapse of the housing bubble; and
4) The concern over “maintaining the confidence of financial markets” is an empty claim that can be used to justify almost any policy.
Consider this post my little attempt to help out on bullet point one. ‘Nothing’-STILL the numerically proven plan since 1997.
In 10 or 12 years ‘Nothing’ will stop being the best policy.
At about that time we will have some experience with the numerical and political realities of spending down the trust fund. Much as I hate analogies, we will be over the top and actually able to see where we are going, so it will be time to plan our trajectory on that slope.
Actually letting the trust fund drop to zero and needing a 25 percent change would be a horrible result. Even if we were to do nothing to increase revenue, we would need to start reducing benefits in about 2025 in order to maintain a constant upward trend in the basket of goods the average (not the median) retiree could afford. And the confidence in that adjustment would be much more than twice as good when the timeline is half as short.
The first shot I took at how much revenue increase we need was an engineer’s approach, applying feedback from the size of the TF. I believe I adopted the term ‘triggers’ from coberly or MG. I don’t believe Congress would adopt using a feedback equation – it gives away too much control.
Changing the taxes (or the benefits), now, to close the entire projected IC gap would be nearly as bad as doing nothing in the 2030s. If the trustees guesses as to each of the components of their model as really the most likely, there is still a 50 percent chance that closing the entire gap would be too big a fix. They need to fix the problem 10 years at a time with an additional view to what will be happening 25 years from now. Now is a bad time to fix things because the 10 year projection and the 25 year projection have the TF going in opposite directions. 10 to 12 years from now it is probable that the will both be going in the same direction with about the right amount of time to decide what adjustment is really needed.
Hopefully, we won’t be in the middle of a recession or another bubble. One consistent result from looking at 20 years of reports is that the current conditions are weighted too heavily. Bad times result in reducing forecasts too much and good times result in increasing them. (Reason number 3 or 4 why now is a bad time to make adjustments.)
While I can understand Dean Baker’s political calculations, the numerical situation is enough to convince me to wait.
Totally agree. And I think Dean would as well, ‘delay’ not meaning ‘never’, just not allowing discussion to be hi-jacked by the alarmists.
If we consider OASDi on a combined basis then the time to move on both legal and policy grounds is the time that Social Security fails the test for Short Term Actuarial Balance, which I would put 12-14 years out, not enough different from Arne’s 10-12 to matter. If we agreed to disaggregate DI from OAS (instead of simply reallocating FICA from the latter to the former to synchronize their test failure dates) there is an argument for an immediate boost to DI which taken on its own failed the Short Term Test awhile ago while delaying any changes to OAS for the extra year or so it in isolation would continue to pass that test, that is acting on DI yesterday while letting OAS go to 2026. But however you slice it there is no risk taking Dean’s advice over the short term while we ramp up our educational efforts.
Let’s see, 2037 is 26 years into the future. Yes, I know, I’ve said this a few times before and some people want to over look the point. So one of you who wants to over look the limited projective validity of any economic prediction more than 25 years into the future please, give us an example of some such accurate prognostications that have taken place in the past and can now be verified?
I don’t think they can even do much of a job for 10 years. Numerical uncertainty is still as large as the change being contemplated. But at that time frame the managers can (probably) focus on keeping enough reserve without the issue of the reserve getting too large again.
This ‘frame’ does seem to typify the narrative du jour when there is any discussion of the negative reactions to the S-B proposal. Ruth Marcus of the WaPo heaps scorn on the crybaby negativists of the left and other pundits and media elites have been working hard to declare opposition to the proposal a sign of non-serious petulance. The implication is, I suppose, that us complainers want to have our cake and eat our kids’, too. But the people like Orszag want to make sure we all have crumbs, save for those people rich enough to be unconcerned about their retirement years or ill health.
Aunt Deb channels the Village so I don’t have to.
And if it was just Ruth Marcus I could shine it on, but both Ezra Klein and Kevin Drum have signed onto the Orszag ‘Can’t we just be adults?’ bandwagon in respect to SS.
well, no one is listening to us. and Peter Orszag has the ear of the President.
to simplify everything that Bruce, and Arne, and Nancy, and everyone says..
whether you call it a “plan” or not, the cost of closing the gap that Orszag says exists… even if it is thirty or seventy years away… would require a payroll tax increase of one half of one tenth of one percent per year. one half of one tenth of one percent of an average worker’s pay today is forty cents per week.
so what you have is a lot of shouting about fixing a problem that may or may not occur, and in any case won’t occur for 30 years, that could be fixed for pennies a week.
but we are being told, no, we have to add years to the retirement age, and adopt a rube goldberg scheme for adjusting benefits, and turn SS into welfare to make sure they can kill it dead, dead, deader than dead, the very next chance they get.
please, children, try to focus on this simple fact. then go out and get someone to listen to you.
