Social Security For The Young
by Dale Coberly
Social Security For The Young
Intelligence Squared U.S. (corrected link: http://intelligencesquaredus.org/) is sponsoring an Oxford-style debate Tuesday evening in Manhattan. The program is entitled “Grandma’s Benefits Imperil Junior’s Future” The resolution:
“Commitments made to seniors decades ago failed to foresee the harsh economic realities of the present. Do entitlements saddle our children with unmanageable debt, asking them to sacrifice their future for the sake of the elderly? Social Security, Medicare, and Medicaid were created to provide a social safety net. But if we cut these programs, are we balancing the budget on the backs of the aged and sick, leaving behind society’s most vulnerable?”
Arguing for the motion will be Fox “News” commentator Margaret Hoover and U.S. News and World Report editor-in-chief Mort Zuckerman.
Arguing against will be former DNC Chair and Vermont Gov. Howard Dean and Roosevelt Institute economist Jeff Madrick.
Does keeping promises to the elderly mean sacrificing our children’s future?
The answer is, “NO! This is nonsense. Social Security has NOTHING to do with balancing the budget.
But while you will hear the lies the enemies of Social Security have been telling for 75 years, it is not certain the defenders of Social Security will explain the simple truth.
The simple truth is that Social Security has nothing to do with “the harsh economic realities of the present” except to provide the insurance payments that people paid for “just in case” of harsh economic realities like the present.
Social Security is NOT in trouble. It is not broke. It is not going to go broke. It can’t ever go broke.
Unless you believe the lies and let them break it.
With NO CHANGES AT ALL Social Security can continue to pay “all” benefits forever at a level that is “enough” by today’s standards.
So why do we keep hearing that is going to go broke and create huge budget deficits… unless we raise huge taxes on the young… or “the rich”?
Well, because there are highly paid liars — they call them “non partisan experts” — who are paid to tell you this.
And you, dear reader, will have to think very hard to free yourself from the lies. They have been telling you lies since you were a child, charitably giving “lesson plans” to the schools, so that well meaning, but not very well informed, teachers would teach the lies to children too young to know they were being lied to. So you would grow up and every time you heard “Social Security.” you would think, “it won’t be there for me. it’s going broke.”
And even those people who partly know better can only say “it’s not going broke… not yet anyway.” or “it’s not going broke, it will be able to pay 80% of benefits… so it’s only 20% broke,” or “it’s not going broke… we can make the rich pay for it.”
Well, it’s not going broke at all. Not even one percent. Not ever. And it doesn’t need to be fixed. And the rich don’t have to pay for it.
In fact the whole point of Social Security is that it is NOT a tax on the rich. It is NOT welfare. It is not even “government spending.” It is the only way that workers have to save their own money for their own retirement protected from inflation and market losses.
Social Security is a very smart way to protect workers savings by a simple idea called “pay as you go with wage indexing.”
The way it works is something like this. [There are some details here that I have simplified to make the point easier to follow. They do not change the basic idea, or the “cost” to workers in any important way.]
When I was young I made a dollar an hour. If the payroll tax then was what it is today [it was a lot less] it would mean I paid about 6 cents an hour to Social Security, and my boss contributed another six cents. My 12 cents, times 2000 hours per year times about 100 million people [if the population was the same… it was a lot less] would add up to enough money to pay the retirement needs of about 50 million old people [there were a lot fewer]. Fifty years later, workers doing the same work I was doing are making about ten dollars an hour. So they contribute about $1.20 to their Social Security. That means that $1.20 times 2000 hours per year times 100 million people would be available to pay the retirement benefits of 50 million retirees. In other words, to pay my current Social Security benefits, there is ten times as much money available as i was paying in… with no change in the tax rate.
Some of this is “just” inflation, but enough of it is a real increase in wages over that time. This real increase in wages translates into a real effective “interest” on the money I paid into Social Security, allowing me to collect more than I paid in. Even the part that was “inflation” would have been hard for me to earn in interest over those fifty years.
Now it happens that over that time, the ratio of the number of beneficiaries to the number of workers has changed, but so has the tax rate. The ratio of workers to beneficiaries has gone from ten to one to about three to one. So the tax rate has gone from 2% to 6%. That is not a “terrible problem.” It merely reflects the gradual phasing in of Social Security. This meant that on a pay as you go basis the early worker-beneficiaries got a bargain. On the other hand, those early workers had supported their own parents and paid for welfare for others, lived through the depression and fought World War 2, and served in the draft, and built the infrastructure that makes it easier for you to make money than it was for them. But it does not mean that later worker-beneficiaries are bearing a cruel burden. They are paying in no more than they will get back. In fact they are paying less, because of that pay as you go effective interest we just talked about.
If there were no Social Security you would still have to save at least as much money as you now save via the payroll “tax.” Moreover you would have to earn at least enough interest to pay for inflation, and you would be lucky to earn enough interest to equal the effective interest that “wage adjustment” through Social Security provides you. You might do better than that. Or you might do a lot worse. Social Security is insurance to prevent you from doing worse. The “rate of return” is not bad, but that’s not the important point. The important point with insurance is the difference between “enough” and “not enough.” Social Security provides you with enough to retire if all else fails.
The hardest part of saving enough on your own would be actually saving the money in the first place. Most people can always find something more important today than saving money for tomorrow. And then tomorrow comes sooner than they expect. The second hardest part would be keeping up with inflation. And the third hard part would be not losing it all to a bad investment or just a bad decade on the stock market.
That’s basically how it works. No tricks. No magic. No anxious hopes. No “if only’s”. No greedy geezers. No taxes on the rich. No trips to the welfare office. Just you saving for your own basic retirement. There is no reason this can’t continue forever.
So why does “everybody know it’s going broke and it won’t be there for them”?
Because everybody has been lied to. You have been lied to your whole life, and you will have to work very hard to understand that. All the little lies will pop into your head saying, “No…it’s really a Ponzi scheme.” “no, it’s really greedy geezers,” “no. the return on investment is really lousy.” “no, the return on investment is really too generous.”
It’s not going broke. Ever. But here is why they get away with saying “it” is.
Back in 1983 there was some danger it COULD go broke. There was a lot of inflation and a lot of unemployment at the same time, and the Social Security tax rate had not been raised enough to pay for the benefits the workers would need. [it was 8%]. They fixed that problem then by raising the rate to 11.4%, scheduled to rise to 12.4%. But this rate was actually higher than needed to just pay for Social Security’s needs on a pay as you go basis. The extra was put into a Trust Fund — that means it was saved in a legal way so the money, and the interest it earned could only be used to pay for Social Security benefits. So in effect the Baby Boomers would be paying in advance for their own retirement needs above the normal pay as you go rate. This Trust Fund is exactly like a savings account you might set up to pay for your kid’s college. It grows until the kid goes to college, then it is draw down to pay for his expenses. And it runs out of money about the time he graduates. So the Social Security Trust Fund is expected to run out of money just about the time the Baby Boomers run out…. of a need for benefits.
It is this running out of the Trust Fund that the politicians and journalists point to and shout that “Social Security is going broke.” But the Trust Fund is NOT Social Security. It’s a bridge fund to help pay for the Boomer retirement. It is SUPPOSED to run out of money.
After that, Social Security goes back to “pay as you go with wage indexing.” And it can continue on that basis forever.
But there is one more little wrinkle in the story. While the Trust Fund is paying for the Boomer retirement, the “young” are going to be living longer than their grandparents did. If they are going to be living longer, they will need to save a little more for their retirement.
Or they can wait and not retire as soon as they might have wanted. Or they can retire on time and take a little less each month in order to make their savings last the longer time they will need it.
As a matter of fact, with no change at all, Social Security can pay for them to retire on time, and pay “all” benefits over their life expectancy at a monthly rate that would be considered “enough” by our standards today. But because the people of that time will be making about 60% more (real) money than we are today, they may want to retire at the same higher standard of living… that is keep the same monthly rate of benefits that people get today (which would be worth more than today’s). If they will want to do this… keep the same “replacement rate” and the same retirement age, they would need to raise their savings rate (payroll tax) about 2% for the worker and 2% for the employer. This will not be a hardship for them because they will be making 60% more than you are today. And the really good news is they don’t have to do this all at once. In fact it would be better if they raised it about a tenth of a percent per year over the next twenty years. They would never notice the increase… because their wages are going up. But they sure would notice having to put off their retirement, or having to live on a pension that was “enough” for their grandparents, but won’t buy what the people living in the same time and in the same neighborhood are going to “need.”
So Social Security cannot go broke. It can always pay “all” benefits. But you will have to defend it from the liars, and you will have to decide what tax rate you are willing to pay in order to get the level of benefits you will want at the age you will want to retire.
To put it simply, if you want to keep the same retirement age, and the same relative replacement rate you would need to raise your tax rate at least one half of one tenth of one percent per year… that’s forty cents per week in today’s terms.
Or you could take the chance of having to work for the boss until you are ready for the glue factory. Even if you don’t want to stop working when you are 65, or 62, you may like the idea of having your Social Security to back you up while you try to do something really worthwhile with the rest of your life.
But you are going to have to undo a lot of lies if you are going to save your Social Security for your own needs.
Small note on math:
The average worker is making 1000 dollars a week today; he is paying 60 dollars a week for his Social Security, and his boss is contributing a matching 60 dollars. This leaves him with 940 dollars a week to live on (and pay other taxes). The average SS beneficiary gets about 400 dollars a week.
In 2040 or so the average worker will be making about 1600 dollars a week. With no change in the payroll tax, he would pay 96 dollars a week into SS. his boss would match that. leaving him with 1504 per week to live on… The average beneficiary would get 640 per week…. IF he wasn’t going to live longer. To make the money last a life time that is about one third longer he would have to settle for 480 dollars per week.
Or he could have raised his payroll tax by 2%. then he would pay a tax of 128 dollars per week, and his boss would match that. leaving him 1472 per week to live on … And the average beneficiary would get that 640 per week without having to delay his retirement for years. Note the trade off. He gives up 32 dollars a week out of 1500 while he is working in order to gain 160 dollars a week out of about 500 while he is retired. And this doesn’t even count the gain that worker will get from the “effective interest” we talked about.
Look at those numbers. It’s hard for young people to really understand that they are going to get old, and they are not going to want to work until they are ready to die, or may not even be able to work. You are going to have 530 dollars more per week after tax than you have today even if you raise your own tax the 2% that would be enough to allow you to retire young enough to enjoy it, with enough money to live about the way your neighbors live… the way you lived before you retired.
This is not a crushing burden. It’s called being richer, and using some of your extra money to pay for a longer, happier retirement.
And it has NOTHING to do with the Federal budget. It’s you paying for your own retirement. IF you are smart enough to keep them from stealing it.
The billionaires’ minions in the government stole the excess SS receipts to pay for war and tax cuts while they took bribes and allowed (“independent” fed) the US currency to be arbitraged, making for the few fabulous personal wealth, to be bailed by the “we the people”.
The US spends as much on war profiteering as the self funded SS pays out to its contributors.
First, cut out war.
Then raise taxes.
Madrick has done the research on the greed. What do Hoover and Zuckerman, propagandists have to say?
coberly,
What’s funny is I am distantly related (on wife’s side) to Margaret. So it will be interesting to see how this pans out.
BUt as I have pointed out before, the only reason we are in this situation is becuase the Democrat President Obama is leading the charge…a Nixon goes to China event if I ever saw one.
Islam will change
Madrick and Stiglitz visited the NY camp at Occupy wall st.
I am reading Madrick’s book: http://www.amazon.com/Age-Greed-Triumph-Finance-Decline/dp/1400041716
Insightful!
