Grand Bargain in the works?
Dean Baker takes note of the code word ‘tweaking’ regarding Social Security, and points us to one aspect of the Grand Bargain thinking apparently in vogue in DC.
Relevant and even prescient commentary on news, politics and the economy.
you all may also be interested in this new take from charles blahaus, who coberly has addressed previously, claiming the temporary payroll tax cut fundamentally changed the program:
The End of Social Security Self-Financing: What Next? – Today the Mercatus Center is releasing my study entitled, “The End of Social Security Self-Financing: What Does it Portend for Social Security’s Future?” The piece explores the implications of the Obama Administration and Congress having recently cut the Social Security payroll tax and financed benefit payments from the general government fund, thereby ending decades of bipartisan commitment to FDR’s original vision for Social Security — that it be a self-financing program in which total benefits were limited by the amount of worker contributions. This financing change has the potential to fundamentally transform the future Social Security debate, possibly affecting important policy choices ranging from its rate of benefit growth, to whether a contribution-benefit link is maintained, to how eligibility ages are set, to whether formal means-testing is adopted.
as a trustee, blahous sure has it in for social security
Blahous was Bush’s point man on privatization. And the way the current structure of the two Public Trustees is set up is that one is representative of the Republican leadership, while the other is nominally the representative of Democratic leadership, nominally because the ‘liberal’ always seems to be an Erskine Bowles Grand Bargain type. (A good description of current D Public Trustee Reichshauer).
But any notion that either really represents the ‘Public’ in the way say the NYC Public Advocate is supposed to do is fanciful. Instead they represent the ‘Non-partisan’ ‘sensible centrists’ whose policy solutions to just about everything always include a SS ‘reform’ component.
Which is why I laugh and laugh when certain commenters try the “Even Public Trustee Blahous says—“. Pull the other finger guys.
Mr. Webb-Thanks for enlightening us on the messenger. What about his message? Have you seen any numbers regarding the payroll tax cut’s impact on SS?
The temporary payroll tax cut impact on SS was to reduce the number of IOUs written to the SS trust fund during that period. The trust fund is gigantic.
$28 trillion bucks over the past 60 odds years for international intrigue and insecurity. Now they are worrying that SS cash needs might cut into war profits and securing the world for the Saudis.
Prior to 1991 when the US had an adversary war absorbed substantially more than SS. For the past several years perpetual war has demanded as much cash as SS retirement and Disability.
Since 1950 the perpetual war profits machine consumed $28000B [2011]dollars, with no dedicated funding stream. The part since 1991 is nearly $15000B.
Bastiat said that money goes to naught.
The money in the trust fund went to perpetual war profiteering for naught in terms of improving US productivity.
little john
except for propaganda iike Blahous’, the payroll tax cut should have no effect on SS, as long as the treasury pays the money back to the trust fund as promised.
i thought the tax holiday was a stupid and dangerous idea. but technically, for now, the answer is “no effect.”
Little John
The Treasury did a transfer to the Trust Funds in the precise amount of the revenue lost. To the extent that that transfer plus similar transfers to credit interest accrued plus transfers for tax collected (via remaining FICA and tax on benefits) still exceeded total Cost (which it did) the total net Surplus was ‘invested’ in Special Treasuries.
Now the actual financing and accounting of this transfer on the Treasury side is a little obscure but from the Social Security side the net effect on Social Security balances and long-term solvency was zero.
Now the political effect is a much different question, which is why a lot of progressive supporters of Social Security squealed and hard at this “painless” way of delivering tax relief to the working class, the danger then and now is that the holiday will be continued even as the transfers come to be considered as regrettably “unsustainable” “subsidies” to Social Security. That is even if “temporary” tax cuts/income boosts were the right response to the turndown, dragging what should have been an isolated SS system into the Rube Goldberg contraption of cuts/transfers/chutes/ladders was a mistake. As usual the Obama econ team is too smart by half. Just ask them.
Or. What Coberly said. With some hopefully useful context.