by Dale Coberly
Social Security…Hearts and Minds
Tom Margenau wrote an essay about the payroll tax holiday in The National Memo Is Your Tax Holiday Gift A Lump of Coal? His essay seemed to me to illustrate one of the problems with the Social Security “debate” as it has been constructed.
Margenau describes himself as “not very good with numbers,” but someone who has been accused of being “a bleeding heart liberal.” “But,” he says, “this is one liberal who gives the Republicans credit… at least they are willing to talk about it.” The trouble with all this is that Margenau does not understand the numbers, so he is giving the Republicans credit for being willing to talk about a problem that does not exist.
This is exactly what “liberals” have been doing: searching, searching for a way to ease their bleeding hearts by solving the huge, terrible problem that only looks huge when you don’t understand the numbers.
Margenau cites the famous “in less than 20 years there will be only two workers supporting each retiree.” And he proposes “relatively modest changes… bumping up the retirement age..”
You may read his full essay at the place cited. Easiest for me to simply reprint here the reply I sent to him.
“Tom, Your heart is in the right place, but you miss the critical point. Social Security is not welfare. It is critically important that it is not welfare. FDR understood this so he made it “worker paid” insurance, “so no damn pollitician can take it away from them.” Social Security was never in trouble.
All that 3 to 1 and 2 to 1 worker to retiree ratio is lying nonsense meant to impose on people whose math skills are not very good. What it amounts to is that if people are going to live longer… say 20 years after working 40 years, instead of 13 years after working 40 years, they will need to save about one third more each month for their own retirement.
This means raising the payroll tax from 6% to about 8%. And since the change in life expectancy is not going to happen all at once, it means we can raise the payroll tax one half of one tenth of one percent each year.
This is an increase of 40 cents per week for the average worker today. And while the increase gets bigger over time, so do wages. So the increase will never be felt as more of a burden than that 40 cents per week. AND the workers will get the money back, with interest, so they can look forward to a longer retirement with better benefits than today’s retirees.
The Republicans were not being more responsible… they were telling a Big Lie. They could get away with it because the average person is innumerate, and the average liberal no longer understands the important difference between Social Security and welfare. It is probably too late, but it would help if the people who think SS is important at least understood the facts and the basic principle.
Margenau replied to me that “the worker to beneficiary ratio is not lying nonsense. It is critically important.” And indeed it is. It is fundamental. But it doesn’t mean what he thinks it means. All it means is that if we are going to live longer we are going to have to save more for our retirement. The “more” is not burdensome.
But working an extra year could be hell for many people. Meanwhile, Our President, and his Friends Across the Aisle have killed Social Security. They did it by the breathtakingly bold and easy step of just taking away its funding by calling for a “payroll tax holiday.”
The Democrats …Democrats!… are now running on the issue of making the payroll tax holiday permanent “to avoid a huge tax increase on the middle class.” The lying is sickening. But the people will go for it. And the Republicans will cry, “Oh no, not the briar patch! Don’t throw me in dat briar patch Br’er Obama.”
And laugh up their sleeves while the “progressives” think they have scored a huge win for the poor. And the poor will never understand what happened until they go to retire and learn they’ve had another year added on to their sentence, or have to go to the welfare office to prove they need “benefits,” and they better bring a note from their doctor saying they only have one more year to live.
The only way out of this would be a sudden demand by a hundred million working people to “raise our taxes! give us back our Social Security!”
A major reason the lower ratio of workers to retirees is not a problem is rising productivity. One worker today produces as much output as many workers produced years ago. Rising productivity means the workers will be able to produce enough output to cover themselves and retirees, even at the lower ratio, with some left over.
Life expectancy and worker/retiree ratios were taken into account in the early days of Social Security. When Greenspan and Reagan “reformed” Social Security, they updated the numbers. That fix would have been enough to fund Social Security forever, except they missed one detail. They set the cap on SS assuming it would capture 90% of national income. Because of rising inequality, the highest paid take a larger share of national income, so the cap captures much less than 90%. If we raised the SS cap to once again cover 90% of national income, SS would be fully funded forever.
Even without a change, SS is fully funded for 25 years and almost fully funded thereafter.
The payroll tax holiday provides that SS be funded from general revenues. It does not reduce SS funding, just changes the source.
