OH NOES! SOCIAL SECURITY IS BROKE AGAIN
by Dale Coberly
OH NOES!
SOCIAL SECURITY IS BROKE AGAIN AND
WE’RE ALL GOING TO DIE!
BECAUSE… BECAUSE…
BECAUSE WE’RE ALL GOING TO LIVE FOREVER
A couple of public spirited citizens have taken some of their Own Time to warn us that Social Security is (taken from last January) “worse than you think.”
They take their cue from that great humanitarian and patriot, Peter G Peterson, who has donated a Billion Dollars of His Own Money to his tax free charitable and educationable organization to warn the People that Social Security is going to kill them, and burden their children with staggering burdens, and, well, I digress..
These two professors want us to know that the Social Security Trustees are using an outmoded procedure to forecast life expectancies a hundred years from now. Why, they say, we have a New Statistical Procedure that shows that since people are all going to live to be… ah…. older than they are now… Social Security will GO BROKE, and we need to do something about it. NOW.
Like raise the retirement age. And anyway, “new research [is] suggesting that RETIREMENT ITSELF…MAY REDUCE LIFE EXPECTANCY”!
Well, we all know Statistics never lie. And that the average reader is well equipped to evaluate claims based on statistics. And in any case if Statistics shows us SOMETHING BAD IS GOING TO HAPPEN in a hundred years unless we DO something about it RIGHT NOW, we better do it. And hurry. Especially if it’s something Peter G. Peterson has been telling us we need to do right now for the last thirty years.
Or we could just wait and see if we really are going to be living longer and staying strong and happy and loving our jobs. And make adjustments as they seem reasonable… such as raising the payroll tax one tenth of a percent at a time if people decide they’d rather pay for their own retirement so they can retire “young” enough to enjoy life without working for the boss..
Meanwhile, there is this to consider:
50 Is the New 65: Older Americans Are Getting Booted from Their Jobs — and Denied New Opportunities
The discussion about mortality is not about something that may happen in 100 years. The debate is about what might be happening in 2060, not 2114.
In 2004 SS projected that life expectancy was 79.4 years. in 2013 SS had revised up it expectations to 83.6 years. However, the CBO has taken this up to an even higher number – they are now projecting 84.9 years for 2060.
These are very significant changes. I’m not sure why Coberly is ranting about this. Is he in denial about the changing expectations?
It doesn’t matter what Coberly thinks. What’s important is what SS thinks (and does). In four months SS will produce its 2014 report to congress. That report will reflect the lower mortality rates, and as a result it will show a big deterioration in SS’s long term outlook. The NPV of the unfunded obligation is going to soar as a result.
And Coberly will be off in a corner shouting that it does not matter.
thanks bkrasting, i knew i could rely on you.
the fact is that we can pay for our own retirement even with our longer life expectancy… just the same as we can pay for the rising cost of bread.
i would hardly expect you to have any rational idea what the prediction means, much less any skepticism about the men and methods behind it.
or that, even after having been shown the arithmetic, you would understand the point that we can pay for whatever comes
without turning Social Security into a welfare scheme or never being able to retire when we get too old to work.
or maybe you were counting on the professors’ discovery that we will live longer if we never retire.
sound thinking, that.
but just to rub your nose in it a bit:
the bkrasting method:
read a report of a new guess about conditions fifty or a hundred years in the future, made by men with a history to wanting to destroy Social Security.
write breathlessly about ” a big deterioration in SS long term outlook.”
cite “the NPV” without the smallest idea what NPV means, or how it would be affected, say, by actually paying for the increased costs if and as they arise.
offer absolutely nothing as an alternative way to protect people’s savings so they can retire when they need to… or want to, having paid for it themselves.
accuse coberly of ranting and ignoring “the facts.”
not sure anyone but me finds this “argument” not incorrect but simply lacking anything that remotely looks like an attempt to engage “the facts” much less “the problem,” if there is one, other than the Peterson Lie Machine.
Cob,
I’ll trade you CoRev for bkrasting.
Our responses to both are them are almost the same anyway.
SS can’t go broke!
EMIchael
thanks. but CoRev was an SS bot before he became a Global Warming bot. Thing is, the Peterson Liars are relatives of the Koch LIars and they have found out that they don’t need to pay for expensive non partisan expert liars when they can get a CoRev or a BKrasting to do it for free.
The key for them is that it doesn’t matter whether they know anything or make sense at all. All they have to do is keep shouting Fire and blowing smoke, and the people and the press …. who think no better than they do… will keep reporting on the SS looming catastrophe or the climate change hoax as though it were an established fact
here’s a question that I’d like to see addressed. If the government were to decide to cut back in some way or another on the benefits paid to Social Security eligible retirees would that result in a loss of tax revenue, and how much so, due to the taxes currently applied to up to 85% of those benefits for those with “other” forms of income over specified amounts? The point being, if government cuts back for any reason on benefits paid it loses what ever revenue would have been collected from the income tax on a large portion of those benefits.
Also, it seems to me that that aspect of Social Security benefits, up to 85% being taxable, is a form of means testing. The test doesn’t effect the benefit level received, but it does reduce the benefit through taxation if other income is over certain thresholds.
