PERNICIOUS IGNORANCE ABOUT SOCIAL SECURITY
by Dale Coberly
ABOUT SOCIAL SECURITY
A REPLY TO KRASTING
Bruce Krasting in comments to Bruce’s post on Social Security made a number of claims that deserve a fuller answer than I was able to give in comments. Below in quotes are Krasting’s claims followed by my replies. I hope I am reasonably clear.
“I could list numbers showing how things have deteriorated at SS… every measure of solvency has gone downhill.”
No. “Solvency” is not an issue with Social Security. SS is not a business, much less a business that borrows money or has bills to pay.” I stated this in my reply to your first comment. You show no sign of having read it. This doesn’t mean you disagree with it, but that you are physically incapable of seeing anything that disagrees with your preconception. The “numbers” you are thinking of are “projections,” that is, guesses. And, again, they have nothing to do with SS “solvency.”
“Actuarial solvency” is merely a projection that if taxes remain as they are and the benefit schedule is unchanged the Trust Fund will fall to a reserve below 100% of one year’s benefits. This is a “warning” that taxes may need to be raised or benefits may need to be cut. This is a largely meaningless statement unless someone knows “by how much.”
We have used the same projections as the Social Security Trustees and found that a tax raise of about eighty cents per week per year for each worker, matched by his employer, would avoid any need for benefit cuts, and avoid any future “actuarial insolvency.” The Trustees avoid referring to this number; instead they choose to report their “actuarial insolvency” in misleading, alarming terms: “8.6 Trillion Dollars (present value) over 75 years.” Well, that’s where the eighty cents per week (also present value) comes from. It’s “just arithmetic.” Or they say, “a 25% benefit cut”… which would hurt… or “a 33% increase in the tax,” which they fail to note is a 33% increase in a 6% tax, or about 2%, which would not hurt, especially if phased in over 20 to 70 years depending on just how soon the “shortfall” begins to occur. However fast it is phased in, the ultimate tax increase would be about 2%, and would not be needed at that level until wages have risen about 100%.
This projected shortfall has not been alarming enough to “the deciders,” so CBO has come up with a number that is about 12% higher… based on their guess that unemployment is going to be a lot higher over the rest of the century than it has been, on average, for the last seventy years… even though “huge numbers of boomers” are leaving the work force with fewer young workers entering. But we showed that even this “higher” estimate can still be addressed by that one tenth of one percent raise in the tax each year….or possibly raising the eighty cents per week to as much as a dollar and a half per week per year (for fewer years)… still hardly crippling, and the workers will still get that money back with interest when they retire.
In an earlier thread Krasting reported the CBO numbers as proof that Social Security was doomed. Then in private correspondence he admitted that the numbers (my numbers) worked, but then he decided that the 75 year shortfall was actually going to double in the next two years. He didn’t say how this miracle of mathematics was going to happen, so I have to assume St Peterson came to him in a dream.
“The NPV of the unfunded portion…”
Again Krasting is using words he does not understand, secure in the knowledge that neither does anyone else. “NPV” sounds so serious, so scientific, and so sound-financial-analysis. But all it means is a guess of how much money you’d have to have in the bank today to pay for what you expect to spend in the future, assuming… that’s ASSUMING…a given level of interest and a given level of risk and “equivalent” other benefits. Used honestly it can be a useful help in analyzing competing investments. Used dishonestly, as it is by the SS non partisan expert liars, it is meaningless and misleading.
All “unfunded” means is that we have not yet adjusted the tax rate (by one tenth of a percent) to match the expected higher costs due to longer life expectancy and lower wage growth of workers.
“the shortened time frame for reaching depletion..”
This is a mathematical consequence of raising the “guess” you make about the costs, or reducing the guess you make about tax receipts, and is just another way of “piling on”: repeating the same guess in different terms. It is not “additional evidence.”
“the rapid shift from positive to negative cash flow…”
Not so rapid, and long expected. That’s what the enlarged Trust Fund was created to deal with. Thirty years ago the actuaries looked ahead at the retirement of the baby boomers and said we can either tax the boomers more now, or tax their children more later. They chose to tax the boomers more “now” (that is, “then.”) But this has become another fact the liars can twist to make SS seem like it’s going broke (SS is using the money it saved by spending it on what it saved it for)… and really evil dishonesty pretending that it is “unfair” to the young… when it is exactly the opposite: the boomers paid for their own retirement. That’s what the Trust Fund is: their “savings.” Cashing in their savings now that they need the money is what Krasting calls “negative cash flow.” Damn those boomers, they were supposed to leave their savings to the kids. (And they will; just not their Social Security savings. But the house, the car, and whatever cash they didn’t have to spend because they had their Social Security savings.)