Spot on. We know that capitalism has failed, and capitalist systems cannot afford to take care of older people at the current level of support. There are too many multi-billionaires who need a fifth private jet.
There is a fatal flaw in the Webb, “Do Nothing Plan”. If we do nothing we blow out the TF in 20 odd years (don’t bet on that 2037 date) and then we drop benefits by 20+%.
How in the world are you goung to get a 25-35 year old worker to sign up for that plan. Thay have to pay full boat only to get a fraction of what the boomers get. That is UNSALEABLE.
The folks at AB need to get out a bit and see what else is being written on this topic. You guys seem like you are holding up a gun and saying that SSA can’t be changed no matter what. What you seem to miss is that there is an even greater percentage of the population that is now saying that they won’t pay unless they get.
The Webb plan excludes the political realities of this. When you realize you are in the minority you might become more flexable as to what has to be done. There is no way this is going to end up with a plan that screws younger workers at the benefit of boomers. No way…
“If you don’t do nothing I’m going to shoot!” It’s kind of hard to visualize Bruce. Looks to some of us like it’s you and peterson and orzag holding the guns
if the young workers recognize that they are going to get more benefits because they are going to live longer, do you think they could come up with an extra twenty cents per week?
the reason the rest of the country even considers changing social security is that Peterson has spent a billion dollars telling them lies. And there are not many people who have the time to sit down and figure out what they real situation is. You, on the other hand, have no excuse.
You spin this with your 20 cents of week stuff and it proves my point. Sure that sounds cheap. But then you read on a bit and it is 20 cents a week going up for ever. So again, if you are 30 you look at a decade or so of programed increases. I tell you there is no support for that plan.
I wrote on this not so long ago. I know you folks don’t much care about my views on this. Fair enough. But if you want to get a little wiser on the issue we face read the comment section from the following (please skip my thoughts). You will not be so happy to read what younger people are saying. They will not support more taxes for SSA.
Just a thought, if the unemployed stays as high as it is, along with the percentage that just quit looking, then unless my math is foggy, then it’s accumlative, which means the percentage grows each year.Also, the fact that wages are stagnant, even dropping due to the growing amount of unemployed that the Business community considers available to fill jobs, that the going rate will be in the neighborhood of minimum wage, perhaps by 2020.
Now, if that is to be allowed, then certainly there will be a crisis in the trust fund, requiring cuts probably totaling more than 20%. By that time, I think we all can kiss the S.S. goodby. Of course, if that were to happen, then the “Violent Revolution” would probably have taken place, and all the S & B’s along with the Pete Peterson’s and the rest of the Wall street gang would be toast.
As I’ve said in the past, it’s up to you people who have standing & knowledge, to get the message out in every which way you can. It’s not enough to post here or other newsletter/blogs, for not everybody is privey to reading these. I’m not sure how to do this, considering that the Air waves & M.S.M. are controled by the very robber barrons behind this dastardly plot to turn the United States into their own little playground with 350 million slaves. One thing is certain, a counter move is needed to offset the disinformation being tossed about, educating the people, which then become dangerous to the ones with the bull horns when they see they can no longer manipulate the masses. I also wonder how the rank & file of the Tea Partiers are going to take their being used by their handlers?
Sorry for being so loquacious here, but I think it’s the age thing, sort of like prolonging life’s unfinished threads.
I wouldn’t bet on Mr. Krasting’s analysis any more than I would bet on anything except keeping the system as is with tax increases when and as appropriate. Of all the people here, I am the one who has the most experience of working and middle-income people and their views of the SS system. Here’s the deal.
People want to know that they can stop work without impoverishing themselves and that’s all. Believe it or not, most people don’t earn enough to worry about ROI. They’re lucky if they have enough money in the bank from paycheck to paycheck to keep the lights on. And, most people are going to reach a point long before age 69 at which they either can’t work or are becoming increasingly less able to work. People who earn their living by processing or manipulating other peoples’ money, don’t understand how anyone would ever have to stop working. The fact is you have to when you wear out. This is a fact, not a rationalization for laziness or lack of enterprise.
So, it is possible to pay a small tax increase out of every paycheck without grudging it. The reason is that most people quite rightly do not scrutinize the investment potention of $5 bucks every pay period is that a 6 pack of beer costs more. If you can afford a six-pack of Bud a week, you can afford a small FICA tax hike. And, most people don’t have a problem in the world with foregoing a bag of Doritos as long as they can have store brand potato chips with their Bud.
