“Kill Grandma” ? Appeal to young people
by Dale Coberly
TOM FRIEDMAN LIES
THROUGH HIS GREAT BIG TEETH
TELLS KIDS
“KILL GRANDMA”
You see, the Wolf (his friends call him Tom) had no reason to
disguise himself as Grandmother. He had already met Little Red
Riding Hood and talked to her like a friend. She saw him as the nice
man in the very nice suit who told her he would help her become wise
and rich like him.
So when he met her outside Grandmother’s house and handed her an axe
and said, “Grandmother is really a big, bad, wolf, and she is going
to eat you up if you don’t take this axe and kill her,” he didn’t
need a disguise, and she believed him.
Or anyway, this is what Tom said in the New York Times yesterday:
“I can absolutely guarantee Seniors, Wall Street, and Unions [Tom is
very clever, he threw “Wall Street” in there to sound “bi-partisan.”
Wall Street won’t mind.] will all have their interests protected as
our politicians [the bad guys] run for the hills the minute someone
accuses them of ‘fixing the deficit on the backs of the elderly’ or
‘creating death panels’ to sensibly allocate end-of-life health
care.” [See how subtle is the serpent: ‘fixing the deficit on the
backs of the elderly’ is just politics and the kids don’t even have
to think about it. But bi-partisan Tom wants you to know that he
knows ‘death panels’ is just more politics… to prevent ‘sensibly
allocating end of life health care.’ No need to think about what that
means either.]
Tom says, “there is only one thing that can produce meaningful
change… a mass movement for tax and entitlement reform led by the
cohort that will be most affected — today’s young people.”
I implore the reader, if it’s not obvious to him, to read what Tom
says very carefully, and note how cleverly he leads his audience to
accept without thinking the idea that “politicians,” paid by the bad
guys… you know, Wall Street, Unions, and Old Folks … are doing
something bad to the kids; something that the kids can only stop by
cutting taxes and “entitlements.” This is not only fact free, it
never actually says what it means.
Then Tom mentions “all the cans we’re kicking down the road.” This
means nothing at all, but it is focus group tested to appeal to the
imaginations of the completely uninformed, so by all means Tom needs
to throw it in the mix.
Tom pulls out An Alarming Statistic: “.. baby boomers retiring at the
rate of 7000 per day.” In a country of 300 million people 7000 per
day might not add up to much, but it sure sounds like a lot to a kid
who is being told he is going to have to support them all. And Tom
forgot to mention that about 5 or 6 thousand retirees are dying every
day. He was betting you’d forget to think of it too.
Tom says, “if current taxes and entitlement promises are not
reformed, the cupboard will be largely bare for today’s Facebook
generation.” Ah how cute, the kids are “the Facebook generation,”
and they don’t need to be bothered with actual facts. “The cupboard
will be bare” is a compelling image. And it’s all because of
taxes…everybody hates those… and those evil entitlements again.
“But the kids need to get out of their Facebook and into their
parents faces”…Tom has a way with words… “and demand that the
next generation leaves something for this one.” Gosh… “leaves
something.” Yep granny and mom and dad are going to take it all with
them. The house, the car, the Facebook, and all the money, unless
the kids demand their parents “do something.” [Tom forgot to mention
all the jobs all those retiring people are opening up for younger
people.]
But there’s hope.. “a legendary investor who made a fortune, and the
president of Harlem Children’s Zone (funded by the legendary
investor) are doing a “MIck Jagger-like tour” where they, out of the
goodness of their hearts “show young people how badly they’ll be
hammered if our current taxes… and entitlements… stay where they
are.” Ah yes, a legendary investor, Harlem Children, and Mick
Jagger. Whose side would you rather be on, Mick Jagger’s or Wall
Street and the evil Seniors? Or a “legendary investor who made a
fortune betting against you, without creating a single job? Why
would an “investor” not want you to keep some of your money in Social
Security where he can’t get at it?
Friedman uses a standard “it’s the math” lie: He uses a big percent
of a small number to compare to a small percent of a big number to
imply (lie) that the small number is bigger than the big number.
This small number that is bigger than the big number is going to
“necessitate cutting the very government investments that help the
poorest and also create jobs of the future.” Yes kids, we need to
cut government to save the government programs YOU like.
Tom gives his solutions… bi partisan all… but they each contain
a hidden lie… that the kids are not invited to think about. He
proposes “phasing in higher age qualifications for entitlements …
and cutting corporate taxes to zero “so the people who actually
create jobs will have more resources to do so.”
Yes indeed kids, make sure granny starves on the street if she can’t
get a job when she’s sixty five, but cut corporate taxes to zero so
those heroes who create jobs will have more money… so they can give
you a job of course. But don’t stop to think about this, or the
politicians, Wall Street, and the evil elderly will strip the
cupboard bare.
Kids, this is all a lie. It’s a clever lie. But it relies on your
not thinking.
Tom doesn’t tell you the cost of Social Security is going to go up
because YOU are going to live longer. You are going to need a little
MORE money saved if you are going to live longer. But Tom wants to
cut Social Security.