Jerry you are right on both pointe, at least conceptually. Any amount of means testing benefits would result in offsets from reduced tax on benefits and indeed that tax on benefits is itself a form of means testing.
But even if the offset through means testing was total (and it would!’t be, they will want their pound of flesh) the result would likely be some leakage of Juice from The Third Rail as retirees who actually supplied themselves a comfortable retirement outside Social Security start feeling ripped off.
The key is that the Bad Guys don’t care about Solvency as such as much as they want to undercut support of Social Insurance in favor of Personal Accounts. So even if their schemes don’t amount to much on the former any success towards the latter serves their purpose.
A word of warning about “means testing.” Programs that are means tested are welfare. Most people think that only “rich” people would be subject to means testing if Andrew Biggs and others have their way. Uncle Sam’s definition of rich would likely include assets as well as cash earned and unearned income. I suspect that single individuals with incomes of $35K would likely be considered rich for purposes of some future means tested SS program. That’s enough to get by, surely! No need to hold your hand out–no SS for you!
And, suppose you have $5K cash in the bank, some Savings Bonds worth $5K and/or a burial life insurance policy worth $2k. Again, that is far over the resource limit for Supplemental Security Income and could be considered excess resources for some new form of SS. The whole point of means testing is to exclude as many people as possible and make benefits as low as possible. There is no pretense of some sort of return on your “FICA investment.” You may have high medical or other expenses–it doesn’t matter. The program is set up to pay the minimum possible to as few people as possible. The fact that millionaires don’t get anything is no consolation when you can’t pay your mortgage. Scrooge is alive and well in the think tanks supported by the kindly billionaires who support our elected representatives’ elections. NancyO
Jack
Bruce is right. it really isn’t “about the money.” it’s about can we fool the people to destroy SS entirely.
Dean Baker at “Beat The Press” responded similarly to this report (on the demographics of Social Security) on the same day. (See his
“Robots and the Demographic Crisis”, Dec. 31, 2013.)
I had forgot much of what I learned about Social Security in high school Social Studies class when GWB launched his “private accounts” initiative, but still something seemed wrong with the argument. SS might not be able to pay full benefits in 2037 (I think that was the year then cited), so to fix our safety net we should take away 1/3 of its funding (and divert it to private accounts) starting in 2004? Sounded like more voodoo economics to me.
READ THE 1937 SOCIAL SECURITY ACT!!!
There are NO guarantees of any benefits of any sort to anyone but those that Congress decides for whomever and whatever amount.
The ONLY guarantee is that a TAX will be paid on all transactions made involving Social Security Numbers.
ALL benefits are determined by however much POLITICAL pressure is laid on Congress for the payment period.
As long as the public lays that whip on the back of Congress then those benefits will be paid. THAT’S exactly what it takes.
Mike Meyer
Of course, no law can compel any Congress to continue any existing program. Or, for that matter, any standing army. Or the salaries of any federal employees, members of the judiciary, the Capitol police force….anything.
You are right to say that the voters keep the Congress from wrecking SS and that there is no guarantee of any particular payment or form of payment. And, so….what next? What the billionaires tell people to do or what we know we can pay for ourselves with no help from anyone but us working people?
In this year of living dangerously, what shall we do? NancyO
There is NO “guarantee is that a TAX will be paid on all transactions made involving Social Security Numbers” either. Congress can change that also.
Right you are, Jerry. NancyO
The immortality of Ike’s anti New Deal millionaires. There is plenty of money for war, not so much for those affected!
“Solvency”.
I keep track of the audit of the federal debt each year, this year it came out one month late. a fact that makes me wonder what is going on.
I have an oar in three US government “retirement” funds: military, civil service and SS- old age.
The only one which gets anyone worried about “solvency” is the one filled with payroll taxes.
The other 2 filled by “obligations” which match cash outlays and some formula are never worried about!
The “civil service retirement fund” seems to have declined by $100B in 2013 because congress decided to hide more of the debt by not doing the usual $100B obligation to make the fund appear “solvent”.
Military retirement went off the pentagon budget to a trust fund in the mid 1980’s as the increased pay for the all volunteer force pushed the actuarial exposure of the military reitrement system into the trillions.
While the DVA budget for 2014 is $153B, $86B of which is “mandatory”, the rest “discretionary”. A bit more than civil servcie and military retirement.
Nancy O frets about means testing SS. She thinks that if one had $10k of assets they would lose benefits. – Nancy has it backward.
Means testing would be for those who had high income and also collecting SS. The intent would be to insure that those who do not have income post retirement would not see any cuts (and possibly even some increases).
Set the level for means testing at incomes (earned and unearned) that exceed the tax cap (now $117k). Cut monthly benefits in half when that level is reached. If income exceeds 200% of the cap ($234k) all benefits are lost.
