Topical thread from Social Security for the Young
Since the thread from Dale Coberly’s post on Social Security for the Young has over 120 comments, and many are not short but could be essays by themselves, I am starting a companion thread for the conversation to contine.
Well, just in case anyone doesn’t know what the post was about, here is the short version:
Social Security has no effect on the budget or the deficit at all. It is not going broke. It does not need to be fixed.
It can continue to pay benefits that are considered “enough” by today’s standards with no changes whatsoever.
IF today’s young want to get benefits that are higher than that in order to keep up with FUTURE standards, and their own longer life expectancy, they would need to raise their own tax about one half of one tenth of one percent per year… that’s forty cents per week in todays terms.
This is essentially what CBO Option for Social Security Number Two says.
The original post explained this in more detail.
But the big point is that “honoring promises made to granny”… that means giving her the Social Security SHE PAID FOR… will not cause “a crushing burden on today’s youth.” In fact it will preserve their own ability to insure their own eventual retirement at a cost they will not even notice. SOCIAL SECURITY HAS NOTHING TO DO WITH THE DEFICITS NOW OR EVER. If you find that hard to believe it is because you have been lied to all your life, and it will take some effort on your part to understand the truth.
Lifted from open thread to this one: By Nancy O
One more thing about Social Security and the young. This is a pretty sophisticated audience so you know that about 25% of SS beneficiaries are kids, their moms, and other widowed wo/men (men are entitled to spouse and surviving spouse benefits). These families receive benefits to replace the lost earnings of their deceased husbands and wives or their living parents/spouses who are retired or disabled. Many who argue that SS is an undue burden on young workers clearly overlook this aspect of the benefit structure.
Otherwise, there is a general benefit to the children of retired people that also seems to have escaped mention. The general expectation these days is that upon graduation from HS or college, kids will get a job, become self-supporting and leave home. The other side of this expectation is that parents will be able to support themselves until they retire and after through savings, investments, pensions and SS benefits. This idea of a small “nuclear family” the members of which become largely autonomous at some point is a new thing in human culture. The more multigenerational family protrayed in The Waltons TV series was once the norm in the US as well as elsewhere in the world.
The independence of older family members is something we take for granted now. But, the money to make this possible doesn’t come from thin air. In many families, SS benefits are the main source of parents’ retirement income. Without SS, it would be impossible for parents to live independently from their children. So, as a matter of practical economic fact, the SS benefits paid to parents and other family members are a subsidy to younger workers and their young families. Without it, the children of retired people would be required either to contribute directly to their parents or take them into their own homes. SS relieves them of a significant burden which would otherwise fall on them in caring for their parents in their old age. FYI. NancyO
Thanks Nancy that’s my view, too. When somebody says we can’t afford Social Security, they are saying that we should not support these people. I just don’t agree with a “let them die” approach. I suppose charity from family and churches or whatever could replace Social Security, just as well as it worked before Social Security which means not well at all. Further, when somebody proposes cuts in Social Security benefits, they are saying that the floor that the system is supposed to provide is too high–that people relying on these benefits are living too extravagently. Uh, no.
Just a question. The $115b that SSA gets from Treasury is on budget isn’t it? It is interest and it is on the budget.
So when you say that SS has nothing to do with budgets and deficits that’s all wrong. Right?
krasting
no. you are wrong. as always.
SS collects its own money and pays its own bills. the only thing it has to do with the budget is that from time to time it lends money to the budget. and from time to time the budget pays it back.
this is NOT the budget paying for social security. this is the budget paying for whatever it bought with the money it borrowed FROM social security.
if you can’t understand that, you need to have someone appointed to take care of your affairs.
BK–The LAE is set by Congress, but not paid for entirely by general revenues. A portion of the LAE is general revs devoted to the SSI program. But, the remainder and largest part of LAE is used to run SSA’s OASDI operation. You should know this before you get into discussions with Dale, Bruce, Arne, and me. We shouldn’t have to go over this every time the subject of SS and deficits comes up. NancyO
pjr
when they say “we can’t afford it” they are forgetting that “we” don’t pay for it. the old people paid for their own benefits.
pay as you go confuses a lot of people… they think they are paying for granny. but granny already paid.
thinking that you are paying for granny is about as stupid as thinking that when you put money in a savings account, and the bank uses the money by lending it to someone else, that “you” are paying for that someone else.
indirectly, of course, you are. but “your money” is still “your money” and the bank will give it back to you when you ask for it.
i had not realized how hard it was for people to understand this aspect of how money works until i started writing about it and listening to the people who think that “their money” has to be kept in Scrooge McDuck’s vault, and that if Scrooge lends it to John Galt to build that bridge with, why, that’s stealing “my money.”