Tom doesn’t tell you that it’s YOUR entitlements he wants you to
cut. His friends are telling “the elderly,” “Don’t worry, no one
over fifty five will have their Social Security reduced.” The cuts
Tom wants to make won’t begin to take effect until YOU are old enough
to need them. And he isn’t telling you that Social Security is not
“too generous.” It’s barely enough to live on. But if that’s all
you have, it’s priceless.
And Tom isn’t telling you that another reason Social Security is
going to cost more is because his friends have already cut government
“taxes and regulations” so they can keep workers’ wages lower than
they would normally have been. This reduces the “effective
interest” that comes from “pay as you go” financing. But that ‘s a
little hard to understand.
Though some of you may not have realized it yet, you are going to be
old some day. And most of you, by far, are not going to be rich.
Social Security was invented so that when you are old and can’t work,
or don’t want to work, or no one will give you a job, you will have
saved enough money to retire on. It works by “forcing” people to
save and then by protecting their savings from inflation and losses
“on the market.” And because it is insurance it also protects “the
poorest” from a lifetime of not making enough money to save enough
for retirement. And it does this without “taxing the rich.” Or even
“taxing” you. You get every dime back that you put into Social
Security… in fact because of the effective interest from “pay as
you go” you get back about two dimes for every dime you put in…
that’s AFTER adjusting for inflation.
The cost of Social Security is projected to go up. But all the scare-
numbers you read [“8.6 Trillion Dollars in Unfunded Deficits!”] turn
out to mean… when you do the math honestly… that it might take
an extra dollar per week per year for you to save enough (via the
payroll tax) to have enough to see you through the twenty or more
years you will probably live… and want to live… after you can no
longer work.
Tom Friedman doesn’t give a damn about you. He is only interested in
“cutting corporate taxes to zero” so his friends can have multi
million dollar paychecks. Any jobs that corporations create come out
of dollars that are not taxed.
Try to understand that you are not paying for “the elderly.” They
paid for themselves. And they will leave you a country far richer
than the one they grew up in. The ones who are robbing you are Tom
Friedman’s buddies, and they pay him well to pull the wool over your
eyes.
Tom F. needs 400 pages to write a 100 page book.
Gas bag.
“you get back about two dimes for every dime you put in…
that’s AFTER adjusting for inflation”
Huh?
Arne
Social Security is “wage adjusted.” That means that wages are adjusted between the time you paid the tax and the time you get the benefit. That adjustment includes the change in the value of the dollar (inflation) and the number of “real” dollars people earn from one decade to another. So the “typical” “effective interest” from your Social Security investment is about 2% these days. Wages are not expected to rise as fast in the future so the “typical” effective interest will be a little bit less than 2% (real). The effective interest for those earning less than average will still be quite a bit more… up to around 10% or more for some. The effective interest for those earning at the top of the scale has been about 2% real up to the last time I calculated it… about five years ago. My top of my head calculation yesterday suggested it might be a bit lower… based on Lyles numbers… but still enough for them to not feel cheated. They will get back more than they paid in. And if they have bad luck along the way, they may get back a LOT more than they paid in.
The numbers you hear from the “non partisan experts” are rigged… comparing SS “returns on investment” to their “magic present value bank.” SS is not an investment. It is insurance. And there are NO magic present value banks.
Arne
you can do the calculations better than i can. but beware of fooling yourself with false simplicity. the real world is not an adding machine.
however, the adding machine suggests that about putting a constant sum of money yearly into a 3.8% per year investment will double the amount you put in after 35 years. This is pretty close to what SS was doing for the “typical” worker. At 2% you would get your money back plus about 40%. So say a dime and a half for every dime you put in.
BUT the point about SS is NOT the “return on investment.” As long as it is reasonable, what you care about is not making a killing, but keeping your savings safe from inflation and other losses. And anyone who wants to go after the bigger interest is entirely free to do so. If they can’t do it without using their SS money, they aren’t smart enough to make money on the market anyway.
sorry.. that’s 3.8% over the rate of inflation or about 7%. maybe not so easy to get even if you could find a magic present value bank.
And in those 400 pages good old Tommy Boy is likely to include a multitude of deceptive descriptions of the world around us, Whether he’s bloviating on politics or the economy Friedman never fails to lay out the scenario that best suits the controllers of the exchequer. Of course he assiduously avoids making the full disclosure of his wife’s family’s business history and personal fortune. Mr. Friedman is not exactly a disinterested reporter in matters regarding the economy and taxation. He’s too wealthy for that to be the case.
Goodness! What an odd rant. Dan goes after Freidman/Drukenmiller and accuses them of killing poor old Grandma.
Actually, it is Crawford who is throwing Granny under a bus.
What is it that those EVIL guys suggested be done? (quotes from the article):
i) raising taxes on capital gains, dividends and carried interest
ii) means-testing Social Security and Medicare
What did Druckenmiller really say about Social Security??
“He (Druckenmiller) considers Social Security and Medicare great achievements for how they’ve reduced poverty among the elderly.”
These are very ‘progressive’ thoughts and actions. What’s the beef?
Or would Dan prefer to see across-the-board cuts of 25+% in just 14 years (the ultimate cat food option)??
Bruce:
What are the titles to each of the artcles? Friedman: “Sorry Kids, We Ate It All” and the Wall Street Article: Stanley Druckenmiller: “How Washington Really Distributes Income, The renown money manager goes back to school to explain how entitlements are helping baby boomers rip off future generations”
I do not believe baby-boomers are ripping off the future of the younger generations. Those pursuing college educations have far more to worry about in obtaining jobs to pay off the ever increasing costs of a college education as paid for by loans.
