Sell out alert
Via Alternet:
The list of Democrats who are entering these negotiations embracing the GOP’s terms continues. There are at least nine in the Senate. California’s Dianne Feinstein, Montana’s Max Baucus, West Virginia’s Joe Manchin, Delaware’s Chris Coons and Tom Carper, and Colorado’s Michael Bennett have all said they support cuts to entitlements in letters to constituents, proposed bills or statements made after the President’s fiscal reform commission led by Eskine Bowles and Alan Simpson issued its 2010 report proposing capping or cutting entitlements while lowering or eliminating corporate taxes.The list of Democrats who are entering these negotiations enbracing the GOP’s terms continues. There are at least nine in the Senate. California’s Dianne Feinstein, Montana’s Max Baucus, West Virginia’s Joe Manchin, Delaware’s Chris Coons and Tom Carper, and Colorado’s Michael Bennett have all said they support cuts to entitlements in letters to constituents, proposed bills or statements made after the President’s fiscal reform commission led by Eskine Bowles and Alan Simpson issued its 2010 report proposing capping or cutting entitlements while lowering or eliminating corporate taxes.
Fortunately, as Harry Reid noted, the Republicans are not going to agree to any new revenue. Therefore,no “grand bargain”; and a good thing too.
Let me suggest a cut that should not hurt to much to SS: Recall the benefit formula for SS with its bend points, What if all amounts above the second bend point used chained cpi while those below the second bend point continued as today. For each birth cohort year the bend points for that year would be used in the calculation; For 2013 this implies that amounts under about 2k/month at full retirement age would get current treatment, and the amounts between 2007 and 2533 (the max benefit at full retirement age in 2013) would get the chained cpi treatment.
It’s really hard to agree that any cuts to SS, even those that don’t “hurt too much”, make any kind of sense. SS doesn’t contribute to the deficit and the deficit isn’t a problem anyway. Democrats should not participate in Republican efforts to erode the SS program.
“SS doesn’t contribute to the deficit”
You are correct. It does contribute if you dishonestly define “the deficit” based on a so-called “unified budget,” but as a matter of law there is no such thing as a “unified budget.” As a matter of law, there is separate accounting for the Social Security program and there may be no commingling of funds. It’s “settled law,” too.
Feinstein, Bennett, Manchin, Carper, Coons and Baucus know all that perfectly well — as do Obama and Gene Sperling — but apparently they simply do not give a crap what the law says. The wealthy insiders for reasons they refuse to divulge want cuts in Social Security benefits, and these self-proclaimed Democrats care more about what the insiders want than what their constituents want and need. Law is supposed to matter. Why does it not matter to them?
Sigh. Under the most commonly used metric of ‘THE deficit’ Social Security does ‘contribute’. By REDUCING IT.
Sure it is legitimate to appeal to the fact that Social Security is legally ‘off budget’. To a point. But that doesn’t make the current inclusion of ‘off budget’ surplus/deficit in a combined calculation somehow either illegal or evil.
Because like the main post itself “Worth repeating twice”.
Social Security contriubutes to THE deficit. By reducing it.
Is this an argument for abandoning the use by CBO of THE deficit because it doesn’t by one formulation line up with current law”? Well maybe.
But is there any argument for allowing the Bad Guys to introduce a totally new meanng for ‘deficit’ beyond the ones already in place and used by CBO, i.e. ‘on budget deficit/surplus’, ‘off budget deficit/surplus’ and ‘THE deficit/surplus’? Well no.
If the Entitlement ‘Reformers’ want to use the terms ‘debt’ and ‘deficit’ when discussing legislation they need to use them in precisely the same form as the official scorekeepers of that legislation, that is CBO.
And per CBO’s own definitions and numbers Social Security is currently REDUCING the ‘deficit’ and will continue to until at least 2016. I understand how the insistance that ‘Social Security does not contribute to the deficit’ is useful for the Good Guys here. Because most people will read ‘contribute’ as ‘add to’ and not ‘subtract’. And that is just factually incorrect when it comes to Social Security. But the ‘off budget/on budget’ distinction really doesn’t bear the weight that people want to put on it. For example Medicare Part A (Hospitals) which is financed in exactly the same way as Social Security, is currently ‘on budget’ even though at periods in the past it was ‘off budget’. And the decision as to where it fell had fuck all to do with the fact that its financing was operationally and legally separate from that of the General Fund. Because the whole ‘on budget/off budget’ distinction is in the end all Inside Baseball rules about which program should be subject to which internal Congressional rules in the whole budget process. It just isn’t some attempt to wall off Social Security for some larger purpose. Although tactically it is useful to regard it as such.
So you all just ignore the blog commenter shouting in the corner. Move along. Nothing to see. Shoo! “La, la, la, we can’t hear Bruce!”