So Nancy, what’s your objection to that plan?
bkrasting
your “plan” wouldn’t change the outlook for SS a dime. All those “rich” people get back from Social Security exactly what they paid in, adjusted for inflation, plus a little “real” interest based on the growth in the economy. In fact their real interest is on the order of 2% or maybe a little less… based on the growth of the economy.
the average earner gets his money back, adjusted for inflation, plus about 3% real interest
and those low earners, depending on their exact earnings history and marital status get back their money adjusted for inflation plus an effective “real” interest up to 10% or more.
hard to see what you gain by “means testing” except the fun of a quarterly visit to the government proctologist who will examine your assets to determine if you are one of those who deserve SS.
so what is it that offends you about the workers paying for their own retirements, using the government to protect their savings and insuring each other against the worst kind of poverty?
based on your comments here, what seems to offend you is that you can’t do the arithmetic to see that the “we are all going to die NPV guesses about the future” add up to a possible need to raise the tax… the savings rate… about 80 cents per week in about twenty of the next seventy five years.
and of course we all know you are a fan of welfare…. lets force the people to pay a tax for a benefit they will never get because the government says they earn too much.
or is that because you expect to be able to hide your earnings overseas?
bkrasting’s idea of a plan is
“hey, what if we….” and “sounds good to me.”
no need to work out the details or consider the consequences.
but the people he gets his ideas from know full well
that the idea is not to save anyone any money
but to put SS on the road to extinction
and turning it into welfare has been their plan since at least 1940.
once people… ordinary people, average workers and the moderately “rich”, find themselves paying a tax for something they get no benefit from, it will be child’s play for the Petersons to lower the income limit from one year to the next… to “save money” of course… until the benefit is not worth the visit to the welfare office to collect it.
Coberly is afraid of a proctologist. Not to worry. In this case it is the IRS. And IRS is Treasury, and Treasury is also SS. No problem to adjust SS benefits based on reported AGI.
All financial and earned income is reported these days. There are no foreign bank havens any longer. The mechanics of implementing this are not so hard.
So you take a guy like me – your stated enemy – and I have a stellar year in stocks and blow through the 200% level (2013 was shooting ducks in a barrel). And as a result, I don’t get my $2k a month for 2014 from SS.
Again, what’s the objection here?
Bkrasting,
Let’s limit your gain to 150%. We will tax everything else at 100%. What’s the objection to that?
bkrasting
turn your hearing aid on:
the objection is that it is a ploy to ultimately destroy social security
and the fact is that it wouldn’t do a damn thing to reduce “the deficit”…. neither the “actuarial deficit” nor the budget deficit nor the “cash flow deficit.”
you propose a plan to steal from the rich because you think the left will go for it. the left is fairly stupid, but i hope not that stupid.
My previous comment was intended to bring to the discussion the fact that Social Security benefits are “means tested,” but after the fact. The benefit itself is not reduced on the basis of the amount of other income. The benefit is, however, taxed to a substantial amount if other income is above certain thresholds. 85% of the benefit is taxed if such other income is more than $34,000(filing as single) and $44,000, if married filing jointly. These are rather low thresholds. Yes, you can live on those amounts, but you can’t live in NYC on such income without feeling a significant pinch. So if your marginal tax rate is 25% on the 85% of Social Security benefits you’re giving back 21% of that benefit. Sounds like a means test to me.
And the effect is just what Dale, Bruce and others are suggesting would occur if a more direct means test were legislated and applied. Those giving back the earned benefit through a tax on the benefit or a reduction of the benefit are seeing their efforts to save and prepare for retirement becoming a two edged sword. It reduces the cost of the program by short changing some part of the participant group. And I repeat that the income levels which trigger the income tax obligation on the benefits is in no way an indication of wealth. An income of $44,000 in a metro area is barely lower middle class. Rent is $2,000-$3,000 monthly for a modest apartment. Own a home and the RE tax is possibly less, but still in the $1,000 range plus all the additional costs of home ownership.
What we are not hearing from any sector of the political establishment is increasing the income tax on the truly wealthy. Those with incomes in the $500,000 and up and yet higher reaches top out at 39% and less on the types of income that is not the result of labor. The middle class is carrying far more than its share of the weight and has steadily been losing its voice in the Congress and the White House.
I was deeply saddened to read very recently that the CEOs of Apple and Disney were expected to take significant cuts in their annual compensations. They’re down to about $35 Million each for just 2013. And they are only a high profile example. Income distribution has gone nuts in this country. As a result less lower incomes reduces the revenue from FICA. Correct that basic distortion and we would be able to table the entire discussion of arcane methods of supporting Social Security.
Y’all–Krasting thinks this stuff is easy. It is easy to understand that the object of this exercise to abolish SS and replace it with (ONE MORE TIME!) welfare. But, people have no idea how complex a process it is to do that. That’s where I come in.
I worked in Social Security for 32 years. I came in as a Claims Representative accepting and adjudicating claims for retirement, survivors, disability and SSI benefits. I worked my way up to a local office manager. Field office managers are mid-level administrative personnel with direct supervisory responsibilities in processing all claims and other actions.
I know the law relating to all SSA’s programs. This subject matter is my specialty–cold.I am especially familiar with how SSA’s means-teseted SSI program works. It’s a complicated program with little or no give when it comes to counting income. If it’s money, it counts. If it’s free rent, it counts. If you have two cars, one of them count. And so on.
