How to Sound Insane by Talking Like a Bi Partisan Expert on Social Security
by Dale Coberly
How to Sound Insane by
Talking Like a Bi Partisan Expert
on Social Security
I apologize for the next couple of paragraphs because they sound overworked and insane, but that’s what happens when you try to illustrate the way Washington talks about Social Security.
Try to imagine you have to buy a medicine that will save your life. You need 100 pills, and the doctor firmly said, “Finish the Medicine… if you stop too soon the infection will come back worse and you will die.”
So you go to the pharmacy and the pharmacist tells you the price of the medicine has gone up and your insurance will only pay for 98 pills. You say, “Okay, I’ll pay for the last two pills myself.”
But the pharmacist tells you, “I can’t let you do that. I can only give you the number of pills your insurance will pay for.”
This is what the “debate” about Social Security amounts to: You are going to need Social Security when you get old. The cost is going to go up by then about two percent. Washington has decided they can’t let you pay the extra cost. The only solution they are willing to consider is cutting the amount you will get… to less than it will take to keep you alive.
Those who would say, “Well, let them cut Social Security, and I will just pay for the difference out of my own pocket,” are missing the point that Social Security is insurance that will… if it isn’t cut… provide you with “enough” to live on even if “your own pocket” doesn’t have enough in it to “make up the difference.”
The “debate”… there is no debate, it’s all about telling lies to the people until they accept those cuts as inevitable… the debate is based on a number of lies, repeated by people who don’t know what they are talking about. The lies include:
Social Security is broke. Flat bust.
Social Security is creating huge deficits.
Social Security will be a huge burden on the young.
Social Security is the old ripping off the young.
Social Security is a bad investment.
Social Security reduces savings.
Social Security reduces people’s incentive to work.
Here is the truth:
Social Security can’t go broke. It is paid for by the workers who will get the benefits.
Social Security cannot create deficits. It does not borrow. It is paid for by the workers who will get the benefits.
Social Security will not burden the young: The young pay for the benefits that they will need when they become “the old.”
Social Security is not ripping off the young. The old people paid for their own benefits. The young pay for their own benefits, which they
will need. Some people cannot understand this because SS is “pay as you go”.
Social Security is not an investment. It is insurance paid for by the people who will need the benefits. It was designed to be “pay as you go” to avoid the dangers of “investments” where you can lose your money to inflation or to bad days on the market. In fact it does pay
an effective interest rate of about 2% above the rate of inflation. That means that you will get back about twice as much in real dollars as you put in. This is exactly how “investments” work, with “the young” paying “the interest” that “the old” eventually get on their “investments.” This is the way money works. The “bi partisan experts” know this, but by talking fast they are sure they can fool “the young” into thinking they are paying for someone else’s greedy granny instead of paying, while they have the money, for what they will need when they can no longer work. This is also the way the generations have cared for each other for the last million years or so, long before the invention of money.
Social Security IS savings. What it is not is money you give to someone else to invest in the hope of a profit… at the risk of losing it. The people who hope to make a profit from your money don’t like Social Security because it gives you a way to save without giving them your money to make more money with… or not. Meanwhile there is plenty of “savings” of that kind in the economy already. More than can be used by the “investors.” In any case, Social Security is cheap enough so that you have plenty of money left over to invest or lend in the hope of bigger profits if that’s what you want to do. In particular, if you cannot make money without “investing” what you would otherwise put into Social Security, you are exactly the kind of person who will need their Social Security benefits when the time comes.
Social Security does not reduce anyone’s incentive to work. You have to work to contribute your money to Social Security. This is where the money comes from that you get back when you need it most. Social Security only “reduces people’s incentive to work” when they are old and can’t work, or can’t find a job, or just decide that they “have enough” and want to spend their last few years enjoying life instead of working for the boss. Remember, they paid for their retirement themselves. The people who make money out of your work don’t like this. They want you to have to work every day until you die, or starve. That’s what they mean by incentive.
Those people… some very rich, some very clever “bi partisan experts” who work for the very rich… are going around the country telling lies and buying media and congressman trying to convince “the young” that they are being robbed by “the old.” The lies are very sophisticated and hard to refute in a few words. But if you try to think carefully about what you are hearing and do a little research you should be able to realize that the truth amounts to this:
You will be old some day and not be able to work. You may live longer than your grandparents did. It takes more money to live longer than it does to live shorter. In order for Social Security to pay for your longer life, you will need to pay a little more for your Social Security. The amount more is not large. Eventually it may amount to about an extra 15 dollars a week. By that time you should be making about an extra 150 “real” dollars per week more than you do today, so you will have MORE money after paying the higher Social Security “tax” (it’s really “savings”: you get the money back, insured, with interest). And there is no need to pay this extra all at once. The higher cost can be phased in at a rate of less than a dollar per week per year… while incomes are going up more than ten dollars per week per year. This way the people who pay the higher “tax” will be the same people who will get the increased benefits (by living longer) and who will have the higher incomes to pay it with.
