FLYING SAUCERS, THE YOUNG, and SOCIAL SECURITY
by Dale Coberly
FLYING SAUCERS, THE YOUNG, and SOCIAL SECURITY
What if the Social Security
Trust Fund WAS
George Bush liked to tell us “the young” were more likely to believe
in flying saucers than they were to believe they would ever see any
benefits from Social Security.
First, let me assure you the iou’s are not worthless. They are legal
promises by the United States of America to pay back money it
borrowed from real people. The United States of America has the
assets to honor its debts.
But it might be interesting to see what could be done, other than
cutting benefits, if a flying saucer came and stole the Trust Fund
and Congress just couldn’t find the money to replace it.
What if the people just decided to repay it themselves? How much of
a burden would that be?
The answer is “Not much.” You can verify this by studying
in the Trustees Report. I’ll spare you the details, but you can
easily do it yourself. You want to look up
http://www.ssa.gov/OACT/TR/2013/ or better http://www.ssa.gov/OACT/
and find Table VI.F9 and Table VI.F6. Find the Balance for each
year from 2013 to 2033 and divide it by the Payroll for each year.
This will give the percent of payroll that is how much the workers
would have to tax themselves to pay what the “worthless” Trust Fund
was going to pay… to repay the Boomers who lent it to the
government to pay for their own retirement. The average of those
extra payments turns out to be 2% of payroll.
Please note, the Boomers are now the “older generation” that
“investment legend” Stanley Druckenmiller is going around saying
“stole from the younger generation.” They stole it, see, by lending
it to you. This makes perfect sense if you are a pathological liar.
If the workers were to pay that 2% by raising the payroll tax 2%,
they would on average see a paycheck each week that was 8 eight
dollars less (that’s 1% because the average worker only pays half of
the payroll tax) than what they are getting today. But it is also
true that over the 20 years they would be paying the extra tax, their
wages are expected to go up from about 800 dollars per week today to
about 1100 dollars per week then. The worker’s share of that would
then be about eleven dollars per week, leaving him 289 dollars
richer each week than he was before he started paying for the missing
Workers would rather not pay the extra, of course, but if the
alternative is “no Social Security,” they would be wise to consider
it a bargain. They will get that money back about twice over in real
dollars, in the form of Social Security checks when they will need
the money more than they do today.
And it is a fact of life that no one is going to pay it for you.
Your choices are to pay for Social Security, which protects your
money from inflation and market losses and personal bad luck, or
take your chances “on the market.” Or you could throw yourself on
the floor and kick your feet and demand that “the rich” pay for your
The rich won’t do that. And if they did, first they’d get the money
back by raising prices and cutting your wages, and second, they would
not rest until they had destroyed Social Security entirely.
In effect “the rich” borrowed the Trust Fund when they got tax cuts,
and the government continued to buy things using the money borrowed
from Social Security. But the rich don’t think that they borrowed
it. They think “the government” spent it. And they will throw
themselves on the floor and kick their feet and demand we “cut
entitlements” so we don’t have to “pay the huge debt” we owe to
Social Security. Except, because they listen to pathological liars,
they don’t hear the “to” in that sentence. They think that somehow
Social Security BORROWED the money … which is getting it
Just to say it again… it would be better for the workers to just
pay the money (again) than to take the chance of losing Social
Security altogether by trying to make the rich pay for it.
But the news is better than that… a whole lot better.
Lets look at what happens if :
The Trust Fund is NOT worthless IOU’s.
First, look at some other tables, this time from the Statistical
Abstracts of the United States:
Table 483 Shows that the 18 million taxpayers who made over a hundred
thousand dollars in 2008 made as much money in total as the 124
million taxpayers who made less than a hundred thousand dollars.
This means, essentially, that those people.. who did not pay the
payroll tax on the part of their income over 100k could pay back the
Trust Fund by raising their tax the same 2% on average that we just
showed it would take the workers who did pay the payroll tax to pay
for it again.
OR… we could ALL of us pay a tax of about 1% to pay back the Trust
Fund. The Boomers would get the retirement they paid for, and the
rest of us would get our money back when we retire in the form of
higher benefits over a longer lifetime. So no one would really be
“hurt.” Except those people who can always convince themselves that
their sister got a bigger piece of the burfday cake than they did.
Arguably, we all benefited from borrowing the money from the Trust
Fund. We got things for the government that, arguably, helped make
this a richer and stronger country. And we, arguably, were able to
invest our tax cuts in enterprises that made US richer. We are NOT
“paying twice” for Social Security; we are paying once, the first
time, for the stuff we bought with the money we borrowed FROM Social
But the news is actually better than this: Neither we nor “the rich”
will probably ever have to pay back any of the “Debt,” including that
owed to Social Security. Normal growth in GDP will enable the
government to pay back the money it has borrowed without raising tax
rates. This is the normal way that governments, and successful
businesses, pay back borrowed money… even as they borrow more.
