Why No Social Security Posts on Angry Bear?
Because we won. Or more precisely I won. Because we are not that much closer to the adoption of the Coberly inspired Northwest Plan than before, despite the fact that similar plans poll spectacularly positive. But mostly all the ‘Reform’ plans for an ‘unsustainable’ Social Security system are running scared from the Senator Warren and Sanders ‘enhance’ approach. Lots of things contributed to this, including the demise of R-R. But in today’s climate the Plutocrats are deploying their billions on defense against the dreaded words ‘income inequality’. And the prospect of a $10.10 minimum wage frightens them much more than having to pony up some bucks to ‘bail out’ Social Security in the 2030s.
I have been relentlessly promoting a Social Security reform plan of ‘Nothing’ since 2005 and since 2010 here at Angry Bear. Now it was never the perfect plan and in collaboration with Dale and Arne I was willing to push another more pro-active plan. On the other hand ‘Nothing’ is a far better, more proven plan than 99% of the ‘Other’ plans out there. And since the only hopes of GOP/Conservative survival going forward depend on not pissing off their base of older white folk I am thinking the target has been taken off the back of Social Security. For now. So ‘Nothing’ is looking pretty good right now.
So you can redub me ‘Social Security Lurker’ from ‘Social Security Defender’. Because the Bad Guys are in retreat. For now.
On the other hand the salvation of Social Security still rests in a policy that would advance the entirety of the progressive agenda overall:
‘More Jobs. At Better Wages.’ And I will be happy to join you all at that set of barricades. But this particular run at SS has seemingly run out of steam. TTFN.
I think you are right Bruce, but I can not help feeling a bit the way I did when Nixon died–I would not really believe he was gone until somebody drove a stake through his heart. The efforts of the 1% to turn the 99% against themselves are relentless and we will see the attacks on social security gather steam again right after a Democratic woman–probably Hillary–wins the presidency in 2016.
The people who want to abolish SS will never give up. They’ll be back. Right now, the progressives are beating the drum for increased and enhanced SS benefits. Right! Dream on, y’all. But, I’m not holding my breath. Meantime, thanks for teaching me what the Social Security Administration never could about benefit computations and social insurance theory. KisseekisseeTTFN, NancyO
as far as i was concerned “we won” when CRFB admitted that a one tenth of one percent each raise in the payroll tax whenever the Trustees report “short term actuarial insolvency would keep Social Security solvent forever at a cost of 80 cents per week per year in present terms.
further conversations clouded the picture somewhat. CRFB’s representative to me did not seem to be lying, but he did seem to be misinformed, or, which is the same thing, to believe the “lies” he has been taught by the friends of Peter Peterson. And while I haven’t really been paying attention it seems to me that CRFB has backed off the Social Security is “the” problem with the budget meme. And apparently “the can kicks back” a Peter Peterson production has run out of credibility. so maybe we can take a breather. But they will be back. And meanwhile “we won” is another way we have of fooling ourselves.
Kind of like the Trojans, lets all get drunk and celebrate our victory. And the only Trojan Horse on the horizon is the new meme… lets “strengthen” Social Security…. by taxing the rich.
[for those who don’t already know, my belief is that the Peterson faction has always understood that turning Social Security into welfare was their best hope for eventually destroying it entirely. The people will no longer be able to say “we paid for it ourselves.” It seems to me a foolish risk to take when we can continue to pay for it ourselves for eighty cents per week. And if there is a need for better benefits for the poor elderly, it would be better to create a separate program (or perhaps SSI… which I hate to say because nine out of ten people can’t tell the difference between SSI and Social Security).
And, of course, meanwhile work on raising wages.
Coberly, et. al. : Social Security is NOT broken and doesn’t need fixin’. In fact, NOTHING is wrong with it except the “big-pile-o-money” which is The Trust Fund which attracts The Greediest Bastards in the world, en mass. It seemingly just sits there waiting to be robbed.
INCREASING THE SS TAX simply TAXES THE WORKING CLASS MORE, poor or otherwise, who are TAXED into near poverty as it is.
IT TIME FOR THE RICH TO PAY! Should SS see a short fall or a benefits increase is needed then REACH INTO THE RICHMAN’S WALLET &TAKE IT.
HELL FIRE, this country was stolen from The Red Man in the first place. Why in the name of continuity and common sense suddenly feel sorry for THE RICH?
I have to agree with Coberly in regards to the tax the rich meme, but only as it relates to the FICA deductions. If the cap is to be increased then so too must be the pay out to those who have the higher incomes. Otherwise it, the Social Security benefits, begins to look too much like welfare.
On the other hand it is high time to require that the income tax rates on extraordinary income needs to be in the same extraordinary range. Multi- millionaires and billionaires paying 15% to 20% on such wealth and income is absurd. It’s too much income going untaxed causing endless arguments over government budgeting. Cut corporate welfare and raise the marginal rates on income. Leave the Social Security program out of the wrangling about the budget.
‘More Jobs. At Better Wages.’
Pay me now, or pay me later, but pay me you will!