Great article Coberly, but it is not being communicated to the common folk. It does not help when so called “non partisan” commentators–Little Tommy Friedman promoting his new book on C-Span claims to be non partisan and then says that we need entitlement reform or we will inevitably decline. Then we get the constant little lie of entitlement reform which lumps social security with the real problems faced by medicare which is really the problem of providing health care which was not solved by ObamaCare. Finally, we have a president who ran as a Democrat, but has shown outright distate for the working–and non working people- of this country and has never been supportive of social security including trying to weaken it in a highly ineffective attempt to boost the economy. Harry Reid is about the only politician I know of any stature who just said that social security is fine and leave it alone. If we had more politicians who would just say that maybe we could actually deal with the real problems not the made up ones, but I fear that when Obama was elected in 2008, that social security was doomed. I go back to the best chance to save it is to hold onto the Senate–I think it will require a majority because the GOP is not going to renew the filibuster rule if they get a majority–and hope that President Romney sees that his re-election chances are improved by leaving social security alone.
The important part is that somebody has to pay for Grandma’s retirement. Scoial Security is inusrance by spreading risk across generations. So if your kids are ne’er do wells and can’t support you Social Secuirty is there. And if your grandma blew her life savings on bingo Social Secuiryt is there to keep her from having to move into the guest bed room. The transfer is going to happen, Social Secuirty provides insurance from idiosyncratic risk.
Buff
yes, Obama is badly informed about Social Security. but that’s not surprising considering that everyone has been lied to for such a long time. and he surrounds himself with people who… uh… go to the same cocktail parties as the liars.
Rob
Social Security also provides insurance from collective risk. Those bad days on the stock market don’t happen to only imprudent people. And inflation is the huge risk that Social Security is specifically designed to finesse.
But you are right about Social Security being the best way you have to keep from having your mother in law come live with you.
btw
it’s not a “transfer.” except in the sense of being a transfer from your young self to your old self.
the whole point about Social Security is that it is NOT a “government transfer payment” or a way to “transfer wealth” from the rich to the poor. It is simply a way for workers to insure their own savings from the risks of inflation, market losses, and some forms of personal bad luck, like death, disability, and to some extent failure to thrive, or even personal improvidence.
It prevents “improvidence” by that “tax” thing that forces you to save even though you know you are going to make a million on the stock market.
ilsm
while i think you are morally right in the larger sense of the Congress’s intentions and self deceptions, and about the causes of our present deficit and “harsh economic times,” I am trying to make the point here that Social Security has nothing to do with any of this.
If the Congress pays back the money lent to it BY Social Security, there is no harm, no foul. Even if it does not pay it back in a timely way, there is not much harm. The Boomers will get the retirement they paid for, and the post-boomers will pay a little higher tax than they expected, but they will still get the retirement they pay for.
The important thing is not the Trust Fund debt owed TO Social Security, but the fact that Social Security itself can keep on providing a secure basic retirement… and other insurance… forever. Whatever the Congress does…
except change Social Security itself. And that is what “the young” should be trying to prevent.
“But because the people of that time will be making about 60% more (real) money than we are today…”
Not if the Social Security “fixers” can help it! The “magic” of compound interest is that unconsumed rentier income has to take an increasing share of total income just to stay even in terms of return on investment. For a while it can do this just by expropriating a larger share of productivity gains. But eventually maintaining rentier income requires cutting into the flesh and bone of the social wage.
lsm,
Can you tell me what the left’s latest version of a Tea Party movement that the Occupy Wall Street want? And why are they not in front of the White House?
Thanks
Islam will change
Terry,
We do need entitlement reform – not SS (which is fine) – but in medicare/medicaid. The problem is, IMHO, they lump SS in with the other two becuase that’s were the money is. I also believe, as I’ve stated before, they really don’t want to pay back the Trust Fund out of the Gereral Fund. YMMV
President Romney (or any ‘R’) will not be doing anything to SS. See Bush’s half-hearted attempt back in ’05. It barely got started before it was blasted off the table. The Reps won’t be touching SS anytime soon. But Democrats CAN gut FDR’s signature New Deal effort. That’s been the entire concern from the start.
But its nice to see the left showing some gumption to protest a D President when if there was a R in the office right now they would be going bats**t insane. I mean the anti-war left disappeared right after the swearing in and hasn’t been seen scince.
Islam will change
This article is very misleading
If the payroll tax then was what it is today [it was a lot less] it would mean I paid about 6 cents an hour to Social Security, and my boss contributed another six cents.
The writer states that some fifty years ago they paid 12% total social security tax. This is nonsensical. You didn’t. In 1960, the employee paid 3% and the employer paid 1.5%, for a total of 4.5%.
If Social security is so solvent why has it constantly had to increase taxation in order to remain solvent?
At the very least, it must be admitted that the original parameters were fraudulent. Use whatever word you want. Not sustainable. Underfunded. BS.
The fact of the matter is that all defined benefit plans are intellectual frauds, because no one can accurately predict the future. Period.
I prefer the honor your father and mother for the industrial age presentation. There is a flow of money to parents, but it is nothing we have not been doing for the previous 10,000 years. I prefer that because you will never convince somone who was inclined to think a “transfer” is bad that there is no transfer. But you should be able to convince them that it does not matter in the way they thought it did. Yes, there is a transfer, but it is not to people who are simply accumulating funds, it is to people who did their part in providing for their parents (as well as us). So, when we do our part instead of trying to “reform” SS, we will be taking part in a program that can go on forever.
Arne
you are exactly right. but as in so many things. a thing can be both one thing and the same thing called by a different name.
i am emphasizing here the “you pay for it yourself” side of SS because that is the side under attack by the “we can’t afford it” meme.
of course it is also the case that “paying for” the generation that fed us when we were children has been the rule of decent people since about a million years ago (the Neanderthal did it), and Moses formulated the rule with “Honor your Father and your Mother” and Jesus reminded them that, yes, it was all about money. All SS is, is that rule brought into industrial times when the family can no longer be counted on to be able to pay for their own parents, let alone the old folks whose children have all died, or become poor themselves.
Terry (Buff can listen in)
Medicare as it was originally conceived could solve the problem with medical care costs. But they have turned it into a part – welfare scheme. And as long as “the rich” are paying for it they won’t let you raise the tax so you can pay in advance for your own medical care costs. They would rather let you pay for part of them, and reach old age when they tell you you don’t have “enough” and you have to find a way to pay co pays or for supplemental private insurance… out of your pension. It’s a stupid or cynical way to destroy Medicare. And it is the way they are going to destroy Social Security itself… cut the tax below “enough”, turn it into part welfare or part private “investment” and then when you are old tell you you don’t have enough, and tell you to go to the employment office and apply for a job at Wal Mart.
The way to “fix” Medicare is to raise the tax enough to pay-as-you-go for the current needs of the already old… which turns out to be the same as paying in advance for your own needs. Sorry that so many people don’t understand this dual aspect of money saved… but it is the way money works.
When you are old, your costs will no doubt be more than you paid in, but the generation following you will have more money, and by paying for your costs, pay as you go, they will also be paying for their own future costs… which the generation following them will help pay for.
No one gets hurt. This is not a Ponzi scheme. It is just a smart way to “pay for” your own future needs when there is no other way to protect yourself from rising costs.
Starve the Beast at work.
Run up deficits, such as by waging war while lowering taxes. Wait for the eventual financial crisis. Tell the people that we cannot afford to keep our promises because we borrowed too much in the past, and throw in some other scary lies. Throw grandma out in the street.
Truman, Eisenhower, Carter, Bush I and Clinton all paid down US debt.
The current rulers’ greed and fianancial fennagling want to get off scot free on the 99%.
Occupy Wall St!!
buff,
Freedom, with human dignity.
The first line of the declaration of independence, the one which got the indentureds and all to take up arms.
“All men are created equal”.
And that banks’ money as Jefferson said is a horrid threat to liberty.
A country for the 100% not the one percent.
You don’t have to listen.
separate reality
you are like the ignorant savage who sees a motor car for the first time. he demands to see the demon that makes it move. the driver tries to explain to him about gasoline and carburetors and spark plugs and pistons and gears and wheels…
and when he is done the savage says, ugh, but where-um demon?
but you are dumber than the savage. after watching the car run around the country for ten years the savage might still be looking for the demon. but you would announce that since there is no demon the car cannot move. period.
contrary to your prediction, that fraudulent, underfunded, unsustainable Social Security has been working for seventy five years paying everyone more than they paid into it, preventing poverty in old age, and helping keep the economy from collapsing because people try to save every dime they get… instead of spending or investing… because they are afraid they will starve when they are old.
“If Social security is so solvent why has it constantly had to increase taxation in order to remain solvent?”
Solvent! It currently had provided $2.6T for tax cuts and war profiteering.
Greenspan and Reagan decided money needed to be “put away” because of the high birth rate, low infant mortality among the men and women (my parents) who suffered in winning WW II.
It was not such an obvious scam until Greenspan helped Bush II cut taxes and run wars for the profiteers on the SS tab.
I suggest you pay SS back before any foreigners’ T Bills.
ilsm,
You didn’t say anything. Just a bumber sticker. What do they want? And why are they not in front of the White House?
(BTW we are all created equal, what we do from there is up to us).
Islam will change
coberly,
Other than you, I have not heard anyone talk about converting Medicare into a SS type entitlement. That might solve teh problem (I do not know) but its not on anyones radar.
And we really do need to bring cost control to these programs.
Islam will change
Reality,
Since no one can predict the future what would you suggest? What would be better or do you think there is no way to provide for the future? SS is flexible enough to have honored every single promise for more than 70 years. all the multi- millions of checks were paid on time. Where exactly is it fraudulent? Why is it not sustainable? What investment or insurance would be sustainable?
The private sector would default long before SS would.
What are the standards for the private sector, are they higher than for SS?
Who?
Listen to you with bumper stickers from the tea party billionaire agitprop writers.
Who sent $1.7T in Oct 08 to the billionaires? I won’t tell the split between treasury and the fed. What they did with their equality, Greenspan help and all the bribing since Nixon!
Suggest you read some of Thomas Paine’s bumper sticker stuff.
Bumper sticker gag, for revolution.
Buff
we absolutely need to bring cost control to Medicare and Medicaid. But in the meanwhile the best way to pay for Medicare is through a payroll tax that pays the full cost of “expected” medical care when you retire by “pay as you go” financing…. without “taxing the rich” more than a reasonable cost for the insurance.
By making the payroll tax “flat” and “capped,” the high earner would pay a bit more than the low earner, but that would effectively be additional insurance against the possibility of becoming poor themselves. It would not be a “punishment” for having become rich.
The point is that we can, and we must, pay for what we are going to need, ourselves. We can afford it. We can’t afford not to.
Wandwitchman –
Actually, hasn’t this been happening already for about 4 decades? Real wages have stagnated over that time, while every penny of gain in society, from productivity improvements to GDP gtowth, has wound up in the pockets of the top 50% – and within that subset skewed powerfully toward the top.
IMHO, the skimming of wealth from the economy by rentiers is the root cause of all of our economic woes. It has funneled money to those who already have the most, driven resources away from real investment into financial tail chasing, and skewed the tax structure such that those who have the most pay low real rates.
Fixing the favored treatment of rentiers will go a long way toward fixing every other problem in the economy, SS stability included.
The reason you hear so much about “fixing” SS is the rentiers want that money, too.
We really are on the road to serfdom, but not in the way Hayek imagined.
WASF,
JzB
Terry
there is a better way to control costs. let the government review procedures and approve only those with reasonable chance of meaningful success. i am sorry it has to be “the government.” but i used to work for the highway department, and we actually did a pretty good job of controlling costs and assuring quality.
Dale –
Great post – thorough and informative. Thank you.
The only problems I see are 1) the real stagnation of wages – which has now become an actual decline, and 2) the idiotic payroll tax reduction currently in effect, which depleats the program from the input side. This is a real killer.
Alas,
JzB
ilsm,
You still haven’t answered the question. What do the OWS want? What would an end-state look like?