As I said, you’d be surprised what “poor” means to the Congresscritters who write Title XVI and other means-tested programs’ law. In Congress’s view, the only reason to impose means testing on any program is to prevent people from receiving benefits under it. I repeat, THE GOAL IS TO PAY OUT NOTHING OR AS CLOSE TO NOTHING AS YOU CAN GET. If you do pay someone a benefit, it’s either so small he can’t live on it or it’s likely a mistake.
Going by AGI is way too generous. Heavens to Betsy! What do you think they’re doing when they cut benefits? Just a little nip here and there? Hah! What’s the point of being in Congress if you can’t abolish a program every week? People’s earned income varies greatly over a year in most cases. Maximum benefit reductions are possible only if you go by gross earned or unearned income without respect to any deductions imposed by payroll taxes or months with no income. And max cuts are the business Congress is in. Make no mistake on that account.
Pretty soon, nobody gets anything from SS and Congress’s job is done. That oughta make us all happy because only when no one gets any SS will rich people know that we’re getting the right amount. Which is a great big zip, zilch, nichts, nada, nothing, naught…zero, in short.
That’s the long and the short of it.
And that’s all you need to understand. Paying billionaires a few hundred or thousand bucks a month is peanuts. FICA revenues flowing through private investment companies are big bucks in management fees. All going right where they should have been going to begin with–into the pockets of billionaire investers and financial industry executives. And, everyone gets exactly what he deserves. Right? NancyO
Coberly tosses this out:
“the left is fairly stupid, but i hope not that stupid.”
Ah… Senator Warren has plenty of clout these days. She would back a plan like I described, provided any clawback would go to those who need it. She stupid?
Obama has pledged that for the next 3 years he is going to pound on the issue of income inequality. Means testing SS leans in that direction. The Prez is stupid?
All of the liberal Dems would jump on this. A fair number of conservatives would as well (different reasons). I guess they’re stupid too.
Means testing SS would draw support from many directions. I think you folks are surrounded on this issue. There’s not many folks left who think Roosevelt’s dream is sacrosanct.
And for Nancy who worries so much. The means testing does not have to reduce benefits, it could also be an increase in Medicare premiums. When AGI = 200% of Tax Cap, Medicare premium = 100% of monthly SS check.
After 32 years you should understand this. All it takes is big computers.
krasting
you should note i said i HOPE not that stupid.
it took FDR’s personal intervention to keep his own commission from going the welfare route.
“Look, here’s some free money!” Is the most common con in the world. Because enough people bite.
Nancy O., Coberly, et.al.: Social security IS successful because TAXPAYERS believe they will get something when their time comes to collect. Problems ONLY occur when interested parties (interested in swallowing The Trust Fund–ie. Dems&Repubs) start to destabilize the conversation with UNFOUNDED worries about some future shortfall. Congress creates the benefits, Congress can maintain the benefits. Federal Reserve Notes can be printed in ANY volume to cover the costs. T-Bills can be printed in ANY volume allowed by Congress.
Congress is the key, vested interests of BOTH political parties is the problem.
Third Party, Folks, is the answer.
Blame Obama. Obamacare is going to extend life expectancy and break social security.
eli
you weren’t reading carefully
according to the professors it is retirement that causes early death. by not letting us retire they are going to keep us alive indefinitely.
possibly as a brain in a vat doing telephone solicitation.
Krasting you are awfully definitive about the incidence of a means treating plan that does not in fact exist in scoreable legislative form near as we can see. You claim:
“Means testing would be for those who had high income and also collecting SS. The intent would be to insure that those who do not have income post retirement would not see any cuts (and possibly even some increases).”
Because absent specific language this is just aspirational claims along the lines of “if wishes were fishes we would all cast nets”. Let me throw down a gauntlet:
There is no actual plan out there that would match your claims and do anything about the actuarial gap. It is a pure fantasy. If I am wrong point me to an actual plan written on something a little more extensive than a napkin. You claim to be numerate: show us a score able plan or begone.
Bruce Webb has a good point. CBO is there exactly for the purpose of determining the solvency of SS. Krasting doesn’t have a plan so much as a desire to attack anyone who tries to explain how a welfare program differs from Social Security, a program whose benefits are derived from earned income. Even though I’m sure he finds it tedious to do so, I think Bruce Webb can deal with Mr. Krastings misunderstandings perfectly well. Or not. It may be that Mr. Krasting is beyond reasoning with. NancyO
Bkrasting,
We have seen actual numbers as to how the Northwest Plans solves Social Secutity’s financial problems. Let’s see some actual numbers, you know real math, as to how your plan solves these same problems.
No numbers? No solution, just BS!
In 2010 CBO produced a document called Social Security Policy Options that scored 30 different policy options
http://www.cbo.gov/publication/21547
The ones that can reasonably be called means testing are Options 13, 14, 18, 19. Option 19 which would reduce benefits for the 50% of beneficiaries would close about 66% of the actuarial gap. But it is hard to see that this would actually meet Krasting’s language about “high income”. And obviously restricting it to say the top 25% of earners would cut that gain in half and to the top 10% to about 12%. And still we would be talking about a population not really comparable to Bill Gates.
If people are serious about Solvency they need to advance a package that adds up to 100% of the actuarial gap by some combination of increasing revenues and/or cutting benefits and then put that forth to be compared side by side with say Northwest. Which is very close to Option 2 (which CBO scores as backfilling 100% of the gap) but in some versions would score closer to Option 2 which would backfill 5/6th of the gap.