I imagine that this may be the time to “sell” the NW Plan, when the Right is not finding a receptive audience for its pitch designed to scare people and politicians into gutting the program. They might be more receptive to a rational, analytic (even technocratic?) solution to the long-term challenge of maintaining scheduled benefits and program integrity.
That said, politically, the NW Plan might have to be linked to the Right’s proclaimed desire not to support tax increases and the Left’s proclaimed desire not to further reduce the take-home pay of low-income wage earners. One thought to toss out: how about phased-in income tax credits for a percentage of FICA contributions, to make the overall legislation roughly “revenue neutral” over the decades for the unified budget? The Right can claim they’ve cut income taxes, the Left can claim they saved Social Security at no additional cost to workers. (I wouldn’t bet that the tax credits survive forever, but that’s okay–the ideological battle would have shifted to the income tax code where it belongs.)
see Jack’s answer
thank you also. i think your plan is too complex, but i would talk about it, if anyone would listen.
the 80 cents per week will not reduce anyone’s take home, as the wages are projected to increase eight dollars per week over the same time.
the politics of this are truly frustrating. too many people believe like Mike above that the answer is “tax the rich.” which the rich won’t like. and they would find a way to make it ugly. meanwhile the rich believe the lies of the Petersons… and all the little politicians… and think SS must be cut or we’re all gonna die.
PJR the structural problem with the tax credit plan is unless it is directly refundable it has no impact on the targetted population. Now it is surely true that low income people pay all kinds of taxes directly (sales taxes) or indirectly (the property tax component of rent) but there is twisted truth to the Romney 47% argument, if you define taxes narrowly as ‘federal income tax’ then the poor by and large don’t pay it. And so non-refundable tax credits don’t do anything at all. This by the way is the fatal flaw of Republican attempts to turn everything from education to health care into tax sheltered personal accounts, the working poor don’t have the particular tax exposure needed to give them any incentive. And transforming that into refundable tax credits (like EITC as a replacement for minimum wage increases) just transforms that into welfare under a different name.
So I still maintain as opposed to the Yglesias’ and Klein’s of this world that the answer is not tinkering at the back end with tax code based incentives but instead with a simple five word platform:
“More jobs. At better wages.”
And if it comes to that take an extra 80 cents a week off the top to fund Social Security. It doesn’t have to be something that would make Rube Goldberg smile.
Webb is claiming victory with the “do nothing” plan? That seems odd to me.
Webb/Coberly have been pushing the NW plan for years, but they should acknowledge that that plan is no longer viable because too much time was wasted before implementing it. The NW plan (80 cent variety) does not fill the SS bucket any longer.
The next step for SS will be the 2014 report to congress. Based on the work of the CBO on life expectancy and on the changes to work force participation, I anticipate that SSA will report a significant YoY deterioration in SS’s long-term outlook.
The unfunded portion could rise by 30% this year. The 2013 cash deficit was $71B. The TF grew by only $32b (the smallest increase in 20 years). The TF will ‘top out’ in 2017 and the end date will be moved up to 2030.
Oh, did I mention that DI is going bust in less than 24 months??
The ‘do nothing’ plan will backfire – the delay just eliminates viable options.
Bruce, it would be easy to compute and apply the credit on each paycheck. FICA withholding would increase a little bit, and income tax withholding would decrease a little bit, roughly offsetting. Unlike other tax credits, it wouldn’t be tied to annual income, so it can be calculated in real-time.
As Coberly said, it’s political. In a sane world, the NW Plan should stand on its own. And it might. However, politicians sometimes need to see a sane option that would address their insane political positions.
It is an election year pause.
Emichael….yes, sad to say. The chained cpi is still an issue. It is amazing what we do not talk about in public.
I don’t know Mr. Krasting but I have to agree that the slow deterioration of IC assumptions will significantly change the game. Last year the CBO disavowed the IC demographic and employment assumptions. What’s next?
The easiest thing for the powers that be is to means test this thing and turn it into a soft form of welfare. Although Bruce has won the battle I am feeling more and more depressed about the outcome of the war.
I can ask Nancy Ortiz to write on the means testing issue…
BKrasting is a reliable source of misinformation about Social Security. In the 2013 “update” of the “northwest plan” it was shown that beginning the one tenth of one percent (eighty cent) plan as late as 2018 would fund Social Security forever.
Now, if circumstances had changed, it might be that instead of eighty cents per week, we might have to come up with, say, a dollar and a half a week. This hardly changes anything substantive about the “one tenth percent” solution. But people like Krasting would cry bloody murder if instead of eighty cents, it was eighty one cents.
Because they want to turn SS into welfare as we knew it, so they can destroy it utterly at their leisure.
And “circumstances” have NOT changed. What has changed is that CBO has changed its assumptions about the FUTURE. You see, “there aren’t going to be enough workers for all those retirees, so the unemployment rate is going to go UP.”
And interest rates are going to go down therefore the “3.6% immediate and permanent” plan of CBO, which relies on interest from a larger Trust Fund, will be cheaper than a one tenth percent “at need” solution that relies on the people paying for the benefits they will get.
I would hate to have to explain the irony in the last two paragraphs, but I know Krasting won’t understand them, and I despair of most everyone else.