Right now all I see is a bunch of dis-organized hippies sitting around without jobs doing nothing but “feeling good” and “being enpowered”. Basically a joke.
BUt after a quick perusal of the net, it doesn’t seem they have a goal. Just soak up some sun and ‘feel good’ protesting, well not sure what they are protesting. But they sure feel good!
Then again the Tea Party types started little also, so maybe they will have some staying power. I doubt it since that would mean squaring off and protesting against a Dem President. Considering the anti-war types through in the towel in a micro-second when ‘the one’ was sworn in, I don’t see this group taking on Obama either. Call me when they start hanging Obama in effugy and Hoolywood is making movies about assassinating the President.
Islam will change
RoR,
Without a change from the situation we are in now:
I put money in the bank(Trust Fund) to gain interest to pay for my saftey net/retirement aid. Before I need to access the savings, the bank(Trust Fund) lends the money back to me, because I need money to pay for my budget that keeps my entire economic infrastructure working for which I derive my savings that I’m putting away in the same bank(Trust Fund).
When I access my savings with the bank(Trust Fund), my kids have to first, pay back all the money I borrowed from the bank(Trust Fund) plus the money they need to put away in savings for their saftey net/retirement aid, before I can access the savings or the bank(Trust Fund) will be in the negative.
Since the bank(Trust Fund) doesn’t actually hold any of the money and lends all of it out, each generations burden increases, compared to the generation in front of it, and we know that based on the demographics and the size and shape of an modern American economy.
If they don’t pay back the money then the bank(Trust Fund) doesn’t really exist because it won’t be able to loan money to the budget, that money is crowded out by interest payments on the debt it accumulated from cashing out the savings accounts.
At some point, an entire generations efforts will be soley focused on just maintaining the balance sheet of the bank(Trust Fund).
There is a name for this situation!
For some reason, the idiotic reasoning of some of these people prevents them from realizing that they are the sole cause of what they fear the most, and they keep telling themselves that just as long as the payroll tax is raised to maintain the accounting of the bank(Trust Fund) that the actual contribution to the savings and the payment of the savings is on the absolute up and up.
I keep hearing that the accounting of the bank(Trust Fund) is so sound that we need to raise taxes to keep it solvent and raises taxes again to pay back what we have borrowed, and raise taxes again to actually pay the benefit. Sounds like a flawless plan!
“Social Security is structured from the point of view of the recipients as if it were an ordinary retirement plan: what you get out depends on what you put in. So it does not look like a redistributionist scheme. In practice it has turned out to be strongly redistributionist, but only because of its Ponzi game aspect, in which each generation takes more out than it put in. Well, the Ponzi game will soon be over, thanks to changing demographics, so that the typical recipient henceforth will get only about as much as he or she put in (and today’s young may well get less than they put in).”-Paul Krugman
JzB,
I was looking at the 2011 report earlier this week and noticed the transfer from general to trust fund that goes along with the payroll tax. By the time it matters, it will be fully and properly booked as what it really was – a stimulus going to people who have a paycheck. It is not a killer.
“At some point, an entire generations efforts will be soley focused on just maintaining the balance sheet of the bank(Trust Fund). “
If you simply reread and digest the math coberly provided, you will see this is not true.
Terry,
The rub, as it has always been, is what constitutes “basic medical care.” I bet if we all were handed a list of treatments and costs we would all come up with a different list. It comes down to what will you let rich grandma live for 5 more years becuase she can write a check while poor grandma gets buried six feet under. I have no problem with Government sponsered death panels as long as I can opt out and buy additional care as I wish. The highway department coberly mentioned is an excellent example. Yes they do a decent job were they work – not teh best, but it gets you there with the normal cost overruns. But which road gets worked on is political. And I don’t want anyone in the government deciding my fate – becuase they will make the it political. The left ‘politics is personel’ mantra is exhibit #1.
Islam will change
buff,
Imagine.
“You can fool some of the people all the time, but…………….”
Read Jeff Madrick’s latest book, it is available on ereader, kindle or in paper.
Open your eyes.
I am not in the movement, although I understand the issues.
Think if you still can.
Imagine, those arrests on Saturday at the Brooklyn Bridge were done by supervisors the blue shirts doing the street beat would not do it.
Next time the bus drivers won’t come.
Did you get anything out of pounding sand on Diego?
Imagine.
Not quite on topic, but:
It is a matter of faith for conservatives that a fully funded SS program would be better than our existing paygo program. FDR wanted a program that combined the two. One of the reasons has to do with distortionary affects of taxes, but I am not interested in discussing something quite so theoretical. The more interesting reason is that a fully funded Social Security would required a huge investment that woudl require the economy to be much larger. A much larger economy should be good for everyone.
So I have questions.
How much larger would the economy really be? It would take $14 or 15 trillion in capital to pay current benefits. Would that extra capital really produce goods and services that would employ more people – or would the financial sector just be that much larger?
How would we get to such a program anyway? People would have to save more, but saving more right now would be contractionary. If people are saving more and buying less, how does the economy expand to where it can provide fully funded benefits. If we suddenly had that much more capital wouldn’t the return on capital drop?
401ks and such have certainly helped me to save more, but returns have not improved. Is there any reason to think mandatory savings would have a more positive effect?
Darren,
Who knew?
A trust fund baby!!
Buff
i am all for letting you buy a cadillac plan over and above the basic Medicare.
Darren
you are still an idiot. write a shorter letter and i’ll try to answer it.
Meanwhile Krugman utterly failed to understand Social Security finances the first time he pontificated about it. He learned a little from Dean Baker, but he still doesn’t quite get it.
In any case the only way today’s young will get less than they paid in is if they let the current crooks in Washington “fix” it.
Also, I suspect poor Krugman has been misled by “analyses” showing that the “present value” of your taxes is greater than the present value of your benefits. That is because the benefits come later and later always has a lower present value, especially if you pick an unreasonably high discount rate.
Arne
it is intended to be a killer. an honest stimulus would not have raided the payroll tax.
jazz
the stagnation of wages is a problem. but not really a problem of Social Security. even if wages FALL, social security will still provide the (only) means people have to save “enough” for their retirement, or , what is the same thing, pay as you go for the old people’s retirement.
if wages fall, benefits would have to fall, but a reasonable balance could be kept between wages and benefits… just like in the old days when the whole family shared the good times and the bad times together.
if nothing else it lets the liars say “see, social security really does affect the deficit.. or take money from the general fund.” but that’s a lie. it is not social security that is increasing the deficit… it is the payroll tax cut.
our boys are really cute. they give you your life savings and say, “Go, Spend.” get yourself something at Wal Mart. Make Mr Wal happy. Don’t worry about your savings, we can always borrow that from the rich and never let you forget it. Don’t want you thinking you can save your own money for your own retirement. You must depend on US!
Arne
you have mostly answered your own question. there is no market for private investment on the scale that Social Security would provide if it were privatized. what is far more important, the private market is not risk free. what is also important is that there would be no gain in “savings.” once the private market started paying out the cash people needed for their retirement, there would be no net increase in “savings” beyond what people can already invest if they want to outside of Social SEcurity which exactly balances the part of “savings” that any ongoing investment absorbs to pay back the previous savers.
and you are wrong about FDR. he insisted that SS be worker funded.
in case anyone thinks i am too rude to Darren, pleas understand that he has been around here before. like “reality” he has his own fantasy which he cannot depart from. he recites it regularly and cannot learn the truth no matter how nicely i try to put it. if anyone else thinks Darren has a valid argument, please write it succinctly and i will try to answer it… nicely.
I at least accept the fact that the wealthy are always going to be able to get more of anything they want than I am. Steve Jobs is a recent classic example. I can accept the fact that if I get pancreatic cancer, I am not going to be able to afford to get a liver transplant and I really do not expect the government to pay for it either.Nevertheless, I agree that it is the rub, but one that must be faced, cold heartedly and without giving in to political pressures. That is why I have problems with the politicians making the decisions. I am sure Coberly did a great job of controlling costs, but I also bet he did not bankrupt any road builders–at least not politically connected roadbuilders and I do not know of any other kind. The problem is not getting people to accept that at some point its lights out–particularly if we worked harder at making death a less emotionally and physically painful event, but in weaning the health care providers from the government teat.
Arne,
“and digest the math coberly provided”
I have and Coberly’s “fix” is based on the accounting of S.S. only, and uses some pretty optimistic assumptions. His fix has nothing to do with the acutal fix required to pay back the Trust Fund.
Buff,
Exactly. This is a Nixon going to China moment. And as I’ve been saying over and over, this Nixon has gone to an awful lot of Chinas. I worry about which other Chinas he will visit if he gets reelected.
Arne
perhaps i am not understanding you. SS couldhave been funded fully “pay as you go” at the beginning for a very very low tax rate that would have risen as more and more of the early contributors reached retirement age. the Committe on Economic Security decided to start with a slightly higher tax rate and build a “reserve” that would be invested in government bonds. The reserve is needed to take care of fluctuations in income vs payments… such as the current recession. so if that is what you mean by advance funding, you are right. but the basic structure of SS is still “pay as you go.” the reserve is just a buffer to make it run more smoothly.
it was never meant to be financed by putting money into “investments” and waiting until they grew enough to pay out for pensions.
i personally think the designers builded better than they knew. Except for the political lies about it, Social Security works very, very well.
Krugman is being stupid when he says SS was a Ponzi scheme. He means that the early investors got a great bargain because they were paid by the later investors. This would make Microsoft a Ponzi scheme… the early investors got great returns… paid for by the later investors. It would make a sale at your corner grocery a Ponzi scheme. Because the low low price you got for cheese is going to be paid for by the customers who come in tomorrow and pay the regular price.
We are in a hell of a state, if we have come to feel we are being cheated because someone else got a bargain and we only got what we paid for.
The early “investors” in Social Security could not wait until they had contributed forty years worth of premiums, so they would be paid out of the premiums being paid by the later “investors” who could wait. but those early investors had paid their dues. Before Social SEcurity was available they had paid for their own parents retirement, and they had paid taxes for the welfare to support strangers retirement who had run out of other choices. and they paid the taxes and went to war and built the schools and the roads … But Darren wants to be able to say, “But mom, I know you did all that, but what you should have done was put the money in a trust fund so i would never have to work or pay for my own retirement.
JzB,
Hayek was working for the rentiers and the crivers of wage slaves.
To them there is zero social utility to poverty among the aged and infirm, they cannot revolt.
Darren said,
“I put money in the bank(Trust Fund) to gain interest to pay for my saftey net/retirement aid. Before I need to access the savings, the bank(Trust Fund) lends the money back to me, because I need money to pay for my budget that keeps my entire economic infrastructure working for which I derive my savings that I’m putting away in the same bank(Trust Fund). “
Poor Darren thinks he is the only person in the country. He thinks he is lending the money to himself.
I don’t suppose he has noticed that all the people in the country borrow from each other and lend to each other all the time.
SS ran a cash deficit of $49 B in 2010. There will be another 50b of red ink in 2011. After that the number goes up every year. It will exceed $1 trillion over the next ten.
Where will that money come from? From Coberly’s trust fund of course. But there is no mney in the trust fund, so it will have to be borrowed.
The US has a massive deficit in front of it. On top of which comes the financing requirements for the unwinding of the Trust Fund at SSA.
Coberly points to 83 when the last fix was made to SS. That was a good plan up until 2008. The recession/depression knocked SS off its feet. What was anticipated to happen in 2017 happened in 2010.
Things have changed. This time it is deflation and high unemployment. Like in 83 the system needs a big fix. I think Cobery is one of the few left who does not see that.
