The Congressional Budget Office came out with its annual review of Social Security this week. Nothing really new. The CBO found that fundamentals at SS deteriorated again in 2013. I thought this quote from the report was interesting:
“In CBO’s simulations, in which most of the key demographic and economic factors in the analysis were varied on the basis of historical patterns, the trust fund ratio falls to zero in 2029.”
2029?? What happened to 2033??
Shortening the time span that SS has left before the TF is depleted is something I have been banging the table on for years. Yes, 15 years is still a long away from today – but the number of years left to fix things before it becomes impossible to avoid a blowup is much less than 15 years.
I recon that we have until 2017. After that the cost of the ‘fix’ will be so high that there will be few viable options.
CBO re-confirmed that by their calculation an immediate and permanent payroll tax hike of 3.4% is required. That would come to a tax increase for workers/employers of $200B a year starting in a few weeks and lasting – forever.
That’s not going to happen (nor is any other plan that raises taxes by an equivalent amount). So what to do?
I think there is no political will to take on SS until at least 2017, and as I say, by then it will be impossible to fix.
Bkrasting,
Put two things together and the “big crisis” evaporates:
per capita economic growth — 1-1 1/2% a year COMPOUNDED, forever;
re-unionization (via legally mandated, centralized bargaining — the only setup proven around the world, for over half a century, to end the race-to-the-bottom) to make sure SS payees get much more increase in income than they will ever have to pay out in FICA: 3-4% ONCE.
As usual: “It’s the labor market … ”
Even without growth, just resetting the overall income share (to 1973 levels) would flood SS.
Without resetting the income share, even economic growth would NOT be enough — all the growth of late goes to the tippy-tippy top (growth distribution wasn’t that stark in the immediate decades post 1973).
“It’s the labor market … ”
I always reassure young people who don’t believe SS will be there for them that “per capita income doubles twice as fast as population — so there’s nothing to worry about.”
Unspoken condition: if and only if we get American labor’s bargaining leverage (and concomitantly political say-so) reset.
I just saw on CNN that insurance companies are dumping multitudes of doctors who have the most expensive patients. As a New York City cop once told me: “There’s all ways to do it.”
***********
If Obamacare does not work that will only set up a broad cry for single payer — which is why the insurance companies are frantically preparing to spend hundreds of millions on advertising supporting Obamacare
Holocene temp trends: http://jonova.s3.amazonaws.com/graphs/lappi/gisp-last-10000-new.png
Note: this data is from RB Alley’s (a vocal alarmist) Greenland ice cores. The most common counter argument from novices is that only one location on the planet. Well, so is every other proxy in the multiple studies presenting Long Term (TM) conclusions. (see the HS discussion below.)
The hockey stick is created by appending high frequency and temporally short temperature records with highly smoothed (low frequency) Long Term (TM) proxy data.
The rest of your article is either strawmen or is in laughable denial of the actual data. (Refer to the WFT and Holocene temp graphs above.)
I tried to reply to you on Zero Hedge. couldn’t navigate the sign up. Nice of you to come here.
You still don’t know the first thing about Social Security. So for fifteen years you have been talking nonsense. When you come here we try to educate you a little and you show no sign of even having heard a thing we say.
So what’s the point?
It does not matter when the Trust Fund runs to zero (or one year’s reserve). At some point it is very likely the payroll tax needs to be raised. A tenth of a percent per year… eighty cents per week per year… will do the job.
I think that on Zero Hedge you were also worried about the fact, the time, that Social Security will stop lending money to the government. Well, that is not really Social Security’s job.
Try to think of SS as you paying for your groceries ahead of time. That’s what it really is. If the price of groceries goes up, or your income goes down, the percent of your income that you have to pay for groceries will go up. That is NOT the end of the world… not when you are talking about a tenth of a percent per year… limited to about 4 percent over the next seventy or more years… many more years.
Unless of course you just have your heart set on making another million dollars in the bond market with all the money you save from Social Security.
Never mind the bodies in the street. They’re just losers.
The fundamentals of SS have not changed. What has changed is that CBO and SS Trustees are reporting… lower interest rates than expected “for the short term” and higher unemployment rates.