Dale-The math, after you and Bruce have dumbed it down for people like me, is really pretty intuitive. The problem is politics. Given our current leadership I am not optimistic.
Congratulations, Bruce! Well done, and I think you are right.
Nevertheless, all of us who have been in on this need to keep our eyes peeled. These people will be back.
BTW, I just gave an interview on this to some local folks here in Harrisonburg, VA, and I argued that part of the pressure is off because of the apparent bending of the healthccare cost curve. The game that has been played for so long has been “Entitlements Crisis, Must Do Something!” which would be followed by all these attempts at some neo-Greenspan Commission deal with tax hikes and benefit cuts. But the crisis story depended on ridiculously rising health care costs. With those now more under control, it is harder to pull that number now.
just an inside joke between you and me:
i had a fellow tell me today the easiest way to get ahold of someone i needed to get ahold of “right away” was to “text” them.
i said “hunh?”
you see, even though i am retired, and even though “texting” is a standard of living increase and not a cost of living increase, i may not be able to live without it.
not dumbed down. the math is really not hard. it’s just a question of actually looking at it and working out the implications.
the same could be said for looking at the words.
i should have said above that even if the 2018 date is not met, all it would mean would be a slightly higher per-week cost of maintaining solvency “as needed” over the hard period running up to 2033, or 2030 if that doesn’t give Krasting a heart attack.
“The NW plan (80 cent variety) does not fill the SS bucket any longer.”
This comment indicates a failure to understand the key to the NW plan is to make adjustments when the numbers show it is time to make an adjustment.
But Arne, that would be tantamount to admitting that the NW plan will work!
BKrasting has never seen a number, or a “fact,” that he understood. He sees every number as isolated and it would never occur to him to compare numbers, or, for example, divide a 5 (or 6 or 9) Trillion Dollar Deficit! by the 250 million people and the 75 years and the 50 thousand dollar salaries to get an honest sense of what it will cost those people to pay that “deficit.”
Nor can he understand that that “deficit” is just the difference between what it will cost to live in retirement for a life expectancy of twenty years, compared to the fifteen years expected when the current tax rate was established. Nor can he understand that the “deficit” is just a guess made by mortals… some of whom may have political motives… about how the economy will behave over those seventy five years. Or that that is not the sort of guess one should not place TOO MUCH confidence in.
We showed that by merely adjusting the tax rate one tenth of one percent (eighty cents per week) at a time, workers can continue to pay for their own Social Security forever.
BKrasting has been crying “the sky is falling” for all the years we have been trying to get people to understand that they can keep the sky from falling for eighty cents per week, so he must take some responsibility for the fact that “too much time has been wasted implementing it.” As of course must those “liberals” who have ignored what they know to be the truth because they have another agenda.
Here is a brief attempt to provide some perspective for BKrasting’s latest scary numbers:
If “the unfunded portion could rise by 30% this year..” To the extent that unfunded portion was not included in our earlier calculation (each year puts the 75 year window further into “unfunded” territory) it would take about a 30% increase in the 80 cents per week required increase… or a total staggering increase of about a dollar and four cents per week.
or, the number of years the increase needs to occur might increase from the 20 previously calculated to about 26. An extra six years of unnoticeable increases in the “tax” that pays for YOUR retirement.
The “cash deficit” is the long expected transfer of money from SS Trust Fund… created for exactly this purpose… to benefits for the retiring Baby Boomers. This is not new. Similarly the TF “grew by only…” because the benefits required by the Baby Boom retirement are using up part of the interest that would otherwise accumulate to the Trust Fund. BKrasting has now idea how this works. It is normal money, savings and spending for what you saved for. But to him it is an alarming mystery.
And the TF will “top out” because that’s what happens when you spend your savings… for the purpose you saved it for… it “tops out” on the way to being “spent.” But again this is long planned for. It is not new. It is not a threat. As long as the tax rate is increased as and if needed to pay “as we go” for benefits, the Trust Fund is not a significant factor.
And if the spending rate is increased, as it has been by the Recession (caused by the banks), the “end date” will indeed be “moved up.” But that isn’t going to make a material difference. A few more cents per week, or raising the tax a couple of years sooner than otherwise expected. raising the tax by an unnoticeable amount: about eighty cents per week.
I do agree with BKrasting that doing nothing is not wise. But agreeing to raise the tax one tenth of one percent “at need” is not “doing nothing.”
Coberly: YOUR “$.80 still lays more TAXES on the backs of workers& the 1% benefits, much like they do with food stamps feeding their labor force. (ex: Wallmart) Pandering to “The Job Creators” HAS NOT created jobs, better wages, or ANY form of more wealth for The 99%. 85 billion per month BANKER/WALLSTREET WELFARE didn’t trickle down to MAINSTREET/WORKERS. Wallstreet swallowed lifetimes worth of pension plans from working people only to leave them with just SS to count on.
ALL T-Bills are an instruments of debt for The Treasury. The QE buyout increases the strain of DEBT on Treasury which in turn makes The Trust Fund a target as well as benefits, too.