>>The payroll tax holiday provides that SS be funded from general revenues. It does not reduce SS funding, just changes the source.>>
At least that’s what the first version did. I haven’t seen all details of the latest iteration.
The problem is that by “making up the difference” with gen revenue SS is no longer paid for by FICA tax alone. The key to its longevity has been its independent untouchable revenue stream. Dale is right that this “tax holiday” gives people the impression that SS is just like any other “transfer” program. Examples of transfer programs are TANF, Medicaid, Food Stamps, and SSI.
Those programs popularly called “welfare” programs are based on need, not work, and are available only to poor people. Thus, SS gets thrown into the mix and magically becomes in Simpson’s immortal words an optional provision “for the lesser people.” We could well be bargaining on just collecting the revenue to pay monthly benefits every time the clock runs out on a CR, debt limit, or annual budget.
The R’s in the House have held the payroll tax holiday hostage over everything you can think of–lately a completely unrelated pipeline project of questionable safety as currently designed. Actually, the Trust Fund is of no importance now in paying for current monthly SS benefits. So, payments to the TF don’t matter here. What matters is that there be no question about how SS is paid for, how much is paid, and who pays for it. There are literally dozens of other ways to provide a stimulus to working people–notably, an income tax reduction like the “Making Work Pay” cut of 2009-2010. Instead, we have this disaster. Welcome to austerity. This is how it works. NancyO
“Margenau replied to me that “the worker to beneficiary ratio is not lying nonsense. It is critically important.” And indeed it is. It is fundamental. But it doesn’t mean what he thinks it means.”
Suppose that Social Security were completely private insurance. The worker to beneficiary ratio would work exactly the same way. The point is that the workers provide the goods and services that the Social Security beneficiaries buy. You have to have enough of them and they have to be productive enough. That is the point.
I think that there is some confusion over the idea that it is the taxes of the workers that pays for current Social Security. But, as the thought experiment of a completely privatized Social Security shows, that is not the point. It is not the money, it is the actual goods and services that is the question.
The OASDI payment reduction is reflected in several ways working together: the SS trust fund grows more slowly (in the unrecognized depression the interest has exceeded the cash from the GF), some cash for current ouitlays will be “raised” from the general revenue (possibly retiring some few billion of the $2600B trust fund) and SS has stopped sending cash to crazed war profiteers (mostly done by the recession anyway).
The concern for worker productivity to fund OASDI outlays in the future results from the wilfull negligence and gross mismanagement characterized by tax cuts, unbridled war profiteering, and supply side economics all of which ignored physical supply in favor of monetarized financial assets at the expense of US productivity to support long term human needs.
Galt has not left.
foosion
changing the source changes SS from “worker funded” to “welfare”. that destroys Social Security. that was what i meant when I said “liberals” don’t understand the basic point of SS,.
and the reason the lower ratio of workers to retirees does not matter much is that it is just another way of saying you are going to live longer than your grandparents, and you can pay for it by raising your own “tax” forty cents per week per year. that means you don’t need to “capture” 90% of national income.
like i said, it would help if the people who defend Social Security actually understood the facts and the basic principle.
NO,
Seems the cash to cover the receipts lessened by the “holiday” will come from FHA mortgage rates. Poor people should not be buying houses anyway. And if you don’t own a house you have less interest in the owner society……..
Krugman calls the USG an insurance co with an army. I prefer to say an insurance company with an empire which is draining the insurance establishment.
OASDI receipts have been surplus (rising to $2600B) for some period since the Moynihan Greenspan CON.
The surplus insurance receipts went into a trust fund. That has grown and accrued interest, both of which reduced unified budget deficits to pay for tax cuts and war profiteering to sustain the millstone weight of the neocon empire.
Now during a lesser depression some of the interest on SSTF has to be paid as cash from the unified budget other receipts/deficits.
The insurance operation is not and will not bankrupt the USG.
Other than if you accept Ayn Rand as a prophet.
If the 99% is less into the owner society then start reading Marx. See where it could go.
A major reason the lower ratio of workers to retirees is not a problem is rising productivity.
This would be true if the workers actually recieved some of the fruits of their productivity increases in the form of higher real wages. Over the last 30-40 years, this simoply has not happened. The facts are that every penny of productivity improvement – indeed , overy penny of GDP growth of any kind, has been captured by the top 50%, and disproporionaly higher as one goes up the income scale – into the realm where the SS portion of FICA does not apply.