In the first report I saw, on the ground, interviewing protesters, there was a well-dressed, well-groomed 72 year old woman who said she was there (probably for the day?) because she had 2 children. One struggled to hold onto his house after he lost a job, and then did lose it when he lost the next job. The other was barely holding on. She said she was looking for work now because she felt a need to help her children and grandchildren. If you look at the video, almost every scene includes people who are obviously not kids. “Hippie” is an anachronism. Some of those with gray hair may have BEEN hippies, but there are no hippies in those crowds.
What you are seeing is a true groundswell of diverse people from diverse groups with diverse gripes and ideas. They are persisting precisely because of that diversity and a desire to work together. At present, their message is “We are the 99%.” In other words, We are The People. Every day they are talking about those gripes and ideas, refining them, and determining how they want to proceed. So far, accompanying the “We are the 99%” theme is “…and we are tired of being ignored.”
They MAY decide that their primary goal is to demand that corruption, cronyism, and predation isn’t the path to success in this country, or to demand that elections aren’t just about voting (numbers) but about determining the path our country will take, or they may come up with a list of more specific demands – or all of the above.
What you are seeing is a demonstration of democracy. As is said, it’s messy… and fascinating. First, identify the problems. Then, begin the conversation. Give everyone a chance to offer solutions. Then, decide and proceed. (I’d refer those interested to the Declaration of Independence, with its long list of grievances. The process isn’t unprecedented.)
buff,
Bumber sticker!
“I’ll be all around in the dark. I’ll be ever’-where – wherever you can look. Wherever there’s a fight so hungry people can eat, I’ll be there. Wherever there’s a cop beatin’ up a guy, I’ll be there. I’ll be in the way guys yell when they’re mad – I’ll be in the way kids laugh when they’re hungry an’ they know supper’s ready. An’ when the people are eatin’ the stuff they raise, and livin’ in the houses they build – I’ll be there, too.”
Henry Fonda, as Tom Joad, at the end of “Grapes of Wrath”.How many young people of all those available in the lower 99% want to take action and see this through?
Darren said,
“I keep hearing that the accounting of the bank(Trust Fund) is so sound that we need to raise taxes to keep it solvent and raises taxes again to pay back what we have borrowed, and raise taxes again to actually pay the benefit. Sounds like a flawless plan! “
But that’s because when I tell him we DON’T need to raise taxes to keep it solvent, he can’t hear me. The voices in his head are too loud.
We would need to raise taxes if we want to have more money for a retirement that is going to last longer than what our grandparents had. The fact is that the worker to retiree ratio is changing BECAUSE WE ARE GOING TO BE LIVING LONGER. You are paying for your own needs (wants.)
But raising taxes has nothing to do with keeping SS “solvent.” It needs no tax raises or benefit cuts or increases in the retirement age. It will be solvent forever…. except for the payroll tax cut that Obama and the Republicans and their Democratic friends came up with as a way to start the death of a thousand cuts they have in mind for Social Security.
Lys,
The Baby Boom generation will rely on the Trust Fund to supply the required benefits. There is no actual money in the Trust Fund, we would need to raise taxes, borrow, or cut benefits. The accounting of the program, as listed above is fine, but how to actually maintain the accounting while paying back the trust fund is the real question.
The Baby Boomers out numbered the generation before it, and enjoyed a vigorously growing economy it’s entire working life. This is the reason the program worked just fine, we could let the Trust Fund grow, use the extra money in the budget, and no problems. This will always be the case in a growing economy where the “paying” generation outnumbers the precedeing generation.
This is not the senerio moving forward. Not only do we need to pay back the trust fund to supply current and future beneficiaries, we would need to pay for the discrepancy between the size of the generations and the difference in economies. The left keeps trying to pretend that this is an attack on Grandma….it clearly is not…..it’s Math! Something must be done, and a simply payroll tax increase does not even come close to solving the problem, and the longer it continues the larger the problem will be when it is time for it to be addressed.
“but you are dumber than the savage. after watching the car run around the country for ten years the savage might still be looking for the demon. but you would announce that since there is no demon the car cannot move. period. “
🙂
It’s not just Social Security. See Ellen Schultz’s book, Retirement Heist: http://www.aarp.org/work/retirement-planning/info-09-2011/ellen-schultz-interview-retirement-heist-author-speaks.html
Coberly,
“It needs no tax raises or benefit cuts or increases in the retirement age.”
“The relatively large deficits at the end of the 75-year projection period — equal to 4.24 percent of taxable payroll in 2085, indicate that sustained solvency would require payroll tax rate increases or benefit reductions (or a combination thereof) by the end of the period that are substantially larger than those needed on average for this report’s long-range period (2011-85).”
http://www.ssa.gov/oact/trsum/index.html
What was the situaiton lat year? It was better….What will the situation be next year….It will be worse….See the trend?
You just said above that a fix was applied 1983 and other fixes will be needed to maintain. So which is it?
Darren
the Trust Fund is a legal debt of the United States of America. it will be paid back. it might mean raising taxes, or borrowing the money from someone else, or cutting spending. But it has nothing to do with the solvency of Social Security.
i use the same assumptions as the Trustees, and most people who know anything say those are pretty pessimistic. I have also pointed out that even if worse comes to worser, it will have no effect on the solvency of SS. it just means that the workers and their aged parents will have to share the bad times together, as workers and their parents have for the past million years.
Coberly, I’ve copied and saved your post for forwarding to those who need to read it.
Have you thought about putting a petition up on “We the People”?
https://wwws.whitehouse.gov/petitions
Currently there is one supporting Bernie Sanders’ bill that would gradually remove the cap, and a couple of others on SS. Of course, it would take some careful thought. You’re only allowed 800 characters to make your case! And they’ve raised the signature threshold from 5000 to 25000. What do you think?
Darren
read what i wrote. A tax increase of one half of one percent per year… forty cents per week… would enable future workers to pay for their own retirement at the same replacement rate and at the same age as current retirees. The Trustees are not being quite honest when they say “substantially larger.”
The 75 year period can be “fixed” (that is same rate etc) for 2%. The infinite horizon period can be fixed for 4%… 2% for the worker and 2% for the employer. But neither “fix” is needed to keep Social Security “solvent. They would be needed only if future workers want a larger benefit than is considered “enough” by today’s standards. I think those future workers will decide that they will… if they understand their choice.
But that doesn’t mean that SS needs to be fixed. is “insolvent”, or going broke, or not going to be there for the young.
The “trend” you see, is just the artifical result of setting a date and “fixing” SS up to that date, including by collecting interest on excess taxes collected before that date, and then dropping the “fix” and starting over again.
But i’ll tell you this… those folks over the infinite horizon aren’t going to give a damn what you and I do… unless of course we fix SS the way we fixed the cat and the “non partisan experts” never tell them there ever was such a thing as Social Security, or how it worked.
Ah yes, the get a tan and get a job argument. For some, perhaps, but youthfull energy abounds in many forms. And doesn’t fit the 3000 here in Boston who were here Friday and Saturday.
Not having a disciplined message at the start is not unusual, and as others join in middle ages and older some of that will occur in the general assemblies that appear to be the initial organizing principle. Even Mr. Bernanke said he could sympathize.
Too bad we all don’t have golden parachutes and set our pay through a peer benchmarking system. Makes it great for quadrupling take home pay so to speak in the last few decades as a cohort.
At its best, I like Linda’s description. Even deciding whether to get police permits in Boston was a discussion of several hours…it is a diverse group.
And good grief buff….hippies? Define hippie. There were few hippies in the midwest even in the day.
Yep.
Darren
you don’t have a clue what “Math” is. I have tried to explain it to you and all you do is keep reciting your catechism. The Boomers paid for their retirement… lent the money to the government. now the government has to pay it back. Business as usual, in spite of all the screaming. The rise in life expectancies is expected to level off after 2050 and the tax increase that i suggst…2% for the worker, 2% for the boss, reached one half of one tenth of one percent (forty cents) per year… will fund Social Security from then on as far as the eye can see over the infinite horizon.
I have written a paper on this, accepted as accurate by some experts, though the “non partisan experts” paid to lie to you keep hoping you won’t read it.
Krasting is another regular idiot who comes here and keeps saying the same thing in spite of all we do to try to teach him.
Krasting, the money to pay back the Trust Fund will come from the same place the money comes from to pay back the Bonds you bought. I hope you don’t think the bank keeps money in a drawer waiting for you to come back and ask for it. “Money” is a record of obligation. The government has an obligation, and a record of it, to pay back the money it borrowed. That IS the trust fund. The money will come ultimately from taxes, just like all the money the government uses to pay its bills.
The 83 “fix” works until 2036 by the last estimate. Then, just as in 83 a small tax raise that the people will not even notice will be needed to pay for THEIR OWN retirement. Though it would be even easier if they started by raising the tax today a tenth of a percent per year.
But if no “fix” is applied at all, it will not affect the solvency of Social Security which can continue to pay a benefit that is “enough” by today’s standards without raising the retirement age.
btw, it’s not red ink if you take it out of your savings account. The Trust Fund is Social Security’s savings account.
Ah BK. You just don’t read the same people, some of ours are heavy hitters. And Arne could discuss redoing the numbers after some of these trends play out for real (wages, consistent high unemployment, deflation)and not simply guessed as to quantities, and which Coberly has mentioned several times as potential problems, which you still ignore. Many programs need a look, SS should be lower down the list.
How is the July 4th bond prediction going?
As a percentage of GDP but gross debt remained flat to rising. And I don’t think Bush I actual fits in that category, his late and commendable rax rate increases didn’t compensate entirely for his first few years of piling up debt, the just changed the rate of growth in a way that allowed Clinton to resume the post war performance you cite. But add Nixon and Johnson in and take Bush 1 out and you captured the overall picture.
JzB. ‘Stagnant’ doesn’t mean no movement at all. BLS and SSA numbers still show that Real Wage has increased at a higher rate than increases in FICA.
The formula that has real benefits under Social Security increase over time has slowed but not stopped. Except in the last decade when the numbers started sucking to the point of actually going retrograde. But taken as a whole the word best applicable to the last 40 years increases in real wage is ‘slowed’ rather than ‘stopped in its tracks’. That is workers started being cheated in the late seventies and early eighties but outright theft had to wait on Dubya.
The US is a country with 300 million people and a huge economy, not all of which is on the books. It is ridiculous to think we can’t afford a modest public retirement plan. It is insulting to read guys like Samuelson in the WaPo insist that the Gray Peril will soon overwhelm the slender resources of the younger generation.
Nonsense. We Boomers are paying the taxes that keep the governments at every level going and have been doing so for the past 40 plus years. We did indeed pay for our SS benefits just as our parents paid for theirs. We’re putting up our boomerang kids who have to come home thanks to rampant unemployment and helping out our parents too. We are paying for our kids educations, taking in their kids when our children can’t cope, and generally being leading candidates for being named Salt of the Earth for this and all subsequent years.
To say that the younger generation can’t pitch in and do the same down the line is to say that this country is headed toward a state of permanent depression. Is this true or just what the rentiers and financial classes want to see? Sometimes it seems that the great dream of the upper 2% is for wages here to sink so low that it would almost be worth actually making something in the US again. Then again, nah. It’ll always be cheaper somewhere else where, after all, you can actually take advantage of slave or virtual slave labor to pump up your profits.
I’m afraid Samuelson really hit a nerve with his latest unfounded drivel. Why, oh why, can’t we have a better press corps? NancyO
Linda R
“Enact CBO Option Number Two for Social Security”
would do it.
but you would have to write all your friends and ask them to write all their friends to sign the petition to have a chance. refer them to this post on Angry Bear. I will try to put up another post explaining CBO option number two. It is very similar to what I have said here. It would raise the tax on workers one percent over twenty years, and a similar amount on their employers. That would solve the Social Security question for the next 75 years. It would leave the door open to that infinite horizon, but raising the tax another one percent over the next twenty years would fix that forever.
No cuts in benefits, no raises in the retirement age, no means testing, no visits to the welfare office, no taxing the rich.