Krasting,
I have to assume you get taken in a lot. Means testing would destroy Social Security entirely. Druckenmiller knows that. He also knows that not giving “the rich” Social Security sounds sensible to the foolish.
It is very easy for the accomplished liar to praise that which he intends to destroy. It kind of gets the simple minded off their guard.
Hmmmm…late to this party. BK, part of the problem is that Friedman presents old slogans as explanation….no reason you need to.
This is a very bizarre rant unbecoming a serious blog.
The underlying issue is the deficit and the debt. coberly et al. has chosen to focus on the actuarial aspect of Social Security saying that only a small tax increase is necessary, along with the regular contribution of the general fund to redeem the IOU’s.
Virtually no one else, outside of the amen chorus on this blog, looks at it this way.
They, and I would argue the serious analysts, look at it as this: we are spending 150% of our tax revenue; where can we cut spending or raise taxes?
coberly, a wealthy social security recipient, and Webb, choose to characterize this as wealthy conservatives mad at FDR. Yeah.
Friedman thought that S. Hussein had WMD’s, was in cahoots with Al Queda, and bought yellow-cake from Nigeria. Now he says that the most attentive and generous parents the world has ever produced are intent on stealing their kids’ futures. Well, maybe, soon’s we can get them to move out and get a job. Uh-huh. NancyO
Sammy
you make it very hard to be nice to you. fortunately no one with a functioning brain can imagine that you just said anything.
however, just in case there is anyone reading this, except Krasting, who doesn’t already know:
Social Security has nothing to do with the deficit. or the debt. Social Security pays for itself… that is, the workers pay for their own future benefits by an ingenious system called “pay as you go” which protects their savings from inflation and market losses. SS also insures the workers… that is they insure themselves by insuring each other… against reaching the end of their working lives without ever having been able to save “enough” to get by in retirement.
This has nothing to do with the deficit. [I can’t say that too many times.]
By “redeeming the iou’s” the general fund is PAYING BACK THE MONEY IT BORROWED FROM SOCIAL SECURITY. That is, it is paying back the baby boomers who paid an “extra” payroll tax so that there would be enough money for their larger than average cohort.
Sammy does not believe in paying debts. He looks at “where Congress can cut spending or raise taxes to pay for all the other things it has bought and wants to buy. “Hey,” says Congress and Sammy, “Let’s take it from the old folks. They can’t fight back, and there is nothing we will want from them in the future.”
Only hitch is first they have to convince “the young” that it’s really the old folks who are robbing from them.
Nothing wrong with this except it is stupid and dishonest.
And I am not a wealthy Social Security recipient. Sammy lies so easily because truth has never mattered to him: “Let’s see, where can we get the money to pay out debts?” Simple, steal it from the people who trusted us to hold their life savings.”
Good job, Sammy.
I’m not sure that means testing would, by itself, destroy SS. For that matter, changes to COLA and age limits will not kill it.
But I’m as as certain as I can be that higher taxes will kill it.
I think we are about to find out – the next few months will have plenty of talk about entitlement cuts. We know Obama will talk about it, he already has put it on the table. The GOP, and a fair number of moderate Dems would sign up for long term changes.
So folks calling for no changes (Reid, Pelosi and guys like Nigel Cummings) would be in the minority.
Druckenmiller, Freidman etc. are not going to be the agents for changes to SS. The fact that it is running $100b annual deficits will.
$920 a month.
That’s the SS my blind, crippled mother had to live on.
Lets get Friedman and Druckenmiller to explain to the kids that their parents are being so lavishly paid that SS pension need to be cut to LESS than $920 a month — by the time those kids have become old, so arthritic they can’t sleep for the pain, and blinded from cataracts.
Rice and lentils, kids. Get used to them, it’s all you’ll be able to afford under Friedmanomics.
Krasting
You have never understood the first thing about Social Security, but you may understand the first thing about politicians… they are as stupid and ignorant as you are.
Social Security CAN NOT EVER run a deficit. It will soon be drawing down it’s savings to help pay for the boomer retirement. That is long planned, and that is what the savings were saved for. Drawing down you savings to pay for what you saved for is NOT RUNNING A DEFICIT.
Means testing would IPSO FACTO destroy Social Security by turning it into welfare as we knew it.
Changing the COLA will destroy Social Security slowly by cutting benefits below the point where old people can no longer survive on their Social Security check.
Raising the retirement age will kill people.
The higher taxes that will be needed by Social Security in the future amount to less than a dollar a week per year.
WHAT IS THERE ABOUT A DOLLAR A WEEK that you can’t understand?
You and the politicians of both the left and the right. The right because they can run around and shout hysterically about “higher taxes” never mentioning that it’s one dollar per week higher. And the left because they can run around indulging its fantasy by shouting hysterically “make the rich pay!” Never telling the workers they can pay for their own retirement for an extra one dollar per week per year.
But you and they can have the satisfaction of driving 50 million people in every generation into poverty and despair… all because you are too damn dumb to understand ONE DOLLAR A WEEK.