PJR–Well, if anyone would pay proper attention to the voters, the Petersons and Koch’s of US politics would have faded away long before now. However, voters are no match for the ceaseless flow of money the Billionaires pour into Congress’s campaign funds. The list of things we can’t afford isn’t very long–SS, Medicare/Medicaid, SSI, Food Stamps, et al. But the list of things assumed to be absolutely indispensable is even shorter. Oil and Defense. Just gotta have ’em and anything else is the enemy of fiscal solvency. Ok. I’m for fiscal solvency but with the difference that the money we send to Washington be spent on people here in the US, not weapons systems that don’t work and never will. Right, ilsm? NancyO
Coberly,
To be fair, in our paygo system granny paid for something else to be funded, We *are* paying in the money which is being used to pay her, but that’s only because she paid for us to have bridges and roads.
As to “getting your money back” I don’t think many rationale people are concerned about getting their dollars back… the question is more to the issue of how much those dollars will be worth.
Inflation is, after all, the debtor’s friend.
Matthew
no. granny paid directly and formally for her SS benefits. the fact that while she is waiting to collect those benefits, the Social Security “bank” uses the money to pay other benefits is no more significant than the fact that the Bank of America uses your savings for “other things” while you are waiting to take your money back when you need it.
As for the “inflation” thing, i tried very hard in my post to show how SS finesses the inflation issue. I wish you would go back and read it more carefully. Basically, under pay as you go, the dollars you get back are in proportion to current incomes, which have inflated right along with everything else, so you get you money back adjusted for inflation, and also adjusted for the REAL growth in the economy over the same period of time. IT’s just like interest, only better.
Matthew was concerned
in a comment on the original thread to this post, that SS would weaken the moral fiber of Americans who would depend on forced savings instead of their own prudence.
I think he has cause and effect backwards. Very prudent and self-reliant Americans saw their savings destroyed and invented… that old enterprise thing… a way to protect themselves in the future by using a system of pay as you go with wage indexing. It happens that the only way for that to work is with “forced savings” and government management… but not “government funding.”
People had to invent government to protect themselves from other dangers too big for one person to defend himself against. Of course this introduces new dangers, but I never promised you a rose garden… only sometimes better ways to manage the problems we all face.
As for the moral strenght of the American people… I worry more about this “every man for himself” idea that would turn man back into some pre-primate law of the jungle creature whose life would be “poor, nasty, and short.” Evolution produced co-operation as a kind of superior way to “compete” against the real dangers us creatures face in a big world.
Ooops–Forgot to explain LAE. It means “Limitation on Administrative Expenses”, and is a line item in the Health, Education and Welfare Appropriation. Congress sets a limit on how much SSA can spend to operate its programs, pay employees, rent space, train employees, etc. However, Congress cannot give SSA zero money to operate on and cannot stop the distribution of SS benefits. These expenditures are not included in the budget and will not be unless the program is abolished and all benefit payments for all federal programs are paid for by general revenues.
I do not regard this as a good outcome, but Congress would like it. It would then have complete control over all federal expenditures. That’s a lotta money. And our dear Congressional representatives would be able to do anything they liked with it, including not pay for programs it didn’t like, no matter what the law passed by former Congresses said.
Congress is now doing this in small ways like cutting back on foodstamps and the program which provides food for women with infants and small children (WIC). Baby formula, milk and surplus cheese are real budget busters, alright. As it happens, a considerable number of military families are eligible for SSI, TANF, food stamps and WIC. Congress has declined to increase the pay of enlisted military personnel for quite a while now. After all, the troops have all those freebie food stamps and WIC coupons to help them get by. No reason to actually pay them more money or upgrade their base housing. I’ll shut up now. NancyO
Apparently this is hard for people to understand. Here is an effort to “explain” it. It’s kind of an experiment, so don’t get too excited if it doesn’t work for you.
Suppose you pay a man for some shoes. And he takes the money and buys a hat.
Did you pay for his hat? or your shoes?
There are a variety of right and far right plans that would change SS into something totally different. Is there anything farther to the left than keeping current scheduled benefits as they are and increasing revenue to actually pay for those benefits?
Even if you think that the answer is nearly always in the middle (after all, the 1983 fix was 50-50), how would we get there if the only thing people talk about is changes that are far right and other things that are still right of 50-50? The discussion here is left of (that 50-50) center, but in the mainstream, not so much.
