What would a bipartisan solution to Social Security actually look like? The Northwest Plan retains the pay-as-you-go structure with an increase-as-you-need-it taxing structure. Is there a conservative plan that retains the PAYGO structure entirely on benefit cuts? Is a compromise halfway between politically viable?
From the Democratic side, there are many who would compromise. I don’t see that on the Republican side. I do not see eye to eye with coberly’s need to attach “evil” to any suggestion of compromise, but I also see little point in debating the fine points when there is no possibility of real compromise.
It has been several years since I thought Nothing was the analytically correct choice, but it is still the necessary choice.
Krugman made the argument in 1994 that “Nothing” was not an option. He of course was perfectly correct, no one who looked at the changes in projections between the 1992 Report and 1994 and took them seriously could disagree.
Well we collectively did Nothing. Big mistake? Well not so much. Because the very first Social Security Report I studied and contrasted with the one from the previous year was 1997. And things were looking up, in fact under then current projections simple continuation of productivity and real wage numbers being booked in real time would easily hit Low Cost (I.e. fully funded) outcomes. But really only idiots and pollyannas insisted that one year of economic data equated to destiny. But at a minimum the “we are fricking doomed!” narrative was at risk.
Well one year of data turned to three and by 1999 some guy named Dean Baker, not by nature an optimist, was comfortable titling his book with Weisbrot Social Security: the Phony Crisis”. And given what he and we knew about actual outcomes as compared to what Prof K knew in 1994 he was perfectly right. Nothing worked out as a plan.
And continued to work, by the time Arne and I and Barkley Rosser started pushing ‘Nothing’ in 2004-2005 it was a proven success. That is whatever your views on Social Security GOING FORWARD, inactivity from 1994 to 2004 was numerically proven beyond any doubt RETROACTIVELY. And BTW Prof K had come around on this point, it turning out that contingency and reality and history mattered.
Who knew?
On the other hand contingency, reality, and history continued to work, and the PROSPECTIVE view in 2007 was a little different. Because frankly few people not named Roubini and Baker had turned on the Washington Consensus.
But none of this changes the fact that Arne (though to his credit always more skeptical) and Dale and Barkley and I were right to embrace ‘Nothing’ right up to 2007. Because in practice and projection ‘Nothing’ held workers harmless both in respect to current earnings and future projections while all suggested ‘Somethings’ would have required premature give-aways by labor. Plus I have and will argue that there is still a numeric case for ‘Nothing’. Not as strong as it was say in 2006 but still holding up well against the competition.
So I don’t have a thing to apologize for. And I suggest Arne doesn’t either.
Arne’s ‘necessary’ in relation to ‘Nothing’ is a little strong.
Still back in 2006 when official projections for Social Security started turning a little south I put up a series of posts on a blog mostly ignored by everyone (except later by some Dan Crawford guy who was intrigued by some comments at AB in 2007-2008) called “The Cost of Inactivity” which sought to quantify ‘Nothing’. That is even assuming that ‘Nothing’ implied some worsening of outcomes at the point of Trust Fund Depletion (either by advancing the date of benefit reductions or the amount) what would be the actual current give-away for current workers to do ‘Something’ as opposed to ‘Nothing’ As balanced against the probabilities that actual outcomes would come out in advance of projections in the way the 1994 to 1997 ones did.
Well the answer is not simple. In fact it is far from definite. At least projected out ten or seventy-five years. But it is testable year over year. And in all such calculations since ‘Nothing’ has been an arithmetically winning bet for almost all workers.
And if you like me ring in what I cheekily call Rosser’s Equation, for All WORKERS. So not meeting the formal test for ‘necessary’ but a pretty good policy bet.
There is exactly zero chance for a bipartisan approach (I won’t say solution, because I’m not convinced there is a problem that in urgent need of solving.) This is because the Republicans want to destroy SS. I don’t buy into the Obama is evil part Dale’s PoV, but I do believe that the opposition party has many in it with genuinely evil intent.
On a related note, I heard Bernie Sanders today on both Thom Hartmann’s and Ed Schutz’s radio programs saying he voted against the payroll tax holiday extension because it under-funds SS.
a “bipartisan compromise” would raise FICA and reduce inflation indexing to prevent the $2.6T surplus from every having to be paid back via higher taxes on the top 1-10%.
My current analysis is that the improvement in SS that Bruce observed was almost entirely due to the increase in labor force participation (over what had already been predicted from Boomer and women workers) during the dot-com and then the housing booms. Even so, DI should have been fixed before the meltdown. What would I trade for the 0.1 percent rate increase needed to fix DI? I say Nothing is “necessary” because I don’t think there is anything the right would trade for a tax increase. Doing Nothing could be bad fifteen years from now, but until the right is as willing to compromise as the left, the only Something available will be a lot worse than Nothing.
Troy I am sure you mean well, in fact I am ready to go to the barricades shoulder to shoulder to defend the interests of the workers!
Right on Brother!!