Which is why I disagree with Dale on this point: “This is an increase of 40 cents per week for the average worker today. And while the increase gets bigger over time, so do wages.”
Sorry, real wages have been stagnant for decades.
I don’t think I’ve ever seen anyone address this aspect of SS funding.
BTW – I agree with Dale and Nancy that the payroll tax idea is horrible. But there it is, and now we have to live with it. I don’t think there is any going back, which can make the imagined SS fnding problem into a real SS funding problem.
WASF!
JzB
If the plan is to have workers fudn their own future retirement, why can’t they do that now? Why can’t I just take the money you think I should be paing to SS and save it myself? That way it won’t be vulnerable to the predations of evil Rebublicans.
jazz
the Trustees Projection upon which I base my forty cents per week per year assumes a real growth in wages of 1.1% per year. this is low by the standards of the last fifty years. I don’t know what the “facts” are about workers not getting a real increase in wages, but i suspect there is some fancy arithmetic going on in that camp, just like what goes on in the other camp. in any case the whole point of SS is that it’s a way to save what you actually make, whether that is high or low is not relevant to the actual “problem.” it does determine whether the retired, as well as those still working, have a higher or lower standard of living, but that has nothing to do with funding SS.
heart of flint
the whole point of SS is that your savings are protected from inflatioin and market losses by the genius of pay as you go financing.
you COULD try to do as well by yourself, and you might do better, but you could also do a lot worse.
then you’d have to go on welfare and WE would end up paying for you. with SS you pay for yourself.
your “plan” was tried. it didn’t work. so they had to invent Social Security. and they had to make it mandatory to take care of all the geniuses who were going to get rich on the market.
and you haven’t been reading if you think i am talking about the evil Republicans. the Republicans have always been bone stupid. But the evil right now is coming from the Democrats.
Min
i think i agree with you. never safe to say “for sure.” but the idea that it was “actual goods and services” that is the question was what got me started on this whole SS thing in the first place. When I heard the “experts” talking about the huge cost of SS, it struck me that a person can only eat so much bread, and they have to eat the bread that is baked in the day… there is a limit to how much it can cost to feed the elderly. and that cost is going to be the same whether it is paid for by means of SS or by means of private “investment.”
once you can keep that in mind it gets easier to see the many many ways the Liars try to confuse people about “money.”
Nancy
thank god for the Republicans. they are “holding the payroll tax cut hostage” because they know Obama is stupid. Having given the R’s what they have only dreamed of getting for seventy five years, he is ready to give them even more of they will only take what he has already given them.
being businessmen, the R’s are perfectly willing to take what they wanted and “bargain” for more. They always take advantage of a fool when they see one.
The hope… faint… is that they will overplay their hand and the “holiday” will expire.
But don’t count on it. There is a pipeline in your future. Let them eat gas.
Nancy
thank god for the Republicans. they are “holding the payroll tax cut hostage” because they know Obama is stupid. Having given the R’s what they have only dreamed of getting for seventy five years, he is ready to give them even more if they will only take what he has already given them.
being businessmen, the R’s are perfectly willing to take what they wanted and “bargain” for more. They always take advantage of a fool when they see one.
The hope… faint… is that they will overplay their hand and the “holiday” will expire.
But don’t count on it. There is a pipeline in your future. “Let them eat gas.”
flint
because of new deal reforms, you now have more money than your grandparents had. there is nothing stopping you from “saving your own money” and getting as rich as Bill Gates, who, I understand, paid his SS taxes and managed to get rich anyway.
SS is insurance in case your other investments don’t work out. If you can’t get rich with the money you have left over after paying SS, you are too dumb to get rich. Be very very grateful the government is making you save something for your old age.
Can anybody provide evidence to support Dale’s statement that “The Democrats …Democrats!… are now running on the issue of making the payroll tax holiday permanent” because I cannot. I have seen proposals to make it permanent at redstate.com and in the Washington Examiner, but those sources hardly reflect positions that the Dems are running on. (The Dems have been insistant on extending the payroll tax cut for 2012, but that is somewhat different than a permanent cut.) Is there a large number, at least a minority, of Dems running on the issue?