(I’ll be the guy over there reading the footnotes in the CBO Tables cited by others and muttering)
In fact even if one accepts the concept of a unified budget Social Security cannot contribute to the deficit because its “share” of the budget actually runs either balanced or slightly surplus depending on the revenues to benefits balance. Any deficiency in the revenues is made good by drawing from the Trust Fund assets. This in fact reduces government debt though the reduction may be short term if the Treasury redeems Trust Fund assets by issuing other debt instruments. And, of course, when revenue is more than sufficient to cover benefits the Social Security income will actually reduce the deficit within the extra legal concept of a unified budget. However, in such a case the increase in Trust Fund assets resulting from such a FICA surplus would then increase government debt while reducing its deficit.
That is precisely why the Social Security budget cannot rationally be unified with the general budget. The two budgets serve distinctly different purposes and have distinctly different revenue streams, though those stream flow from the same source, the American tax payers. Write to your representatives and remind the scum that they are supposed to be just that, your representatives rather than representatives of only the One Percent. Feinstein and Baucus are two bullshit wind bags that are Democrats in name only. If it walks and talks like a fiscal conservative than it is a Republican, a representative of plutocracy.
Lyle suggests: “Let me suggest a cut that should not hurt to much to SS: Recall the benefit formula for SS with its bend points, What if all amounts above the second bend point used chained cpi while those below the second bend point continued as today. For each birth cohort year the bend points for that year would be used in the calculation; For 2013 this implies that amounts under about 2k/month at full retirement age would get current treatment, and the amounts between 2007 and 2533 (the max benefit at full retirement age in 2013) would get the chained cpi treatment.”
To what end? And exactly how would this score by CBO? And what do you do about the people who get 100% of their post-retirement income from Social Security at $2008 dollars a month? Who are not exactly living lives of luxury at $24, 096 a year. As opposed to those people to whom that $2006 dollar a month check is just leveraged on top of some other pension or annuity?
If you want to fuck around with bend points, then just fuck around with bendpoints in a way that reduces the payout for people making over the second one. Take the Replacement ratio down from 15% to whatever. But doing that in some back handed way through different metrics for annual COLAs is just technocracy for the sake of technocracy and buying into the whole ‘Selfish Geezer’ messaging of Bowles and Simpson.
If Chained-CPI was really an accurate measure of the inflation actuallly experienced by seniors and so was ‘more accurate’ then there is a case to apply it across the board. If as a lot of really smart analyists assert Chained-CPI is actually a less accurate measure of such inflation that CPI-E then there is a case to apply the latter across the board. Which would mean increasing Social Security cost and not reducing it. But any attempt to selectively introduce Chained-CPI in a way that only affects the ‘wealthy’ and leaves the ‘poors’ alone is conceptually, operationally and arithmetically a nightmare. Because not everyone who has earned a SS check above some arbitrary bend pont is ‘wealthy’ and not everyone earning a check below that point is ‘poor’. You could consider the case of some guy that had 10 years in covered employment as a relative gofer in a major corporation and then got fast tracked into the ownership class via stock options. Say some Silicon Valley coder that came up with the killer App that let the company get go Big and get bought out. I mean for all I know Elon Musk and Mark Cuban might have spent enough years working server jobs in college and coder jobs after to be vested in Social Security. But only enough to be getting a minimum check. Should they get a pass on Chained CPI while the guy that worked his way up to foreman and never got a sniff of company stock options be penalized because his earnings put him above that second Bend Point? To what end?
The whole thing seems to me just an attempt to buy off ‘Reformers’ with some technocratic kludge when issues of ‘solvency’ are not reallyh what they are all about anyway. Offering the Bad Guys a more complicated and potentially slightly more progressive way of leeching the Social Security patient when their end goal is to bleed it dead seems a waste of time. Because you are playing on their field under their rules which include you wearing a patch over one eye and your left arm in a sling while they swing away. Don’t play their game for them.
Jack says: “In fact even if one accepts the concept of a unified budget Social Security cannot contribute to the deficit because its “share” of the budget actually runs either balanced or slightly surplus depending on the revenues to benefits balance. Any deficiency in the revenues is made good by drawing from the Trust Fund assets. This in fact reduces government debt ”
Jack that is a reasonably sound argument for dropping the current way in which ‘THE deficit’ is calculated. But that is not the way that CBO actually calculates that number. Their scoring makes sense internally just as standard accounting rules as to debits and credits make sense. Internally. But the fact is that most everyone gets nowhere trying to interpret a firms ‘Balance Sheet’ because by definition everythng nets out to zero. Because Debits always match Credits, which is why they call it a ‘Balance Sheet’. If you want to do actual financial analysis on that firm you need to consult the Financial Statements that flow OUT OF that Balance Sheet: Statements of Owner’s Equity, Income Statement, Cash Statement, Ratio Analysis. Because those will show real world positive and negative numbers you can work with.