Now of course some people might like to substitute Option 6 which would backfill 150% of the gap by a pure cap increase with no commensurate increase in benefits. Me I think this is a near horrific plan with all kinds of unintended ill consequences. But IT IS A PLAN. With SCOREABLE NUMBERS. All I am asking is that Krasting drop the stupid “Why should Bill Gates get Social Security” talking point and present either his own plan or some cafeteria plan chosen from these 30 options. Which individually or in combination pretty much cover the board for plans that don’t include private/personal accounts.
Krasting in recent days has put a lot of credit in CBO reporting, clearly preferring it to SSA stuff. Well fine, here is a perfectly serviceable link.
And of course of much interest for everyone who has an honest interest in this process.
Webb – You point to a CBO document from 2010 to make your point. I think this report is a perfect example of the points that I have been trying to make.
This was just 3 years ago – What did CBO say then and what are they saying today?
In 2010 CBO thought the end date for the TF was 2039, today they think it is 2029.
In 2010 CBO concluded that an immediate and permanent increase of 1.6% in payroll taxes was necessary to achieve long term balance. Today that has risen to 3.4%. More than double in just a few years.
You guys point to ‘solutions’ back then – I tell you they are no longer valid. Things have changed. Ignore this reality at your risk.
There never was, nor will there ever be, a single solution to fixing SS. Means testing does not fill the bucket, neither does raising the cap. A combo approach is the only viable road. So there will be tax increases, there will be changes to COLA, the cap will be increased, the benefit formula will be changed and there will be means testing of SS/Medicare.
In answer to your question, I support the combo approach. And yes, the combo approach will forever change SS, and socialize the program.
Webb – you say that this is a serviceable link. The options discussed are still on the table, but the results today are very different from what they were a few years ago. Is the report ‘serviceable’ for a discussion in 2014? I say no.
please note, anyone who cares
bkrasting said exactly nothing in his last comment.
in fact he may have lied a little, or just forgot
he knows we went through the math for the latest CBO report and showed that a
one tenth of one percent per year increase in the payroll tax still solves the problem entirely.
but he keeps asserting… no evidence, no argument, no data, no math… that because CBO changed its guess from 2010 that there is nothing that will work… except to destroy Social Security….
this is the technique of the Big Lie. just keep repeating the lie again and again. eventually enough people who aren’t paying attention will hear and believe and then “every knows that…”
a time may come when the official guess shows a need for a bigger fix than the one tenth of one percent tax increase. it is even possible that such a bigger fix would actually be needed.
the thing to keep in mind then is first… how MUCH bigger? would TWO tenths of a percent be a “staggering burden”? I don’t think so.
and second… would what you are getting for your extra tax be worth the money? i think it would… the ability to retire at a reasonable age is worth quite a bit more than a few pennies or even dollars per week.
and third… is there any OTHER way to guarantee that you will have at least “enough” to retiree when you need to? I think the answer is no. but there will be people offering “plans” like bkrasting. you need to think those through and look for the hidden traps. There is no reason you should “trust” anyone, not even me. But I think that if we look at it together we can find a way to understand the REAL costs and risks.
The problem will then be, as it is now, to find a way to stop our “representatives in congress” from doing something really stupid… so stupid and harmful as to deserve to be called evil.
note in passing that Krasting… either because he is stupid or evil… seizes on the 2010 date of the report Bruce Webb cites as a “reason” to reject Webb’s argument. No need to actually understand the argument or do the math Webb suggests. It’s just “they have a new report and it’s different from the old report so we are all going to die.” Well Webb wasn’t saying “we need to go by the old report”, he was saying look at what the old report concluded and look at the arithmetic by which they got there and apply that to ANY new report or new “plan.” The latest CBO report doesn’t give any details, and is a bit suspect in my estimation, but EVEN ASSUMING ITS NUMBERS it is easy enough to show that it still amounts to “we can fix this for one tenth of one percent per year.” bkrasting knows that because I showed him the arithmetic. he agreed with it. then turned around and claimed it was HIS arithmetic and that it didn’t matter because “the 75 year actuarial deficit is going to double next year,” which shows he doesn’t have the slightest idea what he is talking about, and doesn’t care. it’s all a matter of sowing Big Lies and hoping they grow into a Big Victory for the Big Liars.
option 3 which “backfills 5/6 of the gap” would fill the entire gap if it was allowed to run ten years longer. no idea why the CBO stopped the option short of the complete fix. maybe they didn’t want to make it so obvious that even a congressman could understand that one half one tenth of one percent increase per year for 40 years SOLVES THE SS “PROBLEM” ENTIRELY.
this is exactly the same as the “northwest plan” except that it raises the tax half as fast for twice as long. the final numbers are the same… because that is the size of the “problem”… the difference between current tax rates and the eventual costs of retirement. and ANY fix is going to have to come up with the same numbers.
the difference is that a payroll tax increase guarantees YOU get your money back when you need it. with a “welfare” fix, or a “market” fix, you will pay but may or may not get your money back when you need it. and there will be ugly side effects.