“SS will never be cash flow positive again…”
This is alarming to Krasting who doesn’t understand SS at all. SS was designed NOT to be cash flow positive but to be “pay as you go.” Cash flow positive just means that SS lends more money to the government, increasing the “debt.” But when you are completely ignorant you can say “cash flow negative” like it was a bad thing in the same breath that you say “increasing the debt” like it was the fault of SS.
“One thing that NO policy maker would suggest is more taxes. Especially not more regressive payroll taxes. I continue to tell you that increasing taxes to stabilize SS is simply not in the cards”
Here Krasting shows his complete ignorance of even what his own side is “worried about.” The tax increase they fear is the tax increase that would be needed to pay back the money THEY borrowed FROM Social Security. That would be income or corporate taxes or possibly a financial transaction tax. It would NOT be the payroll tax, which they do not pay. Krasting calls SS a “regressive tax.” This is a remark usually made by ignorant leftist college professors. SS is not even a “tax”, it is an insurance contribution or a (forced) savings plan… to save the workers from starving in the streets when they get too old to work, or find work. In any case Krasting and friends don’t give a damn about the payroll tax being “regressive.” But they think if they repeat “regressive tax, regressive tax, awk awk,” often enough they can make even the liberals hate Social Security…. and want to replace it with welfare, which the Big Liars will know how to “fix” to their liking. Krasting has no clue that lowering taxes has been what has caused “the deficit” and the hard economic times that are going to make it harder for workers to save enough for their own retirement. Because the Big Liars don’t give a damn if you do starve in the street when you get old. That will provide better “incentive to work” to the younger people. And without SS they will have no choice but to trust their savings… if they have any… to the man in the suit with the sure thing on Wall Street.
“but you are smart enough to know these things. I guess you choose to ignore them.”
Yes, we are smart, but we do not “choose to ignore them.” We choose to understand them. It is Krasting who chooses to ignore the explanation.
“look into Summers/Krugman…”
Actually Krasting, I do my own work. I don’t need to find a Big Person to tell me what to think based on his one minute analysis of a problem I have studied myself quite carefully, and checked my work. [I did read the article in question. I cannot see how it helps Krasting’s case. Except that Krugman refers to the possibility of a long period of slow growth… caused by the very policies Krasting favors. This is typical Krasting: Completely fail to understand something he reads… understand it to mean what he understands everything to mean: Social Security is doomed. Doomed.)
“US is facing a long period of sub par economic growth..”
Quite likely, possibly caused by Summers and company, but in any case that is a reason why you are MORE likely to need your Social Security, not less.
“The cost of fixing SS is about 1% of GDP every year forever..”
This is ignorant nonsense. The cost of “fixing” SS… that is raising the tax enough to pay the retirement needs of those paying the tax… is about 1% of GDP in TOTAL (forever?)… most of it in the next twenty or thirty years… at a rate the workers won’t even notice.
The worst possible scenario for SS “finances” would be that costs would continue to go up as projected, adding about an eventual fifteen or twenty dollars a week to the required “tax” (it’s really “savings”), and that wages would not go up at all.
This would mean the average worker instead of taking home about 800 dollars per week as he does today, would take home about 785 dollars per week . I am reasonably sure even that steep price would be taken in stride by workers without their really noticing it. And they would get their money back in the form of being able to retire when they were too old to work… or find work in the “sub par economy”… and have it last even though they are going to be living longer.
The workers WOULD notice that their wages were not going up… wages are currently expected to double over the same time the cost of SS rises about two percent. But complete wage stagnation would not be caused by SS… but by the policies of people like Larry Summers.
In short, Krasting doesn’t know what he is talking about. But he scares himself with numbers he does not understand. Just the way the Big Liars intend to scare him… and you.
You are going to need your Social Security. The cost may go up, but not by much. You are still going to need it.
If you have been paying attention to my posts on Student Loans, you would understand exactly what BK is talking about. He, like Elmensdorf, Jason Richwine, and Jason Delisle are using Fair Market Valuation to assess risk with Social Security, Medicare, Student Loans, and every other domestic program with the exception of Defense. The issue is these programs are fully funded into the future and the risk is little. Student loans there is no escape as Alan Collinge would tell you.
Ask Brucie why he is assigning commercial risk methodology to a program which is already funded. Social Security is not the same as derivatives which FMV was used to assess.
i try not to pretend i know anything about things i don’t know anything about. This makes me different from Krasting and other commenters on Social Security. Angry Bear website and my computer don’t get along for still undisclosed reasons so it will be very hard for me to keep up with comments here (this is written off site).