But the news is even better than that: A payroll tax increase of one
TENTH of one percent (about eighty cents per week per worker) per
year will entirely pay for the future costs of Social Security. That
will reduce the “actuarial deficit” from 9.6 Trillion Dollars to
zero. AND it will eliminate the need to “repay” the Trust Fund. The
tiny tax raise will entirely pay for Social Security costs “as we
go,” so the Trust Fund can lie there, on paper, growing with the
size of the economy, without ever needing any actual cash.
Coberly, All good points, but you can not listen to a “serious” Republican or unfortunately a majority of “serious” Democrats without them talking about the need to “reform” social security and by “reform” they mean gut it. Even too many “progressive” Democrats think that the answer is to raise the cap or means test benefits with virtually no recognition that this would undermine the plan to the extent that like Norquist’s dream of drowning government in a bathtub, I guarantee you social security would be nothing more than a cut rate welfare program within 20 years. And just as it looks like there is no way the long term unemployed in this country are going to get any benefits after the first of the year, it will only be a matter of time before the rich and powerful decide that it really is time for grandma to die because we just can not afford to feed her catfood anymore–think of all the hungry productive cats out there who are going hungry just to keep grandma alive. By the way it was just about 45 years ago today when I asked my dad what the FICA deduction was from my paycheck–which was larger than either the state or federal taxes withheld. My dad–then and now a Republican of the Barry Goldwater branch–told me it was for social security and that I would never see a dime of it. Well I will be 62 in 6 months and although I would like to wait and get full benefits at 70, I just might claim so I can tell my dad he was wrong on social security.
Table 483 Shows that the 18 million taxpayers who made over a hundred thousand dollars in 2008 made as much money in total as the 124 million taxpayers who made less than a hundred thousand dollars.
I love that stat, but when I click on the link I get:
You are not authorized to access /compendia/statab/cats/ on this server.
Return to referring page.
The reason I wanted to look up the stat noted above (be nice if I could contain all my thoughts in one comment) is that I would like to know what portion of the 18 millions’ income is above the Social Security cutoff — so I could figure out how much it would add to Social Security take if it were all taxed.
The Trust Fund setup this, thus: the wrong tax is paying for the wrong thing all the time — while saving politicians the embarrassment of, every so often, needing to raise the right tax to pay for increasing Social Security outgo.
While the regressive FICA tax (pays back progressively; so, that’s alright) stays the same for 60 years or so, the extra money not needed to pay retirees in the beginning goes to pay for what the progressive income tax is supposed to pay for — with the mechanism of buying US bonds.
When retiree outgo finally starts to exceed FICA collections the income tax takes over paying for the extra outgo — will reach 25% of outgo by the end — with the mechanism of cashing the bonds.
When and if the bonds ever run out, income tax will be lowered and FICA will have to be raised — to where it would have been in the first place if the pols had been willing to embarrass themselves every so often.
There legitimately should be a five year surplus in bonds so that any temporary shortfall in FICA income can automatically be covered for retirees while congressional pols get around to embarrassing themselves — happened a couple of times.
Don’t worry, Terry. SS will still be here when you reach 70. You can wait and still,prove your Dad wrong.
I think you are about right. I am sorry about your dad. People believe what they read in the Wall Street Journal and they don’t know enough about reality to think carefully.
Denis, try this
i can’t access AB except for about 4 minutes of reading ads folowed by 30 seconds to read and reply to comments.
i tried to show in the original version of this post that NO ONE gets the biggest piece of the burfday cake. The workers get the Social Security benefits they paid for… the tax is not regressive if the program is progressive… AND the general taxpayer gets the gadgets he didn’t pay for, but the way interest and growth in the economy work, he will never have to pay for them…if Congress does the intelligent thing (they won’t) and raised the payroll tax one tenth of one percent per year starting by 2018.
it would be easier to just start now, or even raise the tax 1% (each) starting now, and then we could listen to the Petersons for the next 75 years saying Social Security is going broke… in 2088… when another 1% increase would fix it forever as far as anyone can see from here.
Well Denis I would quarrel a tiny bit on the phrasing and framing but you have gotten most everything right, so let me add a geek technical point.
Social Security’s official target for ‘solvency’ as defined is to have a reserve equalling 100% of NEXT year’s cost for each year of the projection period. This target is a ‘Trust Fund Ratio’ of 100. Now since Social Security will always have SOME income as long as SOME people have jobs, it can always pay out SOME level of benefits. Which in turn means that a reserve equalling 100% of cost means a reserve covering multiple years of shortfall, the amount depending of course on such things as Employment and Real Wage. And the result when you look at the numbers carefully is that a TF ratio of 100 works out to around a 4 year buffer. That is even if the long term trends are against you the politicians have that much time to get things right.