LET’S FACE FACTS, governments, ALL governments are funded by TAXES, its the PRICE of civilization. NO government can borrow its population into wealth. America’s working class is TAXED to its limit while PAYING INTEREST on borrowing that benefits the RICH.
As in ALL dances, at some point one must “PAY THE PIPER”!
so you’re saying that Romney was right: you see yourself as a victim and you don’t want to pay for your own retirement.
what ARE you willing to pay for? or why do we bother with work? and why do they bother to pay us wages?
Social Security is NOT a “tax.” It is a way for you to save your own money protected from inflation, market losses, and some kinds of personal bad luck (workers insure each other against a lifetime of wages too low to save for retirement.)
Pete Peterson wants you to think of it as welfare. The more you demand the rich pay, the more they are determined to kill Social Security because they don’t want to have to pay for it. You need it. You need to pay for it. Just like you pay for your own groceries… only these are the groceries you will need after you are too old to work.
Coberly just won’t let go of the NW plan. Some numbers for him to chew on.
CBO did a report on “Differential Mortality” 1/31/2014. Using this method of calculating mortality CBO concluded that an immediate and permanent tax hike of 3.94% would be required to bring the SSTF into balance.
Page 12 of this report:
3.94% of taxable payroll comes to a tax increase of $268B in 2014 and a larger amount every year thereafter. (this would be the largest tax increase in history – and it would fall on workers – not fat cats)
To achieve an equivalent on an NPV basis the NW plan would have to increase SS taxes by (combined) 0.2% every year for the next 30!!
This would bring total payroll taxes to 18.4% of the taxable base. This means that SS would have to collect 100% of the tax on incomes just to stay solvent. There would be no money left for all the other things that government does. SS would take it all.
Coberly looks at this and claims “no problem”. I say there is not one chance in a thousand that anything as crazy as this would be considered.
Bottom line Coberly – you can’t ‘fix’ SS with tax increases. The numbers do not add up. The 3.94% solution does not work, the NW plan does not work.
I did sent Coberly a spread sheet on the NW plan and the CBO 3.94% scenario. I suspect he will ignore it, as he has done with the others I’ve sent him in the past.
has always been an idiot. but lately he has become a liar.
he knows I have NEVER ignored his spread sheets. in fact i took some time a while back to show him how to do the calculations correctly. he responded by subsequently claiming the calculations were “his.” and then went on to the next insane claim: that the SS deficit would double by 2014.
He does not appear to have read my reply to his latest nonsense on this thread. Or he hopes…and is likely correct… that even those who have read it will forget it instantly when they see his latest scare-numbers.
I haven’t got a lot of time for this game, but here are some brief points
CBO’s report on “Differential Mortality” is just the latest attempt to squeeze more blood out of the turnip of guess about the far future. My point has been and remains… there is no conceivable circumstance in which the workers cannot continue to pay for their own Social Security with tiny raises in the payroll tax at need.
We talked about the CBO report when they were only claiming a 3.6% immediate and permanent increase would be needed, and showed that it was exactly the same in cost to the workers of a gradual raise in the payroll tax of one tenth of one percent per year over 23 years, or about a one and a half percent over 20 years. We are talking about increase of eighty cents to a dollar and twenty cents per week per year. And we can easily wait to see what the future actually brings. The best news would be the workers start gettting the pay raises their work earns. The worst news would be that some time in the future an decision has to be made between higher taxes or lower benefits… but that decision can wait until it actually needs to be made, if ever.
Stampeding you into making it now is just the long term Peterson Big Lie to fool you into cutting Social Security so you can NEVER afford to retire.
Krasting doesn’t know what he’s talking about with his “NPV” basis. Since SS is workers paying for their own retirement it has NOTHING to do with “tax on incomes.” Since low earners don’t pay any income taxes, their payroll “tax” is simply a way for them to pay in advance for what they need when they are too old to work… with that payment guaranteed against inflation and market losses, and insured against personal bad luck including a lifetime of much lower than average wages.
A “.2% increase in SS taxes every year for the next 30!” would be a total increase of 6%, of which the workers would only see half. So a three percent decrease from a payroll that has meanwhile increased by about 50%…. would leave the workers better off AFTER taxes than they are today PLUS having a secured retirement.
a 268 Billion tax increase…would be about a 2000 dollar per year increase for the average worker. While this would be the worst way to pay for a GUESSED potential increase in SS costs, 2000 a year is not too much to pay for a retirement that will last an extra five years and pay about 20,000 dollars per year. IT’s 80 thousand over a forty year career, and it pays a hundred thousand over the extra five years of retirement.
The only other ways to pay for those extra five years would be to do well on the stock market… chancy. Or to make the rich pay for your retirement. Chancier yet, and I don’t think this is what Krasting is calling for.
BUT the “northwest plan” has shown that the same amount of money can be raise one tenth of one percent per year over… probably twenty years… but if Krastings predicition comes true, then “over thirty years.” You still aren’t going to notice the increase, you will have more money to pay for it each year, and you are going to need the money when you retire anyway.
once again… that 18.4% is NOT a “tax.” IT’s your money. you get it back plus interest… more than inflation… when you are really, really gonna need it.