Farther up the earnings ladder, SS is a guaranteed base on which to build retirement income. So, any reduction in future benefits means you have to scratch up money from somewhere else to make up the difference. There is little prospect of finding that somewhere else to get the money from. Salary increases? Maybe not for a long time, based on recent trends. New technology? Just as likely as not to cost you a job, not create one for you. Stock market? Next question. Unless you were born rich or stand to inherit substantial money, you’re not going to be able to make up the difference easily or at all. Right now, people nearing retirement age are down about 6 Trillion bucks in assets for retirement because of the recent bubble and wave of unemployment. A couple of generations of people fit in this category, late Boomers and Gen X’ers among them.
Now, tell me again that the deficit is the most important problem the government faces and SS is standing in the way of resolving that problem. There’s plenty to worry about now and 2037 or 2026 is far enough away that we don’t have time to fool with that for a while yet. NancyO
Wait, wait, let me get this straight: you suggest that the most representative views of “younger people” come not from polls, voting patterns, or focus groups, but — the comments section *on your blog*? No wonder no one is taking you seriously here.
Right on, Norman!–as we used to say back in the 60’s. According to conservatives, the 60’s Revolution ruined everything, sapped our country’s moral strength, turned innocent girls into feminazis, and encouraged formerly patriotic citizens to question authority. Whose authority? Why the authority of conservatives, of course. So, feel free to wax eloquent, Mr. Norman. I will emulate you if I can. NancyO
A little OT, but who/what is the ‘Village”?? I assume its Kevin Drum (who I read) and Ezra Klein (who I don’t) but who/what else? Is my favorite illiterate blooger M Ygleasious in the Village?
Back oon topic – good post and nice add by Arne. Once again pounding home the need to move swiftly, quickly, and with all due haste to ‘do nothing!’
Islam will change
” If we do nothing we blow out the TF in 20 odd years (don’t bet on that 2037 date)”
using Krasting math which is better than CBO and SSA math because —-
“and then we drop benefits by 20+%.”
from a baseline that is 60% higher than today’s. Leaving the retiree of 2037 (40 years old today) with a check only 25% better in real terms than a similarly situated retiree gets today, and back on a path that continues to boost that percentage over time.
Krasting, you simply refuse to engage with any of the data points we present instead prefering to substitute your own calculations without ever seeming to supply the reasoning beneath them. Younger workers who only ‘know’ the lies the ‘serious’ people like Orszag have been feeding them are naturally going to look at Social Security with a jaundiced eye. That is simply the product of being a low to zero to negative information participant in this discussion. Arguments that start from the proposition: “No one my age believes Social Security will be there” fail because of the GIGO factor.
Social Security under the ‘Nothing’ plan is still a very good deal for those 25-35 year old workers. They literally don’t know it because they spend too much time at Zero Hedge and too little time at ssa.gov and cbo.gov comparing and contrasting those official projections. Instead they are stuck accepting data sets produced by what from my perspective are little better than charlatans intent on selling the Leninist Strategy. http://www.cato.org/pubs/journal/cj3n2/cj3n2.html (11th article of this Fall 1983 Cato Journal Social Security Issue).
In the beginning it was difficult to determine whether you were Knave or Fool on this issue, that is willing participant in Butler and Germanis’ open strategy of undermining faith in Social Security via half truths or a victim of it. After awhile your stubbornness and refusal to engage on the substance mostly made that a moot question, which is why our initial response of patience and attempted education has over the last few months given way to outright ridicule. Because we wasted many hours under the assumptions that you were one: educable on this issue and/or: acting in good faith. On the evidence neither of those assumptions was justified.
The downside is that it allows you to come off to newcomers as the aggrieved victim of closed-minded ideologues. Itself a perfect example of the ‘Brave’ vs ‘Sniveling’ framing I highlighted in the post
Norman you got the big picture right and all I have to say about that is “Right On Brother!”
But when you get down to the nitty gritty the percentage of the cut at depletion is not as sensitive to the amount of screwing workers get in the meantime, Social Security recipients mostly sharing in both the upside and the downside with the replacement ratio staying pretty much the same under the various scenarios.
That is a policy that targets increases in Real Wage and reductions in income inequality serve both the interests of workers and future retirees in roughly equal proportions. In this case worker Solidarity can actually be the Tide that Raises all (Worker) Boats.
If you don’t have the data, argue the analysis. If you have neither cite random popular opinion spouted by sockpupets. Nice.
And to be fair to Mr. Krasting I have no doubt that a random sample of billionaires think he’s right.