But four years is not that much time so the Trustees have imposed on themselves even a tougher test. Under the test for Short Term Actuarial Balance Social Security fails if in ANY year of the next 10 it projects to have a TF Ratio less than 100. Which actually gives the system a 13-14 year buffer.
For example the TF Ratio is currrently above 350 and actually projects to get a litle larger before the Trust Fund starts getting drawn down. And BTW conformtably meets the test for Short Term Balance. But not by a lot. That is under current projections our Canary in the Coal Mine, the Ten Year in Advance warning of a TF Ratio under 100 will get triggered in the next half decade. Leaving us with only that 13-14 year buffer before benefit cuts. Or 20 years total.
Now a perfectly sensible strategy would be to put the trigger point for actual action at the exact point the Trustees do, that is the point at which the TF Ratio is within 10 years of going below 100 and so 13-14 years from going to zero. And given what was happening with the projections between the 1997 and 2006 Report years this put the projected action point at about the 15th of Never, indeed Trust Fund Exhausion (TF Ratio of 0) was being pushed back at almost two years per year during that period. On the other hand there was a political argument for doing ‘Something’, if only to get the Bad Guys to Shut the Hell UP, We GOT This.
Thus the NW Plan was born – as a compromise between Get Them to Shut Up by Acting Now and Lets Not Do Anything Until the System Fails its Test, If Ever. Because the NW Plan codifies the Short Term Test but then presestablishes the response mechanism.
That is at the point of Test Failure, or about 13 years in advance of actual TF Failure, you start a phased in plan of payroll tax increases. And becaues you do have 13 years to play with those increases only have to be large enough to keep that 13 year window moving ahead by a year per year. Now if things get marginally better year over year you trim that increase a hair, if marginally worse, you boost it a bit. But the end resultl is that you are ALWAYS 13 years plus ahead of the crisis point and so can be said to have permanently fixed the problem. At least using the Short Term Actuarial Test.
All of which is a roundabout way of endorsing your strategy of always having that five year surplus. Not mind you 5 years of actual future cost at any one time, but 5 years or so of buffer between worse case shorter term gaps between income and cost. And then adding on enough years BEFORE that to plan and implement the schedule of fixes, or as with Northwest have the mechanism prepared in advance ready to be Triggered.
So the Trust Fund has an important role and we would miss if it the aliens came down and stamped Null and Void on all those Special Issues because it serves as valuable diagnostic and palliative tool and so eliminates the need for drastic emergency surgery.
But ‘important’ does not mean ‘day to day critical’ nor does this diagnostic role make the Trust Fund into some investment fund dependent on ROI. That the TF earns interest is just a matter of equity, the money was after all borrowed and workers deserve to have interest credited on their reserve funds. But in the end that is all the Trust Fund really is – a reserve and buffer. And the failure to understand that is why we have certain critics from the Right bleating about ROI and some from the Left decrying the fact that ‘they borrowed all the money and never want to pay it back!’. Well sorry that is a feature and not a bug of maintaining a prudent reserve set to always have 100% of next years cost at any given time which in turn would cover several years of even severe shortfall;.
But this does result in the kind of mind wrenching conclusion that fixing Social Security means never getting the Trust Fund ‘paid back’. Because the Trust Fund was NEVER designed to go to zero. And we wouldn’t WANT it to go to zero. Which means keeping a prudent reserve. Which under this particular test has to grow in nominal terms every year. Meaning we never WILL get our money back (as such) and that is a GOOD THING.
actualy we will get our money back
in the form of retirement checks.
haven’t thought this through yet, but
the difference between raising the tax one tenth of one percent in 2018 and for the next fifteen years… when the trust fund would have run out without the tax raise
and just waiting the fifteen years until the trust fund runs out… that it, is has been entirely paid back by “taxing the rich”… and then boosting the tax all at once by 2% (each) in order to pay the then higher benefits… by then not so much the boomers as because you all are going to be living longer…
looks like about an average of 0.7% increase in the tax for 15 years, followed by an average 0.25% tax “savings” for five years… which would leave our mythical average worker a little “ahead” by letting the TF go to zero (or one year’s reserve) and “making THEM pay for it”… THEM being the people who are the heirs of the people who got the tax cuts.
and not counting all the intricacies of who really pays what tax and who really got the benefits of that borrowed money..
and not counting all the wailing in washington about SS running out of phony iou’s
it doesn’t seem to me to be worth it.
though, since we can’t count on sense… i would not object if we ran out the clock and then raised the tax 2% all at once. the shock would be much less than people think. a one day wonder. then we’d all go back to work… and watch our wages rise that much in two years… and of course look forward to bigger benefits over a longer life span
not to put too fine a point on it… all this sweating and shouting over a couple of percent or a couple of years one way or the other is actual bona fide verifiable insanity.
the point is you are gonna need your Social Security, and you are gonna have to pay for it, and it ain’t gonna cost enough for you to even notice.
and if you ever figure out a way to assure perfect financial justice in taxation and the economy, be sure to let me know.
i have it on good authority that God himself is not too worried about it.