Mr Coberly, let’s just admit you can not say no to governmental units’ welfare programs…
SS, is nothing more than a poverty program for senior, as it does not leave the pensioner with little more than subsistence…
You do not care about the elderly, but only for redistribution of income by your beloved governmental unit.. The left does not care about high returns nor efficiencies but rather equality for all…
The defense of this poverty program is vain and sad, to say the least…
SSDI coming collapse will be your first clarion call followed by a string of red budgets for Social Insecurity itself…
Listen readers, not to far in the future, SS will be means tested, because the Progressos can not and will not let this program die..It is more important to them than either the Founding Fathers or the US Constitution.. .The left’s Bill of Rights, is indeed Social Insecurity…
Did you bother to read any of Coberly’s post? It would seem not and your comment is indicative of the ignorance that too many people bring to this issue.
Jack, Mr Coberly, is a advocator for SS just like you and Herr Webb…
He posts things than are not germane and believes in quick fixes, which he speaks about at great lengths..They are non-sense and will fail..
He, like you, support a pyramid system which is guarantied to fail…His advice, like Mr Webb’s is grounded in leftwing orthodoxy and not common sense..
Every the left touches, it wrecks beyond repair…
You, Social Security expert, do you know what percentage of Social Security revenue is from the General Fund and interest income (from the General Fund?)
Hint, hint: The answer would be found in the first Table of the Trustee report: http://www.ssa.gov/OACT/TRSUM/index.html
“He, like you, support a pyramid system which is guarantied to fail…” Hans
A pyramid system guaranteed to fail you say. So the fact that the program has been running successfully for nearly 75 years is not evidence of its validity and success? Are you sincere in your commentary or just an ideologue with no basis in fact for your inane commentary?
Hans–You are a ringer and as trolls go, absolutely the worst I have seen here. If you can’t do anything else, at least lose the fake German accent. Furthermore, if you must visit this site, please make an effort not to be a pest.
No one has appointed me site yente. I am simply unable to contain myself any further. Hans, I suggest you be nice or be gone. NancyO
Sammy what part of that Table are you reading?
The part that has the General Fund reimbursement to Social Security of around $116 billion to compensate for the 2% temporary reduction in FICA that Coberly and I strongly vocally and shrilly opposed EVEN BEFORE IT HAPPENED.
Or the part dealing with SMI which is the General Fund paid Medicare Part B and has nothing to do with Social Security as such?
Either way you don’t seem to understand the import of what you are reading but it would be useful if you gave us a hint of WHICH part you are misunderstanding.
Speaking for my only there was nothing surprising in that Table, just evidence of a stupid payroll tax ‘holiday’ that was opposed by most supporters of Social Security in real time.
The Trustees Summary is a political document prepared by the political appointees to the Social Security Administration. It is designed to mislead.
The Trustees Report is mostly prepared by the actuaries and if you read the numbers and very carefully parse the language… also apparently intended to mislead, as I discussed in my post, you can get a true picture of SS.
The contribution from the general fund that you cite is a result of the general fund having by law to make up the money that Congress took out of payroll taxes to provide a stimulus to the economy, weakened by the bad faith dealings of the big banks… rather than use the general fund for the same purpose. This was also a political act intended to make it harder for people like me to say that SS does not take any money from the general fund.
And I’ll stand by that. SS did not take any money from the general fund. The “payroll tax holiday” did. And it’s not me being cute here, it’s the Congress.
As for the interest… well Congress borrowed the money from Social Security, so I would expect it to pay the interest on the money it borrowed. Try to get it into your head that Social Security did not cause the debt. Social Security lent money TO the government.
as for the general fund contribution to Medicare… that is not an issue i usually talk about. my interest is Old Age insurance.
if anyone had asked me I would have advised the people to NOT let the general fund “help” them pay for Medicare. If they paid for it themselves they would not be seeing the games they are now seeing where Medicare is cut below what people need, so they have to scramble to find the “extra” money to pay for care… or do without.
Sammy I did a little something I call ‘arithmetic’ from that Table
Total cash transfers from the GF = $169 billion
Amount to reimburse ‘holiday’ = $114 billion
Transfer absent holiday $54 billion
Total gap between DI income and cost $31 billion. This would represent actual Trust Fund redemptions or cashing back of money previously borrowed. To this you would add the $6.4 billion in accrued interest for a total of $37 billion fo non holiday transfer for DI.