Can you explain exactly what the government does with my extra money that generates high returns without any risk? SS just means that you are depending on future tax revenue rather than any particular investment. It doesn’t increase wealth, it only shifts the burden onto an uncertain future. It doesn’t eliminate risk it just means that retirement depends on economic and political risks.
It seems to me that one good retort to fear mongering about Medicare and Social Security is the completely private insurance thought experiment. If you have the same problems or concerns with private insurance, that shows that the attack against Medicare or Social Security is off the mark.
If there is a problem of too few workers per retiree in the future (a pretty big if, IMO), then one possible solution is increased immigration. The U. S. is a nation of immigrants, and always has been. While the melting pot is a myth, immigration is a source of strength and resiliency.
flint
as the economy grows… including inflation… the same tax rate 40 years from now as you pay today will bring in more money. that more money is the “interest” that you get from what you paid in. it is always enough to cover inflation, and will almost always be more than the real interest rate on secure investments. especially when you factor in the insurance that covers you in case of death, disability, or just not having made enough over a lifetime of work to save enough to be able to retire at all.
future tax revenue is as certain as… well, as death and taxes.
the increase in wealth comes from all that work people are doing over the forty years you are paying your SS “tax.”
now if you invest in stocks and bonds… well, talk about an uncertain future.
but let me urge you to go ahead and invest. maybe start your own company. i’m all for it. i did it myself. but keep that SS insurance policy, you know, just in case.
and i’ll say again, if you can’t get rich without investing your SS, you aren’t smart enough to get rich.
pjr
try not to be so rigid. obama is chortling that the R’s don’t dare end the holiday because it would be a “huge tax raise on the middle class.” if the R’s don’t dare end it, when will the D’s dare end it?
i don’t think even the D’s are stupid enough to come out and say… this is it, folks, we have just destroyed Social Security by the clever idea of giving you a few dollars per week to spend at WalMart… by taking it out of your retirement savings. But that’s what they have done.
and just to be clear, NO, no one is “running on the issue”. even the R’s are not that dumb. Everybody is running on “protecting Social Security.”
If you think politicians are telling you anything like the truth you must be a lot younger than i thought you were. ANY politicians.
and yes, i see how what i said led you to think that by “running on the issue” i meant the D’s were explicitly calling for making it permanent.
no, they are calling for extending it.
with no end in sight.
to be more clear.. the forty cents per week per year will pay for the expected costs whether wages grow or not.
the 1.1.% expected growth in wages will mean that for every forty cents in extra tax you pay, you will earn about nine dollars in “extra” wages.
watch out for the “extra” here. it gets more complicated. i am not trying to fool anyone, but there is no percentage in explaining complications. the basic idea is absolutely correct: you can pay for your own social security with an increase in the tax that no sane person would even notice.
You are simply assuming that the economy will grow and this is somehow seperate from investment. The only way the per captia economy can grow is if people become more productive or work harder. People in the past worked plenty hard, so I think prosperity is mostly a result of increased productivity.
My question is how will SS increase future porductivity? I don’t think it will, so the great returns that you are so excited about will be extracted from the rest of the economy. The idea that you are avoiding risk is illusory. If the economy has done poorly, there will not be enough goods and services to provide the expected benefits without placing a large burden on society. Furthermore, SS prevents money from being invested. It actually reduces growth because investment is how we prepare for future needs.
flint
if the economy has done poorly there will not be enough goods and services period. SS will not change the burden. the old people will eat whether the “money” comes from SS or from “investments.”
SS does not prevent money from being invested. poor prospects for profit prevents money from being invested. the problem for advanced economies for the past hundred years has not been “too little money to invest” but too much money to invest.
and at this point i bid you farewell. you have been reading trash designed to fool you. it has succeeded. you are reciting talking points and obviously have never thought for ten seconds about any of it.
You are exactly as I remember. Feel free to ignore whatever I say, you obviously don’t have the patience or imagination to argue with those who don’t share your views.
The problem with the payroll tax deduction is not what is actually does, but what it seem to do (to people who have not looked at it closely enough). It even has some Agry Bears upset.
It is stimulus pure and simple. Money from the general fund is funneled into the hands of people likley to spend it. The amount in the TF maintains the exact same relationship to how much workers earn as it had before.
As stimulus it needs to be temporary. It still is. Instead of explaining how bad an idea this is, you need to explain why it has nothing to do with SS because it is stimulus.
heart_of_flint: “If the plan is to have workers fudn their own future retirement, why can’t they do that now?”