Honestly, I don’t think most young people care about the solvency of social security. They don’t believe it is going to be there because they don’t believe that the United States is a going concern. Questions about social security aimed at young people are more a referendum on the state of the union than the solvency of the trust fund.
Jerry, I agree social security will be there when I am 70, but I do not think my dad will be. He might, but he would be 94 then. By the by he has accepted his social security checks and has used Medicare despite it being another communist plot.
i don’t think we are ASKING the young people to learn anything from them. the bad guys are TELLING the young people lies, then polling them to see if they are getting away with it.
when i was a young person (not anyone over thirty) i didn’t know anything, except I thought Vietnam was a bad idea.
Turns out i was right, and therefore smarter than Robert MacNamara… but that wasn’t because I KNEW anything.
You know, they’re so eager to say our SS savings are worthless pieces of paper, but somehow they never go on to say the $3-4 trillion of cash that businesses and banks have cached away are also “worthless pieces of paper.”
I’m so confuzled… what’s the difference?
Though Noni is snarking you can pinpoint the origin of the Phony IOU argument.
In 1999 Dean Baker and Mark Weisbrot published a book called “Social Security: the Phony Crisis” which among other things showed that all SS needed to self-fund was for Real Wages to resume the path they had been on before the Supply Siders took over. Moreover in the six years that followed the date of Trust Fund exhaustion, which heretofore had been the acknowledged point of ‘Crisis’ was being pushed back at a rate of more than a year per year and indeed had moved from 2026 with the 1997 Report to 2042 with the 2005.
Now a crisis point that retreats at more than a year per year and indeed at almost 2 years per year (around 1.7) is maybe a crisis that will never come and as Trust Fund balances balooned to and beyond the trillion and then the two trillion it became a little embarrassing to stick with the messaging “Flat broke, and Sooner is Better than Later” when flat broke meant $2 trillion in the bank and Later proving itself better than Sooner with every new Report.
So they just recalibrated and invented a new metric for ‘Crisis’. Because they needed SOME sort of ‘Crisis’ to sell their message. And the way to do that was to make a claim that no one had ever made before, at least in such an obvious way, that Special Treasuries just were not real at all.
That is the need for ‘Crisis’ drove the re-definition and not some ‘principled’ argument that entities can’t owe debt to themselves and the rest of the claptrap.
Social Security is bad. And always has been. Even when most people thought it was good. So saith Cato and AEI. It is the job of the hirlings at those think tanks to sell that message, by foul means or fair. The argument doesn’t have to be consistent or logical, it just has to be plausible enough that it doesn’t fail the laugh test outright.
My way of making sense of this is to see the critics of Social Security in the guise of debaters engaged on this years National Debate topic. At that level of debate the teams are expected to be able to present the cases for and against the Question, that is they are being trained to be Advocates. And while it is useful for your Advocate or Attorney to actually believe in your case, it isn’t an absolute requirement and in some cases actually makes your task impossible. For example no one in or out of court really believes that big time lawyers for Mafia Dons really believe their clients are innocent or even narrowly innocent of the specfic crime for which they are being currently charged. While lawyers are restrained by various mechanisms from actually lying to the judge or in the judge’s precense, they have a lot of leeway with the jury.
In 1994 the case for ‘Crisis’ was easy. The Trust Fund was projected to go to Depeletion in the early years of the 2020s, at the point when Boomers looked to be imposing the maximum amount of strain on its financing. Similarly the general consensus that we were facing General Fund ‘deficits as far as the eye can see’ and so had no hopes of a bailout there. Hence a perfect storm. But by 1999 the storm signals weren’t so strong, General Fund deficits growth rates were slowing and the date of Trust Fund depletion started pushing out beyond the point of maximum Boomer impact. Until by 2004 the whole thing was looking ridiculous with SSA putting depletion at 2042 and CBO at 2048.
So the Mafia lawyers, er, er SS policy analysts at Cato and AEI adopted two different arguments: one presenting numbers in PV Infinite Future (adopted with the 2003 Report) and then having Bush go out on his vaunted Social Security Tour talking up ‘Phony IOUs’.