This would represent about 25% of total DI cost. Which since DI went out of actuarial balance a decade ago and was ignored by the Bush Administration in order to sell private accounts for the OAS piece is no surprise.
So this leaves $54 billion of non holiday transfer minus $37 for DI for a total of $17 billion for OAS. This represents around 16% of the S102 billion in interest on that Trust Fund meaning that OAS would still have run a roughly $85 billion surplus.
DI is sick and has been, something I pointed out many times at AB.
OAS is currently tapping about 1/6th of the interest due on its assets to pay the gap between total income from tax and cost.
Which of these numbers represented your ‘gotcha!’ ?
OK. So you guys give up or obfuscate. The correct answer is $200 B out of total expenses of $730 B. Or about 30%. So 30% of your revenues come from the General Fund, which is spending 150% of its tax revenues.
Don’t worry. Be Happy.
as someone reminded me today, you can’t fix stupid.
As to Ponzi/Pyramid ‘bound to fail’.
Social Security can’t ‘fail’. Certainly not if by ‘fail’ you mean ‘no check for me’.
Now Social Security under current projections can ‘fail’ to meet the full scheduled benefit after Trust Fund Depletion. This under most interpretations of current law would trigger a 25% cut in benefits, something that would certainly be painful and something the NW Plan is designed to prevent. On the other hand that 25% cut would be from a baseline benefit something like 135% in real basket of goods terms from that received by current beneficiaries. Which might be unacceptable but still would represent around a 10% better basket of goods than a similarly situated retiree gets today.
Now as I said something to avoid but hardly meeting most people’s definition of failure in that instead of ‘no check for me’ it would mean ‘still a check better than gramma got’.
But what of ‘unfunded liability’ and Trillions of Dollars? Well unfunded liability is a totally theoretical metric of the difference between ‘scheduled’ and ‘payable’ extended forwards from the time of TF Depletion. But it doesn’t really represent anything tangible because once Scheduled resets to Payable, an event that is essentially automatic, then that ‘unfunded liability’ vanishes. And so becomes no ‘liability’ and certainly no ‘debt’ at all. On the flip side if we took action to slightly boost payroll tax along the lines suggested by Dale ‘unfunded liability’ also vanishes overnight, even though the downpayment is just 80 cents per week per worker. But in this case it is not the ‘liability’ that vanishes but instead the ‘unfunded’ part. But either way there is no path that actually converts ‘unfunded liability’ into actual debt, literally something would have to be done in 2033 at latest and whatever that ‘nothing’ or ‘something’ it would drastically change the number.
Yes this is confusing. Which is why you should pay no attention to the Bowles-Simpson/Fix the Debt folk that like to deploy this essentially meaningless number.
Now it isn’t ENTIRELY meaningless. Because the gap between scheduled and payable however quantified can be used in a POLITICAL way to influence policy makers to fill it on the revenue side. And depending on how that fix is settled upon this might mean shifting that 80 cents per worker per week over to the ‘wealthy’. Now it would still mostly be a small bite even for the smaller number of people concerned but for anti-tax absolutists even the risk of a penny more per $100 of tax is an existential threat. So they hope to express this gap between Schedule and Payable in the most extreme ways possible to scare workers away from even CONSIDERING a revenue based solution. And oddly enough even one like Dale’s that would fall entirely on workers and not impact the wealthy at all.
That is it is deeper than just tax avoidance. In fact when Bush set up his CSSS (Commission to Strengthen Social Security) in 2001 he established as one of his 6 ‘Guidelines’ that an increase in payroll tax COULD NOT BE INCLUDED. Even though any number of proposals similar to Dale’s or even ‘Lift the Cap’ would mean no call on billionaires at all.
That is, and as I said in a post from 2005, nothing about this is really about Social Security solvency as such, or debt, or even transfers from the General Fund. In fact many popular plans like Ferrarra (basically the much ballyhooed Chilean Plan) would require MORE GF transfers over the next five decades than simply funding ‘unfunded liability’. Astonishing but true.
The Economic Right simply hates the very concept of what I (and most policy makers on my side) call Social Insurance and which Dale call’s “Let the damn workers fund their own retirement and the wealthy can go pound sand!” (or something).
“The correct answer is $200 B out of total expenses of $730 B. Or about 30%. -”
Per that Table total SS cost is $645.4 bn OAS and $140.3 bn DI for a total expens of $785 bn. So I don’t know where ‘$730 B’ came from.
Per that Table total SS income is $731 bn OAS and $109 bn DI for a total income of $840 billion.