That was the plan that Social Security replaced. It has been tried and found wanting.
We have had Social Security for so long that at least a couple of things have happened. One, we have forgotten what things were actually like without it. Two, society has changed to accomodate it. We no longer plan to have Granny in the attic or extra bed.
flint.
you are right about the patience. but it’s not so much people who don’t agree with me. it’s people who say things that don’t make any sense. and keep saying them.
but be of good cheer. your side has won.
Arne
it turns SS into welfare. that destroys SS.
it isn’t even a good stimulus.
it turns SS into welfare. that destroys SS.
would it do any good if i said that again?
it doesn’t matter that they are “replacing” the money, by borrowing it, or taxing the rich. it turns it into welfare. that destroys SS.
So the plan is not to have workers fund their own retirement, and talk of self finacing is inaccurate. Instead each generation is to fund the retirement of the one that preceeded it. There really is no savings, that’s what pay as you go is all about. Unfortunately the cost of benifits to to future retirees will be considerably more than advertised. Really though SS is solid compared to Medicare.
I agree that people have become dependant on the government for retirement, but I do not believe that is wise or just. You seem to suggest that the elderly would otherwise be a burden on their children, but isn’t it also possible that they could work longer (if needed) and/or save more (start w/ FICA $), so that Granny could own the house and rent out the attic to her her grandchild who is trying to pay down college loans?
People like SS in part because they imagine that it is risk free and pays good returns. I think that instead the risk is systemic, so that losses will come all at once. Either benefit schedules may be reduced, or the inflation adjustment may not keep up with actual inflation. Sure these risks seem small historically, but demographics suggest they may yet materialise. As for the generosity of benefits, that has to come from greater contributions from those now working because the money was never invested and therefore did not contribute to any real economic growth.
flint
i would like to be patient. but you make no sense. you are painting one of those murky-impressionistic pictures that wannabe artists with no talent produce. i can’t follow all the drips and runs, but let me try to explain
that SS does not depend on “investment”. it works simply as “savings protected from loss.” since pay as you go protects the savings from inflation, there is no need for “growth,” it’s just as if you put gold bricks under the bed and the price of gold never varied with respect to the price of bread and rent.
but pay as you go provides another “interest” as the economy grows… because of the work and investment of everybody, not just those who buy stocks… the very growth in the economy means that the same tax rate will provide more money forty years from today than it takes in today. that is effectively “interest” on the growth in the economy, to which all of us, arguably, contribute.
if in fact the economy does not grow… you are not going to make any money on the stock market either.. but more than that, it would just mean that those future people would not get any “more” back that they put in. but they WOULD get back what they put in. which is more than people will get back who “invest” in stocks that don’t make money, or bonds that don’t keep up with inflation. And, because the economy has not grown… the money they saved will buy just as much bread as it would have the day they saved it. and that’s the whole point.
please, i am not trying to hurt your feelings, but if you can, try, try hard, to actually think.
flint
i would like to be patient. [social security is not meant to take the place of ordinary investment, and it does not “compete” with it.]
SS does not depend on “investment”. it works simply as “savings protected from loss.” since pay as you go protects the savings from inflation, there is no need for “growth,” it’s just as if you put gold bricks under the bed and the price of gold never varied with respect to the price of bread and rent. [that would not be investment either. you do NOT invest ALL of your money. SS is a way of protecting SOME of your money.]
but pay as you go provides another “interest” as the economy grows… because of the work and investment of everybody, not just those who buy stocks… the very growth in the economy means that the same tax rate will provide more money forty years from today than it takes in today. that is effectively “interest” on the growth in the economy, to which all of us, arguably, contribute.
if in fact the economy does not grow… you are not going to make any money on the stock market either.. but more than that, it would just mean that those future people would not get any “more” back that they put in. but they WOULD get back what they DID put in. which is more than people will get back who “invest” in stocks that don’t make money, or bonds that don’t keep up with inflation. And, because the economy has not grown… the money they saved will buy just as much bread as it would have the day they saved it. and that’s the whole point.
now please try to think about this. pretend i’m right. pretend this is a class and you are going to have to pass the test. and it won’t be multiple choice.
“please, i am not trying to hurt your feelings, but if you can, try, try hard, to actually think.”