Because Social Security Bad. Per the Bad Guys. All else just works its way back to that.
but since you were the first one to point it out, i think you should start shouting it out to the expensive seats:
“Get on board the tenth of one percent train… and never have to pay back the Trust Fund at all!”
See they have talked themselves into believing that there is a SS debt or deficit that THEY will have to pay back. If they, and we, are smart enough to see how it disappears, it never shows up in that “Budget Deficit” column, and while the Debt… that they owe US… keeps on growing, it never has to be repaid… IF we keep up with the cost of feeding ourselves when we get old.
Thanks to you (and a quick check with Wiki) I am finally getting this down right:
The 75 year thing was something projected way back when for a commission — not anything especially meaningful to today’s policy making. (PS. Never occurred to me that the TF should be enough to cover _short-fall_; without thinking I took it for covering the whole payout.)
So, what we have — approximately; if I understand correctly — is a 4 year full payout which stretches to 13-14 of shortfall. Any less than 100% projected coverage of 10 year shortfall triggers the Trustees making “help!” noises. And, in actuality, the TF is never to run out — but to keep it that just way.
Up until now nobody noticed any of this because the 100% projection has been maintained at the current tax level without any action on anybody’s part. All the heat is as you depict coming from people on the left or the right who don’t have a clue about the (hoped for) permanent state of the TF.
Meantime, if the FICA tax rate has to be raised a decade from now (when the TF starts to draw down according to Wiki), I say it shouldn’t hurt any if we do something else right in the meantime: reform the American labor market so that the 1-2% or more of _compounded_ yearly increase in per capita output goes to the 99% who can then cover the one-time 1-2% increase in FICA tax painlessly (if not silently).
Well once again some quibbles but overall you got it right.
The 75 year projection did not originate with the 1983 Commission and in my opinion it is a useful OUTSIDE window that covers the interest of almost all current worker participants. For example SSA defines ‘current participants’ as precisely those over 15, the earliest possible time for most people to enter actual ‘covered employment’. Add 75 years onto that and even with mortality improvements you capture almost all those 15 year olds retirement years. On the other hand adding Infinite Future onto that with the 2003 Report was simple gratuitous special pleading, certainly I have no firm plans to see in the 24th century.
As to 4 year/13 year close enough, at least when I am hijacking Dales’ post, the principle is right as rain – it is a reserve never designed to actually run to zero. Which fact has some odd results when applied to “paying back what they borrowed”.
But the most important point is the one you bring up in your last paragraph. Currently ‘crisis’ is based on an economic projection that among other things calls on ultimate Real Wage increasing at a 1.1% rate with ultimate (mean) unemployment at 5.5%. Although there are some offsets a whole bunch of that could be addressed by getting Real Wage up to 1.5% and unemployment down to 4.9%.
Or as I like to shorthand: More Jobs. At Better Wages.
Achieve that and a whole bunch of the progressive agenda gets accomplished along the way, including Social Security ‘reform’.
(You would probably still need some increase in FICA as in NW but it would be an even smaller percentage of Real Wage than our model which assumes crap employment and wage numbers).
On 4/13 years.
If there is consensus on what constitutes Social Security Crisis it is the projected 25% cut in benefits at Trust Fund Depletion. Certainly the policy suggestions as to how to navigate that shock vary (Biggs would phase in benefit cuts, Coberly phase in revenue increases) but most people concede it would be a political earthquake if unaddressed.
Which means that the current target level of a TF ratio of 100 would deliver nearly four years of grace assuming we just went into this fat dumb blind and happy. And setting the ninth year before going under 100 as the test of ‘insolvency’ (the TF going under 100 in year ten and then going to zero three years later) gives you the 9 plus 4 = 13.
Now there is no reason to not be proactive and put in a mechanism ahead of time, and particularly a mechanism that would automatically trigger at year T minus 13. That would allow us to say we had ‘saved’ SS without actually changing rates in the first year. Psychologically though I would have to agree Dale that SOMETHING should be done in the first year, if only to get the ‘serious, sensisble, centrist’ but also innumerate morons off our case.
But if I put on my Wirzard Hat I would implement a Denis/Steve Roth plan of attacking wages up front and then have a Coberly NW Plan for backup. That is we would have the Trigger ready to pull and yet working hard to try to avoid pulling it too soon.
And Dale the reason we will never get the 1% on board with your program of 1/10th of a percent per year is that even though it relieves them of a theoretical burden (that $2.8 trillion ‘debt’) it poses huge existential threats to their entire economic and political philosophy.