Now $114 billion of that is replacement for the tax holiday. So if you want to subtract that out fro $840 billion you would get $726 billion in non GF funding, leaving a $59 billion gap. Which added to $114 billion gets you to $173 billion out of total cost of $785 bn. Which giving you every break in the book and including the payroll tax holiday (which for reasons argued shouldn’t be included in the first place) gets you only to 22% and not 30%.
Sheesh Sammy you can’t even get your DISHONEST math right.
By the way it seems that most of your error was in considering all of the $102 billion in OAS interest as representing a current year transfer. When in fact only 1/6th of that actually came in cash form with the rest in what most Wingnuts would call ‘fiat money’. And maybe the rest of it came from your not being able to add two figures and come up with the correct figure of $785 billion for cost.
But I don’t have the patience to sort it all out for you. But it sure argues that what AB needs is a better class of troll with improved math skills. It is enough to make you miss PRS of the old pre-Dan days. Because man was he irritating, but at least it was a challenge to chase down the errors in his talking points. Sammy? Not so much.
Sorry friends, the comment left by the participant known as “Hans” at 11:52 crossed the threshold.
You can call anyone at AB a Commie, that goes with the territory. But racial, misogynistic or similar attacks get you banned. At least by me. You can always appeal these decisions to Dan.
But minimal respect for persons is key. Politics is fair game. But—
I think so as well….
Hans said goodbye. In two followup comments which I disappeared.
He will miss the brilliant Ed Lambert (his words) but me not at all. Oh well.
I doubt that this formats correctly but I’ll try
2012 Trust Fund Income by Source (OASDI)
Payroll Taxes $503.9
Tax on Benefits $26.7
Reimbursements from General Fund $97.7
Interest Income $102.8
Total Income $731.1
Both “Reimbursements from the General Fund” and “Interest Income” are from the General Fund.
Also from the Trustee Report:
Concern about the long-range financial outlook for Medicare and Social Security often focuses on the depletion dates for the HI and OASDI trust funds—the times when the projected trust fund balances under current law will be insufficient to pay the full amounts of scheduled benefits.
*** A more immediate issue is the effect the programs have on the unified Federal budget prior to depletion of the trust funds.***
Chart D shows the excess of scheduled costs over dedicated tax and premium income for the OASDI, HI, and SMI trust funds expressed as percentages of GDP. Each of these trust funds’ operations will contribute increasing amounts to Federal unified budget deficits in future years. General revenues pay for roughly 75 percent of all SMI costs. From now through 2026, interest earnings and asset redemptions,
*** financed from general revenues***
, will cover the shortfall of HI tax and premium revenues relative to expenditures. In addition, general revenues must cover similar payments as a result of growing OASDI deficits through 2033.1
In 2013, the projected difference between Social Security’s expenditures and dedicated tax income is $79 billion. For HI, the projected difference between expenditures and dedicated tax and premium income is $26 billion. The projected general revenue demands of SMI are $239 billion. Thus, the total General Fund requirements for Social Security and Medicare in 2013 are $344 billion, or 2.1 percent of GDP.
Redemption of trust fund bonds, interest paid on those bonds, and transfers from the General Fund
***** provide no new net income to the Treasury, which must finance these payments through some combination of increased taxation, reductions in other government spending, or additional borrowing from the public******.
The discussion with Coberly started with my pointing out to him (and AB readers) that the the CBO had made a significant revision to its long term outlook for SS. That was 9/24. The CBO link:
The CBO conclusion was that to address the SS shortfall an immediate and permanent payroll tax increase of 3.4% was required. And yes, I was shocked by this as it is such a big number and big year-over-year change in the forecast.
3.4% comes to $190B dollars in year one, and rising every year thereafter. I stick to my guns on this – no one on either side of the aisle, and no reasonable economist would look at this alternative and conclude that it was good for the overall economy.
Coberly thinks he can accomplish the same economic results by raising PR taxes by 0.2% a year. I provided him with spread sheets that showed that his plan would require a .2% tax increase every year for the next 22 years. In the end, PR taxes would raise by a total of 4.5% and remain at that level for the balance of the 75 year horizon. So for 53 years the tax rate must be higher that the CBO alternative of 3.4%. I accused Coberly of kicking the can down the road, rather than actually fixing SS.
Coberly responded: ” i don’t think i can read an excel spread sheet”. He goes on and says:
“Again Krasting is using words he does not understand, secure in the knowledge that neither does anyone else.”
Actually I do understand spread sheets and NPV analysis. I’ve been using this tool for 40 years now. And the suggestion that “no one else does”, is just ridiculous. This is the basis for all financial projections. It is the tool used by SS and CBO to evaluate different alternatives.
