Dean Baker ponders the lack of focus on Social Security
It is remarkable that social security hasn’t been a more issue in the presidential race. After all, Governor Romney has proposed a plan that would imply cuts of more than 40% for middle-class workers just entering the labor force . Since social security is hugely popular across the political spectrum, it would seem that President Obama could gain an enormous advantage by clearly proclaiming his support for the program.
But President Obama has consistently refused to rise to the defense of social security. In fact, in the first debate, he explicitly took the issue off the table, telling the American people that there is not much difference between his position on social security and Romney’s.
On its face, this is difficult to understand. In addition to being good politics, there are also solid policy grounds for defending social security. The social security system is perhaps the greatest success story of any program in US history. By providing a core retirement income, it has lifted tens of millions of retirees and their families out of poverty. It also provides disability insurance to almost the entire workforce. The amount of fraud in the system is minimal, and the administrative costs are less than one 20th as large as the costs of private-sector insurers.
In addition, the program is more necessary now than ever. The economic mismanagement of the last two decades has left the baby boomers ill-prepared for retirement – few have traditional pensions. The stock market crashes of the last 15 years have left 401(k)s depleted, and the collapse of the housing bubble destroyed much of their housing equity, which has always been the main source of wealth for middle-income families.
It would be great if we had reason to believe that the generations that followed had better retirement prospects, but we don’t. Even in good times, the 401(k) system does more to enrich the financial industry than to provide a secure retirement income. Any reasonable projection indicates that social security will provide the bulk of retirement income for most middle-class retirees long into the future. In this context, the idea of cutting back benefits, even for younger workers, seems misguided…
Neither has a “clear reading” on how much suffering god wants for the 99% to pay for the 1%’s greed.
The difference between Obama and Romney is which one reads god’s mind the way I want it read.
And the GOP would use the courts and privatized prisons to impose their clairvoyance, aided by the clergy of course.
Canada does pretty well with a sovereign wealth fund for social security.
So, I say keep the current program with the cuts in 2030 and introduce a SWF for “social security +”. Perhaps we fund it with a carbon tax.
That may bee too neoliberal for this blog, but its the best Choice for the well being of most Americans.
“best choice” may mean only that you do not know what the choices are.
Social Security can continue exactly as it is… worker paid insurance… with a “tax” increase of about eighty cents per week per year while wages are increasing about eight dollars per week per year. And the workers get the money back, with interest, when they need it most.
In the long run workers will have more than twice as much money in their pockets AFTER paying for a Social Security benefit that will last 30% longer and pay (also) twice as much in real dollars as benefits do today,
Personally, and I am not ashamed to say it, I think it would be stupid to turn Social Security into welfare, which is what your plan does.
Moreover, the President at least has the excuse that he has never heard of the eighty cents per week solution. The “progressives” who claim to be defending Social Security don’t have this excuse. The fact that they won’t talk about it tells me they are as dishonest as the Peterson bad guys.
In this like so many things, this election offers a choice between a headlong rush to failure or a slower path to fail. When Bogama says his position doesn’t differ significantly from Rmoney’s he acknowledges they both end up in the same place. Failing a successful program that is wildly popular.
The fact that I have reconciled myself to the (hopefully) slower failure doesn’t bode well for the future of this political system.
We didn’t allow Bush to privatize SS. Why would we allow Obama or Romney to cut benefits?
I know what the choices are. I have also looked beyond our borders to see what others have done.
Canadian workers pay in 1/3rd less and get 1/3rd more in benefit — their equivalent of the trust fund is invested in a diversified portfolio of funds. It works very well, and their losses in 2008/9 were limited
Social Security has worked very well for over 70 years.
Everyone earns an interest rate that is at least 2% more than inflation. Lower level wage earners, and those who suffer a serious loss earn a lot more.
I guess, without knowing anything about you that you don’t know what SS earners pay or get.
And of course it’s not welfare. Which is very important to Amercan workers at least.
In any case, the Canadian plan does not seem to be on the table, or likely to be in this century in this country.
I looked up Bradley’s blog.
He is a right wing libertarian by confession.
And he doesn’t know what he is talking about. That is he cobbles together “facts” without understanding anything at all about how the facts are related to each other and what they mean.
Bradley seems to object to Social Security because it’s insurance. He thinks that if someone has a fire after paying only a year’s worth (say) of insurance, (say) a thousand dollars, and gets a hundred thousand dollar settlement…. that someone else who pays a thousand dollars a year for forty years and then gets only a hundred thousand dollars for his fire is being robbed. You see, the first guy got a hundred times as much back as he put in. And the second guy only got two and a half times as much back as he put in. It’s clearly unfair.
If you are an idiot.
Bradley also observes, but does not understand, that someone who earns at the cap… pays the maximum tax, gets all the money he paid in… ADJUSTED FOR WAGE GROWTH, WHICH INCLUDES INFLATION, back over the twenty years he would expect to live upon retirement. Seems that earning about 2% over inflation on your 12k per year “savings” is just not good enough for Bradley, never mind the insurance, or the better than 90k said top earner has to play with on his own after the mean old government forces him to buy retirement insurance.
Because as we know, people as smart as Bradley never, ever fall into hard times.
people who earn less than the cap earn considerably more “return on investment” the the 2% above inflation that the high end guy gets.
But Bradley objects to Social Security because it gives a better deal to people who end up poor than it does to people who end up rich.
See, it’s like buying fire insurance. If you KNOW you will never have a fire, buying fire insurance is not the best investment you can make.
Bradley knows. And so therefore, NO ONE should ever buy fire insurance…
ah, certainly not be forced to by the government. There’s the rub. Instead the rest of us should just pick up all the little Bradleys when their best laid plans let them down.
“Canada does pretty well with a sovereign wealth fund for social security.”
A few minutes on wikipedia shows that Canada has a two part social safety net.
One is a mandated government managed pension. It is PAYGO with a higher reserve than SS. It apppears to have taxes and benefits about 2/3 of the size of SS. Its return based on its formula is slightly less than that for SS scheduled payments (as you might expect since it has a growing reserve).
Second is the Old Age Security pension which is an additional mandated government managed program. It is means tested and appears to provide about 1/2 of what SS does at the median.
Combined it appears Canada has a very similar program providing a slightly better safety net at a slightly higher cost.
I should also have said that if someone can provide us with better info that wikipedia, please do. But it would appear that Nick Bradley’s info was incomplete.
The Canada Pension Plan provides a report. It shows the Worker to Benficiary ratio is just over 4, will be 3 in a decade, and is projected to be near 2 in 50 years. Its reserve is (in 2009) nearing 4 years and increasing.
What Canada has does not make it able to spend more than it takes in. It just had less of the Boomer bulge that seems to make PAYGO math hard.