Bkrasting,
You gave us a means testing plan. You now admit that your plan will not solve SS problems. So, give us a plan that will work, or is your purpose here to just blow smoke? So far, you have given us no value, only bs.
krasting math
suppose you had a cookie jar and your goal was to keep 20 dollars in it for odd expenses that come up. you refill the jar on fridays and generally spend about one dollar a day out of it.
now, your precocious eight year old has just discovered the cookie jar and likes to count money. he counts the money on saturday and finds that it has nineteen dollars in it. he tells you it’s going to take “one dollar” to fill up the cookie jar again. you smile and pat him on the head and tell him he’s a smart boy. then on monday he counts the money again and finds “only” eighteen dollars in it. he tells you it’s going to take “two dollars” to fill the jar up again. you smile and tell him what a smart boy he is. but, but, but, he say’s,” don’t you see? it’s going to take twice as much as it did only three days ago! we’re all going to die!”
Back in 2005 a fully fledged Social Security plan was published under the rather unwieldy name: “Liebman-MacGuineas-Samwick Non-Partisan Social Security Reform Plan”. In this model Liebman a former Clinton Admin economist (a Neo-Lib) represented the Dems/Left, Samwick a Bush Admin economist the Repubs/Right and MacGuineas billing herself as a former advisor to McCain, in those days still in full Maverick/Centrist mode as the Center. These days of course MacGuineas is the head of two different PGP organizations devoted to killing Social Security in CRFB and Fix the Debt, but at the time she could at least pose as the sensible center.
I blogged a lot about the plan popularly known as LMS and you can Google that or it, but know this one fact. At the time LMS was published the 75 year actuarial gap was 1.92% of payroll. LMS proposed a ‘sensible’ package of revenue increases and benefits cuts equalling 5.2% of payroll. Yet didn’t actually deliver 100% of the scheduled benefit across the board. Some segments did better than then current Social Securityand none did worse but the arithmetic was clear as day that if the goal was solvency as defined as delivering 100% of the scheduled benefit that the vast bulk of workers would have been better off just taking the 1.92% increase in FICA than the combined 2.5% of payrol increase under LMSand guaranteed 1.7% cut in benefits (to be made up in part by the magic of the market).
In fact since LMS had an across the board 1.5% increase (the other 1% was targeted) that by itself would have accomplished all the solvency outcomes of their plan for all workers below median you might (and I did) ask what was the point? Well as it turns out LMS advanced a number of policy interests of the Center-Right and you could read it to see what they were and maybe support them.
But it had fuck all to do with delivering retirement security to the broad middle class. On balance LMS charged them much more and delivered much less than a simple payroll tax increase would have. Say the one which was developed somewhat latter under the name Northwest.
Yet the authors of LMS, like Krasting, liked to front the pending cut in benefits in the late 2020s or early 2030s for action RIGHT NOW. Even as their ‘fix’ did not well address the ‘crisis’ as defined. It still goes on: posit ‘broken’ and then propose ‘fixes’ that address entirely different policy goals.
The mistake the authors of LMS made was to be too specific. A mistake few critics of Social Security have made in the years since.
I make comments at AB knowing full well that the usual suspects will start spinning things and calling people liars. I do this because I believe that there are some serious people who tune into this stuff, just to see what is being said.
So it delights me when Coberly starts waxing about some eight year old and cookies. I’m sure some others are chuckling too…
A note on NW plan calculations. I did send Coberly spread sheets. The preliminary conclusion was that the NWP = CBO (immediate and permanent) 3.4% on an NPV basis when the NWP tax increase was 0.2% PA for 25 consecutive years. The NWP would end up at 5% higher then currently to be equal. The NWP would have payroll taxes up by 3.4% (cbo #) in 17 years. From then on, the increase would be greater than the cbo option.
In other words, for the next 16 years taxes would be lower under the NW plan, but for 59 out of the next 75 years the rate would be higher than the NW plan.
Let’s get real for just a minute – please? There is not a chance in 1,000 that congress is going to move to raise payroll taxes by 3.4%. The NW plan is just a derivative, and it also has no chance.
The next chapter in this story is the 2014 TF report. Lets see what it says.
Coberly – I don’t recall saying the unfunded portion will double ‘next year’. I think it will double by 2017 however.
bkrasting
you are looking more and more like a liar to me. not just someone with a terrible memory problem.
we showed that the NW plan raised exactly the same money as the CBO plan, with the difference being that CBO hid its tax raise in the general budget.
it did this by running up a huge Trust Fund before SS needed the money, then allowing SS to live off the interest.. paid for by general taxes… until that trust fund ran out, leaving SS with a need to raise taxes again … to the level that NW plan has been saying it would need by that time anyway.
the difference (again) being that NW gets there by having the workers gradually increase their own tax, paying for their own SS benefits, with the increased taxes coming more heavily as both the income of the workers paying the tax goes up and the life expectancy of those workers also goes up….which is why the tax increase would be necessary in the first place.
this avoids the “shock” of an “immediate and permanent” 3.4% increase called by the CBO as “necessary.”
necessary to create the political climate to cut benefits instead.
as for Krasting send ME “his” spreadsheets: after some time and effort teaching him the calculations he finally verified them with his own “spreadsheet” which he sent me with the acknowledgement that yes, indeed NW did equal CBO. Now he seems to think that overcharging people for the first 25 years is entirely outweighed by letting them see the cost of their benefits after 25 years, instead of hiding them in the general budget… which you would think, not caring for deficits or “government” welfare… he would object to…
if it wasn’t convenient for his present argument.