On the other hand the CBO’s official calculation of ‘THE deficit’ is neither fish nor fowl. It provides useful information about the overall financial health of the U.S. government but just doesn’t have the kind of one to one relation with ‘debt’ calculations as one would want.
For example in FY 1999 Social Security ran a surplus. And the General Fund ran a surplus. And as a result Public Debt INCREASED. Because what we think of as real world assets and liabilities hit the various bottom lines of federal deficit an debt metrics in often counter-intuitive ways.
Taking your scenario. When Social Security starts drawing down actual principal on what will then be more than $3 trillion in assets come 2016 and 2017 and still being America’s largest creditor for years after, that drawdown will register as a deficit. Because that is the way the scoring works. That drawdown will also register as a reduction on total Public Debt. Because that is how THAT scoring works. But to say that Social Security can’t contribute to the deficit because it will be reducing debt is a non-sequitor. Because Public Debt is NOT a simple sum of deficits. It can approach such and in the past did approach such when Social Security really wasn’t running appreciable surpluses and was closer to its ideal Pay-Go status. And for what it is worth if people actually listened to Dale and introduced th Northwest Plan the relation would arithmetically come into better alignment. But not entirely. Because under the official definition of ‘Sustainable Solvency’ Social Security would run ‘deficits’ every year and increase ‘debt’ every year and still be kicking back about 40% of its interest earned to Treasury as an effective discount on money borrowed from previous generations. And since under those same conditions the principal on that debt would never actually ever project to be paid back it is a little difficult to see why we would be talking about it as ‘debt’ anyway.
But to repeat. Once Social Security is called upon to tap its principal it will be running ‘deficits’. But even if it NEVER needs to tap that principal via adoption of some plan like Northwest and is permanently ‘Sustainably’ solvent it STILL would be cash flow negative. AND running surpluses.
Because like standard accounting firms can be cash flow negative adn income positive and building or losing owner’s equity but ALWAYS be in balance by the Balance Sheet. Because like the Deficit number, the Balance Sheet is not measuring exactly what you think it would. And if you like you can dismiss that as ‘just definitions’. Well hey that is exactly what accounting equations are. In the end they are mostly just definitions whose coherent logic is only visible internal to the system.
And I have to correct myself. Because keeping all this straight is a nightmare.
Under conditions of ‘Sustainable Solvency’ which means a perfectly ‘balanced’ Trust Fund forever (and essentially the goal of Northwest) Social Security would be running annual surpluses year over year. And be cash flow negative. AND be increasing total Public Debt. But not actually incurring a need for principal payback EVER.
HUH!? Welcome to the world of federal debt and deficit scoring.
Beware of people who explain the national debt, budget deficit, and federal expenditures in general terms. “It’s like your family budget”, they say. NO, it’s NOTHING like your family’s budget. Consider: you can tell within a few bucks plus or minus whether your family is spending within its earnings just by looking at your check book(s). The government doesn’t have a single checkbook, or even a thousand of them. No one can call up the chief financial officers of every agency on Monday, get a spending year to date number, sit down and add it all up. Why?
Every agency has a different accounting system. Some agencies like SSA balance their budgets for ordinary expenses (paper, printer and copy paper, pens, etc.) every quarter at the national level and are audited every year. Payroll and hours worked are tracked weekly. Program expenses are accounted for annually. And, the agency is audited annually. Always comes out more or less to the penny at the local office level and on up the chain of command. SSA’s top staff knows pretty much where it stands financially all the time and very rarely exceeds its annual budget for operations (the LAE which Congress determines.) Benefits are accounted for differently, but are generally within 1% accurate.
Now, compare SSA and other civilian agencies to the DOD. Or don’t. DOD has never been audited and probably never will be. Nobody knows how much money is on hand, is appropriated, is owed or being recovered from overpaid contracts. But, don’t worry. Every penny spent on defense is deemed to be necessary and every bit as mandatory as Social Security benefits. The difference is that cuts in defense spending are considered a threat to our national well-being whereas cuts in SS and other “entitlements” are a sign that politicians are “serious people.”
They’re serious about the debt, not how well the country is faring. But, be sure, all those guys on Wall Street, the bond market, and the billionaires’ club worry about every penny spent on SS benefits. Boy, by George, you better believe they are because everyone knows that money spent on SS benefits will bankrupt us (if it hasn’t already) whereas money spent on defense is good for the economy. Right? NancyO
Gene Sperling says that there should be cuts in Social Security and more stimulus. He isn’t thinking straight. Social Security cuts would hurt the economy a great deal so he is going to take with one hand and give with the other.