But it is an odd arithmetic result that a total permanent fix of Social Security that results in a 100% payout of the current scheduled benefit NEVER requires pay down of Trust Fund balances. Which validates my claim a dozen years ago that nothing about this is about the math. Because all 1% fixes to Social Security actually require more transfers from them to workers than preserving the current system does. Odd but true.
There is a political solution to the SS “problem”. The problem is the membership in the Congress and to a lesser extent the intention of the Executive, not just Obama in the present, to represent the 1% over the interests of the 90%. I the collective electorate functioned on more than a ganglionic root in its collective heads they would better understand that they are being screwed over by their elected, a likely misconception, representatives do not, have not and will not, take their economic needs into consideration.
Did anyone notice that GM has discontinued funding its defined pension plan for those who were still in it? Their now going to fund their own 401K plans. You know, the retirement plan system that guarantees the plush retirements of the mutual fund industry. They made $8Billlion this year, but the defined pension plan was too much to fund adequately. That’s the drift folks. The need is to turn the tide. First by sending the worst packing over the next several election cycles, and then by doing so show the left overs and the newly entering the the game that we don’t want deceit and deception in the Congress. It will, however, take more than the intelligence of a gnat to understand one’s own self interests. America, that’s where we have a problem.
I do not attach “evil” to any suggestion of compromise. I might attach “stupid” to compromise between “raising the payroll tax forty cents per week” and “destroying the fundamental nature of Social Security by turning it into welfare as we knew it.
I believe I have attached “cruel and stupid” to raising the retirement age.
And “Nothing” is a perfectly good option. But it is hard to get it heard amidst all the shouting about “crisis.”
And responding to liars by offering to compromise with them is stupid.
that result is so hard for people to understand that i usually don’t mention it.
following the NW plan… which is the sanest approach… the TF is gradually drawn down until it is near the one year reserve that SSA is comfortable with. then it maintains it at that level by timely tiny increases or decreases in the payroll tax rate… on the order of one tenth of one percent in any given year, currently not projected to ever exceed 2% for the worker and 2% for the employer over the next hundred years or so. while wages will go up more than 100%, leaving workers with more than twice as much pocket money AFTER paying for their retirements which are expected to last a lot longer and be lived at a higher standard of living than today.
the “catch” the Bruce sees, is that maintaining the TF at one years reserve means that one year of SS collectioins (about 700Billion dollars today) is left in the “Bank” earning interest. as long as that “Bank” is the USTreasury, paying that interest amounts to about 35 Billion a year “contributioin” from general fund to SS.
But remember that Treasury would borrow that money anyway, and pay that interest, to China, or Mr Peterson, if not to SS. And remember that paying interest on money you borrowed is not “paying for” SS.
got to go. this subject is not hard, but just complex enough so it’s hard to understand if you don’t take the time, and care , to go at it step by step.
gee wow sound bites are the tool of the enemy. they shouldn’t be ours.
Well the mind blowing piece is that under the NW Plan the Trust Fund is by one metric ‘drawn down’ but by the common sense one of ‘declining year end balance via principal redemption’ never needs to.
Now you can appeal to ‘derivatives’ or other math jargon to argue that the TF ‘really’ will be ‘drawn down’ but I suggest most people will look at nominal (oops jargon alert) balances increasing year over year, meaning total rollover of actual Trust Fund principal and no net redemption and not see ‘draw down’ at all.
Under the NW Plan Trust Fund balances flatline after 2026 but don’t decline in any meaningful way. A result that once pointed out actually surprised the actual compiler of the spreadsheet, one Dale Coberly.
Examined soberly (or better perhaps ‘coberly’) the 1983 fix did not pre-fund benefits at all, instead the system remains as designed: a pay-go insurance system. In practice even the crisis of 1981-82 left unaddressed would have required only minor real changes in benefits. That is measured in basket of goods terms.
Coberly in my view resists the implications of Rosser’s Equation because it risks surrender of the hidden strength of Social Security, that it allows/requires future retirees to share in whatever prosperity resulted from their own lifetime productivity. Or in the worse case the lack thereof. Bit the flip side is that there is no real Intergenerational transfer, no subsidy by future workers of past workers, no AEI ‘backwards transfer’. And never was. That is even in 1981 there really wasn’t a hole in the bottom of the boat, just a need to recaulk the seams due to some unexpectedly rough seas after 1977. In all important respects the USS SS is the same sound ship as it was when Frances Perkins christened it. Then again as a long time ago Navy guy I can tell you there is never a time when you are not wire brushing away rust and corrosion and repainting the bulkheads and handrails, without constant attention it takes no time for a gleaming yacht to transform into a rust bucket. Which doesn’t mean running around screaming “Abandon ship!! We are sinking!!!”. Because the SS SS isn’t and with attention to detail won’t.
I didn’t know how much the MOU’s hated SS, Medicare and all that humanitarian bull in the budget until I became a civilian. I can’t criticize Coberly or anyone else for characterizing their actions as evil.