If we wait until the Trust Fund is fully paid out (after paying for the Boomer retirement) before raising the payroll tax, the needed increase would be about 15 dollars per week. Not crushing, but likely to cause some hysteria at the time. The need for the raise is mostly because “the children” are going to be living longer, but not able to work longer (and because Krastings friends have found out how to pay them less while they are working, and stealing the money they try to save).
If we start raising the tax now by a dollar a week each year, by the time it has been raised that 15 dollars, wages will have increased about 150 dollars per week. And wages will keep going up, but the taxes won’t. “The young” are going to be richer than their parents, not poorer.
And even if they are not, ESPECIALLY if they are not, they are still going to need to retire. Retirement isn’t cheap. And it’s better to save “enough” protected by Social Security, than to need to retire and not have enough…. having trusted to the fantasies of the Right of getting rich on the market…. or the fantasies of the Left of getting the rich to pay for it.
“But I’m as as certain as I can be that higher taxes will kill it.”
80 cents a week in the first year will kill it? That is if we leave the cap alone?
But those same workers will just accept working two more years so as to avoid the cost of a candy bar?
Why on earth would you even begin to believe that? Still less be “certain” about it? Based on what logic?
Or do you just refuse to accept Dale’s numbers?
For the slow. An increase in FICA of 0.1% per year every year actually over fund Social Security. Full funding of the current benefit schedule would require imposing that increase on less than every year in the period or a smaller amount each year. Under relatively pessimistic assumptions Real Wage projects to go up 1% per year.
So take a one worker family earning $40,000 per year or any combination of household workers earning that same amount.
$40,000 x 0.1% = $40 per year
$40 / 50 income earning weeks per year = 80 cents
80 cents / 2 for employer share = 40 cents reduction in take home for that family
And yes it is 40 cents more the next year and the year after that. But at a 1% Real Wage (and again a pessimistic number) that is out of a post inflation increase of $4 a week. Every year.
Dean Baker calculates it a slightly different way and gets 6-7% of the actual increase in real wage. Which actually puts it in dollar and cents a little less than Dale’s figure.
But unless you come at this problem with some pathological fear of the word ‘tax’ no one can argue that increases of this rate will ‘kill it’ for ‘certain’. And as such no one can take this particular version of Krasting’s special pleading seriously, He has given up challenging Dale’s arithmetic and is now reduced to pressing his hands over his ears chanting “I can’t hear you! Taxes are BAAAAAD!”
To put it another way Krasting is inadvertently making Dale’s own case.
Dale resists tinkering with the cap or similar ‘tax the rich’ schemes because he fears an increased aversion/decreased lack of support from the upper middle class. Me I think Dale is over-estimating this factor but lets say he is right. What then would be the solution?
How about workers currently making under the cap formula absorbing 100% of the needed extra taxes required and so relieving the more comfortable and the truly rich from any additional burden? That is the deal that the NW Plan offers the plutocrats: fully funded Social Security at zero cost to you. Yet for Krasting this no hooks offer will lead to killing Social Security. On what planet? Under what financial logic do rich people run screaming and wailing away from a fre lunch?
Actually it is better than a free lunch. Because as a mostly unintended side benefit of workers taking on 100% of the responsiblity for the current projected actuarial gap the result is that the wealthy are relieved of all responsibility for repaying the current $2.7 trillion in assets held by Social Security. An odd result yet true.
That is we are not only offering the rich fully funded Social Security at no additional cost to them (aka a free lunch) but partial debt foregiveness in the form of a discounted interest only payback on their existing debt. What a deal! And it is only their blind hatred of FDR and all his works that keeps them from taking it.
Or stupid innumeracy combined with obstinacy. One or the other.
Hmmm. The following will ‘kill’ SS:
Changing the cap
Changing the formula
Changing COLA
Introducing means testing
Changing the FRA
So that leaves increasing PR taxes. CBO says it must be a 3.4% increase, and that it must be immediate and permanent.
Sorry guys – raising taxes is also a dead end. There is no support for this (other than the folks at AB).
So what is the solution if none of these steps are viable? The ‘Do Nothing Plan’? The Do Nothing Plan will also kill SS, it will just take a few more years for that to be come clear.
Krasting
that’s the trouble with not being able to read.
CBO does NOT say it “must be immediate and permanent.”
it says “an immediate and permanent increase will…”
and we have been through this before… the one tenth of one percent per year increase will more than equal the CBO funding within twenty years, or an one and a half tenth of one percent increase will more than equal the CBO funding within 12 years. The “more than equal” means that the workers will by paying for their own SS while CBO is relying on the general taxes to pay the interest on the excess that their “immediate and permanent” will be collecting in the early years.
You can’t hear. You can’t read. You can’t think. You can’t remember.
But for all your life is worth, YOU, and the people who fool you, are willing, insisting, on causing misery to hundreds of millions of people for what? well in Petersons case it is for the money he expects to make by selling “investments” and by forcing people to work a few extra years before they die.
what is your reason?
