Guest post: Social Security Hurt by Republican Jobs Obstructionism
Guest post by Kenneth Thomas
Social Security Hurt by Republican Jobs Obstructionism
The Center for Economic and Policy Research (CEPR) published its commentary on Monday’s release of the Social Security Trustees Report, which found that the Social Security trust fund would be exhausted in 2033. CEPR rightly blames the recession for the deterioration of Social Security’s finances. As I argued last September with regard to falling health care coverage, the new results from the Trustees show the need for a jobs agenda.
In fact, in just four years, the estimated trust fund exhaustion date (intermediate assumption) has gotten eight years closer. It was 2041 in the 2008 report, 2037 in the 2009 report, 2037 in the 2010 report, and 2036 in the 2011 report. Jared Bernstein charts these trends going back to 1985:
Source: Trustees Reports. via Jared Bernstein.
The CEPR analysis highlights just how crucial jobs are to Social Security’s solvency:
As workers have found themselves without jobs, Social Security has received fewer contributions. The 2007 Trustees’ Report projected 169.0 million workers in 2011 earning $6.5 trillion in taxable earnings. Last year, there were only 157.7 million workers earning $5.5 trillion.
In other words, there was a $1 trillion shortfall of income in 2011 alone compared to the pre-recession baseline. If this doesn’t highlight the need for much greater action on the jobs front, nothing does.
Yet what is the Republican response to this situation? At the federal level, there has been universal opposition to anything that might create more jobs as long as Obama is President. At the state and local level, as Paul Krugman points out, 70% of the decline in public sector jobs has come in Texas and in the states where Republicans took control of government in 2010.
What we see from the Trustees Report is that as jobs and income decline, Social Security is directly harmed. And I’m starting to have the feeling that for the Republicans, this is a feature, not a bug. crossposted with Middle Class Political Economist
“What we see from the Trustees Report is that as jobs and income decline, Social Security is directly harmed. And I’m starting to have the feeling that for the Republicans, this is a feature, not a bug.”
The first sentence of Ken’s conclusion is so blatantly obvious to even a cretin that it relefgates the presentation of his data and graph to the redundency bin. Of course the stagnation of wages is the other factor in the decline of the SSA TF assets. Does it require a presentation of a graph to understand that depressed income levels, especially within the working class has a negative effect on FICA revnues?
The second sentence of the conclusion is less apparent, but an awakening awareness we need to recognize and begin to shout out. Republicans, with the aid of a sumnambulant Democratic Party, are attacking not only your current income stream, but also your future retirement fund and well being. The question is why would wroking class Americans buy the crap they’re selling. Peter Dorman has the seeds of a very good discussion of this issue in his post on wealth vs income at EconoSpeak. Read it and return to discuss, especially this insight, “Similarly, many middle class retirees are highly dependent on the performance of their savings. In fact, this last example reminds us that there is a life cycle aspect to this divergence of interests as well as a class aspect, although the class influence is probably larger overall.” http://econospeak.blogspot.com/.
It may not be immediately apparent why Peter’s point relates, but give lots of thought to why there is always a push to kill SS, the middle class’s retirement anchor. i haven’t the time at the moment to go into it further, but it relates to diverting the FICA revenue flow.
You still have a demographic problem with incomes.
As boomers retire jobs will open up, but you have a higher wage person leaving replaced by a lower wage person – so less payroll taxes.
There is an additional demographic problem with incomes.
As boomers retire jobs will open up, but you have a higher wage person leaving replaced by a lower wage person – so less payroll taxes.
Low wages and high unemployment work to swell the belly of the beast and leads to increasing dissatisfaction with the conditions of life lived at the edge of failure, the financial abyss so to speak. Why did the Chinese political class open their economy to regulated privatization and foreign participation? They recognized that the belly of their best was growing and becoming restless and unwieldy. Total control by either government or capital leaves too much power in too few hands and leads to explosive social conditions. In China, a country with a huge population, increasing social unrest was the alternative to their peculiar structure of capitalism within a socialist state. The masses see improved social conditions and become more acquiescent to control. That was the US not too long past. No, not s socialist capitalism, but a moderated form of a free market economy wherein the worst aspects of private ownership were monitored and offset by careful regulation of economic activites.
I have wondered what the SSTF and its outlook would look like today had real wages for the bottom 90 percent grown over the past 30 years roughly as much as they did in the prior 30 years. Has anyone looked at the data with this question in mind? Is the answer too obvious to bother? Or does nobody really want to know the costs (some of which are long-term) of policies that our elected leaders have pursued to keep wages low and unemployment levels high for all but those at the top?
but the newly retired person has retirement income and spends that back into the economy, creating jobs with that.
the baby boom turning 65 en-masse is going to be a good way to get more money back into the 99%’s hands, I think. Old people need laborers here at home to work for (and on) them more.
Demographic center of mass was 1955, so the incoming tide of retirees will peak in 2020, and remain high for the rest of the 2020s.
Good comment, PJR. NancyO
Ken:
TF exhausts by 1930-something? I am not sure (and can be corrected by either Coberly or Bruce), if this is correct; but, the size of the TF is unusual and was meant to plan for the retirement of babyboomers besides pay out during these times of low contributions, skewed productivity gains. I believe the ideal size of the TF was meant to be 1 year. That the bruce keating and don levitts of the world wish to renege of the TF loan to the gov is puzzling.
Predicting a shortfall in 20 years is a little like buying a lottery ticket. The probability the prediction is correct is slim at the prediction does not take into account the economic ups or downs. It is today’s stake in the sand.
The numbers of workers contibuting given a normal employment rate is not so much a factor as productivity gains impacting incomes of payroll wage workers (the largest segment). That we have a large percentage of the population unemployed and paying little in any tax is a far bigger problem overall.
The largest segment of the population (babyboomers) should be deropping like flies in 2030-something and the issue will lessen.