I pointed to the Krugman/Summers discussion regarding the growing reality that the US is not going to return to full employment anytime soon because that outcome is critical to the financial stability of SS. Coberly can ignore this, but putting one’s head in the sand leads to train wrecks.
The red ink at SS will come to $75b in 2013, it will push $100b in 2014, it will top $200b by the end of the decade. Coberly thinks that this is no problem at all. And I say this reality will be SS’s undoing. Time will tell.
Then do not use Fair Market Valuation.
Krasting can keep repeating his lies and ignorance. I cannot keep trying to explain what is wrong with them. This is the technique of the Big Lie.
Good luck folks.
well, I hate to leave it at that. but the fact is that unless you do your own thinking you will never be able to tell truth from lies. and in the case of the Sammy’s and Krasting’s and Hans’s “your own thinking” won’t do much for you either.
you can go back through what i said above, and in previous posts, and you can find where Krating out and out lies, and where he is simply stupid and has been answered.
or you can think:
you will need your social security…. probably more than ever if the economy does run into a long stretch of hard times… as Krugman suggests it might.
the cost is not high, and will not be much higher. in any case it is what you would have to pay for your retirement anyway. with SS you get your money back with interest, protected from inflation and market losses and your own bad luck.
you can verify most of this yourself by a careful reading of the numbers in the Trustees Report (NOT Trustees Summary).
Krasting copied my numbers to arrive at “his” numbers that showed that 22 years of a one tenth of one percent increase in the payroll tax (each) per year would equal the CBO “3.4% immediate and permanent” increase… which relies on a one percent contribution from the general fund in the form of interest on the “immediate” part before it is needed. Then he decided that after all the 75 year actuarial deficit would double in two years. He did not explain how that was going to happen. But it seems to me to be a mathematical impossibility.
I am aware that lots of people use Net Present Value properly for financial analysis. I am also aware that not many of them UNDERSTAND why NPV is misused and misleading in discussions of Social Security. Krasting is one of those people who doesn’t understand anything but is Very Sure of everything. If you do the actual math, the 8.6 Trillion from the Trustees Report, and the 9.6 Trillion from the CBO report turn out to mean: eighty cents per week per year for about 20 or 22 years respectively. I can give the exact timing according to the Trustees Report. I have not seen enough information from the CBO report to give timing. But in either case the bottom line is that sometime over the next century the payroll tax would have to be raised about 15 dollars per week TOTAL out of an income of between 800 dollars per week (no wage growth) to about 1600 dollars per week (assuming the weak wage growth in the Trustees Report). These are all “net present value” numbers even though Krasting doesn’t understand that. To show his brilliance he insists upon changing 2% of wages into “billions” or “trillions” of dollars, because that sounds scarier. It’s still 2% of wages.
I am very tired of Krasting and Sammy. If they are the best you can do… that is, if you believe them… then, well, then good luck to you. You’re going to need it.
i can’t keep doing this, but one more time, Sammy says (by the way, someone other than “Sammy” is writing what Sammy says, “Sammy” has shown again and again that he is not smart enough to write such sophisticated lies.
One technique of the sophisticated liar is “misdirection.” Watch how Sammy misdirects:
“Also from the Trustee Report:”
actually this is not from the Trustees Report, but from the Trustees Summary, a political document.
“Concern about the long-range financial outlook for Medicare and Social Security often focuses on the depletion dates for the HI and OASDI trust funds—the times when the projected trust fund balances under current law will be insufficient to pay the full amounts of scheduled benefits.
*** A more immediate issue is the effect the programs have on the unified Federal budget prior to depletion of the trust funds.***”
It is not the effect of the programs that is threatening the Federal Budget: it is the effect of previous BORROWING FROM those programs, money that now has to be repaid, which is going to affect the “unified” budget which is a constructed lie designed to confuse you between the federal budget and what the federal government owes TO Social Security. Yes, it is certainly true that paying back your debts is going to affect your budget. Is the answer to that to welch on your debts? It is to Sammy and the “Trustees Summary.” And that is because their real goal is to destroy Social Security, as the people paying them have wanted to do for 78 years.
Trust Fund balances were never intended to pay the full amount of scheduled benefits. Payroll taxes are what pays for current benefits, with the Trust Fund acting as a balancing mechanism to avoid too frequent changes in the tax rate, and to bridge over financial hard times, or soften the occasional needed tax raises by spreading them over several years.