Bruce
thanks for the help.
your numbers are not exactly the same as my numbers. it does not matter at all. the difference between forty cents and eighty cents is immaterial. no one would feel either. but people who can’t understand that will come all unglued if they try to follow the arithmetic and find that you and i disagree.
so… we DON’T disagree by anything that matters, but just in case they wonder.. the way i figure it, the one tenth of one percent increase would need to be “each” to meet the 2030 or so “death of the trust fund!” date. Over the rest of the century the “average” increase would be closer to twenty cents per week per year… but eighty cents per week in “some” years … when an actual shortfall is projected in the near term… makes more sense.
and for those who insist the employers share is “Really” the employees money, so it would be “a dollar sixty per week”… well, first, even a dollar sixty is not enough to notice… and second, if it’s “really the employees money,” then you have to add the “employers share” to the employees salary, increasing it by eighty cents per week, then when you subtract the dollar sixty, you are still only decreasing the employees paycheck by eighty cents per week. that may be too complicated for people who don’t want to understand it.
one more “correction” i’ll take up in the next comment addressed to Krasting.
Krasting
the reason I have decided you are a liar as well as an idiot is because you keep lurching through the door like some old drunk telling the same stories and singing the same song..
but any sufferer from Korsakoff syndrome might do that. You went too far last time when you claimed to have “done the arithmetic” that I did when I wrote you showing how your arithmetic was wrong. And then you went on to prove you did not understand the arithmetic you claimed to have done.
But here are the results again:
In the first place. even CBO’s “immediate and permanent” 3.4% increase in the payroll tax would be completely unfelt by the workers… no more than they felt the recent 2% payroll tax holiday and it’s recision. The employee share of that 3.4% would be 1.7%… that’s less than 2%. and 2% of 800 dollars a week (about the average wage) would be 16 dollars a week. NO one would notice the difference between having 800 dollars a week and having 784 dollars a week. Especially if they understood that the 16 bucks was being put into a guaranteed, interest earning, savings account for them to help pay for their longer-than-their-grandmother’s retirement.
And THAT’s on the assumption that their wages never grow. BUT wages are projected… by the same people that project the “actuarial” shortfall in SS tax collections… to rise at over 1 full percent per year.
So these kids paying an extra sixteen bucks per week this year, will be getting paid an extra sixteen bucks per week within two years… and that wage will increase by eight bucks per week per year while the CBO “immediate and permanent” tax increase does not increase at all. after twenty years the kids will be making 160 dollars more per week… 144 dollars more per week than they had when the “immediate and permanent” tax increase was imposed… the kids are getting richer, not poorer. AND they will get that tax increase back when they need it most, in the form of a Social Security check they will be very glad to have, I promise.
So, Krasting, have another drink, and go to another bar. Maybe they’ll believe your story.
Of course you will be helped by the man on the television telling them that Social Security is going to eat them alive unless they kill granny.
oh, that sixteen bucks per week assumes a pay of 40,000 dollars per year. if you are making less than that, say 20,000 per year, the “extra” SS tax, under CBO’s “immediate and permanent” would be 8 dollars per week. you can handle it. you’ll get it back, better than two for one. when you need it most.
and just in case it’s not clear.. that “two for one” is after adjusting for inflation.
that means if the dollar you paid in taxes is only worth ten cents forty years later, then every dollar you paid in is counted as ten dollars, then you get paid twenty dollars (inflated dollars) for every dollar you paid in…
or two “real” dollars for every dollar you paid in.
most people here understand this. krasting and sammy never will. but it’s so hard to make everything perfectly clear in a short post or comment, and i get really tired of having to go back and explain things to people who more or less deliberately assume that i must be wrong because they make mistakes trying to “factcheck” what i say.
Coberly says:
“CBO’s “immediate and permanent” 3.4% increase in the payroll tax would be completely unfelt by the workers… no more than they felt the recent 2% payroll tax holiday and it’s recision.”
This kind of thinking leans against economists of all stripes. JPM has conclude that the 2% increase in January is causing a hit to GDP of .6%. A 3.4% increase would therefore create a 1% drag. And remember that this is permanent. That comes to $200B of more taxes in year one. This is a very big deal that will be felt by many. Do keep in mind that PR taxes are very regressive.
Link to JPM analysis:
https://mm.jpmorgan.com/EmailPubServlet?h=c7s2j110&doc=GPS-965096-0.pdf
https://mm.jpmorgan.com/EmailPubServlet?h=c7s2j110&doc=GPS-965096-0.pdf
Krasting
the “tax” may be regressive…the rich don’t pay the tax… but the payout is highly progressive.
calling SS regressive is stupid. but usually its a stupidy recited by leftish economics professors. but you’ll take your lies where you find them if you think they will help your cause… which is to destroy Social Security so Mr Peterson can make a few more billion before he dies. And Mr Simpson can be happy watching all the old folks happily at work polishing his wine collection instead of wasting their time in idle retirement.
economists “of all stripes” are shills for whoever is paying their salary. that’s usually right wing millionaires.
i don’t know who JPM is, but he’s a liar. The 2% “increase” in January is doing nothing to GDP. it’s replacing “government borrowing” which I know you and JPM are all in favor of, with the workers paying for their own retirement, as they always have. that worker’s tax goes right back into the economy where old folks use it to buy things.. increasing the GDP. but your average striped economist can never think two steps ahead when one step gets him the answer he wants to hear.
those increased taxes from CBO’s “immediate and permanent” go into the trust fund where they are immediately borrowed, adding to the “debt”… which i am sure you are all in favor of. The “northwest plan” operates with a much smaller trust fund… keeping SS pay as you go as it was designed… with every dime collected in taxes going immediately back into the economy as the people who collect SS pay their rent and buy groceries.
meanwhile the whole point of SS is not to “increase the GDP” so Mr Peterson can collect half the increase, it is to “prevent poverty in old age”… which I can guarantee you will hurt the GDP.
poorly phrased because i am in a hurry and krasting infuriates me.
poverty in old age will hurt gdp, not “preventing poverty in old age.”