You don’t hurt my feelings, but I find your condescending attitude pathetic, and it gives me little confidence that you will make a good faith effort to explore opposing ideas. Also, you seem to assume that everyone who disagrees with you holds identical views. Part of your difficulty in understanding me may be attributable to your false presumptions.
Economic growth is the product of rising productivity which depends on successful investing. You are simply assuming that the economy will grow or not regardless of whether we invest. In fact you seem to suggest that investing is basically a crap shoot, while pay as you go entitlements will somehow secure adequate resources for the future. This is actually the riskier course of action because it depends on future productivity without doing anything to affect it. By taking money out of people’s paychecks that might otherwise go to prepare for the future and spending it on immediate consumption, you decrease the resources available to prepare for future needs.
The rate at which you can exchange gold for bread and rent depends a great deal on the availability of bread and housing. Ideally today’s wealth should be invested in tractors and lumberyards to ensure tomorrow’s supply. If there is a shortage of bread and housing, there is no guarantee that a retiree is going to get back the same amount as expected. The question I am trying to get you to address is how paying for current retirees actually ensures that the wealth will exist to pay future obligations. All it does is create a legal expectation. This is why I say that there is only an illusion of security. A guarantee is only as good as the grantor’s willingness and ability to back it up.
flint I hope you are not looking at Social Security as a welfare or income transfer program and arguing that feeding old people rather than letting them die reduces spending on investment in new plant and equipment and R&D etcetera. (“By taking money out of people’s paychecks that might otherwise go to prepare for the future and spending it on immediate consumption, you decrease the resources available to prepare for future needs.”)
I think it’s more likely that you have a model in which old people are living off the money they made as wage earners when they voluntarily deferried consumption (!) and made brilliant investment decisions (!!). Of course, when they consume, these old people would draw entirely and directly from the investment pool rather than the wage pool. The drain on the investment pool would hopefully be balanced by younger folks deferring consumption and investing a lot, like their elders did. In other words, there’s no difference except Social Security ensures this will happen–lowering the risks all around, including for the investment pool.
“there’s no difference except Social Security ensures this will happen”
This is where you are mistaken. The difference is that under the scenario you decribe in your second paragraph, there is, at any given time, a large pool of money invested. It should be voluntary (maybe that’s just me), but need not be brilliantly invested – low risk makes more sense for the bulk of it. This pool of money represents the main point I have been trying to make. This is the money that is being “put to work” developing new drugs or condos in FL or whatever. (The money could actually be inveted in other things while people seeking higher risk pursue these particular investments.) By contrast, under SS the money comes in one day and is paid out the next. Any future benefits are not paid out of defered consumption because SS is a transfer program (but not a welfare program) that does not defer compensation.
I know you are rigid, but I also know you can look at the numbers. Let them be your guide.
The cuts are temporary. They are targeted at people who will spend the extra money in their pockets. This is about stimulus. It does not matter if you think it is not good stimulus. It is stimulus. Say it again. Stimulus.
At the end of the year the TF has exactly the same amount of money. In the future the TF has the same amount of money. SS benefits are unchanged. There is no impact of SS finances. Say it again. No impact on SS.
It has nothing to do with SS unless we let people think it does. Do no declare defeat; educate people about the difference between welfare and stimulus.
It has nothing to do with SS, so it cannot turn SS into welfare. It has nothing to do with SS, so it cannot destroy it.
It is stimulus that has nothing to do with SS. Have I said it enough times? Do you get it yet?
I think Coberly is right when he says:
The only way out of this would be a sudden demand by a hundred million working people to “raise our taxes!”
Of course there is a zero chance for that to happen. In fact if we were to ask those 100mm people what should be done with SS taxes the vast majority would say the want to opt out of the system and the related taxes.
So if the only thing that would save SS is a mass outpouring of suport and the reality is that the vast majority of workers hate the program, what are the options?
Whatever the remaining options might be, they certainly do not include more taxes as Coberly wants. That door is closed and will not be reopened. It’s time to move off of that one Coberly.
“. . . the reality is that the vast majority of workers hate the program . . .”
Cite, please.