Krasting has nothing to offer but hysteria and lies.
The Peterson Plan relies on people not being able to think too clearly about what they are going to need in retirement and how they are going to pay for it. He tells them they will pay for someone else’s greedy granny and get nothing for themselves.
And encourages them to believe that the magic stock market fairy is going to provide them with the money they will need… or else they can keep working until they shut off the respirator. Meanwhile the left encourages people to believe that the magic government fairy will provide them with the money they will need by taking it from the rich…. which is exactly what Peterson is saying they will do unless they kill social security.
neither side wants you to remember that SS is THE way you can pay for your own retirement. remember “we paid for it ourselves.”
B. Krasting, “Coberly just won’t let go of the NW plan. Some numbers for him to chew on.”
Have you intentionally ignored the apparent agreements stated by several other people who have been participating in this “conversation.” Only you seem to believe that there is a crisis at hand and that the NW plan is not going to have any beneficial effect on the SS program. I’d guess that that would be your analysis to any reasonable plan that leaves the benefit structure in tact and addresses only the need for a balanced increase in the funding stream. By balanced I mean to say an increase that is shared by all future recipients rather than asking the rich to pay more into the plan than the future benefits would be tied to.
i should point out
that 2000 dollar per year immediate and permanent increase that CBO/Krasting is calling for would only appear to the worker as a 20 dollar per week increase in withholding. The “bosses share” indeed is “the workers money” but only after the SS tax forces the employer to pay it to the workers SS account.
Those who work for themselves would indeed see the whole thing. but they still get the money back when they retire, plus interest, or more if their business should happen to fail when they are too old to recover. One hopes that people who work for themselves understand that they need to make more money that people who work for someone else. One would hope they would also understand the need for retirement insurance, but one can’t count on that.
And I should point out that the ultimate tax rate under the northwest plan is higher than CBO’s immediate and permanent because CBO relies on general taxes to make up the difference in the form of interest on the taxes collected before they are needed.
And also, paying 2000 a year extra now, instead of 40 dollars (that’s eighty cents per week) is a much bigger hit on you NOW.
after about fifteen years as the real tax grows bigger than the CBO taxpayer subsidized tax, you will be making far more money than you are now and can afford to pay the difference directly (instead of secretly by the income tax).
retirement is expensive. northwest plan gives you a painless way to pay for it. CBO is not a plan. it is a scare tactic designed to make you say “omigod i can’t afford that. lets cut SS now!” and then wonder where your retirement went when you are too old to work and not as rich as you expected.
not you, of course. you are too smart. but all those other people who won’t have any money to buy what you are selling. and you will have to watch them die in the street or pay taxes for welfare to ease your troubled mind.
with SS, people PAY FOR THEIR OWN RETIREMENT. no welfare needed.
This is just an aside to the current conversation. It strikes me that there are already a significant number of characteristics to the benefits aspect of Social Security that have the flavor of means testing and/or income enhancement for some. I have no doubt that adding more will begin to alienate many recipients as they see their benefits reduced while others see their benefits enhanced by the current regulations.
For example, those who have made an effort to save additional retirement funds and/or receive some form of a pension are subject to having as much as 85% of their Social Security benefit taxed. That is very much a double dip by the government given that the FICA contributions were taxable income in addition to being a contribution to the S.S. program. Also, if other income reaches certain levels, none of which are wealth standard levels of income, the beneficiary’s Medicare premium increases in a significant way. On the other hand, if a recipient/beneficiary is married and their spouse has not worked, nor paid FICA, they will still receive a S.S. benefit based on a percentage of the working spouse’s benefit. I believe that that specific aspect can increase a “family’s” benefit by 50%.
My point is that every effort to cut some benefits combined with enhancing others which are differentially applicable based on income levels will hurt the popularity of the Social Security program. The program has to be fair and balanced, not in the Faux News sense, but in reality. In too many instances to fiddling with the tax codes, including Social Security FICA, results in increased costs to the middle class rather than the truly wealthy. Maybe that is a planned strategy. Such strategies of turning group against group, whether based on religion, race or income, has been used many times in the past by the representatives of wealth with the financial support of those they represent, the wealthiest among us.
i agree with you about some of this, but let me play devil’s advocate a bit.
SS is insurance. As it happens everyone gets at least their money back adjusted for inflatioin and some people who need it more get back a lot more.
I don’t think the income tax on SS benefits is fair. on the other hand it helps keep the SS “premium” a bit lower, and it can be argued that since people are getting back more than they paid in (an effective “interest” made possible by “wage adjusted”
accounting for payments), the tax on benefits is no different from the tax you would pay in interest on your savings account.
So you can look at is a tax on money that was already taxes… the way some people look at taxes on their dividends and capital gains, or you can look at it as a tax on “income”… that is the interest you “earned” on what you “saved.” It’s easier on my sanity to think of it the latter way.