If Government is ALWAYS the Problem and NEVER the Solution then Social Security must FAIL and be seen to be a FAILURE. Because it is a simple historical fact that Social Security OAS led to Social Security DI which lead to Medicare (officially the Social Security Act or Amendments of 1965) and maybe we could throw in Medicaid, AFDC, Food Stamps. From this perspective SS was the camel’s nose under the tent that put us on Hayek’s Road to Serfdom that would underminde Ayn Rand’s Virtue of Selfishness and breaking the link between Friedman’s Freedom and Capitalism.
Just as Conservatism can Never Fail, it can only be Failed, so too can Social Security never Succeed. It can’t, not and keep the rest of the defenses up.
You can shorthand that as Tax Aversion or Hatred of Class Traitor FDR but it all adds up to something existentially risky to the entire superstructure. As such the liklihood of the likes of the Koch’s waking up one morning saying “My God it is only $8 a week if we take our medicine in one gulp! And other peoples $8 at THAT” are between zero and the lower bound. I.e. Zero, Zip, Nada.
On paper Social Security was at its most secure on two dates in the last half century: June 1983 and November 2004.
In June 1983 the official scoring of the legislation that came out of the Greenspan Commission had SS being solvent ON AVERAGE throughout the 75 long range actuarial period. The reaction of Cato was to organize the conference in NYC that among other things produced the paper by Butler and Germanis called “Social Security Reform: Achieving a Leninist Strategy”.
In November 2004 the date of Trust Fund exhaustion had been pushed out to 2041 and so past the point of maximum Boomer impact on the system. Moreover under the economic growth expectations projected by both the Bush Administration and under the Washington Consensus the business cycle had been broken in a way that would have fully funded Social Security. And the response of the Bush Administration was to announce the usage of the ‘political capital’ just gained from the election to launch a Social Security Tour.
That is if the question was ‘solvency’ why did the Right use the points of maximal projected solvency as action points? Why then? Why in 1983 and 2004? Because those were the points of maximum danger to their project and of maximum opportunity to the New Deal Project.
I think it is not a coincidence that the actual pressure on Social Security from the Right has diminished over the last 7 years even as projections worsened and now have TF exhaustion at 2033. The danger of ‘Solvency’ seems past.
Which also may explain the fury directed at Elizabeth Warren this week. How DARE she raise this from the near dead state the ‘serious’ folk had reduced it. Shoot Biggs might have to fire up his website again?
(And there is such, it is called ‘Notes on Social Security Reform’)
you are not hijacking.
glad to have you join the conversation.
we don’t need the 1%. we do need the 10%.
most of whom don’t know anything about SS, and will be relieved to hear that we have a plan that saves them some money.
koch is not going to agree with us.
but if the Trustees say “solvent as far as the eye can see”
he has nothing to talk about.
the one tenth percent solution is not a “backup.”
it’s what to do while you are waiting for your political miracle to restore the wage growth of the working class.
definitely worth working for, but meanwhile… save Social Security just in case.
Dale the ‘backup’ is expressly a function of my policy preference with Wizard Hat on. Which I stated in exactly those terms.
I understand why you prefer to institute the fix right away and even endorsed that approach on real world grounds.
Still in the Magical World of Bruce positive steps towards redressing income inequality via such things as advocating for minimum wage increases in 2014 would come before the psychological comfort of instituting the NW Plan a few years before the arithmetic and the Trustees tests suggest that it should.
It certainly is not clear to me why implementing a revenue based fix to SS is so much easier than say pushing for Minimum Wage that it is a no brainer to do it in that order.
I guess one man’s Political Miracle is another man’s Practical Proposition. I’ll leave it to the AB readers to decide. On the other hand the city that holds Seattle’s airport just implemented a $15 an hour minimum and two Maryland suburbs of DC along with DC itself are implementing a significant if smaller increase already this week. And unless you are holding out on me we still haven’t found a Congressional sponsor for Northwest. (Though FYI Virginia Reno’s plan is getting some interest driven by some NASI polling efforts).
‘Income Inequality’ seems to be the buzz-phrase this week with direct attempts to address it via wages attracting the most buzz. And as I am sure that you would agree there can be little harm pursuing a two track strategy here.
I can’t help but feel that this conversation has been going on and on and on for several years now and it hasn’t changed much. Not that the content of the comments aren’t worth while and valid, but it seems pretty obvious that the conversations regarding Social Security, where ever they may occur, at odds with the reality of the political situation. And that is critical. The Social Security “debate,” if it can even be called that, is almost totally disingenuous. Facts are repeatedly met with political rhetoric and out right propaganda. The discussions are two sided with reality facing off against political ideology and a total lack of candor. Unfortunately the propagandists are slowly, but steadily, winning the minds of the Congress if not the people. Seemingly intelligent people in the Congress don’t seem to have a clue as to the validity of descriptions like those posted here by Dale and Bruce.