No flint there is no difference in the amount of money invested. You still are feeding the elderly. That money for their consumption comes from the investment pool either directly via individual withdrawals or indirectly via taxes on wages that you presume would otherwise be invested. There may be a dozen ways to noodle this through. Try this. Suppose you wanted to start your system today, ending FICA and returning everybody’s prior FICA contributions (with interest) so they can invest the money and live off their savings. All that returned money has to come from the investment pool, and then it is returned to the investment pool by the individuals. No change. It’s then withdrawn from the investment pool by the elderly at the rate that wage earners are contributing to the investment pool. No change. Only now this isn’t enforced and the risks to all have gone up because we’re relying on wage earners to voluntarily defer consumption at the correct rate and relying on everyone to invest wisely so everybody is fed, not just the “winners.” The only way that you can boost the investment pool is by not feeding those old folks. The Big Lie that Coberly likes to reference requires that you not know this and, in fact, that you believe the opposite.
Arne
whether you like the payroll tax cut or not, the point is that when you are paying for SS by borrowing and/or taxing the rich, you no longer have a worker funded insurance program. you have welfare as we knew it. and the fact that Obama is chortling that the R’s won’t dare end the tax cut means it is unlikely that the Dems will dare to end the tax cut.
I am sorry my rhetoric offends you. but you keep missing the point.
Joel
he’s thinking of all those polls where the people say “don’t cut Social Security.”
Yes they are calling for an extension but are NOT running on the issue of making it permanent. And yes there is a danger that they will want to repeat this every election year. However, I think they consider this to be a bargaining chip, and the cut becomes “permanent” if they can’t trade it in for something that they want. What they want in return is a more progressive income tax. If the Dems are beaten badly in 2012, they’ll simply lose their chip. If they win, they may get what they want without using their chip, but it’s much more likely that they’ll force the trade. Imho. That’s why the Dems aren’t running on the issue of making the cut permanent–they are not committed to the cut in the way that the GOP is committed to (and runs on) the issue of making permanent the Bush income tax cuts.
I’ll add that if you believe that Obama, Reid, Warner and the Dems in general are far left-wing extremists conspiring to destroy Social Security and ideologically would never consider raising taxes on the middle class, then maybe you’re being naive and are older than I thought. (Consider a reality check: Krasting below agrees with you.) I appreciate a passionate defense of Social Security, but there’s plenty of real danger without imagining even more.
There is no investment pool for SS. Suppose we were to return everyone’s SS contributions. You say “All that returned money has to come from the investment pool” – but there isn’t one. Invested in what? The money is gone. It has already been paid out. Even the so called trust fund holds only the promise of collecting future taxes.
flint
you will not believe this, but i have thought more about your “ideas” than you have. at some point it becomes perfectly clear that you are not thinking at all, but just stringing together soundbites you have heard/read. that’s why i lose patience.
krasting’
for the benefit of those who don’t already know… this won’t help you a bit, we have been here before..
the tax increase i was advocating was forty cents per week per year. now that we have the “payroll tax holiday” the tax “increase” would be about sixteen dollars per week.
Krasting can’t understand the difference because the vast majority of his friends hate social security to start with… his friends are bankers and bond traders. they need a vast reservoir of suckers and desperate people to make money out of them.
pjr
you are not iike krasting or heart of flint, so bear with me.
i don’t think you are right about the difference between not running on making it permanent and running on “extending” it. i don’t claim to know a lot about politics, so you could be right. i hope so.
but note that Krasting does not agree with me. I wish I could get people to read whole sentences and all the little words. hell, paragraphs, and chapters. whole books.
Krasting has always lied about Social Security, and if you read is columns they read just like flint’s… and kind of vague wash of murky ideas that do not follow from each other except by their shared interest in confusing people about SS.
it’s not that the Dems are far-left, or even sold-out. it’s that they are too stupid to understand that the whole point of SS is that it is NOT welfare.
SS is not supposed to be a “bargaining chip.” That’s what FDR meant when he said “we put {the payroll tax] in there so no damn politician could take [SS] away from [the workers.] he did not reckon with the perseverance of damn politicians or the stupidity of the workers.
and no, i don’t think they are far left, or left at all. they are politicians. i suspect they are “sold out” politicians and the whole show is a lie, but in any case i don’t believe anything any of them say. and that is based on reasonable observation over a long time.
pjr
you are not iike krasting or heart of flint, so bear with me.
i don’t think you are right about the difference between not running on making it permanent and running on “extending” it. i don’t claim to know a lot about politics, so you could be right. i hope so.
but note that Krasting does not agree with me. I wish I could get people to read whole sentences and all the little words. hell, paragraphs, and chapters. whole books.