The Village is the name that the leading lights of the left blogosphere give to that group of DC insiders centering around the Washington Post who have simultaneously assigned themselves the roles of determining who it is that really belongs in Beltway society (in reference to the Clinton’s “it is not their place, it is our place”) but also claim a miraculous ability to channel what ‘Real America’ thinks about anything.
The Ur-Villager was Sally Quinn but full time members are David ‘High Broderism’ Broder, David ‘Bobo’ Brooks, Tom “Everything I Needed to Know about America I Learned in a Cab Ride from National Airport” Friedman, and of course Maureen Dowd. Yglesias, Drum and E Klein are not yet full assimilated to the Village Borg, but show serious signs of falling into the same ‘serious vs shrill’ dichotomy that doesn’t allow factual determinations of who was actually right on the historical facts (about WMD, the ‘Washington Consensus’, the Housing Bubble etc) to govern who is a ‘serious’ person eligible for Village membership as opposed to ‘shrill’ folk clinging to outdated ideas about things like social and economic justice.
The power of the Village extends beyond the Beltway and explains why the two most important Americans (as measured by invitations to the Sunday morning news shows) are a disgraced former Speaker (Newt) and the Flip-Floppinist Politician in America John McCain. Followed closely by Joe Lieberman.
As BW suggests – look at the numbers. In this case, consider what will happen if taxes are increased. Boomer’s benefits will not go up. Those benefits are set by (what will be) history. So where will the extra money end up going? To the younger generation’s benefits. So, increasing taxes leads to increasing the ratio of benefits to taxes.
Do not depend on your intuition. Actually look at the math.
i think your logic unit has gone kablooie. first you yell at us for not caring about the young getting shafted … but it’s the Bowles Simpson plan that does the shafting. or haven’t you read it.
meanwhile the 20 cents per week does not go up forever. it plateaus at about 2% of payroll. and while it is going up 20 cents per week per year, the projected pay increase for the same workers is ten dollars per week per year.
AND the reason the tax has to go up is to be able to pay for the longer life expectancy of the people paying the tax. unless they want to sit in the unemployment office until they are ready for the rest home..
“But then you read on a bit and it is 20 cents a week going up for ever. So again, if you are 30 you look at a decade or so of programed increases. I tell you there is no support for that plan.”
Willl someone explain this to Mr Krasting? Because he won’t believe it if I tell him.
Sure enough, after a decade the twenty cents per week per year has grown to two dollars per week… relax, it’s still growing at twenty cents per week. This is not an exponential progression.
I realize that Krasting and the youth of America are innumerate, but surely they can be made to understand that two dollars per week is not going to be an intolerable burden if it’s purpose is to preserve their Social Security checks, which should run about 20,000 dollars a year for 20 years.
Or, consider the guy who is 32 years old today. After thirty years of twenty cents per week per year increases, his SS tax has increased by Six Dollars a Week! Well, now, this is getting serious. But, wait, the increase has AVERAGED only three dollars per week over all that time. Hmmm. 3 dollars per week… that’s 150 dollars per year… over 30 years…. that’s 4500 dollars extra SS tax this poor, formerly young person has paid just to keep his 400,000 dollars in lifetime benefits… clearly, it’s not fair.
[yes, i know, it’s “extra” tax, not the whole tax… because believe it or not SS isn’t free. that 400,000 dollars has to come from somewhere.
But i’ll let you in on a little secret: EVEN IF it turned out that worker paid more than he will get… he won’t, but let’s pretend… Social Security would still be a hell of a good deal. Because when you are 62, or if you are lucky 65, knowing that you CAN retire if you want to is, as the add says, priceless.
The reason SS had to be invented is because there a ten million Krastings out there who just know they are going to get rich on the stock market and won’t need to save any of their own money while they are working. What SS does is force them to save, and then just to be fair about it, guarantees that their savings won’t be stolen by inflation or a bad day on the market, or just not getting around to putting the money in the bank.
“The reason SS had to be invented is because there a ten million Krastings out there who just know they are going to get rich on the stock market and won’t need to save any of their own money while they are working.”
I think you lose a few people with comments like this. There ARE ten million Krastings out there who will save enough of their own money to invest in the stock market and won’t have to depend on SS as much as the median (or even average) paycheck earner.
SS is for the 100 million who could also earn that kind of return if they could just put away a little more. Next year, when the kids don’t need braces. Next year, when the family reunion airfare doesn’t sap the savings account. Next year, when the wife goes back to full time. Next year, when we have recovered from being laid off for 4 months.
SS is also for the next 20 or 30 million who don’t have jobs that ever let them think about saving.
The group you are really thinking about is that portion of the 100 million who think that SS is keeping them from being part of the 10 million.
I did laugh at you descriptions… 🙂