Let me know. It won’t happen without you. I haven’t officially filed the petition yet. I want to ask a few people to sign it first so it has a chance of getting the 25,000 signatures in 30 days.
Darren,
Coberly is much better than I am with math. What I do know, even if I knew nothing about math, is that my payroll taxes increased in order to create a SSTF to carry the larger baby boomer generation. Wage and salaried employees paid more payroll tax. General taxes did not go up. I don’t mind lending the funds to the government until such time SS needs the funds, but I do mind if the government, Republican or Democrat, tries to fool me by telling me there is no money to pay back the loan, that the baby boomers, actually my children, have to make do with less, have to work a longer time and accept reduced monthly payments.
That would not be because the system is flawed, it is because we have a less than honorable government, looting the SSTF, so they do not have to increase the capital gains taxes. I also see the reduced payroll deduction for employers as a cut in wages and salaries unless the cut goes to the employee and not the employer.
Linda–I have some friends on a google group who can help. Let me know at no5095@gmail.com if you have something I can send them. NancyO
Coberly,
This is why your side is going to lose the debate in the long run.
“But that doesn’t mean that SS needs to be fixed. is “insolvent”, or going broke, or not going to be there for the young.”
You keep defaulting to the accounting of S.S., and refuse to address the issue. We know that the dollar amount that needs to be repaid back to the Trust Fund is accurate plus or minus the status of the future unemployment and economic/wage growth. That’s not the issue. When pressed you consistantly shoot from the hip that American’s need to pay back the debt they borrowed, and quickly move away from this topic, which happends to be the meat of the debate. Who cares if the accounting of S.S. is accurate, that says nothing as to how we pay the trust fund back within limits without exploding the debt and deficit.
All I ask is that you quit lieing to the people who don’t know enough about the situation that we don[‘t have a major problem on the way. Because we do, and your proposed tax increase doesn’t even come close to solving that problem.
As I have pointed out earlier….as of right now we have 154 million employed people. Your tax increase generates 12-15 billion the first year, and which year your increase gets implement only adds to the depth of the hole. By the time your tax increase generates enough money we will have started at $50 Billion in the red a year, and 10-12 years from now after $1.2 Trillion deeper in the hoile specifically because of S.S. the numbers start to come around based on the demographics.
That is a hell of a gamble that the economy is going to grow at the assumed rate to compensate for all this. But what the hell…if it makes you feel better to beleive that so be it…..it is not like much is going to happend. It will either work out, or the debt will spiral which ends up making S.S. a moot issue anyway.
Darren
now you are an offensive idiot. because you are too dumb to understand the subject does not mean that the teacher is a liar.
my “fix” is the same as CBO’s. are they lying?
YOu might notice that your “1.2Trillion in the red” is half of what Social Security has in the bank.
IF he governmen of the United States of America can’t pay its debts we are in a hell of a lot more trouble than Social Security. But it can pay its debts. The problem it is having is damn fools like you won’t raise the taxes enough to pay for what the government has already bought.
That’s about as smart as trying to save money by putting only two quarts of oil in your Mercedes.
Lys
the last cut did go to the employee… it is still looting the employees life savings. the people don’t understand… and didn’t ask for… having their paycheck increased a couple of dollars a week so they spend the money without thinking about it. meanwhile they have to borrow to replace the money in their savings account… and they’ll be told it’s Social Security raising the deficit… when it was the tax cut that increased the deficit.
Coberly,
Listen to yourself!
We have to raise taxes to pay back what we have already paid in……you’re pathetic! Once again your missing the meat of the debate. If you want the general fund to specifically be dedicated to paying back S.S. then your side needs to give up on the growth of government, the increase in baseline spending, refusing to tap our own resources, the heavy environmental regulation, and all the other overlapping agenda driven social policies.
Somethings gotta give! Tax increases are not gonna cover it all. You guys on the left better make up your minds.
The US squanders 5% of GDP, or 20% of federal outlays for war. That amounts to all 12 of the world’s super carriers, 8 of the largest amphibious ready groups, each of which is the amphib capacity of any other nation with such ships.
I could go on.
Take the 20% of outlays for war down to 7% like the Brits’ spending and you free $4500B over the years the deficit commission will look for $1200B.
In round numbers using billions instead of trillions………………..
Terry and Coberly,
We cannot fix Medicare.
Medicare is only a symptom of a completely broken healthcare system. Until you fix the healthcare delivery system, there can be no repair or fixing of Medicare. Anything done, would be akin to a bandage over an abscess.
Medicaid too.
I won’t speak to SS, cause there are others here that try to learn from that are far smarter than I on that topic (Bruce and Dale among them)
Mike
My advice to any of you youngsters out there is to participate in SS, because you must, but don’t expect to “live” on it when you retire. Get ready now and put away 20% of your earnings every year. into some investment. Right now Gold (real physical) looks good. When that goes to $5K an oz (and it will), then move into stocks, cause they will be really cheap. Learn to live with less now so you can at least live when you retire. Since 1913, the dollar has lost over 92% of it’s value. Think about that when you think about retirement. Which is really, really, really hard to do if you are less than 30.
MIke
I kind of agree with you. But turning Medicare back into a fully worker paid, pay as you go insurance program, instead of half-welfare half privatized as it is, would be a good start. Once the people were paying for it directly they would be in a position to insist on cost controls. Eventually a “Medicare for all” might replace the “your money or your life” system we have today.
OF course if it were fully worker paid… and the government did nothing to control costs it would become like the Pentagon… and that would discredit Medicare instead of discrediting the people we elect as it should.
No Darren
we would ahve to raise the payroll tax to pay ourselves a larger benefit in the future.
we might have to raise the income tax to pay for the first time for what we bought with the money we borrowed from Social Securiyt. that is NOT paying for Social Security twice.
the rest of your comment is pure fantasy. you are reading too many Ayn Rand comic books.
and I am not a guy on the left. did you notice i said “DON’T tax the rich”? “we need to pay for our own retirement insurance ourselves. it is cheap at the price.
Linda R
you are right. there is a worldwide assault on retirement. The massa doesn’t like to see the servants “wasting time.” Even if they paid for the time themselves.
Why would you want to sit down and watch a sunset when you could be polishing the masters wine bottles?
foo foo
money inflation is the price we pay to avoid the money constipation that used to cause depressions. now, of course, we have other ways of causing depressions. unregulated banking does it pretty well.
but you must have missed the part where i explained how Social Security keeps up with inflation by “pay as you go with wage indexing.”
of course if the bad guys succeed in killing SS, your advice about saving 20% of your income may the best the people can hope for. can you see an economy where everyone is not “consuming” 20% of what they produce, but trying to stuff it all into the same “investments.”
but you are right about being under 30. i was still pretty stupid at 35, and didn’t really understand retirement until i was 50.
and didn’t understand Social Security until I was about 60 and heard one of the Liars saying something about it on NPR that even I was not dumb enough to believe. Then I looked into it.
My point was that while “wage indexing” works, it only works in current value of dollars, not future dollars, which are doomed to become more and more worthless and in which you will be paid. The difference is dependant on the will of SS (Congress??) to provide COL increases, which of late have been sorely lacking. Do you think that will improve in the furture? I wouldn’t want to bet on it. They will of course make good on all promises to pay, because they own the printing press.
Yes, I can see an economy where people are consuming 20% less, but instead saving. It is the only thing which has kept Japan going for the last few decades and is what we are going to be facing in the near future.
coberly and nancy ortiz,
I guess 5000 was too easy, as many initiated then have already gone over 10,000.
So in addition to thinking of 800 golden characters, I’ll be thinking of possible ways to get exposure. I’ve been signing other types of petitions for other groups for quite a while, so maybe approach some of them… and maybe I’ll sign up for the AARP blogs. (Contrary to the “generational warfare” types, at least half of current recipients and those close to it are quite concerned about the future of the program and preserving it for their children and grandchildren)
I’ll reply to this post when I figure it out (which won’t be tonight).
I think we both knopw you would die before asking a rich person or a powerful person to pay back the governments debt.
You want young people to “pay back” a debt they never benefitted from in any way. It’s nice to rant and rave about how those who weren’t even born at the time of this “sacred committment” have an “obligation”, but I don’t care.
ilsm,
Great graphic! Is it a poster, or ???
The 1983 “fix” was a regressive tax used to finance Mad Dog Reagan’s tax cuts for the rich and other government waste. I suggest you try to get your money back from the rich people who took it.
Not so funny now, is it? But oh the Boomers could rant and rave about the glory of the free market as Reagan burned the physical economy to the ground.
I remember a Boomer article in Reader’s Digest in the late 1990s. In that, a wise Boomer speaks disapprovingly to young worthless animals who imagine that their opportunities are less than the Boomers. The young were right. The boomer was a proud liar.
Kinda like now.
It’s pretty typical for those under 40 to be pretty vague about SS. Back in ’83 I learned enough to understand that all the people claiming they’d put in more than they were getting or would get were either ignorant or full of it (or both). Even so, I supported the program with the thought in the back of my mind that even with the fix we boomers might not get what we were “supposed” to.
And then, over 20 years later, when it was still paying out, but GW was trying to privatize it based on numbers that didn’t make sense, I learned some more.
It was some time during the campaign for ’08, when Obama started talking like there was an urgent need for a fix, that I began to get alarmed. Not about the program. About Obama’s obvious lack of understanding and the people who were there to advise him. Fortunately, in searching for answers about that and many other things economic, I found this site and a couple of others, and learned once again that what threatens SS is political expediency and a lack of knowledge on the part of the public.
Got it from a 60’s era friend, I am in that cohort as well.
Snapfish can make a poster.
I do not know if there is a copywrite…………….
Barnum
who are you talking to?
i have tried to explain that “the debt” is not Social Security. I have been trying to explain that young people can keep Social Security forever, with no changes at all. That if they are going to want a bigger pension… because they are going to be living longer, they need to pay for that themselves… it will cost them an extra forty cents per week each year.
I expect it is mostly “the rich” who will be paying back the money they borrowed from Social Security and benefitted from. But that has nothing to do with Social Security.
I’ve stayed out of this discussion because what more is there to say after Dale’s excellent summary of the issue. At least on the AB site. Talk about it to your “small circle of friends.” Be sure that the people that yu know know the truth of the matter. Keep the hyperbole to the minimum and certainly remember to explain the early disability protection clearly as a part of the program. Remember that Social Security is far more than a retirement program; It is the most cost effective life time financial protection program for all workers and their families. The family financial protection aspect being of no small importance. I know all too well as my own father decided to leave before he reached 52 and my mother and two younger siblings benefited hugely from the death benefits.
Explain it to your friends, co-workers, relatives and neighbors. Talk about the truth of the SS issue as often as you can, not only here at AB (an excellent source of the facts.) In fact you might copy the link to this specific page and email it to all of your contacts. The liars won’t stop lying about the issue because they are paid to do just that; telling untruths, half truths and out right lies. And send the message to those that you know that are less than the brightest bulbs iin the package. We need to be educated.
Remember:
“When will the people be educated? When they have enough bread to eat, when the rich and the government stop bribing treacherous pens and tongues to deceive them. When will this be? Never.” M. Robespierre
We can all try hard to make certain that inn our society Max can be proved to be wrong in his prognosis of peoples’ education.
Barnum
the 1983 fix raised the payroll tax to the level that would be needed for the workers to pay for their own retirements, including the boomers who paid in enough “extra” over the needs of pay as you go to prefund their own unusually large cohort. the extra money was put in a savings account and borrowed… which is the usual way with savings accounts. now the government is paying back the money it borrowed. again, the usual way with money you borrowed.
you have been hearing the lies, and the hysterical answers based on the lies for so long you have completely lost track of the reality.
the stuff about the politicians shouting free markets while they shipped americas jobs overseas, and yell about “investments” while they ran a gambling casino for rubes… is probably true. but it has nothing to do with social security.