SS is not a tax. It’s a way for people to save some of what they are making now so they will have it to spend when they are old and cannot work. This is done by the genius of pay as you go financing…. which finesses the inflation problem without exposing the money to “market risks.” It also pays a respectable “real” interest that comes from the growth in wages over time.
it’s been working fine for over 75 years, in spite of the insane Right trying to kill it all the time. the insane right has finally bought enough news stations and politicians that they have a good chance of finally succeeding.
your only hope is to understand what is going on, and finding a way to make your congressman more afraid of you than he is of Petersons billions.
Another great zinger from Coberly:
“economists “of all stripes” are shills for whoever is paying their salary. that’s usually right wing millionaires.”
Okay, lets ask a few of those ‘shills what they think a 3.4% permanent increase in PR taxes would do.
We should ask ask this question to those who are well know and respected, and we should narrow the list to only those economists who have a liberal perspective, and are also supporters of SS. I would propose that the question be posed to:
Dean Baker
Paul Krugman
Mark Zandi
You couldn’t ask for a more liberal group of economists.
“poorly phrased because i am in a hurry and krasting infuriates me”
I suggest that no answer is better than a hurried answer. If you are going to change BK’s mind about anything it will only be through years of reassessment that he chooses to undertake. Other people will just be turned off.
And minds can be changed:
I once thought that SS Report assumptions were pessimistic. Now I think we were in a bubble.
I once thought that if people live three years longer then they would choose to work 1 or 2 of them. I now believe that the increase in lifespan does not come with an increase in healthy working years.
I once thought that a payroll tax increase would never be sellable. I have since seen that very few pollsters actually ask people what they would do given a meaningful choice between two things they don’t really like, but when they do so ask, people admit that they are willing to have their taxes increased if they see the benefit.
I once thought that since SS was a compromise to begin with that solving the transition from currently scheduled benefits and taxes to something that will work past 2030 will require compromise. I still think so.
Krasting is that the same JPM which reached out to the Justice Department this weekend with a $13 billion settlement offer to settle claims that they systematically lied to their counter-parties?
Do you think JPM might have an interest in redirecting the current 4.8% of GDP that flows from workers through the Trust Fund to retirees through their bank? That maybe even ‘small’ fees on a $750 billion of so set of payouts might justify shading their ‘neutral’ analysis of Social Security?
You can color me skeptic that JP Morgan hires economists of all stripes or has any higher sense of ethics in reporting that Big Tobacco had back in the day.
Plus you might be surprised at the answer you would get if you posed that question to Zandi, Krugman, and Baker. Cause I talk to Dean and his people on a daily basis via a shared e-mail list. And he is perfectly aware of the existence and premises of Northwest and seems to have no fundamental objection to it. Indeed it is a natural corollary of his long-standing line of analysis since publication of Baker and Weisbrot (1999) Phony Crisis.
As to Krugman obviously we don’t know how often he samples Angry Bear, But that he does is made clear by occassional links to our posts. For example one of my biggest brags is that a Google search on ‘Paul Krugman Bruce Webb’ actually comes up with one relevant hit – to a post of mine on Social Security here at AB.
I think you need to get out and talk to some actual liberal economists. You might start by pestering, err I meant asking informed questions, of the guys over at EconoSpeak. And then maybe sampling the public work of liberal think tanks like EPI and CBPP. You will find a startling (to you) awarenes of the broad lines of the Northwest Plan and not a lot of disagreement on either the arithmetic or the macroeconomic implications. Despite what you may think the posters here at AB have not just been shouting down a well/into the echo chamber. Not everyone AGREES with us on every point. Hell Dale and I don’t agree on every point. But they do listen. And if we had really made a bone-head math mistake would have been informed of same by now.
So feel to throw us in the Baker-Krugman Briar Bush B’rer K. We might come out a lot less scratched than you might fondly imagine.
Note I don’t include Zandi here. I don’t know enough about him and as far as I know he doesn’t know either me or Dale from Adam. Emphasis on “as far as I know”.
Arne
you are a human being. Krasting is not. I don’t expect to change Krastings mind. I am afraid people who don’t know anything will believe what he says, because he learned to say it from highly paid liars who are clever at sounding “sensible.”
I believe that Krugan would agree with Krasting if Krasting asked whether now would be a bad time to increase payroll taxes. If believe Krugman would disagree with Coberly about the 2% payroll tax increase doing nothing to GDP.
This has nothing to do with the NW Plan because the NW plan does not change the payroll tax now.
Once we are out of the liquidity trap, once we are not so demand constrained, the answer would likely be different. If we were in a position that increasing taxes meant increasing benefits (in the same time frame as our analysis) then the answer would be different. However, right now, changing the payroll tax changes the amount of money in the hands of consumers (it does not just change which consumers have it) , so it will impact GDP.