Well that is what SS was designed to help people get through. It’s pretty damn dumb to call for cutting benefits just when you are going to need them most. I have recalculated the needed tax increase to get through the hard times: it’s still one tenth of one percent per year. more front loaded now than before, but still hardly a crushing burden. it’s still eighty cents per week. (that’s a “present value” by the way, but i wouldn’t expect you to understand that.)
Falling to zero in 2029 instead of 2033 doesn’t change a damn thing. it should not fall to zero, of course. the tax raise should begin.. one tenth of one percent… by 2018 to avoid having to raise it all at once by about 2% (4% for the self employed) in 2029 or 2033 or whenever, if we are stupid enough to let it go that far. which we might be because there are evil people who want to see SS completely wrecked and they would have more political leverage if there were a sudden need to raise the tax.
but even a 2% tax will not be felt, any more than it was when they ended the damned payroll tax holiday. it’s hardly a blowup except in the mind of the hysterians who are running around yelling the sky is falling the sky is falling we have to cut off our heads right now to save the cost of tomorrows dinner.
We showed you that the one tenth of one percent increase will pay the CBO’s 3.4% “immediate and permanent” . but you can’t seem to remember that.
As far as I know no one is going to have to pay 200 billion dollars per year. So why don’t you use numbers that means something. 200 Billion per year paid by 200 million taxpayers is a thousand dollars per year…. seem like a lot… multiply it by 40 years… you get 40000 dollars, now divide that by your life expectancy when you retire, twenty years. So it’s an extra 2 thousand dollars per year on your retirement. or you could look at it as an extra two years of retirement. You are going to have to pay it anyway. SS gives you a way to pay for it with complete protection from inflation without exposing you to market loss, plus insuring you against death, disability, and even against failing to make enough to save enough for retirement. you can’t match that deal in any other program you can honestly describe. So what the hell are you shouting about? We should refuse to pay the cost of our own retirement? Because who is going to pay it for us?
When you say “forever” you are making an ass of yourself. We don’t live forever. Can you get it through your thick skull that we are talking about paying for our own groceries when we are too old to work? Do you think we are just pissing this money away in some “government program” and if we only cut the program we could magically save the money for … for what… a really bitching new car?
Krasting. you don’t know what the hell you are talking about. A bad dream that makes no sense. But you keep waking up in a sweat and demanding that we kill ourselves because you are too damn stupid to understand what SS is.
It will ALWAYS BE POSSIBLE TO FIX SS. it’s another question whether the politicians and liars and fools will let us fix it.
Coberly,
You obviously haven’t learned a thing here. There will never be a need for our scared politicians to raise the FICA tax rate; not if they make some rudimentary fiscal changes. When the lasts of today’s TF bonds run out, simply print more — never was any need to actually pay for bonds with FICA tax-surplus (not if we understand the primary purpose of the TF*).
Then — having created (perpetuated) an artificial mechanism with which to cover SS retiree payout via income tax (not FICA) — print the money to cash the bonds, which is probably how today’s bonds will be cashed anyway.
Let’s go over that again: print the bonds to cover the SS; then, print the money to cover the bonds. 🙂
* To protect our political leaders for 50+ years from ever having to face up to raising the FICA tax: 30+ years growing the TF; 20+ years drawing the TF down (renewable forever — see above).
in the fairy tale world our politicians and citizens are living in, your scheme might just work.
but i think of money, and bonds, as a record of value received. if we lose track of the value, the money doesn’t mean anything. and if history is any guide at that point anything goes.
Joel, I did read the article, and have seen junk like it nearly daily. I see you can’t discuss the data? OK, but the article was in the same vein as the video. Which, BTW, represents the core of the views between the alarmist and skeptical views. Long Term (TM) data, which is readily available, but is seldom discussed. When it is presented we typically see a deflection: “Just a reminder: here’s what your second link says about itself:
“This entry was posted in Humor, Satire”
The fact that you consider humor/satire to be a rebuttal to science tells me all I need to know about your intellect.” So in your referenced article where was the science? Also, your source article is from 2009, IIRC was when the game changing Climategate emails were first released. a lot of science, including the WFT site, has been created. Much of it contradicts the 2009 SciAm interpretations. Worse, much of the recent alarmist science is done to explain the hiatus.