“Chart D shows the excess of scheduled costs over dedicated tax and premium income for the OASDI, HI, and SMI trust funds expressed as percentages of GDP. Each of these trust funds’ operations will contribute increasing amounts to Federal unified budget deficits in future years. General revenues pay for roughly 75 percent of all SMI costs. From now through 2026, interest earnings and asset redemptions,
*** financed from general revenues***
, will cover the shortfall of HI tax and premium revenues relative to expenditures. In addition, general revenues must cover similar payments as a result of growing OASDI deficits through 2033.1”
here is misdirection on stilts. “dedicated tax and premium income”… strangely excludes “interest income” owed TO Social Security. Then he includes SMI which has nothing to do with Social Security (OASDI) and is a general revenue item, NOT paid by the payroll tax. I am not sure if HI is partly paid by general revenues. I think when they talk about Medicare partly paid by general revenues, they are referring to SMI. In any case, the answer to increased health care costs is NOT to cut your insurance. But they don’t want to talk about honest ways to reduce health care spending, or to pay for it. They want to add it — in your mind — to “the cost of Social Security” which the workers pay for themselves… having no effect on “the budget” whatsoever, except to the extent that “the budget” has to repay the money it BORROWED FROM Social Security.
OASDI will experience no deficits through 2033. It will draw down its “savings”.. that it is will ask to be repaid the money it lent to the government. That is not a deficit. It is the opposite of a deficit.. it is money in the bank.
“In 2013, the projected difference between Social Security’s expenditures and dedicated tax income is $79 billion. ”
again the misdirction. leave out the interest on the money saved for exactly this purpose. misdirection is a lie.
For HI, the projected difference between expenditures and dedicated tax and premium income is $26 billion. The projected general revenue demands of SMI are $239 billion. Thus, the total General Fund requirements for Social Security and Medicare in 2013 are $344 billion, or 2.1 percent of GDP.
again, leave out the HI “savings” and then combine everything with “Social Security” which pays for itself.
“Redemption of trust fund bonds, interest paid on those bonds, and transfers from the General Fund
***** provide no new net income to the Treasury, which must finance these payments through some combination of increased taxation, reductions in other government spending, or additional borrowing from the public******.
of course they provide no new income to the Treasuy. They are DEBTS OWED BY THE TREASURY. The Treasury, Congress, must find new taxes, reductions or borrowing to pay its DEBTS, just as you or I would. Here they lie by saying something that is absolutely true, just misleading as hell.
Sammy it formatted fine. Your understanding? Not so much.
“Payroll Taxes $503.9
Tax on Benefits $26.7
Reimbursements from General Fund $97.7
Interest Income $102.8
Total Income $731.1”
These are not the numbers from OASDI, they are the numbers from OAS (Old Age/Survivors) in isolation from DI (Disability).
And you have made the assumption that you can total ‘Interest’ and “Reimbursements’ to get ‘Transfers’ and so get to $200 billion out of $730. Well no. Because the only actual transfer is the excess of cost over non-interest income plus in this case the semi-bogus inclusion of the reimbursement due to the Payroll Holiday.
The math works like this:
$645 billion in total Cost less
$503 billion in payroll tax less
$27 billion in tax on benefits
Shortfall of $115 billion
But $97 billion MORE in payroll taxes WOULD have been collected without the Payroll Tax holiday giving the real shortfall as
$18 billion. (The transfer from the GF just making up the difference).
Which $18 billion had to come out of the $102 billion in interest earned. Leaving the other $84 billion to add to Trust Fund principal AND ‘unified budget’ surplus.
So the amount is not the $200 you cite even if you include the entire $97 billion. It is instead the $115 trillion in actual shortfall between Income (after deduction of 15% due to holiday) minus Cost.
Which is to say that even giving you the benefit of being able to count the replacement of foregone system income with a transfer still leaves you down in that 22% range instead of 30%. Leaving me to believe you didn’t even try to follow the numbers in my previous response. Perhaps because you didn’t even understand your own numbers to start with.
For others: Trust Fund Interest not needed to pay benefits in the current year is not ‘transferred’ from the General Fund either in a cash flow sense or an accounting sense or as a real world financing event. Instead it is simply credited to the Trust Fund without showing as an actual outlay or transfer or offsetting borrowing or anything else.
The money value is real enough just as the accrued interest on a simle savings account is real enough. But like the latter doesn’t actually need to be financed until withdrawn. Accounted for on the books as a liability yes, financed no. To put it in standard business accounting terms it is basically a confusion between the Statement of Cash Flows and the Balance Sheet. You just can’t take a number from the one and add it to the other without knowing precisely what you are measuring. The $200 billion figure is real in a sense, but it is hard to explain exactly what it signifies in real world terms. What it doesn’t signify is a ‘transfer’ from the General Fund.