If Krasting were to ask Krugman whether the NW Plan is a good plan, Krugman would be answering an entirely different question.
I choose to believe that Krasting is a human being. I choose to believe that when he says that when he says there is no support for rasing taxes, he is expressing something he believes to be true.
I also recognize that Krasting finds it more engaging to trade barbs with coberly than to respond to my dry numbers, but my ego just sees this as confirmation that I have the more effective approach for slowly pushing against resistance to the idea of raising payroll taxes.
Arne
if you wish to undertake the saving of Krastings soul, be my guest.
AS for guessing what Krugman might think…
I guess my ego tells me that Krugman would do well to ask me what I think.
Krugman was very wrong about SS once until Dean Baker set him straight.
The effect of SS on GDP is not exactly a question that can be answered with any assurance by anyone. Especially by those too lazy to think about all the factors that might be invloved.
BUT in any case.. SS is what allows people to stop working when they need to. No doubt if you could force those people to keep working it would add to GDO. I have read that it would add about 90 thousand dollars per year per person who delayed retirement. No doubt that would warm the cockles of Petersons heart. after all he and his buddies get about fifty cents of every dollar’s worth of “product” a worker makes.
But most human beings would like to save enough to quit working before they die. You see, the point of living is not to increase GDP.
Krasting will never understand that. I am not sure about Krugman.
Arne and BruceWebb
Krasting may have picked a bad time for him to call for submitting the northwest plan to Dean Baker for his opinion.
Dean wrote about something very similar on Sunday. I can’t provide the link, because my computer has gone all k’blooie, but you should be able to find it on his blog. Or I may get the link for you later.
Arne
here is the link to Dean Baker on raising the payroll tax
http://www.cepr.net/index.php/blogs/cepr-blog/can-we-never-raise-the-social-security-tax?utm_source=CEPR+feedburner&utm_medium=feed&utm_campaign=Feed%3A+cepr+%28CEPR%29
you can try talking to Krasting about it. you may learn something. he won’t.
meanwhile Baker seems to think it can be done for forty cents per week per year. That might be enough for SS, but I don’t think it is enough to meet the “projections” of “the death of the Trust Fund.”
that would take about eighty cents per week, or even a dollar and a half. This is still too small an amount of money to worry about.
1) The question for Baker/Krugman was what are the economic consequences of a 3.4% immediate tax increase. They would say it was a dumb idea. Coberly suggested that it would be of no consequence.
2) This is the the language from the CBO that started all of this off:
to bring the program into actuarial balance through 2087,
given CBO’s projections, payroll taxes could be increased
immediately and permanently by 3.4 percent of taxable
payroll, scheduled benefits could be reduced by an equiv-
alent amount, or some combination of tax increases and
spending reductions of equal present value could be used
Do the math guys. This comes to either $190B in new PR taxes or 23% across-the-board cuts. Either of those results (or some combo) would have very negative consequences.
3) The Baker plan of .005 for employer and employee that caps out at 2% net increase does not work. AND YOU KNOW THAT! And so does Dean Baker. He knows he is blowing smoke with those numbers because he has read the same damn CBO report! So please don’t point to crap, and then claim ‘gotcha’.
4) Question for Webb: What % number does SSA use for the discount rate when establishing the NPV of the unfunded portion??
Krasting
i did the math, and showed it to you. then you claimed it was you who did the math. then you showed that you did not understand the math you claimed you had done.
how much more of this do i have to put up with?
please note that cbo said “could be increased” not “must be increased.”
“the math” showed that a gradual increase of one tenth of one percent per year “each” would do the same thing without relying on the general taxes to pay the interest on the “surplus” taxes that cbo’s “immediate and permanent” would collect in the early years.
Baker is entitled to his own calculations. I showed once that a half of one tenth of one percent “each” would close the actuarial deficit, and even a quarter of one tenth of a percent “each” would do it over the actuarial window.
i prefer the one tenth of a percent because 80 cents a week is hardly a “burden” and it solves the problem quicker, getting it off the table.
i don’t know if Baker was looking at the 2030 drop dead date for the trust fund… but when you are talking about “either 40 cents a week or 80 cents a week, there is plenty of room to “disagree” about the schedule of the fix. not much reason to get hysterical about something you don’t understand in the first place.
i think the SS Trustees used a discount rate of 5%… but i’d have to look it up. why don’t you. read the Trustees Report while you are at it.
I’m not sure if anyone is following this thread any longer, I thought I would try to move this debate a bit farther.
I did a spread sheet that compares the Coberly NW plan to the CBO plan. I sent this to Coberly and Webb.
This is not a straight forward numbers crunch. There are a number of variables and methodologies that must be considered. I’m not claiming that I have it all right, but if Coberly/Webb contribute to the debugging, we might be able to come to the apples-to-apples comparison that would allow for a sensible debate on this topic.
I’m not looking to prove anyone right or wrong, just trying to have accurate numbers as the basis for conclusions. I’m making no claim that my effort is correct, I’m looking for input from 3rd parties so that it is correct.
I’m hoping that Webb/Coberly do participate in the review of my numbers and the methods used to to come up with them. Should anyone else who is reading this want to either look at the results, or participate in the debugging, I would send my initial efforts along to them.