Krasting that CBO Report wasn’t new, it was an update of numbers that came out in September. Plus you misstated the general conclusion. It was really not the case that the change CBO reported was due to a “general deterioration” in outlook. Instead a full half of the change was due to CBO abandoning years of practice in simply accepting OACT demographic projections and inserting their own. Which merits of their decision aside makes the 2012 to 2013 comparison basically meaningless for policy discusson nearterm. Moreover just about a third of the “deterioration” was an indirect effect of Obama extending the Bush tax cuts to the middle class, which has the effect of lowering the tax on benefits for that proportion of retirees receiving it. Which means that cohort benefited immediately.
And since when have either you or the readership of Zero Hedge worried about the ill effects on Social Security of tax cuts for the upper half of the middle class. Crocodile tears here?
Plus your GDP shock argument was ridiculous, for reasons I explained to Dale in e-mail but are just not worth my time repeating at length here.
Short version. In the year before TF Depletion the General Fund has to come up with hundreds of billions of dollars to redeem remaining Special Issues. In the year after TF Depletion and assuming (as your argument does) that nothing is done on the benefit side the result is that a huge amount of current year budget and spending authority opens up. And since it is impossible to imagine that Congress wouldn’t spend much or all that new ‘free’ money there would be some resulting offset to the 2% of GDP drop in spending on the elderly. Which would be pretty shitty for the elderly but would NOT translate to a total 2% of GDP drop to the economy at large. Because the money that had been collected in Year -1 HAS to go somewhere in Year +1 if only in massive tax cuts. Which according to most people on your side of the economic argument would end up having huge MULTIPLIERS.
Not that I agree, but really you need to think these things true first. My only consolation is that the commenters at ZH were even less informed than you and more rude and dismissive than me.
The Congressional Budget Office came out with its annual review of Social Security this week. Nothing really new. The CBO found that fundamentals at SS deteriorated again in 2013. I thought this quote from the report was interesting:
“In CBO’s simulations, in which most of the key demographic and economic factors in the analysis were varied on the basis of historical patterns, the trust fund ratio falls to zero in 2029.”
2029?? What happened to 2033??
Shortening the time span that SS has left before the TF is depleted is something I have been banging the table on for years. Yes, 15 years is still a long away from today – but the number of years left to fix things before it becomes impossible to avoid a blowup is much less than 15 years.
I recon that we have until 2017. After that the cost of the ‘fix’ will be so high that there will be few viable options.
CBO re-confirmed that by their calculation an immediate and permanent payroll tax hike of 3.4% is required. That would come to a tax increase for workers/employers of $200B a year starting in a few weeks and lasting – forever.
That’s not going to happen (nor is any other plan that raises taxes by an equivalent amount). So what to do?
I think there is no political will to take on SS until at least 2017, and as I say, by then it will be impossible to fix.
The CBO report:
http://www.cbo.gov/sites/default/files/cbofiles/attachments/44972-SocialSecurity.pdf
Bkrasting,
Put two things together and the “big crisis” evaporates:
per capita economic growth — 1-1 1/2% a year COMPOUNDED, forever;
re-unionization (via legally mandated, centralized bargaining — the only setup proven around the world, for over half a century, to end the race-to-the-bottom) to make sure SS payees get much more increase in income than they will ever have to pay out in FICA: 3-4% ONCE.
As usual: “It’s the labor market … ”
Even without growth, just resetting the overall income share (to 1973 levels) would flood SS.
Without resetting the income share, even economic growth would NOT be enough — all the growth of late goes to the tippy-tippy top (growth distribution wasn’t that stark in the immediate decades post 1973).
“It’s the labor market … ”
I always reassure young people who don’t believe SS will be there for them that “per capita income doubles twice as fast as population — so there’s nothing to worry about.”
Unspoken condition: if and only if we get American labor’s bargaining leverage (and concomitantly political say-so) reset.
I just saw on CNN that insurance companies are dumping multitudes of doctors who have the most expensive patients. As a New York City cop once told me: “There’s all ways to do it.”
***********
If Obamacare does not work that will only set up a broad cry for single payer — which is why the insurance companies are frantically preparing to spend hundreds of millions on advertising supporting Obamacare
Seven Answers to Climate Contrarian Nonsense
http://www.scientificamerican.com/article.cfm?id=seven-answers-to-climate-contrarian-nonsense
Joel, that was funny. Here’s what the data shows:
Hiatus: http://woodfortrees.org/plot/rss/from:1996.8/plot/rss/from:1996.8/trend Total years 17.1
Holocene temp trends: http://jonova.s3.amazonaws.com/graphs/lappi/gisp-last-10000-new.png
Note: this data is from RB Alley’s (a vocal alarmist) Greenland ice cores. The most common counter argument from novices is that only one location on the planet. Well, so is every other proxy in the multiple studies presenting Long Term (TM) conclusions. (see the HS discussion below.)