Think about this: on one hand, you have 50 million people with little income other than their paychecks getting SS when they retire. Then, to make matters worse, they want medical treatment too and when they end up in nursing homes, Medicaid. Think of the billions of dollars spent foolishly on these people when the upper 1% can make so much better use of the money! It’s appalling to think of how much the government spends on useless people who have no further purpose once they can’t work! Arrrrggghhhh!
Now, you may think I overstate the arguments underlying CATO, Heritage, and AEI’s various 401K equivalents to SS. But, when you look at the premises underlying their arguments for complete or partial SS privatization, the MOU are the main beneficiaries to an undefined benefit SS system. Therefore, there is nothing objective or at all altruistic about what they say to convince people they’re right. They are lying with no regard to what will happen to millions of people should they get their way. In criminal law, that’s called “reckless disregard for human life” and the criminal justice system will throw you in jail if you engage in it. So, evil or not? Evil is closer than any other word I can think of. So, I’ll settle for evil. NancyO
no need to buy my “they are evil” approach. that’s just opinion. i think i am pretty good on the verifyable facts, however. obama doesn’t seem to know, understand, or care about those.
there is no need for mind blowing. the arithmetic is pretty simple. and so are the concepts if you take them step by step.
the SSTF is drawn down from about a ratio (to “required” one year reserve) of about 3 to about 1 from now to about 2026. i don’t remember if that is an actual cash draw down. it really doesn’t matter. the point is that SS becomes “funded” forever. and worrying about the amount of money in the trust fund, or the amount of dollars that treasury pays in interest for borrowing that money is simply a distraction. it has no significance whatsoever.
it’s one thing to enjoy intellectual puzzles. it’s another thing to make puzzles where there aren’t any.
i can’t remember being “actually surprised.” i might have been surprised that anyone thought it was worth worrying about.
i don’t resist the Rosser equation because of any complex hard to understand esoteric reason. I resisted it because is sounded to me exactly like “use price indexing instead of wage indexing” which destroys the whole point of pay as you go. pay as you go with wage indexing provides an automatic inflation adjustment that is not subject to political manipulation, plus an automatic “interest” that equals the average growth in average wages over the time the worker contributes to his future retirement.
but as long as lthe Rosser equation is used to show people that SS is not going broke and can pay benefits that are higher in “real” value after the “death of the trust fund” i use it myself. then i try to point out that folks would be foolish not to raise their tax one half of one tenth of one percent per year in order to keep the same replacement rate. they are going to want it when they get there, whatever they think when they are young and foolish.
no. there is no intergenerational transfer. that is a lie concocted by evil think tankers.
and, just to do a little mind blowing of my own, there IS an intergenerational transfer. the same transfer that has occurred between generations for the last million years ago. the parents care for the children. the children care for their aged parents. the children’s children care for them (the children) when they get old. there is some variation in good times and bad between generations in how good a deal they get. Andy Bigg’s magic bank that guarantees a 3% real return neither exists, nor could it guarantee the “generational equity” that it claims.
I hope I may be forgiven if I sometimes carelessly apply the word “evil” to the dupes of those people, who trot out endless argument after obfuscation to aid them in destroying SS, either by privatizing it or by turning it into welfare, or by destroying its ability to fund a very minimal retirement at the age when most people want to retire and would retire if they could. SS allows those people to pay for their own retirement, without getting lucky on the “market” or begging the rich for “welfare.”
http://birdlightwind.com/2012/02/17/new-post-at-10000-birds-5/ Something Completely Different–For you dog lovers out there, look at the ridge in the fur down the neck of this lion. Rhodesian Ridgeback dogs have the same ridge, thus their name. The Rhodies are lion dogs, used on African cattle ranches to guard against and hunt lions who threaten the herds. Hmmm. Coincidence? Well, yeah, but still…NancyO
the payroll tax holiday approach to destroying SS is very bipartisan indeed, so bipartisan in fact that the R’s can blame it entirely on the Democrats.
but note that it passed our “dysfunctional” congress with no trouble at all.
apparently the “left” has given up even trying to make a case for a sane and humane solution. because, sigh, why bother, if “the right” won’t give you what you want without a fight?
I should give up talking about “evil”. It is politically incorrect, and worse, old fashioned. We have been carefully taught not to think of evil as evil. After all evil people have feelings too. And the greedy miser always has good reason why other people need to learn “virtue” and “self discipline” or starve.
At some risk to friendships, I will offer a description of the way evil works, in my mind as well as yours.
I know someone who wants to “compromise” between raising the payroll tax 2% over a lifetime, and raising the retirement age 2 years over the same lifetime. He wants to raise the tax 1% and raise the retirement age 1 year.
His reason is that he “has things he wants to do” when he retires that he can’t afford if he has to spend an extra 1% on his Social Security.
He never considers that while the tax is going up 2% (or 1%) his income is going up 100%, or that he could divert an extra 1% or 2% of his larger income away from champagne brunches into those investments he can’t make because of the terrible extra payroll tax burden.