Similarly, the “spousal benefit” gives a boost to those with non-working spouses. It doesn’t take much work for the spouse to qualify for a benefit in her own right that is larger than the spousal benefit. l am a traditional male chauvinist pig so while my SS “tax” subsidizes the spousal benefit, i figure it is a reasonable subsidy so that women who do stay home and contribute according to the traditional wife’s role… as by caring for the children… are not forced into poverty in old age by having to share an SS benefit based only on the husband’s earnings. I know an opposite case can be made, but again, it is easier on my sanity to think of it as a reasonable accommodation to what used to be the “normal” division of labor between the sexes. Times are changing, and maybe the gay marriage spousal benefit will tip the balance so that everyone gets only the benefit based on “their own” payroll tax. I think we will be sorry when we see the unintended consequences of that. But there seems to be no stopping those who are still crying that their sister got the biggest piece of the burfday cake.
Unless the “unfairness” is gross.. and so far it isn’t… l think it is saner (that word again) to think in terms of “did I get enough for my needs, did i get a reasonable return for what i paid?” than to worry about what someone else got.
I certainly think that any kind of “means testing” of Social Security will destroy the program. The “rich” and the “average” earners get a decent return on their money. they paid for it. and it is their money that makes it possilbe for the poor to get enough of a benefit to live in gentle poverty instead of desperate poverty.
it is a tax on 85% of your benefits, not an 85% tax on your benefits. you get 15% of your benefits tax free. or 50%, or 100% depending on how badly you need them.
i think if you do the arithmetic you’d be surprised to see how much of your benefits are “interest”. just assuming about a 5% effective interest rate (roughly the “wage adjustment”), over forty years, your “income” (over another 20 years) would be about 3 times what you paid in.
the numbers are off the top of my head, but i think are roughly accurate.
and you would pay tax on that if you earned it from any other “investment.”
In my opinion, one of the first things to think about when discussing Social Security is how it works as a component of retirement income. For most people it should not be the only source, there should be enough other income so that they can afford things beyond the food and shelter that SS is enough for. If they have been lucky, they will have no difficulty affording to increase the size of the TV and the number of channels and buy a smart phone 20 years after they stop working. If they have not been lucky, there will be an adequate safety net.
The next thing is to ask why if payroll tax provide senough for benefits now, why will it not be anough in the future? Birth rate, economic growth (producivity), and lifespan all contribute, but lifespan is the biggest contributor to why your retirement will cost more than your fathers retirement. If lifespans stayed constant, SS would be overfunded.
Now you need to ask yourself how do you make sure you have enough for retirement. You are either going to have to save more or work longer than your parents generation. Is it reasonable to assume that you can save enough more that you do not need to work longer? Absolutely. The economy IS growing. Standards of living are increasing. BUT, if you want to spend a higher percentage of your life in retirement, you will need to save a higher percentage of your raises than your parents did.
If SS is a component of your retirement and the amount you need to save for retirement is increasing, then why shouldn’t the amount saved by SS increase as well? If we don’t increase SS, then the amount you need to save yourself will incease by more. Either way it is going to come from your earnings.
If you believe that we cannot increase SS, then you must believe that people cannot save enough for retirement. If you believe that people can save enough for retirement, then you should believe that we can increase SS.
In my opinion, people also need to understand Pay-As-You-GO before they can meaningfully discuss SS. People like Andrew Biggs don’t like the PAYGO aspect of SS because they believe the entire economy would be larger if the resources needed to pay for people’s retirement were invested productively. Posts on “savings not equal investment” and “secular stagnation” tell me the case is not so simple, but, in any event, we have PAYGO for multiple reasons.
My grandparents were wiped out by the Depression. The help they needed had to come from people who were still working after WW2. So SS started out as PAYGO. When the economy grew much faster in the 40s than they projected in 1935, SS ended up with a large enough trust fund that it could have been considerably more than PAYGO, but Congress (led by Republican detractors) did not like the idea of managing the investment, so they purposely delayed the planned payroll tax increases, and assured that SS would stay PAYGO.
A look at the 1941 annual report shows that even if the payroll tax increases were maintained, SS would never have been what some people like to call “fully funded”. It could have earned more interest than it does, but retirees benefits were always going to be paid for with worker’s contributions. Some people think this makes SS a Ponzi scheme and even Krugman referred to it as Ponzi-like, but unlike a Ponzi scheme, PAYGO can go on forever. (If/when the rapture comes, it will not matter if you have not received your benefits yet.)
You assess the health of a PAYGO system by whether it can pay benefits, not by its unfunded liability. Calculating an NPV requires assuming some discount rate, but with PAYGO, the discount rate does not matter. (If you can neglect interest on the TF, then the impact of discounting is precisely zero.)
As a PAYGO system SS does needbenefits to equal income over a reasonable time period. A first level analysis, with an average benefit and average contribution as inputs gives you a ratio of worker to beneficiaries that is sustainable. If the ratio is what is changing, then average benefit or average contribution must change. Average contribution changes with recessions and with economic growth, but the W/B ratio is changing more significanlty as people are living longer.
A PAYGO system can work forever, but it does need adjustments. No “reform” needed.
Jerry a small point on Northwest.