Linda R
keep in touch. it’s doable.
foo foo
“wage indexing” works whatever congress does about inflation. as i tried to show, it is the dollars that people are earning today,inflated or not, that are taxed, and that determines the level of beneifits in those same dollars.
the yearly cost of living increases for the already retired is a different issue. and there, yes, the congress is trying to cut Social Security by lying about the CPI… replacing it with a “chained CPT” which means that when the price of steak goes up and you switch to cat food, your cost of living has really gone down, so they will cut your benefits to reflect that.
Linda
you are smarter than the average bear.
ilsm – you still have not said anything. Everything you just said is a staple of every politician in this country. See this through to what????
Sorry I ask you.
Islam will change
Linda R,
Great. First they are not “the 99%”. That would be the guys going to work everyday – you know the ones stuck in traffic trying to get home while these people got in the way.
If I showed up with a sign saying to end Government corruption, close the Department of Education and cut government 10% across the board and increase individual liberty would I be welcome? I doubt it.
And elections ARE about voting. We are a constitutional Republic. The people we elect then carve the path (sometimes poorly when you have Obama types in office) that the country moves in. If you don’t like the way we are going vote the guys out. Put your guys in office. BUt if your the fringe minority that can’t get your people into office or your ideas implemented, becuase the were rejected at the polls, well tough. Protest all you want but stay out of the way of people trying to live their lives. Otherwise you are no longer a democracy but a mobocracy. See Wisconsin as a perfect example. The people voted but the minority tried to overthrow the election by mob action. The farthest you can get from democracy.
Lastly, you have not been ignored. You’ve been out-voted. There’s a big difference.
Call me when you colasce behind getting obama out of office. Tell me again why your not in front of teh White House?
Islam will change
Rdan,
So if I showed up clamoring for much smaller federal government, far less state control of our freedoms, both personel and economic, would I get run out on a rail?
As for a definiotion of hippies – people who are aimless, usually with no job, little money (or a trust fund so they can spend time just laying around the park) who are protesting ‘the man’ but really don’t have a clue who that is. And so far this group fits it perfectly. Only thing missing is the drugs.
Though I do agree – they don’t have a coherent message as of yet. Neither did teh Tea Party at the start, other than a vague notion that the Leviation hand grown out-of-control. So maybe these guys can become some left-wing version of teh Tea Party and actually effect some elections in a few years. My bet is they start with a full throated support of the status quo in Obama…
So on that point it is fascinating. We could be seeeing the birth of two new grass-roots political movements in the space of just a few years. The Tea Party and whatever the OWC folks become.
Islam will change
Mike – Yep. Totally agree. Why we need him out of there in Jan 2013.
The French republic’s 9/11.
On this date in history Napoleon accepted the surrender of the Paris revolt.
The rest, until 1815, is a story of missed opportunity squandered on militarism.
coberly,
Your getting emotional. Darren’s basic point, and I’ve pointed it out also, is that Congress doesn’t want to send funds from the gereral fund to the SS Trust Fund. Yes, Congress loved it when the money flowed from the excess SS to the general fund. They don’t like it when the flow is reversed. Congress doesn’t want to pay the debt it owes itself back. I know you call it ‘theft’ but that doesn’t mater.(And Darren’s point about the SS accounting is also on point – it doesn’t matter either). Really it doesn’t, and you keep ducking that point. The money’s got to come from somewhere – more debt or more taxes.
If I wanted to kill SS and get rid of the debt, I’d fold the program into the general fund. In one move the $2.3 trillion trust fund disappears off the books. SS then just becomes another line item in the Fedral budget like the Bureau of Indian Affairs and NPR.
Islam will change
coberly,
“now the government has to pay it back.”
That’s the entire point. The government doesn’t want to. And they definitely don’t ‘have to’.
I agree with your math as does Darren. The point is politically the Congress doesn’t want to cough up that $2.3 trillion. I know your an expert on the SS, but you keep missing the point.
Congress does not want to send money from the general fund to cover SS payrole tax shortfalls.
The fact that its goes through the special treasuries in the SS trust Fund is immaterial. The money comes FROM the general fund TO the SS administration for disbersment. You’ve explained this many times (as has Bruce). yet you seem to miss this point.
And the US Fed is on both sides of the transaction.
Islam will change
Buff
you are right about how to kill SS. they can’t do it all at once because there would a political hell to pay. but even the Left is fine with gradually folding the program into the general fund. that’s something else i get emotional about.
you are wrong about paying back the money Congress borrowed from SS. that money was used mostly to “pay for” tax cuts at the high end. in order to pay it back, it will take something like tax raises at the high end. that is because those tax cuts did not “pay for themselves” as advertised.
in any case those high end taxpayers had the use of the money they didn’t pay in taxes to make their own private investments, which means they now have more money and can easily pay back the money they effectively borrowed.
if you don’t like that argument… well, just take it from me that Darren’s understanding of accounting is brain damaged. yours is not so much, but be careful who you spend time with or you will end up sounding like them.
i don’t know what point I am “ducking.” It seems to me I try to explain everything very carefully.
thanks jack
i tend to forget about survivors and disability benefits. they are important.
Though I’m opposed to non-voluntary schemes like SS on principal, I do appreciate the fresh perspective continually offered on this site which has made me perceive SS in a much different light than how it’s normally portrayed. Almost makes it worth suffering the ad homs continually lobbed at me here.
I wonder, coberly, if you have any concerns at all about the repayment of the IOUs that make up the Trust Fund. I also wonder if you think demographics could ever realistically require taxation levels which would indeed be a significant burden in order to maintain expected benefit levels.
poppies,
Thanks. And it is a hard balance to post on technical issues without the ferocity of political advantage taking over. Please stay with us.
Not swallowing all the political slogans about ‘economics’ and the ‘deficit’ comes first buff.
Darren offers little but slogans for ‘economic’ justification. As we know there are many ways to approach medium and long term deficits by the feds, and of course rarely include trade policies in place for our economy and other issues that are closely related.
We also completely ignore private debt in the media both qualitatively and quantitatively (as Steve Keen write about).
And buff, I respect the political comments on Congress…but then, that demands particulars that do not necessarily impact medium term SS performance, but how the different factions jockey for power and how they advertise. Maybe you could add particulars… I think we both agree this is political expediency and has little to do with economics and good policy discussions.
Yet how does one separate the two in a public forum…not this election cycle.
Congress can change the game of course, but that may have little to do with economic and fiscal theories, and more to do with expediency. The make up of Congress can change quickly as well which changes the ‘inevitability’ of trends.
And of course we rarely offer multiple explanations without huge assumptions as true but unproven. Hence the difficulty you suggest with Congress and Obama is clearly operating and is entirely possible except it pre-supposes the result is good or inevitable policy, and not fortuitous and driven by specific interests that also are evident.
Amen.
Concerns about the repayment of the IOU’s is a political choice and an idealogical one it seems in this political arena. Of course there are concerns, which is why there is a great deal going on now politically you never read about much it seems. And concessions of possiblities seem to only add to the ferocity of the arguments in public as opposed to perceptions such as you suggest poppies.
But I also believe Coberly and Arne have answered those questions already in this thread.
Buff
I do not “miss the point” that Congress doesn’t want to pay back the Trust Fund. And I do not miss the point that the money to pay back the Trust Fund ultimately comes from taxes.
It seems to me you miss the point that paying back the Trust Fund is NOT paying for Social Security. It is paying for the stuff Congress bought with the money it borrowed FROM Social Security.
And you miss my point that it doesn’t matter if the Trust Fund is never paid back. It would be theft, of course, but the Boomers would still get the retirement they paid for, and the post-boomers would pay a little more than they expected, but they would still get their money’s worth in the form of that longer, richer retirement.
The point you conclude with is the crux of this debate.
We (and therefore the “leaders” we elect) lack the discipline to retain these receipts for retirement. Why, then, should we trust ourselves to focus on sustainable policy? Isn’t time-inconsistent bahvior the hobgoblin of most long-running democracies?
You slyly-dismissively hint at it in the middle of the post too: that a person can easily find something else besides “saving” to spend money on.
But you have not explored that this thought process is linked to the reality of a pay-go government system. Would living with a decreasing government safety net naturally encourage (through risk-aversion) increased savings *outside* of the government sphere?
Rather than highlight an “easier” retirement bought on by additional savings we have tolerating the normalization of the “average” retirement to the benchmark of Social Security. So now we have the politician’s quandary: how can we portray SS as an undesireably safety net which should be supplemented by individual savings and self-reliance while not looking impotent for failing to provide a “comprehensive low-risk” retirement avenue?
The larger problem is systematic: we should *never* have been inclined to consider SS a comprehensive national retirement program. It will take a long time and sufficiently less myopia in the younger generations to correct this path. “The Road to Serfdom” indeed….
poppies
thank you. sorry about the ad homs. i grew up in Chicago.
I… that is I, personally, don’t have any concerns about the repayment of the IOUs. I think the Trust Fund could be stolen by a flying saucer and it would make no difference in justice to anyone. As long as they do not “fix” Social Security, even without the Trust Fund the Boomers will get the retirement they paid for. And while the post boomers would have to pay a little more a little sooner than they expected, they would still get their money’s worth in the retirement they pay for.
Some people go crazy trying to make sure everyone gets at least as good a deal as the last guy. I imagine these people refuse to buy bread or gasoline if they have to pay more than their grandparents or the people across town. SS is not a win or lose contract you make with the bank. It’s a way to pay to make sure you get a retirement benefit that is “enough.” As long as what you pay is not so far out of proportion to what you get that you could do better shopping somewhere else (and you can’t… not now… those big returns on the stock market come with risks that are unacceptable to people who have no safety net) it doesn’t matter if you pay a little more or a little less one day or the next compared to the deal that you think someone else got.
As for the demographics… I don’t think so. While it is possible in theory that we could all start living so long that it would be hard to balance what we need while working with what we will need when we no longer work… that day is a long way away if ever. Meanwhile it’s better if you think of what you pay in as paying for what you will eventually take out. If you think you are paying top much for “the old,” remember that you will be “old” one day, and maybe not as rich as you expect.
If on the other hand, the economy goes bad for a long time, or just that poor people don’t “keep up” they will face a “burden” of having to save for their own old age… or, what is the same thing, pay for their granny’s old age… out of the little money they have. This would mean, again, that they might need to cut the benefits granny gets, or they will get when they get old. But you have to remember that all you are doing is “sharing the poverty.” Humans have done that for a million years.
If we ever got so poor we could not feed both the kids and granny, we would no doubt go back to the Eskimo soution. One day granny would simply walk out into the blizzard and never come back.
I know this: granny would do that. for the kids. It’s a little harder to convince the kids that they can give up champagne brunches so granny doesn’t have to eat cat food… especially if it’s someone else’s granny.
All i can do is remind the kids that granny helped feed them when they were small, and one day they will be old and their kids will do to them what they see them do to granny.
Moses simply said “Honor your father and your mother.” And Jesus reminded them that it was about the money. But even if you don’t care about “religion” you might realize that the idea was invented a million years ago and seems to have had a big part in the survival of the human race.
foo foo,
” Between 1875 and 1995, the share of family income spent on food, clothing, and shelter declined from 87 percent to just 30 percent, despite the fact that we eat more food, own more clothes, and have better and larger homes today than we had in 1875. All of this has been made possible by the growth in the productivity of traditional commodities. In the last quarter of the 19th century, it took 1,700 hours of labor to purchase the annual food supply for a family. Today it requires just 260 hours, and it is likely that by 2040, a family’s food supply will be purchased with about 160 hours of labor.” Robert Fogel
That is to say that the value of the dollar over the period that you cite is meaningless.