Instead, he is willing to offer the “compromise” of forcing old people who are sick, burnt out, in real psychic pain from working at bad jobs.. to work another year… when they could have paid for their retirement themselves… so that he can “do things” when he retires after earning over 100k per year most of his life without ever having to save an extra dime out of his non taxed income.
The evil here is the rationalization… we all do it… that ignores the fact that we are trading luxury we don’t need and wouldn’t notice if we didn’t keep books for the real pain and suffering of others.
this is no different from what the Peterson’s are trying to do. except of course for the scale. at Peterson’s level, money is not for a cruise on the love boat when you retire, it’s for power… mostly the power to force people to work for subsistence wages and depend on the generosity of the massa and be grateful for any retirement that lasts longer than the five minute ride to the knackers.
i neglected to mention that my high earning friend will get all of his SS tax back, with interest.
what he might not get is the big bucks he “might have” earned by successful investment.
of course he might have lost all his money in unsuccessful investment. then the SS guarantee would start to look good.
no chance that he could invest non SS money.
you see, the nature of evil is that you focus obsessively on what you “should have” gotten… that SS money is money you “should have.” You know this because it’s there.
It’s a lot like the biggest piece of the burfday cake. Or your neighbor’s wife.
Laurens van der Post wrote A Story Like the Wind… (a juvenile)
in which he describes the Ridgeback as “noble,” because unlike the low breeds who have enough sense not to attack a lion, the Ridgeback will, and get killed for his troubles unless he has backup.
I knew a good Ridgeback once. Noble dog. Saved my daughter from a pack of low breeds once. Would have saved her from a bear, except she called him back. She says he was glad to obey, but didn’t want the bear to know that.
After you steal everything out of a defined pension by over forecasting returns and the same as for heathcare funding; there is nothing left to take and much to cut as determined by bankruptcy courts picking the bones of what is left to be had. Ever wonder why, the union took over pensions and the funding? Watch what happens to the programs promised in lieu of wage increases. It is occurring in the states today with public workers who are being accused of robbing the state’s coffers.
after working for thirty years for 75% of “private sector” wages on the understanding that you would make up for it with a good pension,
the newspapers have convinced the people that public sector pensions are an optional “gift” if not an outright robbery perpetrated by the unions on the poor confiding state legislature all those years.
i said “low breeds” because i couldn’t think of the word mongrel. it turns out, i think, that this is exactly the way the aristocracy thinks of themselves and the rest of us.
no doubt it would be true if there wasn’t so much aristocratic “blood” in all us mongrels.
“the newspapers have convinced the people that public sector pensions are an optional “gift”….”
I’d edit that just a bit. The news media may very well be complicit in the theft, but the political class is initiating the process. And you can go one level deeper and recognize that it again goes back to those that the political class represents, the One Percent. I’d spread that to the top two or three percent because of all the hyenas that feast off of the beast at the tip of the pyramid. It was noted more than two hundred years ago, but we are fighting the same battle today. “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
That statement is as true today, maybe more so, as then. It may not be an issue of the education of the people, but instead their own ignorant and bigoted manner of seeing one another.
no need to buy my “they are evil” approach. that’s just opinion. i think i am pretty good on the verifiable facts, however. obama doesn’t seem to know, understand, or care about those.
Coberly your friend offers a compromise between a right-wing partisan GOP idea and–rather than a left-wing partisan Dem idea–a centrist nonpartisan idea. It’s how the right-wing of the GOP likes to negotiate, moving the needle ever rightward. The NW plan is a liberal/progressive plan only to those who think FDR was a commie-pinko.
thank you. i have been trying to tell people it’s not “liberal.” and unless Ike was a pinko too, it’s not any more liberal than he was.
all it is is pointing out that we can pay for SS, the way it is, forever. it’s not left. it’s not right. it’s just arithmetic. only, unlike other people who say that, my arithmetic actually adds up.. and keeps track of the apples and oranges.
I said might. And fwiw I am not working or buying or banking on May 1.
I have talked to and met a lot of Occupiers none of them seem to give a fig about making BO look anything but bad. You can’t have civil disobediance without well, disobediance.
And whatever you may think of the likelihood this will even merit mention in the national media (I rate it so far as maybe 5% chance likelihood), I have no doubt the rallies are likely to be huge. It was very smart aligning the day of immigrant protests with this. The ability of occupiers and immigrant rights activists to see enough common ground to collaborate on this seemed to me to represent a real opporuninty…. whatever that .02 is worth.
What would a bipartisan solution to Social Security actually look like? The Northwest Plan retains the pay-as-you-go structure with an increase-as-you-need-it taxing structure. Is there a conservative plan that retains the PAYGO structure entirely on benefit cuts? Is a compromise halfway between politically viable?