This is not a debate that can be won with facts and figures. If the electorate doesn’t wake up to what is being done to them by their own elected officials all the facts will amount to little and deceit and deception will wear down the opposition. The problem isn’t the Social Security program. The problem is the distorted wealth and income distribution
curves. We have a bi-modal economy. Until that changes, and its only been getting worse each year for the past several decades, we will be sitting around trying to figure out all manner of complicated plans and mechanisms to make benefit programs work. Even those like Social Security which is funded by the very people who will eventually benefit from the program. We need to talk more about the deceit and deception so prevalent in our Congress and in the media. It’s a revised representation that is needed not draconian schemes regarding how to live within a world of avaricious greed and the propaganda that is constantly broadcasted in order to maintain the status quo..
jack and bruce
“I” may not be able to walk and chew gum at the same time, but “we” can.
i have been trying to avoid quibbling arguments… there are many offered here.
but there is lots and lots of room to talk about the dishonesty and deception and criminality of the folks running our government and press. feel free to take that on.
and there is plenty of room to talk about raising the minimum wage and the wages of workers genrally…. while STILL arguing that we need to fix the “looming actuarial deficit” now, at the same time. we can do it.
but if we get lost talking about the deceit etc… or the wages of workers only…. they will take away your Social Security while you are planning the revolution.
you are going to need the SS whether or not you win the revolution, and it’s cheap to fix. and easy.
maybe part of attacking the deceit etc is to let people know that SS is NOT a “looming crisis” or huge burden… but an easily solved problem… as easy as coming up with the extra nickel when you find out the price of bread has gone up 5 cents, or that your growing child is eating more…
and maybe part of raising the wages of workers is to keep THEM from cutting “wages” in the form of cutting your retirement.
Dale I’m not quibbling with your post. I guess I’m expressing the frustration of listening to reports of the “budget compromise” agreement coming out of the joint meetings between Darth Vader and Patty what’s her name. The only thing being compromised in that agreement is the social ideals that all involved keep claiming to be preserving.
Social Security has been shielded for the moment, but it’s only a matter of time and a few more compromise agreements between the deceivers and the acquiescers. The description of how Medicare has been protected is an example. As the announcer tells us that both Medicare and Social Security are left unscathed the footer notes that “Medicare reductions continue in place until 2023.”
Yes, all the good descriptions have to continue. But a greater emphasis has to be put on the fact that it isn’t a debate. It is valid argument vs. political bull shit. It is not an argument that is resolved by yet another compromise some time in the near future. It is a venal point of view trying to over whelm the facts of the issue.
you are absolutely right.
u.mm…… didn’t the socsec $ get used to pointlessly destroy Iraq, Afghanistan, Libya, murdering millions of their citizens, putting our own loved ones in harm’s way, vastly increasing risks of terrorism, degrading America’s int’l reputation, promulgating enrichment of greedy evil unethical private contractors who returned to use their resources to do harm in the domestic class war?
“this conversation has been going on and on and on for several years now and it hasn’t changed much”
I am heartened to see that some people are actually talking about expanding SS. Congress never accomplishes anything without compromise, so the discussion needs to be shifted before just paying for what is already scheduled becomes realistic.
Part of the reason that the 75 year projection is useful is that the cost per beneficiary and the revenue per worker do not change very fast. During a timeframe when you can guess how many people there will be alive, you can guess how many will be working.
From 1997 to 2007 the revenue was higher than projected because the booming economy brought more people into the workforce. Since 2007 we have shed all those gains and the SS forecast has reverted to the mean.
An obvious takeaway for anyone actually paying attention to the numbers is the fact that SS cannot just run without some kind of adjustments to account for changing lifespans, changing birthrates, changing workforce participation, and changing labor share. As we come out of an extraordinarily long period of having a high proportion of workers, we need a new mechanism for increasing revenue.
I believe there are lots of conservative people who think SS is a good thing. They may even support raising taxes to pay for the increase in scheduled benefits that they have gotten used to since 1983. I anticipate a pushback from putting the NW Plan triggers in place without having a limit on how fast the taxes could increase.
While thinking about this problem I had an aha moment. We already have triggers on the benefit side. The COLA adjustment linked to CPI is a trigger. The use of AWI to calculate Average Indexed Monthly Earnings is a trigger.
But there is no trigger to adjust (benefits or taxes) for how many years people collect benefits. From 1941 to 1983 we depended on Congress to change rates. Since 1983 we have depended on momentum.
Since we have triggered adjustments for benefits, we should be able to have triggered adjustments for revenue, but I think we need to work harder on explaining triggers and may need some work to put checks and balances on those triggers.
Jack you are right and it seems that this is at the root of why my project drives Dale a little crazy.