The bi-partisan expert liars like to confuse you with numbers they made up in a special way… called “net present value” which can be manipulated to look like you will get less back than you paid in. That is a lie. What they are saying is that you MIGHT (it depends) get back less than you would get back from a magic present value bank that ALWAYS pays a (made up) “return on investment” and has no risks and doesn’t have to pay any insurance benefits. Be careful what you listen to.
And find a way to let your Congressman know that you are willing to pay the few extra dollars it will take to make sure that Social Security will be there for you when you need it most.
Coberly:
A great piece and very understandable.
Yeah Dale, this is one of your best efforts ever. And I probably have read almost every previous one back to 2007 or so. So have a baseline.
Nice job.
>> That means that you will get back about twice as much in real dollars as you put in.<<
That makes sense because average income doubles twice as fast the population doubles — doubles over 40 years on average; about an working lifetime; how convenient for Social Security (get me Malthus). 🙂
“Social Security cannot create deficits. It does not borrow. It is paid for by the workers who will get the benefits.”
There are a lot of errors but this is flat out false. Social Security can’t go into debt but when distributions are greater than contributions and the trust fund is spent, the Federal Government will be forced to take on debt / print cash to make up the difference.
Well Steve, currently not possible. Who are you proposing to change the law?
Steve:
No, when the trust fund is near to being spent; Congress by law must either cut benefits or increase the payroll wage tax to meet the difference and maintain 1 year of the TF.
Yep, this is clear, concise and explains an otherwise complex issue perfectly. Good on yer, mate. NancyO
Aren’t you making some awfully large assumptions? For example, the idea that people working now will collect social security? It seems pretty clear that SS will be a distant memory when today’s 20-somethings are ready to collect it. What happened to the “trust fund?” SS was never anything but a scam, and those who got money back out of it were lucky enough to get in on a low level of the pyramid. Every ponzi scheme pays back to the early investors. When it is no longer bringing in money from workers to be spent by our “representatives” it will be shut down, and the lies we are hearing from politicians are the first clues that it is over.
It seems pretty clear….how do you know this Albert…
Steve Roberts
i guess i won’t be losing a lot of sleep about the “lot of errors,” seeing as you believe something to be “flat out false” because you have a message from god that something else is going to happen.
Albert Meyer
Some people who want workers to stay poor and dependent on the boss have been saying for seventy eight years that Social Security is a Ponzi scheme. I guess all the folks who have collected their benefits over those seventy eight years were just the lucky early investors.
But Social Security can never run out of money as long as the workers understand they need to save some of their money for retirement in a place that is protected from inflation, market losses, and personal bad luck.
Social Security can continue forever just the way it is, with no changes whatsoever.
But it would be wiser for us to increase the amount we save via Social Security so we will have enough to live on for a longer retirement at the higher standard of living we will have learned to expect by then.
A lot of people (including some, maybe all, of my nephews) have been told that SS will go away (or else the country will implode due to debt) before the current college-age generation will be old enough to qualify for it. They believe this because it has been said so many times on TV by well-known people who are not contradicted. The most recent time I saw it was when Charles Krauthammer was on the Daily Show last week to hawk his latest book. If I watched Fox News I would probably hear it several times a month.
The only counter I can think of to propose is that Mr. Coberly write a best-selling book entitled “Social Security: Reality vs. the Myths”, or something like that, and go on The Daily Show and the popular talk shows to publicize it. Then at least people will be aware that there is a controversy.
JimV:
The College Age generation has more to fear from student loan debt and the Fair Market Valuation of the Student Loan programs which will promote higher interest rates and fewer loans in a college market of rising tuition and less goverment support to schools. Higher interest rates on student loans which can not be discharged in bankruptcy and only disposed of through death, diablement, public service or low income for 20 years.
Charlie-boy does not know what he is talking about on SS the same as Druckenmiller, Peterson, Biggs, and others.
Where is my other comment? Are you “moderating” comments?
Jim V,
“Then at least people will be aware that there is a controversy.”
There isn’t a controversy, except here on Angry Bear, where coberly and Bruce Webb focus on the actuarials of Social Security and assume effortless redemption of IOU’s from the general fund.