From the Democratic side, there are many who would compromise. I don’t see that on the Republican side. I do not see eye to eye with coberly’s need to attach “evil” to any suggestion of compromise, but I also see little point in debating the fine points when there is no possibility of real compromise.
It has been several years since I thought Nothing was the analytically correct choice, but it is still the necessary choice.
Krugman made the argument in 1994 that “Nothing” was not an option. He of course was perfectly correct, no one who looked at the changes in projections between the 1992 Report and 1994 and took them seriously could disagree.
Well we collectively did Nothing. Big mistake? Well not so much. Because the very first Social Security Report I studied and contrasted with the one from the previous year was 1997. And things were looking up, in fact under then current projections simple continuation of productivity and real wage numbers being booked in real time would easily hit Low Cost (I.e. fully funded) outcomes. But really only idiots and pollyannas insisted that one year of economic data equated to destiny. But at a minimum the “we are fricking doomed!” narrative was at risk.
Well one year of data turned to three and by 1999 some guy named Dean Baker, not by nature an optimist, was comfortable titling his book with Weisbrot Social Security: the Phony Crisis”. And given what he and we knew about actual outcomes as compared to what Prof K knew in 1994 he was perfectly right. Nothing worked out as a plan.
And continued to work, by the time Arne and I and Barkley Rosser started pushing ‘Nothing’ in 2004-2005 it was a proven success. That is whatever your views on Social Security GOING FORWARD, inactivity from 1994 to 2004 was numerically proven beyond any doubt RETROACTIVELY. And BTW Prof K had come around on this point, it turning out that contingency and reality and history mattered.
Who knew?
On the other hand contingency, reality, and history continued to work, and the PROSPECTIVE view in 2007 was a little different. Because frankly few people not named Roubini and Baker had turned on the Washington Consensus.
But none of this changes the fact that Arne (though to his credit always more skeptical) and Dale and Barkley and I were right to embrace ‘Nothing’ right up to 2007. Because in practice and projection ‘Nothing’ held workers harmless both in respect to current earnings and future projections while all suggested ‘Somethings’ would have required premature give-aways by labor. Plus I have and will argue that there is still a numeric case for ‘Nothing’. Not as strong as it was say in 2006 but still holding up well against the competition.
So I don’t have a thing to apologize for. And I suggest Arne doesn’t either.
Arne’s ‘necessary’ in relation to ‘Nothing’ is a little strong.
Still back in 2006 when official projections for Social Security started turning a little south I put up a series of posts on a blog mostly ignored by everyone (except later by some Dan Crawford guy who was intrigued by some comments at AB in 2007-2008) called “The Cost of Inactivity” which sought to quantify ‘Nothing’. That is even assuming that ‘Nothing’ implied some worsening of outcomes at the point of Trust Fund Depletion (either by advancing the date of benefit reductions or the amount) what would be the actual current give-away for current workers to do ‘Something’ as opposed to ‘Nothing’ As balanced against the probabilities that actual outcomes would come out in advance of projections in the way the 1994 to 1997 ones did.
Well the answer is not simple. In fact it is far from definite. At least projected out ten or seventy-five years. But it is testable year over year. And in all such calculations since ‘Nothing’ has been an arithmetically winning bet for almost all workers.
And if you like me ring in what I cheekily call Rosser’s Equation, for All WORKERS. So not meeting the formal test for ‘necessary’ but a pretty good policy bet.
There is exactly zero chance for a bipartisan approach (I won’t say solution, because I’m not convinced there is a problem that in urgent need of solving.) This is because the Republicans want to destroy SS. I don’t buy into the Obama is evil part Dale’s PoV, but I do believe that the opposition party has many in it with genuinely evil intent.
On a related note, I heard Bernie Sanders today on both Thom Hartmann’s and Ed Schutz’s radio programs saying he voted against the payroll tax holiday extension because it under-funds SS.
Cheers!
JzB
a “bipartisan compromise” would raise FICA and reduce inflation indexing to prevent the $2.6T surplus from every having to be paid back via higher taxes on the top 1-10%.
My current analysis is that the improvement in SS that Bruce observed was almost entirely due to the increase in labor force participation (over what had already been predicted from Boomer and women workers) during the dot-com and then the housing booms. Even so, DI should have been fixed before the meltdown. What would I trade for the 0.1 percent rate increase needed to fix DI? I say Nothing is “necessary” because I don’t think there is anything the right would trade for a tax increase. Doing Nothing could be bad fifteen years from now, but until the right is as willing to compromise as the left, the only Something available will be a lot worse than Nothing.
Troy I am sure you mean well, in fact I am ready to go to the barricades shoulder to shoulder to defend the interests of the workers!
Right on Brother!!
But it is an odd arithmetic result that a total permanent fix of Social Security that results in a 100% payout of the current scheduled benefit NEVER requires pay down of Trust Fund balances. Which validates my claim a dozen years ago that nothing about this is about the math. Because all 1% fixes to Social Security actually require more transfers from them to workers than preserving the current system does. Odd but true.