It mostly grew out of two critiques of Coberly’s existing plan from 2006 or so. One by me that it didn’t take into account the possibility that Productivity and Real Wage would come in ahead of IC projections. Another by Arne that it might not fully take into account changes in longevity. If Bruce was right the fix would be cheaper, if Arne was right a bit more expensive. So between the three of us we came up with the concept of ‘Trigger’.
Under the ‘Trigger’ version of Northwest we just use Intermediate Cost as the starting point and implement a schedule of phased in increases that would prevent Social Security from hitting its designated ‘Trigger’ point. Which we mostly agreed was the Trustees test for ‘Short Term Actuarial Balance’. If it turned out that over the next five years IC was dead on target then Coberly’s 80 cents a week equally would hit the sweet spot. On the other hand if there was such drift in IC that the ‘Trigger’ became imminent, NW would goose the phasing. If on the other hand there were significant improvements in Real Wage then NW could skip a couple of increments at the future end. The key is calibrating new contributions in the present to variations in the Trigger as seen in current projections.
Krasting for one never grasped that concept. Instead he sees every negative variance from IC as an indictment of NW, every change in the date of the Trigger projection as a reason to reject the plan instead as we do as an action point.
Now obviously you could establish acceptable bounds to NW. For example there might be some maximally acceptable proportion of Real Wage increases that should be devoted to Social Security. But at this point in time the increases proposed in THIS year’s version of NW are fall below the level financial analysts would advise people to sock away as a general rule.
So yes there is a case to be made against NW. But pointing out that CBO arbitrarily went against a couple decades of explicitly accepting SSA’s demographic projections and instead insisting on implementing their own isn’t it. If CBO’s new set of projections prove out then the Bruce adjustment to NW is out and the Arne adjustment is in. On the other hand if over the next few years we have a Progressive resurgance based on a “More Jobs. At Better Wages” then the arithmetic result is that Bruce adjustments for productivity and real wage will swamp Arne adjustments for longevity. But the adjustments are built into the model and in fact make what is on the surface a static fix “80 cents a week” in practice a dynamic one.
By that same token delay in implementation cannot make NW fail. It just adjusts the phasing schedule, the mechanism itself remains unchanged.
Coberly: READ THE SOCIAL SECURITY ACT!!! It is indeed a TAX not some insurance policy. Its online and easy to find.
it is always… uh… interesting… to ask a committee what it thought it was doing. But in my corner of the basement it felt something like this (make allowances for selective memory)
I noticed that the Trustees much-shouted-about “raise the tax 33%” was 33% of a 6% tax, or 2%. And that that tax increase could be phased in. Picking a number that felt like a good guess to start with i tried one half of one tenth of one percent per year and found that that actually did the job, and to spare. Told some folks about it. Got kudos from some and “can’t be” from others.
Then, playing around some more, i tried phasing it in (mathematically) according to the Trustees short term actuarial insolvency prediction, and found that one tenth of one percent “whenever” did the job… and to spare.
Subsequent revisions of the official guesses about doomsday left me with three choices: change the rate or change the date of starting or change the date of “finishing.” For reasons of what seemed to me “most reasonable” (or easiest to understand) I preferred changing the date of beginning. And the dates of “whenever” took care of themselves.
It is possible that some future unexpected circumstances will require a change in the rate (from one tenth of one percent to one and a half tenths of a percent or so) in order to keep the final answer within the 75 year window and to keep the “meanwhile” answers ahead of the “insolvency” event. Meanwhile, the “short term actuarial insolvency” projection actually takes care of almost all of that automatically.
Which is to say, the “northwest plan” works. And will work under every reasonably conceivable situation. And if we are faced with an unreasonably conceivable situation, it will still work better than anything else. Except maybe eating the old people.
Coberly: YOUR fears that the rich will run away with their money are unfounded. They’re NOT going anywhere. EVERYWHERE else WILL TAX the piss out of them more so than here. If they even thought there was somewhere to go better than here then they would have already gone. China? North Korea? England? Kiev? Some south sea island with no shopping malls? Venezuela perhaps? Moscow? Canada? Mexico?
BUT what if the did? Can’t that that house in the Hamptons with them or that apartment in New York either. I’d be 3 million less leaches running around here.
They can take their money, WE’ll just print more.
here is where i start to get rude…
it is called a Federal Insurance Contribution Act deduction from your paycheck.
it acts somewhat like a tax because it is the government taking your money without asking you please.
it is nothing like a “tax” because the government gives you the money back with interest when you need it.
And of course because journalists call it a “payroll tax.”
some people cannot understand that words are only words. it is the things in themselves that count.
Social Security is what it does. It is insurance. It is also a savings plan. It is also an investment plan. And of course it is also a “tax.”
Think of it as both a breath mint and a candy mint.
when you win the revolution, then you can tax the rich to your heart’s content.
Coberly: ALL one gets back is a TAX REFUND in frankly cheaper dollars than one is TAXED with over a lifetime. NO benefits are guaranteed. Only that which Congress deems to pay out is what it gives. Congress could put said benefits at 0 (zero, nothing , nil) should Congress so desire. It is NOT a contract.