I am not talking to the Congresscritters and I am not talking to the People. I don’t bother with LTTEs or leaving comments on Samuelson or Sloan or Montgomery instead I am talking to YOU. Not “Jack the guy I know on Angry Bear” but “the politically committed commenter in the left blogosphere” who is also data driven.
I have been at this a long time, starting back when there barely was a blogosphere and well before Bush announced his Social Security tour in 2004. And while I don’t want to dislocate my shoulder patting myself on the back my efforts on this front and the efforts of what was originally only a handful of people like me has coincided with a change in the overall discourse. People talk about Social Security differently than they did in 2003 and I flatter myself that some part of that has radiated out at third and fourth hand from late night comments I made at dKos or MaxSpeak or Economists View years back.
Now I do have some validation of this in that over the last five years or so I am in a place where some important policy people on my side at least read my e-mails. For example one of the most famous economists on the liberal side of the divide has more than once kindly explained to me: “Bruce you don’t know what you are talking about”. Which however you slice the response is a hell of an improvement on the “Bruce Who” I would have gotten back in 2003.
As I said to (name dropping shamelessly) to Dean Baker and some others in an e-mail last week “I never expected to get rich in this gig” and I didn’t or don’t expect Nancy Pelosi to offer me some staff analyst job out of the blue or Ezra to beg me to join Wonkblog. But I know for a fact that both of them listen to people who listen to people who not only listen to me but actually take me seriously.
In large part because I keep plugging away explaining the same stuff over and over. And my ‘students’ or some of them do take some of that stuff away with them, and often enough I hear echoes of it coming back to me from third sources. “Hmm, sounds like something I might have said”. Well sometimes it was.
A good thing since I have been rehearsing a new post in my head, one that goes right back over the same ground of ‘solvency’ ‘Trust Fund ratios’ ‘infinite future’ etc etc in a way almost guaranteed to have some folks say “Oh noes!! Not again!!”. Well yes again. Just like Calculus professors start over every semester with a new class. Even though some of the material is just a review for some students and old hat for others to understand the subject you need to start from Foundations.
“didn’t the socsec $ get used to pointlessly …”
When you borrow money from the back, they don’t care whether you successfully renovated and flipped the house you bought, or lived in it while the value went down. They just want to be repaid.
It is true that the rich pay higher taxes, so it is not true that income tax payers are exactly the same as payroll tax payers, so it matters to SS beneficiaries that the loans are repaid in the same way it matters to the bank. (relating the analogy with the original post, the bank won’t go bankrupt if it sees some defaults, but it will run more smoothly)
Wat. Short answer “No”
Longer answer: the decision of the head of the Bush campaign’s VP recruitment effort, one Richard Bruce Cheney, to select a certain Richard “Dick” Cheney, a well known neo-con and signatory of the Project for a New American Century’s 1996 ‘Statement of Principles’ which called for a series of wars against our perceived enemies in order to establish exactly that ‘New American Century’ had a lot more to do with the fact that the subsequent Bush-Cheney Administration launched the first two in that series of proposed wars using a foreign policy staff at the WH, the OVP, and the Defense Department that had almost a 100% overlap with either the signatories of the PNAC Statement or their near simultaneous 1997 Letter to the President (Clinton) urging immediate war on Saddam Hussein.
Bringing Social Security and it sthen large surplus in this is nonsensical. The decisions that led to that surplus in 1983 did not overlap in purpose or in significant ways in personnel with the decisions that motivated the PNAC Vulcans in 1996 and after. This is perhaps the stupidist example of ‘post hoc ergo propter hoc’ I have ever read, which considering the standards of the blogosphere is saying something indeed.
well, i didn’t see any “ergo” in Wat’s proposition
and while it’s true that if the money is paid back, the “bank” (us?) don’t care what it was spent on
and while it’s true that the personnel from 1983 were not the personnel from 2001, there is some over lap in world-view.. not that SS, or raiding SS figured in any of their calculations
nevertheless it is not stupid to observe that some 3 Trillion dollars worth of money collected from people who thought they were paying for their Social Security… and I do count interest on that money… and interest on the interest… just the way the rest of the word does..
that money was used to buy war toys and other things. the fact that it doesn’t need to be paid back… point out by one Bruce Webb… should lend a degree of credibility that the Boomers “extra” payroll tax was used to help fund the rest of the government at a lower general tax rate, or borrowing from the public rate, than would otherwise have been the case.
not … as i have tried to show… that this amounts to anything we need to worry about
but “stupidest”? i don’t think so.
there is a “brake” on the one tenth percent plan
it’s one tenth percent per year.. up or down.. whenever the Trustees etc.
and if it ever becomes too expense the congress can change it
hopefully based on facts and not the lies of the Peterson Machine to Destroy Social Security.