There is a political solution to the SS “problem”. The problem is the membership in the Congress and to a lesser extent the intention of the Executive, not just Obama in the present, to represent the 1% over the interests of the 90%. I the collective electorate functioned on more than a ganglionic root in its collective heads they would better understand that they are being screwed over by their elected, a likely misconception, representatives do not, have not and will not, take their economic needs into consideration.
Did anyone notice that GM has discontinued funding its defined pension plan for those who were still in it? Their now going to fund their own 401K plans. You know, the retirement plan system that guarantees the plush retirements of the mutual fund industry. They made $8Billlion this year, but the defined pension plan was too much to fund adequately. That’s the drift folks. The need is to turn the tide. First by sending the worst packing over the next several election cycles, and then by doing so show the left overs and the newly entering the the game that we don’t want deceit and deception in the Congress. It will, however, take more than the intelligence of a gnat to understand one’s own self interests. America, that’s where we have a problem.
Arne
I do not attach “evil” to any suggestion of compromise. I might attach “stupid” to compromise between “raising the payroll tax forty cents per week” and “destroying the fundamental nature of Social Security by turning it into welfare as we knew it.
I believe I have attached “cruel and stupid” to raising the retirement age.
And “Nothing” is a perfectly good option. But it is hard to get it heard amidst all the shouting about “crisis.”
And responding to liars by offering to compromise with them is stupid.
Bruce
that result is so hard for people to understand that i usually don’t mention it.
following the NW plan… which is the sanest approach… the TF is gradually drawn down until it is near the one year reserve that SSA is comfortable with. then it maintains it at that level by timely tiny increases or decreases in the payroll tax rate… on the order of one tenth of one percent in any given year, currently not projected to ever exceed 2% for the worker and 2% for the employer over the next hundred years or so. while wages will go up more than 100%, leaving workers with more than twice as much pocket money AFTER paying for their retirements which are expected to last a lot longer and be lived at a higher standard of living than today.
the “catch” the Bruce sees, is that maintaining the TF at one years reserve means that one year of SS collectioins (about 700Billion dollars today) is left in the “Bank” earning interest. as long as that “Bank” is the USTreasury, paying that interest amounts to about 35 Billion a year “contributioin” from general fund to SS.
But remember that Treasury would borrow that money anyway, and pay that interest, to China, or Mr Peterson, if not to SS. And remember that paying interest on money you borrowed is not “paying for” SS.
got to go. this subject is not hard, but just complex enough so it’s hard to understand if you don’t take the time, and care , to go at it step by step.
gee wow sound bites are the tool of the enemy. they shouldn’t be ours.
Well the mind blowing piece is that under the NW Plan the Trust Fund is by one metric ‘drawn down’ but by the common sense one of ‘declining year end balance via principal redemption’ never needs to.
Now you can appeal to ‘derivatives’ or other math jargon to argue that the TF ‘really’ will be ‘drawn down’ but I suggest most people will look at nominal (oops jargon alert) balances increasing year over year, meaning total rollover of actual Trust Fund principal and no net redemption and not see ‘draw down’ at all.
Under the NW Plan Trust Fund balances flatline after 2026 but don’t decline in any meaningful way. A result that once pointed out actually surprised the actual compiler of the spreadsheet, one Dale Coberly.
Examined soberly (or better perhaps ‘coberly’) the 1983 fix did not pre-fund benefits at all, instead the system remains as designed: a pay-go insurance system. In practice even the crisis of 1981-82 left unaddressed would have required only minor real changes in benefits. That is measured in basket of goods terms.
Coberly in my view resists the implications of Rosser’s Equation because it risks surrender of the hidden strength of Social Security, that it allows/requires future retirees to share in whatever prosperity resulted from their own lifetime productivity. Or in the worse case the lack thereof. Bit the flip side is that there is no real Intergenerational transfer, no subsidy by future workers of past workers, no AEI ‘backwards transfer’. And never was. That is even in 1981 there really wasn’t a hole in the bottom of the boat, just a need to recaulk the seams due to some unexpectedly rough seas after 1977. In all important respects the USS SS is the same sound ship as it was when Frances Perkins christened it. Then again as a long time ago Navy guy I can tell you there is never a time when you are not wire brushing away rust and corrosion and repainting the bulkheads and handrails, without constant attention it takes no time for a gleaming yacht to transform into a rust bucket. Which doesn’t mean running around screaming “Abandon ship!! We are sinking!!!”. Because the SS SS isn’t and with attention to detail won’t.
I didn’t know how much the MOU’s hated SS, Medicare and all that humanitarian bull in the budget until I became a civilian. I can’t criticize Coberly or anyone else for characterizing their actions as evil.
Think about this: on one hand, you have 50 million people with little income other than their paychecks getting SS when they retire. Then, to make matters worse, they want medical treatment too and when they end up in nursing homes, Medicaid. Think of the billions of dollars spent foolishly on these people when the upper 1% can make so much better use of the money! It’s appalling to think of how much the government spends on useless people who have no further purpose once they can’t work! Arrrrggghhhh!