The hockey stick is created by appending high frequency and temporally short temperature records with highly smoothed (low frequency) Long Term (TM) proxy data.
The rest of your article is either strawmen or is in laughable denial of the actual data. (Refer to the WFT and Holocene temp graphs above.)
Keep believing!
Krasting
I tried to reply to you on Zero Hedge. couldn’t navigate the sign up. Nice of you to come here.
You still don’t know the first thing about Social Security. So for fifteen years you have been talking nonsense. When you come here we try to educate you a little and you show no sign of even having heard a thing we say.
So what’s the point?
It does not matter when the Trust Fund runs to zero (or one year’s reserve). At some point it is very likely the payroll tax needs to be raised. A tenth of a percent per year… eighty cents per week per year… will do the job.
I think that on Zero Hedge you were also worried about the fact, the time, that Social Security will stop lending money to the government. Well, that is not really Social Security’s job.
Try to think of SS as you paying for your groceries ahead of time. That’s what it really is. If the price of groceries goes up, or your income goes down, the percent of your income that you have to pay for groceries will go up. That is NOT the end of the world… not when you are talking about a tenth of a percent per year… limited to about 4 percent over the next seventy or more years… many more years.
Unless of course you just have your heart set on making another million dollars in the bond market with all the money you save from Social Security.
Never mind the bodies in the street. They’re just losers.
Joel, just a reminder: http://wattsupwiththat.com/2013/12/06/denier-land-how-deniers-view-global-warming/
Krasting
other points:
The fundamentals of SS have not changed. What has changed is that CBO and SS Trustees are reporting… lower interest rates than expected “for the short term” and higher unemployment rates.
Well that is what SS was designed to help people get through. It’s pretty damn dumb to call for cutting benefits just when you are going to need them most. I have recalculated the needed tax increase to get through the hard times: it’s still one tenth of one percent per year. more front loaded now than before, but still hardly a crushing burden. it’s still eighty cents per week. (that’s a “present value” by the way, but i wouldn’t expect you to understand that.)
Falling to zero in 2029 instead of 2033 doesn’t change a damn thing. it should not fall to zero, of course. the tax raise should begin.. one tenth of one percent… by 2018 to avoid having to raise it all at once by about 2% (4% for the self employed) in 2029 or 2033 or whenever, if we are stupid enough to let it go that far. which we might be because there are evil people who want to see SS completely wrecked and they would have more political leverage if there were a sudden need to raise the tax.
but even a 2% tax will not be felt, any more than it was when they ended the damned payroll tax holiday. it’s hardly a blowup except in the mind of the hysterians who are running around yelling the sky is falling the sky is falling we have to cut off our heads right now to save the cost of tomorrows dinner.
We showed you that the one tenth of one percent increase will pay the CBO’s 3.4% “immediate and permanent” . but you can’t seem to remember that.
As far as I know no one is going to have to pay 200 billion dollars per year. So why don’t you use numbers that means something. 200 Billion per year paid by 200 million taxpayers is a thousand dollars per year…. seem like a lot… multiply it by 40 years… you get 40000 dollars, now divide that by your life expectancy when you retire, twenty years. So it’s an extra 2 thousand dollars per year on your retirement. or you could look at it as an extra two years of retirement. You are going to have to pay it anyway. SS gives you a way to pay for it with complete protection from inflation without exposing you to market loss, plus insuring you against death, disability, and even against failing to make enough to save enough for retirement. you can’t match that deal in any other program you can honestly describe. So what the hell are you shouting about? We should refuse to pay the cost of our own retirement? Because who is going to pay it for us?
When you say “forever” you are making an ass of yourself. We don’t live forever. Can you get it through your thick skull that we are talking about paying for our own groceries when we are too old to work? Do you think we are just pissing this money away in some “government program” and if we only cut the program we could magically save the money for … for what… a really bitching new car?
Krasting. you don’t know what the hell you are talking about. A bad dream that makes no sense. But you keep waking up in a sweat and demanding that we kill ourselves because you are too damn stupid to understand what SS is.