Poppies
i don’t like “non voluntary” much myself. But ultimately even the voluntary contracts you enter are enforced by a non voluntary threat from the courts backed by the government gun. it’s not nice, but it seems to be the way the world works.
ss has to be non voluntary because most people would not participate and then most of them would be too poor when they got old to live without public assistance. ss just forces them to pay in advance for their own basic needs so they won’t be forcing us to pay for their welfare or step over their bodies in the street.
a note on paying back the Trust Fund: is said it wouldn’t matter as an issue of real justice to anyone. But it does matter if “legal” and “honest” are to continue to mean anything in this country…. especially as applied to the government.
coberly,
Bush I raised taxes, Clinton did also. Bush II cut them and Obama atively made them his in 2010. So since 1983 we have had three tax cutters (Reagan/Bush II, Obama) and two tax raisers (Bush I and Clinton). We’ve never had 1 year when the US debt has not increased (assuming Mike’s data is good – which I have always assumed was so). So during the time when the SSTF was accumulated we’ve had both. So to blame it on not taxing Baby Boomers enough 20 years ago so that Baby Boomers can tax the next generation for their tax cuts 28 years ago doesn’t make sense. Basically following your logic we should immediately cut SS for teh Boomer genration to recoup that money they spent ($2.3 T) instead of taking it out of te hides of teh younger ste.
I like your 40 cents a week plan better.
What you ducking is the fact that Congress doesn’t want the SSTTF to actually cash in those IOUs. Darren’s point is that the money to pay back the SSTF must come from somewhere. Doesn’t matter if we raise teh payroll tax, raise other taxes, or just take on more debt, it still must come from somewhere productive.
Islam will change
Rdan,
Yep – you get it. This is a political decision. And Obama is the one leading the charge to gut SS. No one else. And if your think Mccaine would have tried after teh shellacking Bush got over the issue I think your nuts. ONly a Dem can gut SS. And it looks like Obama is the man.
Islam will change
Matthew
sorry, i really don’t know what you are saying here.
there is nothing sly about noting that most people don’t start saving until they see the wolf at least looking at the door.
as a matter of personal history, i was like that. and i found a way to make it work by saving every dime i made over the last three years of my working career. not as much of a burden as you might suppose, and no worries about inflation or the stock market.
but as a matter of fact, my Social Security has made the difference between extreme poverty and genteel poverty, so I am glad someone “forced” me to contribute (i never even noticed.)
SS is sustainable forever as long as you treat it more like a car than a guided missile. You have to adjust for turns in the road. You can’t set it in advance and expect it to hit a moving target.
There is no evidence that the majority of people behave in “risk aversion” the way right wing economists postulate. nor is there any evidence that the economy can absorb the savings they would try to put away if they did.
Social Security is as close to “self reliance” as you are ever going to see in an economy that is not simply the law of the jungle. All it does is provide a way for people to save their own money safe from inflation and market failure, which they cannot predict or protect themselves from as individuals.
The young are naturally “myopic.” They got other things to do besides pontificate about “market discipline.”
coberly,
Doesn’t matter how congress spent the money on in the past. Water under the bridge. Paying back the SSTF is paying for Social Security now.
That’s the point. All Congress cares about is they have money flowing out of the genral fund. SSTF is another line on the outflow sheet.
And yes there are a myraid of ways to have this all be a non-issue and everyone get their SS. You and Bruce have listed quite a number. I applaud you for it. But it hasn’t slowed the Democrat Obama’s moves yet. And I would bet big bucks you all vote for him even if he folded the entire thing into teh general fund.
Remember it was Obama that gave us teh 2% payroll tax holiday…
Islam will change
poppies,
coberly may be a closet statist and a fairly open socialist, but he and Bruce know their SS. They convinced me (and I many otehrs) that SS was really in fairly good shape from a fiscal perspective. The politics is a whole other angle.
And as long as you are fairly polite and ignore the ad hominimums and name calling you won’t get banned here. Heck I’ve managed to stay around for quite awhile and I disagree with most of the statist ‘progressive’ drivel that gets posted here.
Just remember that Soro’s is the good guy and that Koch is the center of all evil and you’ll be fine.
🙂
Islam will cahnge
buff
i am not a socialist. i don’t like “government” any more than you do. but i stop at red lights (mostly), and i pay my taxes so the air force can pay your pension.
the thing about Ayn Rand is that she wants “the first raters” to be the effective government so she can have a dictatorship and all us second and third raters will just doff our caps when our betters ‘splain to us how things is gonna be.
i don’t worry about Soros and Koch. I worry about Buffy and Jimmy, and you oughta hear what the real lefties think about me.
Buff
i don’t know what you are talking about.
I guess you mean we had the Trust Fund AND increasing debt. Yes, but the debt owed to the public would (aguably) have been bigger if part of the money was not borrowed from the Trust Fund.
You make a huge mistake if you think “Baby Boomers” descibes a meaningul part of the population. Most Boomers were poor people just like you and me. Some of them were crooks and politicians.
The poor boomers paid “extra” tax for Social Security so that they could pay in advance for their own larger numbers… meaning they still paid for what they would get, but they didn’t get as good a bargain as they would have got from straight pay as you go.
if you had just taxed them more in income tax you might have gotten about the same result as far as government spending, but you would not have created the legal link between what they paid and their future Social Security. This makes a difference. Unless you are the sort of person that takes your dinner and your dessert and your wine and your pepto bismal and mix it all together before you eat it on the theory that it all gets mixed up inside.
you are not basically following “my” logic. you are following your own logic. which i can’t follow.
the different places to get the taxes you propose are from different people. and that makes a difference. i wish you could understand that. the United Sates of America is not one person.
Buff
i’ll take that bet.
as for that ‘doesn’t matter how the money was spent”, i hope you don’t tell that to the phone company, and the power company, and the insurance company, and…
granted, it doesn’tmatter to you… it all comes out of your pocket. but it does matter a great deal to the phone company, and the power company, and the insurance company… that you put the right name on the checks.
First, I think Rand had some decent ideas, but as usual with people, have taken them way past any logical conclusion. Extreamism usually is pretty bad choice in almost every case. The real lefties are insane – see the list of demands from the nutcases at occupy wall street.
I’ll bite – who’s Buffy and Jimmy? I’m missing the reference.
And since you here: What ever happened to the SS primer you and Bruce built that used to be at the top of the page? Just wondering since it was a good reference.
Islam will change
Darren reductionist metaphors work better if you understand the numeric reality from which you are reducing.
You don’t.
The actuarial situation of Social Security since 1997 has improved every year until this year once you account for taxes not collected from the theoretical fixes that would have been needed.
The actuarial 75 year gap in 1997 was 2.23% of payroll. The change to that gap due to change in acturial period alone adds 0.05% of payroll to that quite apart from losses from interest on this foregone taxes not collected.
So under the ‘sooner is better than later’ ‘it will only cost more’ theory all things being equal inactivity should have driven the gap up by 14 x 0.05 or to 2.93% of payroll. Instead it is now set at 2.22%of payroll.
Your argument sounds logical, but real world numbers don’t support it.
This author is smoking some hice crack, and I want some of it.
Social security is not GOING to be broke. It IS BROKE and DELINQUENT TODAY.
There is not a single dollar in the SS fund. There a ‘bonds’. Bonds that the government has to pay. How is that different that having no bonds at all? Still government has to pay!!!! And SS last year already started distributing more money than it collects so it does directly increase the deficit. And in the near future the bleeding will skyrocket.
My point is that you have relied of tautology to illustrate a point about paternalism.
You have (correctly) asserted that people today tend not to save on their own accord very well; then you inferred from this that SS (or any “forced” saving plan, for that matter) is beneficial so that people have *some* savings.
I contend that the existence of a growing paternalistic forced-saving plan is *responsible for perpetuating* the otherwise low savings rate.
Certainly a transition from current spending to current saving will have some economic impact. We are, after all, in a recession and it seems like an opportune time to encourage this shift.
There is no long-term impact provided we adequately discourage legacy-wealth because a dollar saved by the young today is simply spending in the pipline tomorrow.
I’m not against *any* such soft-paternalism like SS; but we should acknowledge that it is self-perpetuating for diminished savings.
SS receipts are inherently related to GDP. Just because a recession now leads to a net loss doesn’t doom the program in the long term.
Don’t think of government programs as big money-bins that have horizons on their debt. Nothing is a “fund” per-se. It’s perfectly reasonable for a government to have net-debt forever.
O here we go again. LOTS of unsupported statements.
Matthew: Please find the flow of money research that even attempts to support your thesis on either savings as part of an economic system and relation to retirement accounts of any kind.. I have a lot of research that indicates other correlations. I assume you are not proposing causation. And that your ‘correlation” is unrelated to most people’s lives and 401ks.
ForLib: I am losing patience with drivebys. Send your numbers, if you have any, to the National Academy of Social Insurance for review by their actuaries and see if they are reasonable. Thinking you are making points this way is delusional.
Coberly and Bruce have devised and sent their numbers, and are reasonable. Default on any US fed bonds will be a political act and have little to do with economics and finance, and will have plenty of consequences unrelated to Social Security.
You could always pick on the F-35, the extra engine, or the new Eisenhower class air craft carriers, or the new Virginia class submarines, etc.to save money…bring something to the table than your current response.
Rdan,
I don’t understand what you’re asking of me.
You want evidence that consumer spending impacts GDP or that money saved for retirement *is* delayed consumer spending?
Or you want evidence that correlates forced savings programs to other savings practices?
Matthew
you are wrong. and your use of “tautology” is out of place.
where is this “lost savings” you speak of. the stock market is stuffed with cash it can’t use. so much so that the cash simply disappears… but that’s not what you mean by lost savings.
you are merely reciting some nonsense an economist wrote years ago when it might almost have meant something, but has been picked up and repeated for political reasons by people who want YOUR savings, because they can use the money better than you can.
i am a bit of a hard paternalist myself. i force you to save so i don’t have to pay to clean you off the street when all your best laid plans go agley.
Matthew
thank you for your reply to For Liberty. it isn’t quite right. but the spirit is good.
For Liberty is too stupid to notice that SS checks are being paid today. Not by borrowing, but by cashing prior savings. He is upset that the people who borrowed that savings might have to get a job to pay back what they borrowed.
He seriously expects there to be “money” in the trust fund, like Scrooge McDuck’s vault. That’s not the way money works.
It is true that the government could have a net debt forever… within limits, but that has nothing to do with Social Security, which is fully funded.. essentially forever.
ForLiberty is the kind of ignoramus the Big Liars are counting on to destroy SocialSecurity. I am tired of talking to them.
You assert that “if people are not required to be a forced-saving program, they will not be forced to save”.
I contend that people are partially dissuaded from other savings vehicles by being forced into one. I don’t think you’ve outright rejected this premise, you’ve just ignored it.
I don’t equate “buying stocks” with “saving” so I don’t follow your allusion to the stock market (and its being bloated by fleeced “investors” and people who have little business owning equities). The notion of “diversification” isn’t solely applicable to stocks either.
I like the fact that people are forced to save. I don’t mind paying the costs of living in an “organized” society. By concern is the degree to which we’ve been instructed to rely on it, by both parties.
Just because you force me to save doesn’t mean you’re not going to “pay to clean [me] off the street”; and, increasingly, you’re paying for *both*.
My point is strictly that people should not be trained to rely on this forced savings plan.
Sure, make them pay for a safety net… but treat it as a safety net rather than a retirement plan.
Fair enough Matthew…I can’t do this from work…..worth a post or two of its own I think. I must be cack later…sorry.
Poppoes
The key to protecting the rights of all the people, and their retirement programs, is wide spread awareness. Knowledge of the truth of the program and its place aside, not within, the general budget. Keep reading the truth and the liew will become apparent. Go to Bruce Webb’s web site. There’s a link some where on this page, to the right above. That you have read and learned is the reason for all of this effort on this site. I’m glad to see that fruit is borne of the effort. As I had said above, spread this information to your friends, neighbors etc.