Note that part of the problem is that there is little agreement as to where the center is, and that my putting forward 50-50 is a discussion point rather than an evaluation.
Arne
I am not sure what is “left” about “we pay for it ourselves.”
“left” is “make the rich pay for it” (Bernie Sanders) and I am passionately opposed to that.
“right” is cut it and let the people take their chances “on the market.” and I am passionately opposed to that.
what was “wrong” with the 83 fix in my estimation was that it raised the retirement age…cruel. it should have arranged to raise the payroll tax “as needed” and avoided the big Trust Fund, which while reasonable in principle, introduces complications and opportunities for political games.
what is “left” about the 83 fix is that it saved the program for another 30 years — barely, Clinton was ready to sell it out in his term because he was as stupid as everyone else… thinking of it as “government spending” and the “obvious” fix being to raise the retirement age..
what was “right” about the 83 fix was that it cut benefits for people already on the edge… especially those who had no choice but to retire “early.” and of course it opened the door to the yearly hysteria from the right “Social Security is running out of those worthless iou’s and we’re all going to die!”
Arne I think the left has been less dramatic, and more defensive, on the issue but pushes ideas that would make Social Security far more progressive than it is. Like using general revenues instead of FICA to fund it, not that this would ever happen. They also want higher benefits at the lower end and needs-testing at the higher end. They don’t propose eliminating the system, just “reforms” that change it in fundamental ways to turn it into welfare. To me, that’s no different than the “reform” proposals on the right–both advertise their changes as needed reforms when they really are radical changes. Coberly and Webb are among those who take a rather centrist approach to preserving the system pretty much as it is and has been.
PJR
what is going on here, i think, is that the left can’t think in any other terms but welfare. even the folks who designed SS couldn’t quite shake the welfare idea. It took a Roosevelt to understand that “the dole” was not the answer. and he had to insist on it. making it worker paid, “so no damn politician can take it away from them.”
unfortunately the damn politicians have been more persistent than FDR may have reckoned with, and the workers and their liberal defenders may no longer understand what it is he gave them.
well, i didn’t see any hands go up.
that’s too bad. because the next question is harder.
suppose you want to surprise your wife with a fur coat on her birthday, so you start saving a part of your paycheck every week and put it in the bank to save for that fur coat.
now, unbeknownst to you… but they all do it…. the bank takes your money and lends it to some guy who wants to build a house. now, are you paying for (saving for) that fur coat, or the other guy’s house?
okay, well, here is the money question.
unbeknownst to you, there are thousands of guys in town all taking a part of their paychecks to the bank and saving for something in the future. but since their wives don’t all have the same birthday, on any given day some guys put money into the bank and some guys take money out of the bank.
so the question is, when you put money into the bank, and some guys take money out of the bank the same day, are you paying for your wife’s fur coat or their wives’ diamond rings? and when you finally take your money out of the bank, do they give you your own money back, or try to foist on you some other guy’s money that he put in that same day?
and is that other guy “really” paying for your wife’s fur coat? and should the bank be shut down because it has spent “your” money?
well, i didn’t see any right answers. that’s too bad, because if you had gotten all of them right, you would be able to look pityingly at your friends who still think Social Security takes your money and gives it to someone else’s granny.
or that “all the money in the Trust Fund has been spent.”
i tell you its a crying shame that the banks get away with this confidence scheme. this shell game. this ponzi scheme.
why i understand that some of them have been doing it for over a hundred years.
really, you need to go to the bank today and demand they give you your money back. your OWN money… make sure it’s the same money you gave them.
and then take it across town and give it to your broker who knows a sure thing on wall street.
coberly,
If SS is a fractional reserve system like every private bank, what makes it inherently more secure?
When you say “the government needs to pay back”, I think that would be great. The government could just print debt and sell it to “pay that back”.
Oh, that would have some bad consequences.
Maybe the government could tax rich people to get the money?
No Mastah, no sir!
Maybe the government could tax retirees to get the money?
They don’t work. What is there to tax?
Maybe, the government could tax the worthless young animal to get the money?
YIPPEE! HERE WE ARE. AN ANSWER THAT WORKS.
The oldsters were one of the few hysterical supporters of the Wall Street Bailout.
I suggest that appear wise as their benefits are cut. Their terrible and awe-aspiring wisdom, acquired from a lifetime of such difficutly as a worthless young animal as me will never know, will see them through these tough times.