An insurance policy IS a contract where something of value is paid in and carries a GAURANTEE of something of value returned.
There in lies the difference.
Nor is it an INVESTMENT, that’s a 401k.
Neither is it a savings account, YOU don’t get back what is saved plus interest.
AGAIN, it is a TAX, not a contractual agreement.
READ THE SOCIAL SECURITY ACT.
Why have a revolution? It ONLY takes an act of Congress and the rich can be TAXED ALL one desires. IKE was getting 91% & by golly, what was good enough for IKE is good enough for me.
you say that Congress could put benefits at zero
but that it only takes Congress to tax the rich 91%
right i suppose on both counts.
so instead of winning the revolution
you only have to win the election.
by the way, don’t tell me to read the Social Security Act. it annoys me and i am likely to say something about your reading comprehension skills.
and currently you are getting about 5% real return (that’s above inflation to you) on your SS “tax.” Less if you earn more. Much more if you earn less.
Flexibility is one of the key factors that allows the NW plan to work.
Coberly: I agree to never mention reading The SS act to YOU again, my friend.
If I may point out though, an insurance policy is inheritable as are investments, as are savings accounts, while SS is not except to a spouse or underage children as YOU have pointed out above.
Coberly: By the way, please feel free to say ANYTHING YOU desire about my reading skills (or anything else for that matter) I take criticism well and don’t mind a bit. Also I am against ANY form of censorship, even self censorship. (Digby-are ya listenin’???)
I am sure you mean well, but you are so predetermined to “make the rich pay” you seem to be unable to understand any of the reasons offered for why that may not work out so well for you. And I can’t keep replying without losing my patience.
SS is insurance for YOU and for your spouse and underage children. If it was also insurance for your remote relatives and friends it would be too expensive for anyone to afford. There are differences between things in the world, even things with the same name.
try to think about this. hard.
you object to my saying that SS is not a tax because in some ways it is like a tax, even though in some other ways it is not like a tax.
you object to my saying that SS is insurance because in some ways it is not like insurance even though in some other ways it is like insurance.
please note that your logic in the first case is exactly backwards from your logic in the second case.
the fact is that the “thing” is not the “word.” in particular i am trying to call your attention to the way that SS is not like a tax, and to the way that it is like insurance. you think you have proved me “wrong” by pointing to the way that SS is like a tax and to the way that it is not like insurance.
it is very frustrating to try to explain something to someone who thinks the way you are thinking here. it is also very very common for people to think that way. and it causes a lot of trouble, and keeps people from solving problems.
mostly we “have to” think in words because our brains are not big enough or fast enough to think about “things” in all their aspects and varieties. but when we become word blind and cannot get behind the word to the thing when it is important to do so, then we get stuck. and that can be the cause of much pain or failure or futility.
Coberly: What can I say? Sorry YOU feel frustrated by what I have said, but I have read The Social Security Act, more than once and so, due to my comprehension of what I HAVE READ, I shall continue to disagree.
By the way, as I stated above, concerning JUST SS and nothing else—Its NOT broken, there is NO shortfall, NOTHING ELSE need be added to SS. Its moving along fine as is. Should YOU take the time to reread my first post, I said that in the event( a rephrasing, if YOU will) of the unlikelihood of a shortfall OR need for a benefits increase then TAX THE RICH for it. Personally, I see no need to TAX labor anymore for ANY reason as things stand today.
Coberly, The Rich won’t go hungry and run away over a TAX increase. They may shit themselves BUT they won’t starve, they’ll STILL be rich.
that’s what you said.
i see no indication that you have heard or understood anything i have said.
so why should we continue this?
bark, bark BARK
bark bark bark bark.
Mike Meyer: if Social Security is a tax (and nothing else, as you seem to imply) then the entire defense department is also a tax. It is not; it is a wide array of government programs funded by taxes.
Your statements are also self-evidently contradictory: for example “Neither is it a savings account, YOU don’t get back what is saved plus interest.” – of course you do, if you take inflation into account. You may not like the interest rate, but you certainly get back more than you put in.
i keep trying to tell people that SS pays a decent real interest. about 2% to the richest in the past. maybe only one percent in the future… still hard to get from an insurance policy. and 5 to 10% for the poorer and poorest, depending on circumstances.
in any case even earning back what you lose to inflation is not all that easy for ordinary workers who do not understand “finance,” or even manage to save enough at any interest to pay for a retirement that includes a roof and groceries.
Batmensch: If one works 45 years paying in than one needs to live 45 years collecting and STILL won’t break even as one doesn’t collect as much as one pays in. inflation, for one thing makes the payout dollars way cheaper than the pay in dollars, also its very rare that one lives to 110. Its a TAX. Having read The Social Security Act, I DID NOT see the WORDS “savings plan”, “insurance plan”, “investment plan” or the word “GUARANTEE” in said document. I did see, however the words “TAX”, and “TAX ACCOUNT NUMBER”.
you simply don’t know what you are talking about.
Bruce, I’ve lost your emails but you may want to weigh in on Crooked Timber, where John Quiggin put up a nice post and then a privatizer was banned from the discussion. Lee Arnold