We are all the 99%. Unless, of course, you or “the guys driving to work every day” are in the 1%, which I highly doubt.
Your sign would probably provoke interest, especially if it started with the 25% of your platform that you could all agree on. I imagine you’d be listened to, argued with, and might not want to stay, but I’m not sure you wouldn’t be welcomed.
My point about voting was that we vote for someone based on their political party, but also based on what they say they will do and who we believe they are. Once they are in office, if they turn around and do something else, especially if conditions haven’t materially changed, we might not want to quietly wait for the next election. So we write letters, submit petitions, and protest. This is all quite Constitutional, an exercise of those Rights we all hold dear. It would be good if we also learned the lesson that choosing who to vote for involves research to determine who they really are, what they really want, and who is funding them and perhaps why. The Press could help, but it seems we can no longer rely on them. (And I believe the “minority” used the democratic process, recall elections, not mob action, to try to unseat those they disagreed with.)
The White House, Wall Street, Congress, all would be good places. Given the theme of the protest, Wall Street is appropriate.
“My bet is they start with a full throated support of the status quo in Obama… “
I doubt it. They aren’t there to show him support. But if they vote, a majority would probably vote for him.
Both Tea Party and OWS are symptomatic of a system gone wrong. Both are reacting to the results of a hijacking of our nation’s economy by a few and the resulting imbalances. It’s when we get any more specific than that that we run into troubles and disagreements.
coberly,
I wouldn’t call that socialist at all. I would say its good planning to stand up to the bullly. That seems diaganol to what your syaing. Oh well.
Later
Linda,
Yep, I’m all for thos ethings to. And once the recall elections are over, and the mob lost, let teh legislature do its job. I have no problems with all the peaceful stuff you listed. None at all. But the second you interfere with anyone you have crossed the line into a mob. You can protest all you want. You cannot stop, or interfere with anyone, especially after losing at the polls.
BUt again you were out-voted. I was in 2008 and look what we got.
As for a theme – I haven’t seen one.
Islam will change
Matthew
we are having some language difficulties here. i don’t disagree with what you said.
but i can’t remember saying “if people are not required to be [in] a forced saving program, they will not be forced to save.” I did say that people find ways to avoid saving that leave them unable to take care of themselves when they get old. So “society” protects itself by forcing them to save via Social Security.
That is not tautological. it’s history.
As for buying stocks being saving, I believe you are technically correct. But what happens to “savings” in the regular market? Perhaps you put it in a savings account, and lose it to inflation, while the bank lends it out to some guy who builds houses with it. That’s fine, but Social Security is safer, and the interest is better. And since SS only forces you to save a little bit of an income that is much larger than your grandparents, you are free to save the rest of your money and lend it to housebuilders if you want. Since the housebuilder eventually pays you back, and you spend the money on retirement needs, the “economy’s” net savings is the same. {that is, SS only takes in as much as it needs to pay out… this is the same (or less) as “private savings” would have to pay out (convert to spending) in any case… subtracting from net savings.
As for cleaning the unlucky and improvident off the streets, we are doing a lot less of that than we did before Social Security was invented.
Would not call SS a “retirement plan” because most people will want more. But as an insurance for a “basic retirement” plan it’s hard to beat.
you don’t have to train people to rely on it. the bad days on the stockmarket have forced some people to rely on it, contrary to everything they were trained to believe.
coberly,
?
Look from your and Bruces own description of how this works the SS checks flowing out get that money from two sources. SS Payroll Taxes or the General Fund. That’s it. No where else. The General fund gets its money from either Taxes or debt. That’s it. So what the General fund did with the SS overages in 1997 are meaningless to a the SS outflow today. It doesn’t matter, that money was spent long ago. Its gone.
Now we have a nice, legal stack of IOUs called the SSTF. Its an accounting process to keep track of the money (with interest!) that the SS Admin sent to the general fund (which then spent it). Now its time for the general fund to send money back to the SS Admin who will cut checks to their recipients. The SSTF then decreases its number by the amount. All sides of the process are part of the Federal Government.
And it really doesn’t matter how the money was spent. It was spent. Now we need to cover the IOU. And my bet is Congress and Obama don’t want to do that.
And that’s basically everyone’s point who you argue with. Its that simple – no one wants to cough up the $2.3 trillion, even in little bite sized $50-100 billion per year bites.
Yes its unfair and stupid not to solve teh SS issue and keep the checks rolling. But that doesn’t change the fact the money is now going from the general fund to the SS admin.
Islam will change
coberly,
ForLiberty could simply read Bruce’s excellent post here:
http://www.angrybearblog.com/2011/03/why-we-dont-need-to-repay-social.html
For good insight into why his point is invalid.
I don’t suppose he will, though.
Nonetheless, neither side of the aisle are talking this up. Both seem to prefer using FUD about SS to their own political gain.
Buff:
Actually, I have avocated increased Medicare taxes in a way similar to what Coberly advocates for SS.
Coberly:
No, you do not need to bring cost contol to Medicrare or Medicaid in the manner in which I believe you mean.
You do need to change the “fee for services” cost model which the healthcare industry thrives on today. Not even the SGR touches this aspect of healthcare and it is a wide open field. The ACA empowers Medicare to do such. One poster pointed out that Medicare does not cover long term nursing care; but, Medicaid does cover long term nursing care. >50% of the people in nursing homes today are there because of Medicaid payments.
Cut Medicaid and you help eliminate one of the supports for the middle income elderly who can not affod the $70,000 to $80,000 a year for non-subsidized healyhcare. I for one have a 4 year long term nursing or assisted care plan which I bought for myself and my wife at a dirt cheap rate. I am one of 7 million US citizens who possess one. Cut Medicare and you tamper with one of the few public plans available for much of the US
http://www.kaiserhealthnews.org/Columns/2011/May/051811gleckman.aspx
Michael:
Medicare is the fix for the fee for services healthcare system and industry.
Buff,
And to add to what you just said…my point is really that if you increase the tax, your just adding more money to the general fund for the politicians to spend, which they will, and therefore you don’t actually end up attacking the problem of solving S.S. not adding to the deficit.
If we give them more money they will blow it, and you’ll still have a huge hole to fill until the Baby Scammers die.
Matthew, as I remember, the incidence of poverty in the elderly was much higher before Social Security than after. So, it may well be that the existence of SS causes some to not save when they would have otherwise; however, it is difficult to claim that this overrides the very real benefits of SS for a much larger majority.
Buff
now that you have read it i am going to delete it as it is of no interest to anyone esle.
my uncle got the little people together to defend them from the big bullies. that is what you call socialism.
Matthew
that is absolutely the truth.
it’s why i am here. and why i get cranky.
I will gladly opt out of SSI. Where do I sign? The internal rate of return on my “benefit” relative to the extortion, oops, I mean contributions, is a negative two percent! If I invested that money myself, even in an ultra-conservative portfolio, my benefit would be three times higher than projected. The whole SSI system is a giant cluster. Privatize it. Politicians can never keep their hands off a surplus of any kind.
run
i was not proposing cutting medicaid.
i think Medicare could achieve cost control by establishing government run clinics, staffed by doctors who were paying back their education loans, or just doctors who would rather work for a salary than run a business. But there are other ideas out there. Including Atul Gowande’s essay in New Yorker some months ago.
Plenty to work with, I would expect government to control costs by negotiating as an equal with the hospitals… or let contracts to insurance companies to manage the day to day..
i don’t know what you believe i mean… but i did not mean to eliminate medicaid unless a single payer… Medicare for all… plan takes its place.
i don’t see the private sector working in medical care any more. but i hate to see the government pay the bills and act like just another dumb patient.
run
me too.
Buff
accounting is how we keep track of what we owe. Social Security did not spend that money. The government borrowed it, just the way they borrow it from you if you buy a Bond. Now they have to pay it back. When you go to cash the Savings Bonds your granny gave you , you don’t want to hear that “the governmetn spent the money”… of course it did. and “the governmetn can’t pay it back.” of course it can.
do not try your reasoning with anyone named Al who has two big friends named Guido and Tony.
Darren
it is very very hard to be polite to you. the money collected for Social Security is used to pay ONLY Social Security benefits. that is the law. The “extra” money was lent to the government, legally and formally. it has to be paid back. you don’t know what you are talking about. and you are not worth talking to.
James
you don’t know what you are talking about, and i hope you arent’ doing the “math” on your customers accounts.
IN the first place SSI is not Social Security. In the second place the “rate of return” on your “investment” in SS varies from about 10% to 2% positive REAL depending on circumstances.
In the third and most important place SS is insurance. Your rate of return if you don’t have the fire is less than the guy who does have the fire. So do you want a fire?
I wish there was a cure for ignorance.
My use of quotation marks was inappropriate. My paraphrase was the effective message of your post: that additional funding levels are required to make such a forced savings plan sustainable for this generation.
I contend that people depending on SS income is not in their best interest nor is it in the best interest of the country as a whole.
Do not take that to mean that I want to destroy the safety net. The net is a great accomplishment of our developed nation…
I think the difficult question (which nobody seems interested in addressing) is how we can retain an effective safety net while simultaneously discouraging people from depending on it… The funny thing is that such effective management would probably be more expensive *and I wouldn’t mind paying more for it either!* because it would be structured to encourage self-reliance rather than government-reliance.
That won’t happen though… Our government likes having more and more people dependant on their “social programs” because dependency perpetuates their power.
Meanwhile we’re content to be bribed with our own money.
As for poverty pre-SS… we were coming off of the great depression and an era of elderly living with familiy and dying pretty darn quickly… it’s not a fair comparison and you know it.
However, the data demonstrates the stagnation of buying power over the last few decades *despite* SS and the expansion of many federal programs.
This is a very excellent break down of the current SS system and how we got to this point. To be honest, it is very refreshing to see someone with an optimistic point of view for the future and someone that isn’t scrutinizing the elderly for attemping to get the SS retirement benefits that they have workred so hard for their whole lives. Social Security Disability Help has a lot of great information on SSD and can help you get connected with an attorney in your area.
reality
i wish you could read. i specifically said “if” and to make sure, I also said “it wasn’t.” i was trying to make the point to people that even if it had been the same, the return to the taxpayer would be more than he paid in. then i went on to discuss what happens when the ratio of workers to retirees changes… the tax rate has to change. that’s all. it turns out that raising the tax is not a big scary deal… since you get your money back, you are making more money than your parents did, and the tax is a tiny part of your income.
you can’t “sustain” anything if you don’t water it from time to time. SS does not need to predict the future. it relies on “pay as you go” or did you miss that part too?
what is misleading here is the voices in your head.2
Matthew
you have an ideological mind set that makes it hard for you to understand “facts as they are.”
i would be glad to see self reliant and virtuous people who did not depend on the government. but they are no where to be seen. and the Depression would not be an exception if it hadn’t been for SS and a few other “government” interventions to keep the “business cycle” from rolling over people on a fairly regular basis. are you saying that having the elderly die pretty darn quickly is a good outcome?
i don’t think anyone intends to depend on Social Security. but experience has taught us that it’s a good back up in case all else fails.
and my whole thesis was that “additional funding levels” are NOT required to make SS sustainable for this generation. please read more carefully.
I guess 35 years of trading and managing money, an MBA and CFA has taught me nothing. Social Security is not sold as insurance; it is sold as a retirement benefit–unlike the original intent of FDR as a minimum social safety net for the truly destitute. Why do you think the national savings rate has plummeted? Decades of entitlements mentality has shifted the burden of personal responsibility from individuals to the nanny state in which we now live.
Soory, dude, numerous IRR calculators give the same negaive result. I have paid in the max benefit at the max rates nearly my whole life. I ain’t coming close to a positive return unless i live to be 100+.