Bkrasting says,
“I make comments at AB knowing full well that the usual suspects will start spinning things and calling people liars. I do this because I believe that there are some serious people who tune into this stuff, just to see what is being said.”
In other words, he is not interested in solving SS problems. He simply wants to spread misinformation to “people who tune into this stuff, just to see what is being said”.
again
please note that krasting NEVER answers the important question:
how are people going to insure that they can retire when they need to, or, having paid for it themselves, want to? SS is the only way currently on the table, and the gradual increase in the payroll tax is the simplest, fairest, cheapest, most honest, and most stable way to pay for the expected increase in costs, especially in an economy with the predicted slower rate of wage growth.
and is a 4% increase in the payroll tax over 75 years a terrible burden, or a bargain, when it pays for a retirement that may last more than 20 years, and meanwhile wages will more than double (even allowing for the projected slower rate of wage growth)?
but those of you who want to watch him dance around the question with rhetoric and non material side issues… be my guest.
And note this last move of Krasting, one he has made many times before:
“Let’s get real for just a minute – please? There is not a chance in 1,000 that congress is going to move to raise payroll taxes by 3.4%. The NW plan is just a derivative, and it also has no chance.”
He concedes the numbers and then pivots to an entirely political argument. One that BTW is based on nothing. In contrast recent polling by NASI has shown that once presented with an option similar to Northwest that it gets huge majority support, rivaling that of raising the Cap and swamping any benefits cut scenario. It is just for a variety of reasons a payroll based solution was literally ruled off the table with Bush’s Guidelines for his 2001 CSSS and never was presented as a policy option.
Until Virginia Reno of NASI independently put forth a plan every similar to Northwest. You don’t have to take Dale and me seriously, but people listen to Reno. And in this case I claim a case of “Great minds think alike”. Or at lest can run the same numbers and come to the same conclusions.
Reno/Northwest work. And once presented to the majority score very very well. Making Krasting’s claim that either is just totally unrealistic a classic case of special pleading.
Sometimes it might see that Dale is shouting into the clouds, but trust me people take him seriously. Wish he was a little more patient in making his case perhaps but nobody disputes his arithmetic. His numbers work. And when similar plans are polled draw large majority support. Just say’in.
As of course do Raise the Cap plans which he rejects. And which draw the support of much of the policy elite on the defenders side. Which doesn’t take away from his arithmetic.
But what doesn’t draw big support? Plans that rely on benefit cuts. That is Krasting’s political judgement is just as flawed s his understanding of the program.
At least Coberly IS consistent. He’s been promoting the EXACT same solution since the dayz of MAXSPEAK. And I also have been saying the same “Social Security ain’t broken!” It doesn’t need to be “fixed”. Its working EXACTLY as proposed in THE SOCIAL SECURITY ACT and will continue to do so if left alone to do so.
not sure if “at least…consistent” is supposed to be a good thing.
it’s easy to be consistent, though, because i started with no political agenda at all.
i just heard a version of “we’re all going to die” that didn’t make any sense to me. so i tried to think out what “retirement” meant, and found some reasonable parameters for what it would cost. i also noticed that however you pay for it, it is always the “still working” who pay for the bread of the “no longer working.” an argument could be made that the “investment” of those who will retire some day adds to the wealth of the economy, so they “really” pay for it themselves. it turns out that this is exactly the same in the case of Social Security, or just living with your son in law when you get too old to work. you eat the bread baked in the day, and presumably your lifetime work added to the economy such that the “young” baker can bake more bread with the same effort… etc.
the difference is in how “safe” your “investment” (or “savings”) is. and as far as I know Social Security is the safest way to “save” invented so far. it IS possible to get a higher return on your savings… at the risk of getting a lower… “not enough” …. return. but the dirty little secret of the privatizers is not only the risk you take, but the fact that to the extent that you DO win big, THAT is what “robs the young” because that’s who ends up paying for your big winnings. SS provides you with groceries and a roof. not much more. but that is “enough” and that is “priceless.” Having everyone become a stock market millionaire is not going to leave the kids with much to grow on… absent huge gains in productivity… which NO ONE is predicting.
none of that changes. To provide a retirement for a certain number of people requires a certain percent of the work of those not yet retired. Those workers will one day retire and get the same deal…only better, because their work, just like the work of their parents and grandparents, will have made the country richer in the meanwhile… barring war, famine, depression… which are the risks every generation faces. in which case the people make adjustments. consume less while they are working, or consume less when they retire. but short of sending granny out into the snow…. which she will volunteer to do if times get that hard… the adjustments are small and “shared” as they have been since humans climbed down from the trees.
after that i looked….hard… at the Trustees Report and found that the big scary numbers amounted to exactly one tenth of one percent per worker per year over the forty year period of the adjustment to the new longer life expectancy (but not longer ability to work) and the expected slow down in the growth of wages. and that is not going to change by much. recent predictions of “worse” are based on a number of mathematical tricks that don’t change the reality in any measurable way.
but that reality does include that we need to recognize that we WILL have to pay for it…. and that extra we will have to pay won’t amount to much.
something that “both” sides are currently choosing to ignore because they expect to make huge political gains out of the panic generated by the Big Lie.