Now, you may think I overstate the arguments underlying CATO, Heritage, and AEI’s various 401K equivalents to SS. But, when you look at the premises underlying their arguments for complete or partial SS privatization, the MOU are the main beneficiaries to an undefined benefit SS system. Therefore, there is nothing objective or at all altruistic about what they say to convince people they’re right. They are lying with no regard to what will happen to millions of people should they get their way. In criminal law, that’s called “reckless disregard for human life” and the criminal justice system will throw you in jail if you engage in it. So, evil or not? Evil is closer than any other word I can think of. So, I’ll settle for evil. NancyO
jazz
no need to buy my “they are evil” approach. that’s just opinion. i think i am pretty good on the verifyable facts, however. obama doesn’t seem to know, understand, or care about those.
Bruce
there is no need for mind blowing. the arithmetic is pretty simple. and so are the concepts if you take them step by step.
the SSTF is drawn down from about a ratio (to “required” one year reserve) of about 3 to about 1 from now to about 2026. i don’t remember if that is an actual cash draw down. it really doesn’t matter. the point is that SS becomes “funded” forever. and worrying about the amount of money in the trust fund, or the amount of dollars that treasury pays in interest for borrowing that money is simply a distraction. it has no significance whatsoever.
it’s one thing to enjoy intellectual puzzles. it’s another thing to make puzzles where there aren’t any.
i can’t remember being “actually surprised.” i might have been surprised that anyone thought it was worth worrying about.
i don’t resist the Rosser equation because of any complex hard to understand esoteric reason. I resisted it because is sounded to me exactly like “use price indexing instead of wage indexing” which destroys the whole point of pay as you go. pay as you go with wage indexing provides an automatic inflation adjustment that is not subject to political manipulation, plus an automatic “interest” that equals the average growth in average wages over the time the worker contributes to his future retirement.
but as long as lthe Rosser equation is used to show people that SS is not going broke and can pay benefits that are higher in “real” value after the “death of the trust fund” i use it myself. then i try to point out that folks would be foolish not to raise their tax one half of one tenth of one percent per year in order to keep the same replacement rate. they are going to want it when they get there, whatever they think when they are young and foolish.
no. there is no intergenerational transfer. that is a lie concocted by evil think tankers.
and, just to do a little mind blowing of my own, there IS an intergenerational transfer. the same transfer that has occurred between generations for the last million years ago. the parents care for the children. the children care for their aged parents. the children’s children care for them (the children) when they get old. there is some variation in good times and bad between generations in how good a deal they get. Andy Bigg’s magic bank that guarantees a 3% real return neither exists, nor could it guarantee the “generational equity” that it claims.
Thank you, Nancy.
I hope I may be forgiven if I sometimes carelessly apply the word “evil” to the dupes of those people, who trot out endless argument after obfuscation to aid them in destroying SS, either by privatizing it or by turning it into welfare, or by destroying its ability to fund a very minimal retirement at the age when most people want to retire and would retire if they could. SS allows those people to pay for their own retirement, without getting lucky on the “market” or begging the rich for “welfare.”
Excellent comments, Jack. SS is undoubtedly all the workers will have other than a 401K. I think that speaks for itself. NancyO
http://birdlightwind.com/2012/02/17/new-post-at-10000-birds-5/
Something Completely Different–For you dog lovers out there, look at the ridge in the fur down the neck of this lion. Rhodesian Ridgeback dogs have the same ridge, thus their name. The Rhodies are lion dogs, used on African cattle ranches to guard against and hunt lions who threaten the herds. Hmmm. Coincidence? Well, yeah, but still…NancyO
jazz
turns out there is a bipartisan approach
the payroll tax holiday approach to destroying SS is very bipartisan indeed, so bipartisan in fact that the R’s can blame it entirely on the Democrats.
but note that it passed our “dysfunctional” congress with no trouble at all.
Arne
apparently the “left” has given up even trying to make a case for a sane and humane solution. because, sigh, why bother, if “the right” won’t give you what you want without a fight?
I should give up talking about “evil”. It is politically incorrect, and worse, old fashioned. We have been carefully taught not to think of evil as evil. After all evil people have feelings too. And the greedy miser always has good reason why other people need to learn “virtue” and “self discipline” or starve.
At some risk to friendships, I will offer a description of the way evil works, in my mind as well as yours.
I know someone who wants to “compromise” between raising the payroll tax 2% over a lifetime, and raising the retirement age 2 years over the same lifetime. He wants to raise the tax 1% and raise the retirement age 1 year.
His reason is that he “has things he wants to do” when he retires that he can’t afford if he has to spend an extra 1% on his Social Security.
He never considers that while the tax is going up 2% (or 1%) his income is going up 100%, or that he could divert an extra 1% or 2% of his larger income away from champagne brunches into those investments he can’t make because of the terrible extra payroll tax burden.