Anyone who wants to have a crack at this effort please send me your email and I will send you the spread sheet.
Bruce Krasting
bkrasting@gmail.com
Krasting
I appreciate the sincerity of your offer. I will try to take it up.
But assumptions are critical. And it is necessary to pay attention to details.
We had most of this discussion before. The NW plan does eventually reach a slightly higher tax rate than the CBO plan…. because it does not rely on general taxes to make up the difference, and because in year 75 the CBO plan runs out of money while NW is able, with no further tax increase to fund SS into the forseeable future.
as to the effect of the CBO plan on the economy… well, it’s their plan, not mine. I don’t think it would have a measurable effect. but I was not raised in the Church of the Sriped Economists.
I will add that it’s “obvious” that Social Security “reduces GDP”. If people stop working when they have enough saved to retire, they are not going to be making more money and adding to the economy. But the alternative is to keep working until you die. I am reasonably sure that given the freedom… and savings… to decide for themselves most sane people will choose to be able to retire. I am also reasonably certain that the sight of old people starving in the streets will have a depressing effect on the economy.
in case it’s not clear.
while CBO might depress the economy (not proved), it is by no means clear that the eighty cents per week per year gradual increase in the payroll tax would.
moreover, what effect is forcing people to work longer (the effect of cutting benefits) going to have on the economy…. with old people holding on to jobs that would otherwise go to young people and reduce the “higher rate of unemployment” the CBO projects as a reason for it’s “newer, bigger deficit!” projection?
striped economists tend to only look at one thing at a time, secure in the faith that other things will remain equal.
more in case its not clear:
the northwest plan gradually raises the tax so that the people paying the higher tax will have more money to pay it with. moreover the people paying the higher tax will be the people who are going to benefit from it as life expectancies increase.
CBO just imposes a large (and scary… which is their point) on workers working at todays wages, who will not get the benefit , adding that tax to the money that Congress borrows from SS every year and may or may not pay back eventually.
somehow Krasting has convinced himself that I am arguing in favor of CBO. all I did was point out that, contrary to his assertion, the NW plan brings in the same amount of money … as it is needed .. and that even if wages do not grow, the 3.4% of the CBO plan amounts to about sixteen dollars a week, which no one is going to notice out of an 800 dollar a week paycheck.
the economy won’t notice it either, as the money would mostly be borrowed by the government and go right back into the economy as deficit spending. eventually the money should go into SS benefits which also will go right back into the economy.
Krasting fails to note that “the economy” has been suffering pretty badly because of stuff his banker friends did, having nothing to do with Social Security. moreover any growth in GDP will mostly end up in the hands of those bankers… so it’s hard to see why an ordinary worker should work himself up about GDP
i know the striped economists are sure a slow growing GDP hurts “jobs.” but i think even that isn’t quite true. we haven’t seen any job growth or increase in wages in about twenty years of reasonable growth in GDP. this GDP has tended to go to those rich who are defrauding the workers.
point here is economics is complex. you can work yourself up worrying about figments of striped economists imagination, or you can arrange to put your savings in a place where they will be safe from inflation and market losses and be there when you want to, or have to, retire.
That will NOT affect “the economy” any more than it has for the last seventy five years, even while the same Liars were claiming it would destroy the country.
I would be prefectly happy to try to “save” Mr. Krasting. The first stoep is actually to find out where we agree rahter than where we disagree. When he days “The question for Baker/Krugman was what are the economic consequences of a 3.4% immediate tax increase”, I can agree that he is correct about the qualitative impact that a large increase would have in a demand limited economy.
I wold then hope he would also look for where he agrees with me. I would suggest going back to see if anyone actually suggested making such an increase right now. As coberly has said several time, the NW plan does not. A reread of Baker does not say when. Reading a significant selection of Krugman clealry shows that he believes things will be different once we are out of the Zero Lower Bound.
I would suggest that the CBO number of 3.4 percent is not a plan, rather it is a measure. Comparing this year’s 3.4 percent to last year’s 1.9 percent is more a measure of the changes in assumptions than a measure of the impact of the change in the economy.
When I start to seek agreement rather than disagreement I risk needing to make changes in my own thinking. I showed last thread about CBO that 3.4 percent times 75 years is essantially the same as a linear increase to 6.8 percent (simple geometrical calculation) and that Krasting’s 25 percent could not be right. He ignored me. Either he did not want to be saved or he really thought that the interest could make that much difference. I redid my spreadsheet to include interest and it made a small difference, but since I was being ignored, I did not post my results.
One area that I think important, but where I do not know who agrees with what, is how to save for the fun things in retirement. Everyone should want to have fun after they retire and they should figure out how to save enough to do that. SS comes in when that plan fails.
It is clear that most people do not save enough on their own. We should be telling people not just that they need to keep their safety net strong, but that they need to save more so they can enjoy their retirement more. We should not lull anyone into thinking that SS is enough.
It is entirely possible for our citizens to fail to notice that they are adjusting to having less money by spending less money. Each of those individuals is not harmed by the sudden change. At the same time, the reduction in GDP does mean that some people will lose (or be unable to find) a job. By focusing on their disagreement, coberly and Krasting are unable to see that both are correct about certain aspects.
I will save them both. 🙂