Every other analyst is focusing on the overall budget deficit and debt. The government is spending (including Social Security payments and taxes) 150% of its tax revenues. We are $14T in debt, approaching the 100% of GNP that signals imminent problems.
Social Security is 20% of total government spending. Another retirement program, Medicare is another 10%. Both are projected to grow.
So you can believe coberly, a lone “sane” voice among all the “liars” or realize he is very much the embodiment of the phrase “missing the forest for the trees.”
His belief is also influenced by the fact that he is a social security recipient. He claims with just a small tax increase on the younger generation, everything will be fine. Just cut the check.
How about a small benefit decrease? Wouldn’t that work just as well, coberly?
No, Sammy
benefits are set at the lowest possible level for a person to survive. this is to keep the “tax” at the lowest possible level. it would be smarter to raise both the tax and the benefit level. but what with politics and all, people are not that smart.
the “plan” which i have advocated raises the tax slowly enough so that those who pay the higher tax will get the higher benefits.
social security is not ANY percent of “government” spending. Social Security is paid for by the people who will get the benefits…. Its money has nothing to do with “the government.”
The government has been borrowing money FROM Social Security… that is from the poor people who put their money into Social Security on the promise that it will be saved for them so they can retire when they get old.
The government has been borrowing money from Social Security for about thirty years. Now that the time has come to pay the money back, the bi partisan experts have discovered a brilliant financial plan to help solve the government debt problem: just don’t pay back the money to the people you borrowed it from.
Sammy does not see anything wrong with this.
“Sammy does not see anything wrong with this.”
No, I, like virtually everyone else, am not focused on the intra governmental debt aspect.
You see we have the choice of redeeming the trust fund IOUs or funding any number of worthy programs that help people in need. Who says your benefits are inviolable while any number of others are not.?
Do wealthy Social Security recipients with multiple pensions and paid for homes that travel around the country in $100k RV’s deserve tax payer money more than ____________ (fill in the blank)?
The people with their 100k RVs deserve their SS benefits just like everyone else that PAID for them.
sammy
everyone who gets an SS check paid for it themselves. everyone who will ever get an SS check will have paid for it themselves.
those who end up “rich” will get a lower “return” on what they paid than those who need the “insurance” that SS provides, so “the rich” who get SS checks will actually be where the money comes from that helps “the poor” who get SS checks… but it’s insurance, not welfare. the same way the insurance premiums of those who don’t get the fire help pay the people who do get the fire.
as for all those other government needs… they can be paid for by ordinary taxes… which of course you are eager to pay. so instead of looking at your social security benefits and crying crocodile tears about how you don’t need the money and it should go to pay for the other “needs” of the government, why don’t you just keep the money but tell your congressman to raise your regular taxes by the amount of your benefits.
or you can keep on pretending that you are making any kind of moral sense by arguing that the government should welsh on its debts in order to pay for the other things you want.
“intragovernmental debt” is just an “Enron accounting” way of saying that the money people paid for their Social Security was put into a Trust Fund so it would be there for them when they needed it. This money was borrowed by the government. Since those who want to confuse things call the Trust Fund part of “gvernment” they can call the debt to the Trust Fund “intragovernmental debt”, but morally and legally the money is owed to the PEOPLE who paid for their Social Security benefits.
Of course to Sammy, who doesn’t know what he is talking about, but believes he hates Social Security because people with money tell him he should, “intragovernmental debt” sounds like it’s “just” the government owing itself, so it doesn’t matter whether it gets paid or not.
But it does matter… the money is owed to the people who were told they were paying for their own retirement. Sammy and his friends cannot understand honesty much less honor. But the people who paid for their own Social Security know that they paid for it, and they will know when they have been cheated.
and that’s what it comes down to. Social Security could work fine even if the government welshes on its debt TO Social Security. The payroll tax would need to go up a percent or two some years earlier than it would have to anyway. But no one would really be hurt. The people who already paid their Social Security “tax” would still get the benefits they paid for. And the people paying the higher tax will still get the benefits they are paying for. They’d pay a little more for them than they expected. But they won’t be paying more than they will get back.
Dale,
Not to be off the thread, but there’s a lively discussion going on over at Balloon Juice, with people advocating raising the tax. I’ve tried to inject your notion against it, and could use a little help. 🙂
Meant to say raising the tax CAP.
nanute
will try. having a little trouble posting at AB
testing to see how long it takes comments section to cut out after i start typing a comment . one two three four (so far it is two minutes after comments section opened and about one minute since i started typing this comment. and everything seems to be working fine. for the first time in two days. so now i’ll try to post it and see what happens. if you see this it worked fine.
worked fine.