Krasting has always lied about Social Security, and if you read his columns they read just like flint’s… a kind of vague wash of murky ideas that do not follow from each other except by their shared intent of confusing people about SS.
it’s not that the Dems are far-left, or even sold-out. it’s that they are too stupid to understand that the whole point of SS is that it is NOT welfare.
SS is not supposed to be a “bargaining chip.” That’s what FDR meant when he said “we put {the payroll tax] in there so no damn politician could take [SS] away from [the workers.] he did not reckon with the perseverance of damn politicians or the stupidity of the workers.
and no, i don’t think they are far left, or left at all. they are politicians. i suspect they are “sold out” politicians and the whole show is a lie, but in any case i don’t believe anything any of them say. and that is based on reasonable observation over a long time.Today, 9:30:49 AM PST– Reply – Delete
Coberly, the time you spend thinking about my ideas is wasted. You refuse to give them any serious consideration. You refuse to even acknowlege that they are the product of thought.
“when you are paying for SS by borrowing and/or taxing the rich”
But that is NOT what is happening. We are paying for stimulus by borrowing from all future income tax payers.
A Brooks flavored smoothie may be in order here. You have paid out $6.20 for your smoothie for for years. In 2011 you only had to pay out $4.20. But it would be exactly the same if you paid out your $6.20 and were given back $2.00. The smoothie is the same.
It does not matter whether the Making Work Pay stimulus was better stimulus than the Payroll Tax Cut stimulus. It is still stimulus that really has nothing to do with SS.
You would better spend your time by making sure that poeple understand that we will go back to no stimulus; we will go back to SS the way it was with no confusion.
Arne
here’s another thought-picture:
you capture the enemy and cut out his intestines. then you put him on an IV. see, you haven’t hurt him by disembowling him at all.
i would not be so impatient if you had said I was wrong and offered an argument. but you simply assert that changing the nature of SS from “worker paid” to “borrows, and taxes the rich” doesn’t make any difference just because the money is the same.
really, that’s where i came in. the whole POINT of Social Security is (was) that it is not welfare. NOT that you can pay for benefits, for a while, by borrowing and taxing from the rich.
Can you understand that I understand about the money being the same… for now…? The point is that the BASIC NATURE of Social Security has been destroyed.
But it’s okay as long as the people who ripped your guts out keep paying for that IV.
enjoy your smoothie.
you see, Arne, it makes all the difference
whether you pay for that smoothie yourself
or let the guy at the other end of the bar who has been eyeing you all night pay for it.
“i would not be so impatient if you had said I was wrong “
When I quote you and then I say “that is not what is happening”, that IS me telling you you are wrong. None of the rest of the garbage you spewed is worth responding to.
The payroll tax cut is stimulus. It really has nothing to do with SS.
flint I didn’t refer to an “investment pool for SS.” What investment pool are you thinking about when you expect people to put their 12.4 percent into it if they don’t have to pay Social Security taxes? That investment pool. (And yes, paying back everyone’s SS contributions would require a ridiculously massive redistribution of wealth. I never said any of this is a good idea, I’m just saying there’s no gain to the investment pool via your approach–unless you don’t feed the elderly. I hope that clarifies a little.)
I can’t disagree with anything you said and I should apologize for the unfair low blow (the reference to Krasting saying that he agrees with you ouch–this was a bad attempt at humor). As for our pols, I also don’t trust them but remember that the same advice should be heeded by those who oppose SS. Opponents can give you an earful on that subject, covering many decades.
pjr
don’t worry about low blows. i indulge in rhetorical excess myself.
i did want to offer thanks and condolences for your effort to explain net investment to flint, but you had sense enough to know when to quit.
Arne
garbage? hmmm. one more try: you can tell me i am wrong, and you might be right. but when you tell me i am wrong without any argument, merely a restatement of the proposition that i began by saying i didn’t agree with and thought was dangerous, you don’t convince me that you have added anything to the discussion, or even understand what it was about in the first place.
logic lesson
Arne said “The payroll tax cut…has nothing to do with SS.”
well, in some rhetorical universes that might mean something. but in this case I think Arne actually thinks it means something (that is: he fails to notice that there might be something odd about the statement.)