And just a note on Medicare.
Medicare Part A = Hospitals and is financed out of the HI (Hospital Insurance Trust Fund) which in turn is funded almost entirely by payroll taxes (SECA). Thus Medicare Part A is financed almost identically to Social Security. It also constitutes about 55% of all Medicare expenditures.
Medicare Part B = Physicians and Part D = Drugs are financed out of the SMI (Supplementary Medical Insurance Fund). SMI while looking kind of like HI is funded entirely differently being about 75% funded by General Fund and 25% by beneficiary premiums.
So the overall breakdown is close to this:
55% payroll tax
33% general fund (75% of 45%)
12% premiums (25% of 45%)
There are complications here which bring in the often discussed but little understood ‘Doc Fix’ every year but this is supposed to be how it breaks down.
All in all around 2/3rd of Medicare comes from workers directly via paycheck deductions or after retirement premiums. But a full third does come from the General Fund. To some people this seems like some horrible burden, to me it looks like only a partial downpayment on what should actually be Universal Single Payer.
Either way SMI and its transfers past and present are a feature and not some newly discovered bug. And yet another reason to insist that there is nothing called SocialSecurityMedicareMedicaid even though all three fall under the category of ‘Entitlements’. The financing of SS and Medicaid don’t overlap in fact or concept and Medicare is a confusing blend. (For example I didn’t even cover Medicare Part C).
I brought up Krugman and his concern for a long term sub par economic outlook. Today he is back on that theme, and he’s talking about Social Security.
He wants to go the E Warren route. Make SS officially a wealth transfer mechanism. Increase benefits etc.
But what about the finances? And what about Roosevelt’s dream that SS not be socialized?
What do the supporters of SS say about the Warren/Krugman views of SS?
The Krugman link:
Well it depends on which pieces of Warren/Krugman you are talking about. Because not all of them amount ot a wealth transfer and not all would have to be implemented within the current structure of Title 2 Social Security Insurance.
Speaking for me only (Dale and I are only in rough argreement on much of this) I have not objection to adopting CPI-E as opposed to current CP!-W and certainly against proposed Chained-CPI. I would also not object to changing the cap formula so that the incidence returned to 90% of covered income rather than the roughly 83% today. But then I would boost the top income tax rate on the over 90% folk by at least the foregone 12.4% and devote it to other needs and not send a dime through Social Security and so preserve the non-socialization of SS itself.
Along those lines adjusting benefits is not a wealth transfer mechanism unless it is funded by wealth transfers. Duh.
And Krugman doesn’t talk for me. And dare I say it certainly not for Dale. I is funny that the Right would don’t believe in collectivism and always insist that every outrageous thing said by any Republican ever, even if they are in positions of power is simply them expressing their own opinion. But every single utterance of any obscure entertainer, college professor or sixties organizer or radical needs to be defended by the whole Democratic Party from top to bottom. Why on earth does every single Republican in the country know the names Ward Churchill, Sistah Souljah, Saul Alinsky and Bill Ayers? Because they use this “what about the X/Y views of Z” shit all the time.
I will read the Krugman piece with attention. Because I admire both him and Elizabeth Warren. And if I agree I will say so and if not, not. Because thoughtful liberals are not Dittoheads.
And which Krugman piece are you referencing? Your link just goes to his main page and while there are some recent pieces on entitlements reform and Social Security I saw none that referenced Warren directly.
Could you be a little more specific/less sloppy and actually get the permalink to the EXACT piece you are asking us to comment on?
“AB needs is a better class of troll”
AB needs for its authors to learn not to feed the trolls.
If you find yourself trying to educate sammy or hans or in any way addressing them directly, you are wasting your time. When it was pointed out (for anyone else reading) why the transfers from the general fund had nothing to do with SS the job was done. The troll could then be ignored as well as any other phantasm.
Actually the whole post should have been avoided. It was not the kind of “pulled from the comments” post that creates new discussion beyond the original post that had the comment.
Webb – The article I referred to:
Webb – Math question:
This report from SSA has 2012 income subject to taxation (earned income) at $6.298 Trillion.
The 2013 TF report has 2012 Payroll tax income at $703.8b. (589.5 PR + 114.3 GF transfer)
Take the 703.8 and divide by 12.4% – you get 5.676 Trillion. (income subject to SSA taxes)
Now take the 5.676T and divide it by total income (uncapped) and you get……..90.12%.
Where did you get the 83% from???