It will ALWAYS BE POSSIBLE TO FIX SS. it’s another question whether the politicians and liars and fools will let us fix it.
Coberly,
You obviously haven’t learned a thing here. There will never be a need for our scared politicians to raise the FICA tax rate; not if they make some rudimentary fiscal changes. When the lasts of today’s TF bonds run out, simply print more — never was any need to actually pay for bonds with FICA tax-surplus (not if we understand the primary purpose of the TF*).
Then — having created (perpetuated) an artificial mechanism with which to cover SS retiree payout via income tax (not FICA) — print the money to cash the bonds, which is probably how today’s bonds will be cashed anyway.
Let’s go over that again: print the bonds to cover the SS; then, print the money to cover the bonds. 🙂
* To protect our political leaders for 50+ years from ever having to face up to raising the FICA tax: 30+ years growing the TF; 20+ years drawing the TF down (renewable forever — see above).
Denis
in the fairy tale world our politicians and citizens are living in, your scheme might just work.
but i think of money, and bonds, as a record of value received. if we lose track of the value, the money doesn’t mean anything. and if history is any guide at that point anything goes.
Ah, CoRev:
Your first post on this thread shows me that you either never read, or else failed to comprehend, the Scientific American post.
Just a reminder: here’s what your second link says about itself:
“This entry was posted in Humor, Satire”
The fact that you consider humor/satire to be a rebuttal to science tells me all I need to know about your intellect..
Joel, I did read the article, and have seen junk like it nearly daily. I see you can’t discuss the data? OK, but the article was in the same vein as the video. Which, BTW, represents the core of the views between the alarmist and skeptical views. Long Term (TM) data, which is readily available, but is seldom discussed. When it is presented we typically see a deflection: “Just a reminder: here’s what your second link says about itself:
“This entry was posted in Humor, Satire”
The fact that you consider humor/satire to be a rebuttal to science tells me all I need to know about your intellect.” So in your referenced article where was the science? Also, your source article is from 2009, IIRC was when the game changing Climategate emails were first released. a lot of science, including the WFT site, has been created. Much of it contradicts the 2009 SciAm interpretations. Worse, much of the recent alarmist science is done to explain the hiatus.
Krasting that CBO Report wasn’t new, it was an update of numbers that came out in September. Plus you misstated the general conclusion. It was really not the case that the change CBO reported was due to a “general deterioration” in outlook. Instead a full half of the change was due to CBO abandoning years of practice in simply accepting OACT demographic projections and inserting their own. Which merits of their decision aside makes the 2012 to 2013 comparison basically meaningless for policy discusson nearterm. Moreover just about a third of the “deterioration” was an indirect effect of Obama extending the Bush tax cuts to the middle class, which has the effect of lowering the tax on benefits for that proportion of retirees receiving it. Which means that cohort benefited immediately.
And since when have either you or the readership of Zero Hedge worried about the ill effects on Social Security of tax cuts for the upper half of the middle class. Crocodile tears here?
Plus your GDP shock argument was ridiculous, for reasons I explained to Dale in e-mail but are just not worth my time repeating at length here.
Short version. In the year before TF Depletion the General Fund has to come up with hundreds of billions of dollars to redeem remaining Special Issues. In the year after TF Depletion and assuming (as your argument does) that nothing is done on the benefit side the result is that a huge amount of current year budget and spending authority opens up. And since it is impossible to imagine that Congress wouldn’t spend much or all that new ‘free’ money there would be some resulting offset to the 2% of GDP drop in spending on the elderly. Which would be pretty shitty for the elderly but would NOT translate to a total 2% of GDP drop to the economy at large. Because the money that had been collected in Year -1 HAS to go somewhere in Year +1 if only in massive tax cuts. Which according to most people on your side of the economic argument would end up having huge MULTIPLIERS.
Not that I agree, but really you need to think these things true first. My only consolation is that the commenters at ZH were even less informed than you and more rude and dismissive than me.
MERRY CHRISTMAS ANGRY BEARERS!
AND
A HAPPY NEW YEAR!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Anna Lee:
And a return Merry Christmas and Happy New Year to you.
thanks anna
and also to you
On the “waste of time scale”, talking with Krasting on SS ranks right up there with talking with CoRev on climate change.
Links that show nothing are pasted as “proof”.
EMichael
too true