Instead, he is willing to offer the “compromise” of forcing old people who are sick, burnt out, in real psychic pain from working at bad jobs.. to work another year… when they could have paid for their retirement themselves… so that he can “do things” when he retires after earning over 100k per year most of his life without ever having to save an extra dime out of his non taxed income.
The evil here is the rationalization… we all do it… that ignores the fact that we are trading luxury we don’t need and wouldn’t notice if we didn’t keep books for the real pain and suffering of others.
this is no different from what the Peterson’s are trying to do. except of course for the scale. at Peterson’s level, money is not for a cruise on the love boat when you retire, it’s for power… mostly the power to force people to work for subsistence wages and depend on the generosity of the massa and be grateful for any retirement that lasts longer than the five minute ride to the knackers.
i neglected to mention that my high earning friend will get all of his SS tax back, with interest.
what he might not get is the big bucks he “might have” earned by successful investment.
of course he might have lost all his money in unsuccessful investment. then the SS guarantee would start to look good.
no chance that he could invest non SS money.
you see, the nature of evil is that you focus obsessively on what you “should have” gotten… that SS money is money you “should have.” You know this because it’s there.
It’s a lot like the biggest piece of the burfday cake. Or your neighbor’s wife.
Nancy
Laurens van der Post wrote A Story Like the Wind… (a juvenile)
in which he describes the Ridgeback as “noble,” because unlike the low breeds who have enough sense not to attack a lion, the Ridgeback will, and get killed for his troubles unless he has backup.
I knew a good Ridgeback once. Noble dog. Saved my daughter from a pack of low breeds once. Would have saved her from a bear, except she called him back. She says he was glad to obey, but didn’t want the bear to know that.
Jack:
After you steal everything out of a defined pension by over forecasting returns and the same as for heathcare funding; there is nothing left to take and much to cut as determined by bankruptcy courts picking the bones of what is left to be had. Ever wonder why, the union took over pensions and the funding? Watch what happens to the programs promised in lieu of wage increases. It is occurring in the states today with public workers who are being accused of robbing the state’s coffers.
because, you see,
after working for thirty years for 75% of “private sector” wages on the understanding that you would make up for it with a good pension,
the newspapers have convinced the people that public sector pensions are an optional “gift” if not an outright robbery perpetrated by the unions on the poor confiding state legislature all those years.
i said “low breeds” because i couldn’t think of the word mongrel. it turns out, i think, that this is exactly the way the aristocracy thinks of themselves and the rest of us.
no doubt it would be true if there wasn’t so much aristocratic “blood” in all us mongrels.
“the newspapers have convinced the people that public sector pensions are an optional “gift”….”
I’d edit that just a bit. The news media may very well be complicit in the theft, but the political class is initiating the process. And you can go one level deeper and recognize that it again goes back to those that the political class represents, the One Percent. I’d spread that to the top two or three percent because of all the hyenas that feast off of the beast at the tip of the pyramid. It was noted more than two hundred years ago, but we are fighting the same battle today.
“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
That statement is as true today, maybe more so, as then. It may not be an issue of the education of the people, but instead their own ignorant and bigoted manner of seeing one another.
jazz
no need to buy my “they are evil” approach. that’s just opinion. i think i am pretty good on the verifiable facts, however. obama doesn’t seem to know, understand, or care about those.
Coberly your friend offers a compromise between a right-wing partisan GOP idea and–rather than a left-wing partisan Dem idea–a centrist nonpartisan idea. It’s how the right-wing of the GOP likes to negotiate, moving the needle ever rightward. The NW plan is a liberal/progressive plan only to those who think FDR was a commie-pinko.
PJR
thank you. i have been trying to tell people it’s not “liberal.” and unless Ike was a pinko too, it’s not any more liberal than he was.
all it is is pointing out that we can pay for SS, the way it is, forever. it’s not left. it’s not right. it’s just arithmetic. only, unlike other people who say that, my arithmetic actually adds up.. and keeps track of the apples and oranges.
This might get interesting: http://www.nationofchange.org/occupy-wall-street-calls-may-day-general-strike-1329579039
It’s time.
Just tell folks on the right that the NW Plan just preserves the legacy of Reagan and the Greenspan Commission.
AS,
Not going to happen. It would make Obama look bad. OWS wants Obama to get re-elected. Not do a remake of ’68.
Note how all the Dem mayors are closing them down.
Islam will change
I said might. And fwiw I am not working or buying or banking on May 1.
I have talked to and met a lot of Occupiers none of them seem to give a fig about making BO look anything but bad. You can’t have civil disobediance without well, disobediance.
And whatever you may think of the likelihood this will even merit mention in the national media (I rate it so far as maybe 5% chance likelihood), I have no doubt the rallies are likely to be huge. It was very smart aligning the day of immigrant protests with this. The ability of occupiers and immigrant rights activists to see enough common ground to collaborate on this seemed to me to represent a real opporuninty…. whatever that .02 is worth.