Coberly says:
“To provide a retirement for a certain number of people requires a certain percent of the work of those not yet retired. Those workers will one day retire and get the same deal…only better”
Coberly – it is current law that in about 15 years SS benefits get cut across the board by 25%.
This means that anyone who is 50 today is going to be disappointed. They will not get the ‘same deal’ and they certainly will not get a ‘better deal’. This is not something that is far far into the future. As far as retirement planning goes, it’s right around the corner.
Of course you know these facts. And that begs the question of how you can type this stuff, knowing it’s just not true.
krasting
what is the point of your hanging around here if you can’t read?
even if “nothing is done” those SS beneficiaries will get a better deal than today’s… the cut is from PROJECTED benefits which would be about 150% higher in real value if not cut. you do the math.
it would be far wiser for those future beneficiaries to start raising their tax by eighty cents per week per year in order to keep up with the rising standard of living… not to say their longer life expectancy.
but here i am boring you with facts.
Krasting the retiree of 2034, after a 25% cut from his 2032 benefit, would still have a benefit 15% better in real basket of goods terms than a similarly situated retiree gets today.
By almost anyone’s definition a 15% better basket of goods is a “better deal”.
Now Coberly, for very good reasons, rejects this outcome. But he understands the math involved. You clearly don’t and so your retirement planning opinions are worthless.
You may have been a very fine bond trader in your time and maybe are a fair hand at running a spreadsheet. But you are so totally blind as to the fundamental arithmetic of Social Security and the relation between scheduled and payable benefits as to draw accusations of being a liar. Because it is hard to believe that someone with your obvious knowledge of certain aspects of finance could be as ignorant as self-described “Rodeo Clown” Glenn Beck.
Because in an odd way us callng you a “Liar” is a compliment. Because it implies at least a minimal command of the material. Enough that you should recognize correction.
A certain wise-ass guy named Bruce Webb named the relation between the Real Basket of Goods post Benefit Cut at Trust Fund Depletion as “Rossers Equation” after Professor Barkley Rosser Jr, a friend and Economics Professor at JMU (and unbeknownst to me at the time the son of important Mathematician Barkley Rosser Sr.)
The numbers vary a little year over year s projections change but the fundamental equation relies on the fact that Social Security Scheduled Benefits are set to grow to around 180% of current benefits in Real Basket of Goods terms by the end of the 75 year projection. Hence any reset in benefits come 2029 or 2033 or whenever of 22% or 25% or whatever can be plugged into whatever the Real Basket of Goods percentage the Scheduled Benefit would deliver in that year at that rate.
The original version of Rosser’s Equation was 75% of 160% = 120%. In recent years the date of Trust Fund Depletion has been pulled back some and so to the percentage from which the cut would be taken. So today it is more like 75% of 150% = 112%. But absent worldwide perma-recession the cut will never come early enough at a high enough percentage of cut at so small an advance over current benefits that the result turns negative compared to today. It will never be objectively a “worse deal”. Not when measured in literal ‘Bring Home the Bacon’ terms.
There are good reasons to not just accept the equation, ones which both Professor Barkley Jr and I share whole-heartedly. But the fact is that the rhetoric of “Intergenerational Theft” is bogus. The math doesn’t support it, no matter how often folks ring in “ROI” and “Backwards Transfer”. That just doesn’t capture the Basket.
the answer i gave krasting above was not the best answer.
by “the same good deal” i meant that each generation gets his retirement paid for by the generation that comes after (this is true even if “we paid for it ourselves”… in fact we paid for it by paying for the retirement of the generation that went before us. i am very sorry there are people who cannot understand this.)
it does not matter that “we” may get a few percent more or less “return on investment” than someone in some other generation. in fact, within each generation people get different returns on their investment. this is not “unfair”… in fact it is very much “more fair” than some perverse “equality.” i am very sorry there are people who cannot understand this.
as it happens, according to current projections, the next generation will … if nothing is done… get a “better deal” than the last. they will live longer and they will get more in “real” benefits. the projected “cut” in benefits is a cut from what they would have gotten if either the tax rate was raised (which should be done) or if their life expectancy was shorter or if the rate of increases in wages was as good as it should be or… actually the opposite… if there was no change in living standards that requires a higher benefit to keep up with. i am very sorry there are people who won’t understand this.
krasting has been hanging around here for years and years. and we have talked about all of this. but he hasn’t learned a thing.
krasting missed the point that
“the same good deal… only better” was not about Social Security per se, but about the human tradition of caring for our elders.
SS does what our families did before modern life made it impossible for families to provide real security against the forces of “the market.”
we cannot all be “family,” perhaps, but we can learn from the experience of families and arrange to take care of our elders by a similar “plan,” reserving “the market” for those who can afford the risks, and “welfare” for those for whom even Social security i not enough.
eem the key i not working.